I was very interested to read - admittedly some time ago - 'A fraudster steals and alters a cheque' (Accountancy, November 2000, p 93). This seemed to indicate that if a cheque is intercepted in the mail and altered, the drawer of the cheque will have to suffer any loss as a result of the fraudster successfully presenting the cheque for payment. Is my appraisal correct?

There are indeed some implications from the LloydsTSB and Woolwich cases to which you refer. Although they were not raised in the cases, it is worth looking at these implications.

The reports of the cases do not indicate how the alterations to the cheques were made, but they were undetectable. Lord Justice Pill said: 'Neither alteration was apparent on the face of the document and the failure of the bank to recognise the change in name was not in either case negligent.' This rules out the law of bankers' negligence.

The claims were made by the payees against the banks in conversion, and they failed because, when the instruments were altered, they were, according to the court, worthless bits of paper. They had been 'avoided' under the Bills of Exchange Act 1882. They could not be converted and that was the end of the case. The position of the other parties - the drawer, for example - was not included in the decision because it wasn't in issue. Our understanding is, however, that the paying banker bears the risk of a material alteration and cannot debit its customer's account. There is some confirmation of this in the judgments.

The case is different, because a bankers' draft is debited to the customer's account on issue, and is from then on like banknotes. The customer assumes the risk from the beginning, as he would if he drew banknotes that were stolen. The paying bank here suffers no loss; the law requires a debtor to seek out his creditor and pay him. If money is stuffed into an envelope and posted to the creditor but fails in the end to come under his control because of a thief, it is always likely that the paying debtor will be regarded as having taken the risk.

The law relating to bankers' drafts receives some confirmation in the later reports. However, this was limited to a couple of lines or so, since the points were not in issue. The paying bank in the LloydsTSB case was the Bank of England insolvency account. The claimant liquidators would have had the right to have their liquidation account credited.