Back
2012 MarsdenLR 492
HIGH COURT MALAYA KUALA LUMPUR
ML BREADWORKS SDN BHD – Appellant
Versus
MALAYAN BANKING BERHAD – Respondent
[Writ Of Summons No: D-22NCC-1003-2011]
A bank is liable to reimburse a customer if it pays out on a forged cheque unless it can prove the customer knowingly contributed to the forgery, as outlined in the Bills of Exchange Act.
Headnote:(A) Bills of Exchange Act 1949 - Sections 24 and 73A - Forgery of a cheque - Plaintiff seeks recovery of RM383,769.33 for a cheque allegedly forged by an employee - Defendant bank's liability affirmed for erroneously honoring a forged cheque - Court found that the signatures on the disputed cheque were forged - Plaintiff did not contribute to the forgery or breach any duty rendered by contract to the bank for the bank's defense under Sections 24 and 73A - No valid estoppel established as no clear representation was made by the Plaintiff that the cheque was good for payment. (Paras 56, 86, 90)
(B) Negligence & Duty of Care - General position under banking law is that the bank cannot claim exoneration for losses unless it can establish that the customer was negligent beyond normal duties of care - In this case, Plaintiff had adequate internal controls in place and could not be held negligent for the forger's actions. (Paras 39, 76)
(C) Expert Testimony - Weight of expert evidence from handwriting analysis considered, with a preference given to the Plaintiff's expert, who identified fundamental differences supporting the allegation of forgery. (Paras 35, 36)
| Table of Content |
|---|
| 1. claim for wrongful debit due to forged cheque (Para 1 , 2 , 14 , 15) |
| 2. background facts of the plaintiff's banking issues. (Para 3 , 4 , 5 , 6) |
| 3. details on the forged cheque and bank procedures. (Para 7 , 8 , 9 , 10 , 11 , 12) |
| 4. plaintiff's notifications and controls on cheque processing. (Para 13) |
| 5. identification of key issues for trial (Para 16 , 17 , 18) |
| 6. trial process and presentation of witnesses. (Para 19) |
| 7. burden of proof regarding forgery lies with plaintiff (Para 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29) |
| 8. discussions on handwriting expert findings and credibility. (Para 30 , 31 , 32 , 33 , 34 , 35) |
| 9. position in law regarding forged cheques (Para 36 , 37 , 38) |
| 10. legal principles related to forged cheques. (Para 39 , 40 , 41 , 42 , 43 , 44) |
| 11. duties of customers and banks regarding cheque transactions. (Para 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52) |
| 12. effective statutory defenses for banks in cases of forgery. (Para 53 , 54 , 55 , 56) |
| 13. implications of section 24 of the bills of exchange act. (Para 57 , 61 , 63 , 64) |
| 14. estoppel related to representations regarding forged signatures (Para 58 , 59 , 60 , 62) |
| 15. assessing liability under section 73a regarding contributions to forgery. (Para 65 , 66) |
| 16. assessment of management control and responsibility (Para 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74) |
| 17. plaintiff's financial controls and responsibilities. (Para 75) |
| 18. the significance of fiduciary duties and supervisory measures. (Para 76 , 77 , 78 , 79 , 80 , 81 , 82) |
| 19. validity and enforceability of exclusion clauses. (Para 83 , 84 , 85 , 87 , 88 , 89) |
| 20. limitations of liability clauses in banking terms (Para 86) |
[1] The Plaintiff, ML Breadworks Sdn Bhd ('the Plaintiff'), seeks through this action to recover the sum of RM383,769.33 from the Defendant, Malayan Banking Berhad ('the Defendant') being monies debited from the Plaintiffs account with the Defendant, in respect of cheque number 063367, which the Plaintiff maintains is a forged cheque, which the Defendant erroneously honoured.
[2] The brief background facts leading up to the present claim has been comprehensively set out in the Plaintiff and Defendant's summary of facts which I adopt here. In or around 29 May 2004, the Plaintiff opened a current account with the Defendant's branch located at Lot No. G(e)-006, Ground Floor, Mid-Valley, Phase 1, 59000 Kuala Lumpur. The Plaintiff was accorded the Current Account Number 51448631279 ('the Current Account'). The Current Account is subject to numerous terms and conditions. At the outset these terms formed a part of the account opening form signed by the Plaintiff. Subsequently in July 2007 the Current Account was subject to the Defendant's Terms and Conditions Governing Banking Accounts. The Defendant further contends that the Plaintiff is bound by the conditions printed on the cover of the cheque books issued by it to the Plaintiff.
[3] By way of the Plaintiff's Directors' Resolution dated 8 March 2010 which was received by the Defendant on or about 19 March 2010, the Plaintiff informed the Defendant that there would be two groups of authorised signatories in respect of the operation of the Current Account, namely:-
(a) Group A - Quek Seng Hwa and Toh Kiam Hwee;
(b) Group B - Goh Tong Pak and Lee Khia Yee
[4] The Resolution also provided for the following signing conditions:-
(a) That all cheques for an amount of up to RM50,0000-00 were to be jointly signed by one of the signatories from Group A together with one from Group B or to be jointly signed by both signatories in Group A or to be jointly signed by both the signatories in Group B; and
(b) That all cheques for an amount above RM50,000-00 were to be jointly signed by both the signatories in Group B.
[5] Prior to this vide letter dated 22 August 2007, the Plaintiff informed the Defendant that the Defendant was to contact one Ms. Jo-Ann Yeoh Cheng Im or one Ms. Lew Soo Fung (Sim) for any bank matters or queries.
[6] On 8 January 2010 the Plai
