If a financial institution collects a cheque for someone who is not the true owner it may commit the tort of conversion and be liable to the true owner for damages.What is the institution's main statutory defence?

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Quizplus · Accepted Answer

The main statutory defence for a financial institution that collects a cheque for someone who is not the true owner is that it acted in good faith and without negligence. This is known as the Statutory Protection under Section 82 of the Bills of Exchange Act. If the financial institution can prove that it had no knowledge of any irregularities and had acted in good faith, it can use this defence to avoid liability for the tort of conversion. Option A is not a valid defence as the absence of "not negotiable" does not excuse the institution's duty to ensure that it collects a cheque from the true owner. Option B is not a complete defence as the institution must also prove that it acted in good faith. Option D is not a valid defence as the party collecting the cheque has a duty to exercise reasonable care in detecting forged signatures, regardless of whether they are detectable by an expert.

If a Financial Institution Collects a Cheque for Someone Who