In the high court of malaya at kuala lumpur (civil division) suit no. S7 22 1502 2003



Download 134.74 Kb.
Page1/2
Date conversion28.07.2017
Size134.74 Kb.
  1   2


IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

(CIVIL DIVISION)

SUIT NO. S7 - 22 - 1502 - 2003

BETWEEN

GLOBELINK CONTAINER LINE (M) SDN BHD

(Company Registration No. 214517-P) …PLAINTIFF

AND

BUMIPUTRA COMMERCE BANK BERHAD

(Company Registration No. 13491-P) …DEFENDANT

THE JUDGMENT OF JUDICIAL COMMISSIONER

Y.A. TUAN LEE SWEE SENG

Prologue

Banks honour cheques based on the mandate given it by its customers. Usually in the case of a customer that is a corporation, there would be normally 2 signatories at least for an amount exceeding a certain sum. How is the Bank to know that the signatures are the proper mandate in that the signatures are not forged? If any one of the 2 signatures for instance is forged, then there is no proper mandate from the customer. The age-old method of comparing signatures in specimen card with that in the cheques is still being used and perhaps with development in computer technology, a time will come when a software can immediately highlight the differences between the signatures on a cheque and that in the specimen card when compared in an enlarged scanned version in the computer.

Until then there is always a risk that a banker might be paying out without mandate and hence liable in the tort of conversion to make good the amount wrongly paid out.

Parties

The Plaintiff is an account holder and customer of the Defendant, a bank. The mandate set out in the Plaintiff’s resolution dated 11 January 1999 to the Defendant was that the Defendant was authorised to pay on the Plaintiff’s cheques for any amount if signed by any one of 2 of the Plaintiff’s directors, namely Mr. Lian Tian Kim or Mr. Sim Kim Hock.

The Defendant was authorised to pay on the Plaintiff’s cheques for amounts less than RM10,000.00 if signed by any 2 of 3 of the Plaintiff’s employees, namely Miss Kok Seoh Yen, Miss Wong Mei Chin and Miss Kunatheertam a/p Karuppiah.

Problem

Nothing was amiss initially until May 2002. Between the period of May 2002 and March 2003, the Defendant honoured and paid out on 389 cheques to the tune of RM2,777,159.97 . Most were cash cheques and some were crossed cheques. Indeed 285 were cash cheques and 104 were crossed cheques. Out of the crossed cheques 102 were made payable to Syarikat Karupiah and 2 made payable to Sri Maju. The Plaintiff contended that these were cheques paid out without its proper mandate in that the signature of Miss Wong Mei Chin in all those cheques had been forged. It transpired that an account staff of the Plaintiff had forged the signature of Miss Wong Mei Chin. The Plaintiff also contended that some of the staff of the accounts department had conspired with the staff in the bank’s branch in Port Klang to act fraudulently and in collusion with them to siphon off the Plaintiff’s money without raising any suspicion.

The Defendant denied that there was a lack of mandate. However they had not called any expert witness to contradict the expert witness of the Plaintiff. The Defendant had stated in the Defence that when they were alerted on the forgery they did their own investigation. But the results of the investigation was not shared with the Plaintiff and neither was anyone called to give evidence as to the Defendant’s own investigation.

The Defendant contended that none of the staff named had been involved and that all payments made on those cheques were paid in good faith. The Defendant argued that the Plaintiff had negligently contributed to the forgery or the making of the unauthorised signatures and as such the signatures shall be deemed to be the signatures of the person it purports to be in favour of any person who in good faith pays the cheques. In short the Defendant is depending entirely on the defence provided for by s 73A of the Bills of Exchange Act 1949.

Prayer

In the Statement of Claim filed on 26 September 2003 the Plaintiff prayed for the following:



  1. A declaration that the Defendant was not entitled to debit the Account with the amount of the cheques;

  2. The sum of RM2,777,159.97 being the total sum of the cheques and the loss of use of the same;

  3. All such other sums of money yet to be determined as against the Defendant;

  4. Interests;

  5. Costs.

The Defence briefly was that:

  1. The Defendant had acted according to the mandate or the expressed and/or implied authorisation of the Plaintiff;

  2. The Plaintiff was negligent in that it had contributed to the said forgery and the particulars of negligence were pleaded in paragraph 6 of its Defence;

  3. The Defendant further pleaded that it is entitled to rely on s 73A of the Bills of Exchange Act 1949.

Parol Evidence

The trial proceeded on the following dates 16 to 18 February 2011 and on 7 as well as 11 March 2011.

The following were marked for the purpose of the trial:

Bundle A - Bundle of Pleadings

Bundle B1 - Agreed Bundle of Documents (Volume 1)

(subject to cross-examination)

Bundle B2 - Agreed Bundle of Documents (Volume 2)

(subject to cross-examination)

Bundle C1 & C2 - Non-Agreed Bundle of Documents

Bundle D - Defendant’s Bundle of Documents

Bundle E - Statement of Agreed Facts

Bundle F - Statement of Disputed Issues

The following witnesses testified on behalf of the Plaintiff:

PW1 Kunatheertam a/p S. Karuppiah

PW2 Lee Gek Kwee (Forensic Document Examiner)

PW3 Kok Seoh Yen

PW4 Wong Mei Chin

PW5 Steven Ong

The following witnesses testified on behalf of the Defendant:

DW1 Ramlee bin Johor

DW2 Surjit Kaur a/p Mukhtiar Singh

DW3 Mohamed Anshun Bin Ali

DW4 Siti Masayu Bte Moklas

DW5 Ikram Haji Osman

DW6 Gan Seng Kian

The Plaintiff through its General Manager and Director PW 5, Mr. Simon Ong said in evidence that somewhere in the beginning of 2005, inspite of the good collection of fees from the freight forwarding services that it rendered to its clients, it was experiencing cash flow problems. It became particularly acute when it came to payment of bonuses and after a complaint from a creditor that it had not been paid for a long while. The Plaintiff wrote to the Defendant by letter dated 29 May 2002 to seek clarification on the actual balance in its account. Things happened in quick succession. The 3 account staff of the Plaintiff resigned almost immediately.

PW 3 Miss Kok Seoh Yen went to the Bank’s branch in Port Klang to check with Miss Surjit Kaur, the Branch Manager, in whose branch the Plaintiff had opened, maintained and operated the account. Upon going through the cash cheques in question, she even discovered that there was a cheque without the word “CASH” written on it (p 1163 of Bundle C2) marked as Exhibit D8, which the Bank had honoured. Miss Surjit Kaur of the Defendant’s branch confirmed in evidence that it is an unusual practice for the Bank to have honoured the payment without the payee’s name being written. The next day when Miss Kok went back to the Bank she was given a photocopy of the cheque with the word “CASH” written on it.

Whether the Defendant Bank had acted in breach of the mandate given it by the Plaintiff in honouring the 389 Cheques.

This issue is important because of s 24 of the Bills of Exchange Act 1949 and also because the Defendant had denied in paragraph 3 of its Defence that it had paid out without proper mandate and where it had further contended that it paid out based on a proper mandate and/or express or implied authorisation of the Plaintiff.

S 24 of the Bills of Exchange Act 1949 reads:

“Subject to the provisions of this Act, where a signature on a bill is forged or placed thereon without the authority of the person whose signature it purports to be, the forged or unauthorised signature is wholly inoperative, and no right to retain the bill or to give a discharged therefor or to enforce payment thereof against any party whom it is sought to retain or through or under that signature, unless the party against whom it is sought to retain or enforce payment of the bill is precluded from setting up the forgery or want of authority:-

Provided that nothing in this section shall effect the ratification of an unauthorised signature not amounting to a forgery.”

PW 4 Miss Wong Mei Chin testified that the signature on the 389 Cheques which purported to be hers was not in fact her signature. The other signature on the Cheques is that of PW 1 Miss Kunatheertam. I agree with the Plaintiff’s counsel Mr. Colin Andrew Pereira that it is evident through the naked eye that the purported signature of Miss Wong on the cheques is different from the specimen signature tendered by the Defendant itself from the specimen cards during trial at page 4 of Bundle D.

As the Defendant, at the outset when the forgery was reported to the Bank and when filing the Defence, was not prepared to admit and accept that the purported signatures on the Cheques were not that of Miss Wong Mei Chin, the Plaintiff called PW 2, Miss Lee Gek Kwee from Singapore who is a forensic document examiner from the Centre for Forensic Science in Singapore with 30 years experience in examining signatures. PW 2 has a very impressive credential and has testified many times in a court of law Singapore, Malaysia and Hong Kong. PW 2 produced 2 Reports dated 20 March 2004 (page 1226 of Bundle B2) and 14 February 2011 marked as Exhibit P3. She also explained during trial with great detail how she had arrived at the conclusion that there is no evidence to show that the signatures in the 389 cheques were made by Miss Wong Mei Chin whose specimen signatures appeared in her Report as S1 to S16.

I am appreciative of the Plaintiff counsel’s effort in arranging for an LCD projector and a notebook to be used to project the magnified signature referred to in the cheques in the Reports with that of Miss Wong’s specimen signatures onto a white screen provided by the Court to assist the Court in understanding how an expert in examining signatures come to the conclusion of forgery. PW 2 drew the Court’s attention to characteristic features in Miss Wong’s signature and the aberrations found in the forged signatures and when enlarged on a big screen, the differences are very much enhanced. PW 2 found the specimen signatures of Miss Wong “S1-S16” to be consistent in respect of the line fluency, pen pressure, slant, formation and relative height and spacing of strokes. She found the slant, formation and relative height and spacing of strokes in all the questioned signatures in “Q1-Q389” to be different in one way or another from those in the specimen signatures.

Based on the Supreme Court decision in United Asian Bank Bhd v. Tai Soon Heng Construction Sdn Bhd [1993] 2 CLJ 31 at page 37 it was held that a customer of the Bank only needs to prove on a balance of probabilities that the signature on the cheque is forged:

“Another important matter has been raised by the appellant in connection with the issue of forgery. It was argued for the appellant both in the Court below and before us that the standard of proof required in cases such as this should be beyond a reasonable doubt and Syarikat Perkapalan Timor v. United Malayan Banking Corporation Berhad [1982] 2 MLJ 193 was cited in support. We have examined this decision with some care but we are unable to agree with appellant's Counsel that it is authority for the proposition that is put forward for the appellant. In our judgment a customer who alleges that his banker honoured forged cheques drawn on his account need only establish the charge of forgery on a balance of probabilities and in this respect we agree with the statement of the law by Gunn Chit Tuan J. (as he then was) in Syarikat Islamiyah v. Bank Bumiputra Malaysia Bhd. [1988] 3 MLJ 218 where at p. 220 the learned Judge said:

In this case although it would appear that there was no or insufficient evidence to prove beyond reasonable doubt for purposes of criminal proceedings that the signatures on the cheques concerned were forged by the said Awang alias Che Mah bin Che Lob, yet I was satisfied that there was evidence adduced to prove on a balance of probabilities in this case that the signatures on the cheques were not those of the plaintiff's but were forged or placed thereon without the plaintiff's authority and were therefore wholly inoperative.” (emphasis added)

The Defendant did not challenge the credentials or the expertise of PW 2. PW 2 was very meticulous in the way she examined each and every cheque in question. Her evidence was not seriously challenged by the Defendant. The Defendant did not call any expert witness to contradict the evidence of the hand-writing expert PW 2 and even the evidence of PW 4 Miss Wong Mei Chin was not seriously challenged on the part where she said positively that she did not counter-sign beside Miss Kunatheertam on those Cheques.

I am rather surprised that the Defendant had contended in its Defence that it had the mandate to pay on those Cheques and yet chose not to call their expert to give evidence to the contrary. If indeed the Defendant had taken a change in its stand before trial, it should inform the Court so; otherwise unnecessary costs is incurred by any party calling an expert to prepare the Report and to testify in Court. Such a conduct does not behove well for the Defendant who seeks to activate the protection provided for it under s 73A of the Bills of Exchange Act.

I have no hesitation in holding that the Plaintiff had proved on a balance of probabilities that the signatures of Miss Wong Mee Chin on the Cheques are forged. Having so found, the Bank is not protected and so is liable under s 24 if it pays out on those Cheques and the only way for the Defendant to escape liability is show that the Plaintiff is estopped from asserting the forgery or want of authority in being precluded from setting up the forgery or want of authority or that the requirements of s 73A of the Bills of Exchange Act apply to absolve the Bank from liability.



Whether the Defendant through its staff had acted fraudulently and in collusion with the Plaintiff’s staff to defraud the Plaintiff.

It goes without saying that if the Defendant’s staff had been involved in this scheme of defrauding the Plaintiff together with the Plaintiff’s staff then the protection of s 73A of the Bills of Exchange Act is of course not available to the Defendant Bank. S 73A provides:

“Notwithstanding section 24, where a signature on a cheque is forged or placed thereon without the authority of the person whose signature it purports to be, and that person whose signature it purports to be knowingly or negligently contributes to the forgery or the making of the unauthorized signature, the signature shall operate and shall be deemed to be the signature of the person it purports to be in favour of any person who in good faith pays the cheque or takes the cheque for value. (emphasis added)

The element of good faith cannot of course co-exist with the element of fraud or conspiracy involving the Defendant’s staff. The converse need not be true, that if there is no fraud or conspiracy involving the Bank’s staff, it does not necessarily mean that the Bank had acted in good faith assuming that the person whose signature had been forged had knowingly or negligently contributed to the forgery or unauthorised signature. The Court must look at all the circumstances of the case to see if the Defendant’s conduct as a whole both during the period complained of and after the discovery of the forgery, can be said to have been bona fide with respect to payments made out on those Cheques.

The chief evidence of fraud or conspiracy to defraud the Plaintiff involving the Defendant’s staff come from PW 1 Miss Kunatheertam, the account staff of the Plaintiff. She is an interested witness and not an independent witness, having confessed in Court to be part of the conspiracy to defraud the Plaintiff. The Court of course must view very carefully, circumspectly and cautiously her evidence. The Plaintiff’s counsel said that she had nothing to gain because by her confession in Court she is exposing herself to an irresistible criminal charge by any reckoning and that a judgment having been recorded against her in another suit in the morning of the first day of trial, she really has nothing to gain from giving her current evidence.

For completeness and continuity I must mention that the Plaintiff had also commenced another suit in Kuala Lumpur High Court S 22-449-2003 for RM3,590,545.51 against PW 1 Miss Kunatheertam and also the other staff of the Plaintiff involved in the conspiracy to defraud the Plaintiff ie Miss Chew Su Lian, Miss Abirami and Mr. Karupiah as 1st to 4th Defendants respectively. Mr. Karupiah is the father of Miss Kunatheertam into whose account, Syarikat Karupiah, Miss Kunatheertam had made some payments of cross-cheques. She had consented to judgment to be entered against her and judgement was also entered against the 4th Defendant, with his counsel confirming this. Judgment in default of defence had been entered against the 2rd Defendant whom Miss Kunatheertam PW 1 alleged had forged Miss Wong Mei Chin’s signature. The claim against the 3nd Defendant went for trial and judgment was finally given against her for a smaller sum of RM133,958.62, being the sum which she had arranged to be paid out to her husband’s company supposedly for stationeries.

The Plaintiff’s counsel contended that PW 1 Miss Kunatheertam has nothing to gain as the Plaintiff could at any time execute on the judgment and PW 1 had herself testified that the Plaintiff had not given her any incentive to testify on its behalf. In fact she admitted that she is openly exposing herself to a criminal charge.

Whilst all these may be true this Court can surely take judicial notice of the fact that a Plaintiff armed with a judgment against a Bank for instance would probably pursue against the Bank which has a much deeper pocket compared to an individual who might be resigned to be declared a bankrupt. As for criminal charge, it has been some 7 years since the Plaintiff lodged a police report and though PW 1 together with the other staff of the Plaintiff had been detained by police for questioning, no criminal charge had been preferred against any one.

PW 1 story in Court is that sometime in 2002, a staff of the Defendant named “Ramli” had approached the Plaintiff’s staff, Miss Abirami, and suggested a way in which the Plaintiff can be defrauded. The said “Ramli” also assured Miss Abirami that his colleagues would be able to assist in covering up the fraud provided that they received a commission. Abirami informed both PW 1 and another staff of the Plaintiff, one Miss Chew Su Lian of the proposal by “Ramli”.

PW 1 went on to say in Court that the Defendant’s staff wanted 30% to 40% of the share of the proceeds from the forgery. The assurance given by the Defendant’s staff was that they would not contact the Plaintiff’s manager for verification of any cheques and instead would contact only the Plaintiff’s staff involved in the fraud, namely PW 1, Miss Abirami and Miss Chew Su Lian.

PW 1 further identified the Defendant’s employees involved in the fraud as “Ramli”, “Sham”, “Anshun” and “Siti Masayu”. The Defendant admitted through document marked as Exhibit D 7 which is the list of employees at the Port Klang branch of the Defendant at the material time that there were the following staff working there: Ramlee bin Johor, Shamsul Anuar bin Mat Isa, Mohamed Anshun bin Hj Ali and Siti Masayu bt Maklas. PW 1 further testified that the share of the proceeds were distributed to the Defendant’s staff at the local KFC restaurant after office hours. It is also the evidence of PW 1 that Ramlee was the one who supplied her with the original letterheads of the Defendant to allow them to forge the audit confirmation, showing a figure that tallied with the monthly bank statements which statements had been intercepted when it comes into the Plaintiff office and the statements altered to reflect the transactions minus the fraudulent ones!

The Defendant called all the staff identified save for Shamsul Anuar bin Mat Isa. It was said from the Bar by the Defendant’s counsel, Mr. Faizal Hassan bin Abdul Hamid, that Sham was too vague a name to be identified with precision and that in any event such a person had left the Bank. Ramlee was DW 1, Anshun DW 3 and Siti Masayu DW 4. Ramlee was a teller of the Bank at that time and Anshun and Siti Masayu were Customer Service officer and Oerations officer of the Bank respectively.


Plaintiff’s counsel submitted that the Court should believe PW 1’s story because:


  1. PW 1 identified only 4 out of 26 employees of the Defendant who at the material time were involved in the fraud. He asked this Court to consider the question: Why should PW 1 have identified these 4 employees only unless it was true that they were in fact involved in the fraud?

  2. Why would PW1 implicate these 4 employees as well as herself and risk subjecting herself to criminal prosecution without anything to gain but everything to lose? Conversely, the 3 witnesses for the Defendant were witnesses with a purpose to serve and who would obviously deny any involvement to save themselves from civil or criminal proceedings. Mr. Colin Andrew then submitted that it is more likely that PW1 was telling the truth rather than the 3 witnesses for the Defendant.

  3. All 3 witnesses testified that they only called PW 1 when verification was needed. Even DW 2, Surjit Kaur a/p Mukhtiar Singh, the Customer Relationship Manager of the Bank confirmed that she only called PW 1, although the said Ms Surjit is not implicated in the fraud. Why didn’t any of the Defendant’s employees ever call Ms Wong Mei Chin to verify the cheques when her purported signature was on the 389 cheques? Mr.Colin for the Plaintiff submitted that for different employees to have called the same employee of the Plaintiff, namely PW 1, on each and every occasion verification was needed, would either have had to be a coincidence of Herculean proportions or by deliberate design.
  4. Original bank letterheads were given to the Plaintiff’s employees for them to be able to generate false bank statements. It has not been disputed that the said letterheads were in fact genuine letter heads. Who else, save for an employee of the Defendant, would have had access to these letterheads?


  5. Original bank letterheads were also given to the Plaintiff’s employees to enable them to generate the false audit confirmation. Again this begs the question as to who could have had access to the letterheads, save for the Defendant’s employees. See page 1176 Bundle B2 for the audit confirmation.

  6. The clearance of cheque number 213814 (page 1163, Bundle B2) despite the fact that the “Payee” column was left blank and the word “CASH” was inserted thereafter, approximately 6 months later. Plaintiff’s counsel submitted that no reasonable bank officer would have cleared such a cheque. In fact both Miss Surjit (DW 2) and Mr Gan Seng Kian (DW 6) testified that it was not normal for such a cheque to be cleared.

  7. The very fact that numerous cash cheques were being issued ought to have put the Defendant on alert. Any reasonable bank officer should have realised that it is unusual for corporations to issue so many cash cheques.

  8. The reasonable inference was that there was a conscious effort by the Defendant through its employees not to make reasonable inquiries or to direct all inquiries to only one person, namely PW1, Ms Kunatheertam.

  9. In the face of such adverse evidence against the Defendant, no evidence of any internal inquiry being conducted vis-a-vis this entire affair was tendered by the Defendant.

10.If one was to peruse the defence, it would also be evident that the fact as to whether an inquiry was conducted was never pleaded.

11.As such, when the Defendant denies collusion on the part of its employees, it would be apparent that the said denial is a bare denial, unsupported by any reasonable effort to ascertain the truth.

Plaintiff’s counsel then urged this Court to consider the totality of the evidence, and then it would be more likely than not, that the Defendant’s employees were involved in the forgery. The only denial of its employees’ involvement came from the employees who were implicated.

I must admit that there are some uncomfortable discoveries that leave much to be desired and indeed some evidence or the lack of it that cries out for an explanation. I would have more to say on this when I consider all the above arguments from 1 to 11 of the Plaintiff when considering the matter of a lack of good faith on the part of the Defendant Bank. However I am not prepared to say that the Plaintiff had proved beyond a reasonable doubt the element of fraud or collusion on the part of the Bank’s staff so as to make the Bank liable.

The test of proving a claim under fraud or conspiracy to defraud beyond a reasonable doubt has been well entrenched in our jurisprudence. In Yong Tim v. Hoo Kok Chong & Anor [2005] 3 CLJ 229 the Federal Court speaking through his Lordship Steve Shim CJ (Sabah & Sarawak) (as he then was) at page 235 issued this reminder:

“In our view, the Court of Appeal has obviously misdirected itself in rejecting the proposition of law applied in Saminathan v. Pappa (supra) that the standard of proof for fraud in civil proceedings is one of beyond reasonable doubt which has been consistently applied by the courts in Malaysia. We see no reason to disturb that trend.”

Again in the Court of Appeal case of SCK Group Bhd & Anor v. Sunny Liew Siew Pang & Anor [2010] 9 CLJ 389 at page 397, his Lordship Low Hop Bing JCA observed:

“[15] As the tort of conspiracy to defraud involves an element of fraud, the standard of proof required is very high. It is proof beyond reasonable doubt. In Yong Tim v. Hoo Kok Chong & Anor [2005] 3 CLJ 229 at pp. 233a-g, 234a-h & 235a-d, Steve Shim CJ (Sabah & Sarawak) (as he then was) applied the Privy Council advice given by Lord Diplock in Saminathan v. Papa [1980] 1 LNS 174 and held that the standard of proof for fraud in civil proceedings is proof beyond reasonable doubt. This high standard of proof was reaffirmed by the Federal Court in Asean Security Paper Mills Sdn Bhd v. CGU Insurance Bhd [2007] 2 CLJ 1 where Nik Hashim FCJ (as he then was) said at p. 19 [12] that "It is now settled law that the standard of proof required where there is allegation of fraud in civil proceedings must be one beyond reasonable doubt and not on a balance of probabilities". (See also Seah Siang Mong, supra)”

I bear in mind too the salutary words of his Lordship Gopal Sri Ram JCA (as he then was) in the Court of Appeal case of Aik Ming (M) Sdn. Bhd. & Ors. v. Chang Ching Chuen & Ors. & Another Case [1995] 3 CLJ 639 at page 658:

“...For a charge of conspiracy to defraud is a serious one to make. It ought not to be countenanced by a Court unless properly taken in a party's pleadings supported by full particulars. The evidence led must be in proof of the pleaded case. The standard of proof where a conspiracy to defraud is alleged (as opposed to where e.g., a conspiracy to induce breach of contract is alleged) is the same as where fraud is alleged. A plaintiff must prove his case beyond reasonable doubt. Imprudence is not and ought not to be equated with dishonesty...”

It must be borne in mind that the evidence of PW 1 was not corroborated by any other witnesses on material particulars. DW 1, DW 3 and DW 4, the tellers identified by PW 1 all denied their involvement in the conspiracy to defraud. They were the staff involved in approving the cash Cheques presented at the Bank’s counter. They remained unshaken under cross-examination. I asked myself the question, What could these witnesses say if they really are not involved at all? They would be saying what these witnesses had said. As to why PW 1 should implicate only 4 staff and not the rest of the staff in the Defendant’s list of 26 staff at the branch of the Bank at that time is anybody’s guess. We must not pretend to understand the myriad of motives and the mysteries of a man’s motivation (and that includes that of a woman as well) and yea even unto its morbid machination. There are the perplexities and paradoxes of life which depths we have not plumb. None of us fully understand the human heart. We do not pretend to have all the answers to the enigma of life and neither shall we profess or pretend to understand every human thought from afar and even after the event. Perhaps if she were to implicate the rest not involved as teller or Customer Service officer she would be less credible. Perhaps if she does not implicate someone than the whole brunt of the burden of paying the judgment would fall squarely on her shoulder and that of Miss Chew.

Yes, they now did admit that the signatures of Miss Wong Mei Chin look different now compared to the specimen signature. Perhaps they have been less than careful in approving the cheques when they were discharging their duties at the counter. Perhaps they were too pally with the Plaintiff’s staff and even approved a cheque without the payee’s name written. Granted even if they had been involved they would be saying they know not a thing of the conspiracy. Where the evidence can be interpreted to be consistent with guilt as well as with innocence, this Court in the absence of credible independent corroborated evidence must give the benefit of the doubt to the Defendant in a charge of conspiracy to defraud. They will of course have to explain why they did not call Miss Wong to confirm if she had signed the Cheques in question. They perhaps were gullible and even bordering on recklessness in accepting PW 1’s evidence that she is authorised to confirm on behalf of Miss Wong. Perhaps their actions might be taken collectively and cumulatively to constitute a lack of bona fide. That is different from saying that they have acted fraudulently.

On the question of the source of the Bank’s letterhead I must say that though print technology might not be that advanced in 2003, there is nothing preventing a person whose energy and enterprise had been wrongly channelled towards covetousness to come up with a reasonably good photocopy and for that matter, a coloured photocopy that looks as good as the original if not better! However I must confess that it was troubling that the auditors KPMG had found in their file an audit confirmation on the Bank’s letterhead that is a false audit confirmation dated 28 October 2002 at page 1176 of Bundle B when compared with the correct one at page 1166 of Bundle B.

As for why the Defendant was reluctant to share the fruits and findings of its own internal inquiry, one must bear in mind that the burden of proof is always on the party that asserts to prove and here to prove the ingredients of conspiracy to defraud beyond a reasonable doubt. It is different if the Defendant Bank wants to rely on the defence that it had acted in good faith in paying under those Cheques in which case the burden is on the Defendant.

Taking the points raised from 1 to 11, I find that though there are aspects of it that point to a lack of bona fide on the part of the Bank, taken collectively and cumulatively, I am not prepared to say that they point inexorably and irresistibly to collusion or conspiracy to defraud on the part of the Defendant to defraud the Plaintiff through the overt actions or inaction of its staff.

In arriving at the above findings I have in mind the case referred to the Court’s attention by the Defendant’s counsel in the case of Seah Siang Mong v. Ong Ban Chai & Another Case [1998] 1 CLJ Supp 295 at page 334, where his Lordship Mohd Ghazali J (as he then was) had made reference to an English case of Marrinan v. Vibart [1962] 1 All ER 869, where Salmon J held:

“the gist of the tort of conspiracy is not the conspiratorial agreement alone, but that agreement plus the overt act causing damage. ... The tort of conspiracy, however, is complete only if the agreement is carried into effect so as to damage the plaintiff.

In order to make out a case of conspiracy the plaintiff must establish –

(1) an agreement between two or more persons;

(2) an agreement for the purpose of injuring the plaintiff; and

(3) that acts done in the execution of that agreement resulted in damage to the plaintiff*.

(* Halsbury’s Laws of England (4th edn,) vol. 45 p. 271)”



Whether the person whose signature is forged had negligently contributed to the forgery within the meaning of s 73A of the Bills of Exchange Act 1949.

S 73A is again reproduced for ease of reference and with a different emphasis added now:

“Notwithstanding section 24, where a signature on a cheque is forged or placed thereon without the authority of the person whose signature it purports to be, and that person whose signature it purports to be knowingly or negligently contributes to the forgery or the making of the unauthorized signature, the signature shall operate and shall be deemed to be the signature of the person it purports to be in favour of any person who in good faith pays the cheque or takes the cheque for value. (emphasis added)

Plaintiff’s counsel submitted that reading the ordinary and natural meaning of the words in bold, the person whose signature it purports to be and who negligently contributes to the forgery must be referring to PW 4 Miss Wong Mei Chin. That is especially so when there are 2 signatures to constitute a proper mandate and one signature is not forged for it is PW 1 Miss Kunatheertam’s signature and the other purporting to be PW 4 Miss Wong Mei Chin’s signature is forged.

Defendant’s counsel submitted that “...that person whose signature it purports to be knowingly or negligently contributes to the forgery…” must for all intents and purposes be referring to that of the Plaintiff as a corporation. How then does a corporation sign on a cheque? A corporation being an artificial person signs through its agents who are natural persons.

I am conscious of s 22 and s 96 of the Bills of Exchange Act which read:

“22.  Capacity of parties.

(1) Capacity to incur liability as a party to a bill is co-extensive with capacity to contract:

Provided that nothing in this section shall enable a corporation to make itself liable as drawer; acceptor, or indorser of a bill unless it is competent to it so to do under the law for the time being in force relating to corporations.

(2) Where a bill is drawn or indorsed by a minor or corporation having no capacity or power to incur liability on a bill, the drawing or endorsement entitles the holder to receive payment of the bill, and to enforce it against any other party thereto.

96.  Signature.

(1) Where, by this Act, any instrument or writing is required to be signed by any person, it is not necessary that he should sign it with his own hand, but it is sufficient if his signature is written thereon by some other person by or under his authority.

(2) In the case of a corporation, where by this Act, any instrument or writing is required to be signed, it is sufficient if the instrument or writing be sealed with the corporate seal.

But nothing in this section shall be construed as requiring the bill or note of a corporation to be under seal.”

There are instances where “person” can be read as referring to “corporation” under the Act. One must go by the context in which the word “person” appears. Generally “...the person whose signature it purports to be, and that person whose signature it purports to be....negligently contributes to the forgery...” in the case of a corporation that has 2 signatures of its 2 agents, that expression of a “person” would be referring to a natural person’s signature and the person being a natural person signing as an agent or in a representative capacity as referred to in s 26 of the Act. As a corollary, the person who negligently contributes to the forgery must be the natural person in this case Miss Wong, acting as an agent of the corporation.

Perhaps such a meaning comes into sharper focus when one asks the question: Which of the 2 signatures of the corporation had been forged, Miss Kunatheertam’s or Miss Wong’s? The answer is: Miss Wong’s signature. To the question: Who then is the person whose signature is forged? The answer is: Miss Wong. Continuing with the question: Which person then is the person who might have negligently contributed to the forgery of the signature? Answer: Miss Wong.

The last occurrence of “person” in s 73A of the Act is wide enough and the context allows it to include a corporation in this case the Defendant Bank.

An amplified version of s 73A with the amplified words in square brackets would read something like this:

“Notwithstanding section 24, where a signature [of a natural person who signed on behalf of a corporation] on a cheque is forged or placed thereon without the authority of the person whose signature it purports to be, and that [natural] person [who represents the corporation] whose signature it purports to be knowingly or negligently contributes to the forgery or the making of the unauthorized signature, the signature shall operate and shall be deemed to be the signature of the [natural]person [who represents the corporation] it purports to be in favour of any person who in good faith pays the cheque or takes the cheque for value. (emphasis added)

I hold that in the context of a corporation like the Plaintiff, in a circumstance that requires 2 signatures to constitute the corporation’s signature, the “person whose signature it purports to be” refers to a natural person, in this case to PW 4 Miss Wong Mei Chin acting no doubt as an agent of the Plaintiff. How has Miss Wong contributed to the forgery of her signature? It has not been shown that she knowingly did that. Has she negligently allowed her signature to be forged? Again it has not been shown that she signed it so negligently that she actually facilitated the forgery of her signature. It was not as if she had signed something like resembling a circle or a “W” or an “M” or for that matter a “T”.

That element of “negligently contributes to the forgery” being absent there is no need to consider the second element of paying out in “good faith” under s 73A of the Act.


Whether the Plaintiff whose signature is forged had negligently contributed to the forgery within the meaning of s 73A of the Bills of Exchange Act 1949.

However, assuming for a moment that I had been wrong in so holding and that “the person whose signature it purports to be” refers to the Plaintiff as a whole and that it is the Plaintiff that had negligently contributed to its signature being forged, then let us consider how the Plaintiff had been so negligently acted.

Defendant had contended that the Plaintiff contributed to the forgery in the following manner:


  1. The Plaintiff failed to take any steps to supervise its staff;

  2. The Plaintiff failed to take any steps to safeguard its cheque books;

  3. The Plaintiff failed to verify its bank statements thus enabling the forgery to continue undiscovered;

  4. The Plaintiff failed to administer its account or its business in a proper manner.

One must look at the high watermark case of the Privy Council from Hong Kong in Tai Hing Cotton Mill Ltd v. Liu Chong Hing Bank Ltd. And Others. [1986] 1 AC 80 it was held in the headnotes at page 81 that:

“…that no wider duty, requiring a customer to take reasonable precautions in the management of his business to prevent forged cheques being presented to the bank for payment, or to take such steps as a reasonable customer would to check the periodic bank statements in order to be able to notify the bank of any items which were not, or might not have been, authorised, could be implied into banking contracts as a necessary incident of the relationship of banker and customer; and that, therefore, the banks were not relieved by any breach of duty by the company from having to bear the loss occasioned by the forged cheques.”

Lord Scarman when delivering the judgment of the Privy Council stated at page 110:

“If banks wish to impose upon their customers an express obligation to examine their monthly statements and to make those statements, in the absence of query, unchallengeable by the customer after expiry of a time limit, the burden of the objection and of the sanction imposed must be brought home to the customer. In their Lordships’ view the provisions which they have set out above do not meet this undoubtedly rigorous test. The test is rigorous because the bankers would have their terms of business so construed as to exclude the rights which the customer would enjoy if they were not excluded by express agreement. It must be borne in mind that, in their Lordships’ view, the true nature of the obligations of the customer to his bank where there is not express agreement is limited to the Macmillan and Greenwood duties. Clear and unambiguous provision is needed if the banks are to introduce into the contract a binding obligation upon the customer who does not query his bank statement to accept the statement as accurately setting out the debit items in the accounts.”

The principles set out above have been approved and applied by the Supreme Court in United Asian Bank Bhd’s case (supra) at pages 192-193 where Anuar J (as he then was) observed:

A consideration of the relevant authorities shows that at common law a customer owes his banker only two duties. The first is to refrain from drawing a cheque in such a manner as may facilitate fraud or forgery. The second is a duty to inform the bank of any forgery of a cheque purportedly drawn on the account as soon as the customer becomes aware of it. The first duty is laid down by the decision of the House of Lords in London Joint Stock Bank Ltd. v. Macmillan [1918] AC 777 ("the MacMillan duty"). The second was laid down by the decision in Greenwood v. Martins Bank Ltd. [1933] AC 51 ('the Greenwood duty").

The MacMillan and Greenwood duties have been recognised and applied in Australia (Commonwealth Trading Bank of Australia v. Sydney Wide Stores Pty. Ltd. & Anor [1981] 148 CLR 304), in New Zealand (National Bank of New Zealand Ltd v. Walpole and Patterson Ltd. [1975] 2 NZLR 7), in India (Abbu Chettiar v. Hyderabad State Bank [1954] 1 Madras Law Journal 566) and in Canada (Canadian Pacific Hotels Ltd. v. Bank of Montreal [1988] 40 DLR 4th 385). The decision in MacMillan has been applied in Malaysia: see Syarikat Islamiyah v. Bank Bumiputra Malaysia Bhd. (supra).

After a careful examination of the decisions of the superior Courts of the Commonwealth, we are satisfied that there does not exist, at common law, a further duty on the part of a customer to take precautions in the general course of his business to prevent forgeries on the part of his servants. Neither is there at common law, in the absence of a contract to the contrary, a duty imposed upon the customer to inspect his periodical bank statements to ensure that his account is being properly maintained by the bank.

In Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd. (supra), an accounts clerk of a textile company forged the signature of the company's managing director on some three hundred cheques totalling approximately HK$5.5 million. The forgeries extended over a period of about 3 1/2 years and were not discovered because of inadequate internal controls. The company brought an action for a declaration that the three banks involved were not entitled to debit its accounts for the payment of the forged cheques. The banks contended that the company was precluded from setting up the forgeries by the breach of a duty of care owing to the banks. The banks relied on what was referred to as the "wider duty", that is, a duty to take such precautions as a reasonable customer in his position would take to prevent forged cheques being presented to his bank for payment. They also relied on what was referred to as the "narrower duty", that is, a duty to take such steps to check his monthly bank statements as a reasonable customer in his position would take to enable him to notify the bank of any items debited therefrom which were not or may not have been authorised by him. Reliance was also placed on the customer's agreement at the time the accounts were opened to comply with the bank's rules and procedures governing the conduct of the accounts. In each case there was a rule to the general effect that upon failure to notify the bank within a specified period of any error in the bank statements, which was sent to the customer without return of the cancelled cheques, the statement would be deemed to be approved or confirmed. We would observe that the facts of Tai Hing were much stronger in favour of the banks there than those in the case before us.

The Privy Council held that there was no basis for the "wider duty" or the "narrower duty" as either an implied term of the contract between banker and customer or as a duty of care in tort, and that in the absence of any duty there could not be an estoppel. It is of interest to note that Lord Roskill who was the trial Judge in Brown v. Westminster Bank (supra) was a member of the Board that heard the appeal in Tai Hing.”

Based on the above clear and concise declaration as to the position of the law with respect to banks paying out against forged cheques, I would dismiss the Defendant’s contention in 1 to 4 above as being unfounded.

With respect to contention 1 on the Plaintiff’s failure to adequately supervise its staff, I can accept the fact that PW 1 was only made a signatory 4 years after she had joined the Plaintiff. Her work was being supervised by Miss Wong at the early stage of her employment for about 6 months until she became comfortable handling her job scope. She was subsequently promoted to accounts assistant about a year later in 1996 and made an authorised signatory in 1999.

At any rate, the degree of supervision over and the level of trust the Plaintiff had for its staff is a matter strictly within the province and prerogative of the Plaintiff to decide. It is to put bluntly, none of the Defendant’s business. The Plaintiff might well have trusted the wrong person as it discovered in this case with respect to Miss Kunatheertam and Miss Chew Su Lian and to a lesser extent, Miss Abirami. The Plaintiff will of course have to reap the consequences of its poor judgment and its lack of discernment as in this case, having to pursue 2 actions in Court to try to recover its loss and expanding time and energy and incurring costs in a matter that started in 2003 and with no end in sight yet.

So is the level of corporate governance that the customer chooses to adopt and apply to its proper management and administration of its accounts and business. If it has a poor risk management structure, then it will suffer the bitter consequences should a fraud be perpetrated as it has now happened to the Plaintiff as a result of the fraud committed by its own staff. However the lack of corporate governance with its attendant lack of risk management cannot absolve the Bank from its duty to pay only upon a proper mandate as spelled out in s 24 of the Act.

The forgery and fraud had been so carefully and clandestinely carried out to the extent of deleting entries of forged cheques in monthly Bank Statements which payments had been withdrawn and showing only transactions genuinely paid out on a proper mandate. Just as it takes a lie to cover up another lie, the perpetrators ensured that the audit confirmations were intercepted or not sent by the Bank but by the PW 1 and her team and in any event tempered with such that the balance in the Plaintiff’s account with the Bank showed a higher figure-arousing no suspicion and alerting no one. Like all fraud cleverly and carefully perpetrated, it would take a while to detect by which time the culprits might have covered their tracks.

The law of negligence is common law based and if there is no duty to supervise staff and safeguard cheque books as well as to check bank statements and administer accounts and business in a proper manner other than the 2 common law duties above-stated, then there cannot be fresh or new heads or categories of negligence. Where there is no new duty of care there cannot be new heads of negligence vis-à-vis a customer and its bank with respect to forged cheques.

What then would be examples of negligence of the part of a customer whose signature had been forged and who had negligently contributed to the forgery or fraud which breach is being referred to as breach of the first common law duty? In the case of London Joint Stock Bank Ltd v Macmillan [1918] AC 777, where a clerk with a view to fraud drew up a cheque and inserted a figure “2” in the space for figures, with blank spaces before and after the number “2”. After the cheque was signed, he inserted the figures “1” and “0” before and after the “2” respectively. The cheque thus read as “120”. The House of Lords found for the bank as the customer had drawn the cheque in a manner which facilitated the fraud. However this is a case more of fraud rather than forgery.

Other examples would be where the Plaintiff had suffered the staff to sign in such a fashion as to be easily copied and forged by unscrupulous staff like signing with an “O”,”W”,”M” or a “T” kind of signature. None of these have been suggested here. Indeed I would say Miss Wong’s signature is not that easily forged seeing that there are a few characteristic strokes.

The Defendant’s counsel submitted quite forcefully that this Court must be wary of applying blindly the cases decided after the amendments introduced by the new s 73A which came into force only on 1 July 1998, being introduced by the Bills of Exchange (Amendment) Act 1998. Thus United Asian Bank Bhd’s case (supra) must be read in the context of pre-s 73A amendment.

Counsel then referred to 2 cases which were decided after the s 73A amendment but still following the 2-fold duties principle laid down by the Supreme Court in United Asian Bank Bhd’s case and making no reference at all to s 73A:





  1   2


The database is protected by copyright ©hestories.info 2017
send message

    Main page