Lack of contractual nexus and knowledge of fraud invalidated claims for recovery under mistake and unjust enrichment, while change of position defence protected the Defendant from liability.

In this case the Plaintiff (a bank) claims against the Defendant, a firm of licensed money changers, the sum of RM1,074,710.50, interest thereon, costs and declaratory relief. The sum of RM1,074,710.50 represents the proceeds arising from three forged cheques drawn on the account of an innocent third party, KOHOKU.

The facts giving rise to this claim are as follows. On 22.12.2009, 28.12.2009 and 7.1.2010, three Cashier's Orders (COs) were purchased at the Plaintiff bank's premises by persons unknown. The COs were made payable to the Defendant. The sum of the value of these COs is RM1,074,710.50.

As payment for these COs, the Plaintiff bank received three cheques drawn on the account of one of its customers, KOHOKU. Unbeknownst to the Plaintiff and KOHOKU, these cheques were forged. It was established in evidence that at the material time, the original cheque leaves were still in the possession of KOHOKU and the cheques presented were really altered cheques belonging to a former customer, "Maxx Hi Power". These three transactions were part of a series of nine (9) COs that were obtained using the same ploy by the unknown fraudster.

The three COs made out to the Defendant were subsequently cashed into the Defendant's account with Maybank (not the Plaintiff bank) on 22.12.2009, 28.12.2009 and 8.1.2010. It is not known who was actually responsible for cashing in the COs, or the true identity of the fraudster. Police investigations have, to date, established no link between the Defendant and the fraudster.

The Defendant says that it has no knowledge of any fraud or forgery that may have been perpetrated on the Plaintiff. Its account is that at the material time, it was approached by one "Allen", purportedly acting for a company called Source Code , seeking to buy certain relatively large sums of foreign currency from the Defendant. With the Defendant's agreement, the relevant sums in Ringgit Malaysia were deposited into the Defendant's account, whereupon the Defendant acquired foreign currency from another money changer, Sharazmin Resources , and duly sold on the foreign currency to Source Code. It turned out that the money deposited into the Defendant's account came from the COs that had been raised using the forged cheques.

The Plaintiff now seeks to recover the sum of RM1,074,710.50 paid to the Defendant under the COs. The Plaintiff brings this action as it has on 31.3.2010 fully reimbursed KOHOKU all sums wrongfully drawn from its account, amounting to RM2,872,950.50.

It is not in dispute that the COs in question were genuine. It was the cheques that were used to purchase the COs in question were forged.

The Plaintiff's claim

The Plaintiff founds its claim on two assertions.

Firstly, the Plaintiff says that the sum of RM1,074,710.50 was mistakenly credited into the Defendant's account and therefore, the Plaintiff is entitled to claim the money under s. 73 of the Contracts Act 1950 and the principle of moneys had and received. This may conveniently be termed "payment under mistake".

Further and/or in the alternative, the Plaintiff claims that the Defendant received the sum of RM1,074,710.50 as constructive trustee and is therefore liable to return the funds to the Plaintiff. This may conveniently be termed "the constructive trustee argument".

Section 73 of the Contracts Act 1950 provides:

73. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.

A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.

In support of this contention, the Plaintiff relies on Re Jones Ltd v. Waring and Gillow Ltd ^[1] a decision of the House of Lords. In this case, a rogue who was indebted to the WG under a hire-purchase agreement convincingly represented to J that he was the agent of a motor car company that was about to place a new model on the market. He further represented that WG, as would-be distributor of this new car, would like to engage J as sub-agent, and t

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