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2023 MarsdenLR 2421
HIGH COURT MALAYA KUALA LUMPUR
NEMONIA INVESTMENTS LTD – Appellant
Versus
AMBANK ISLAMIC BERHAD & ORS – Respondent
[Suit No: WA-22NCVC-306-05/2018]
The court established that banks owe a duty of care to non-clients, but the plaintiff must prove a breach of that duty, which was not demonstrated in most claims against the defendants.
Headnote:(A) Negligence - Duty of Care - Standard of Care - Anti-Money Laundering, Anti-Terrorism Financing and Proceedings of Unlawful Activities Act 2001 - The Plaintiff alleged that the Defendants were negligent in allowing fraudulent transactions to occur via their banking systems. The Court held that the Defendants owed a duty of care to the Plaintiff, despite the lack of a direct client relationship, fulfilling the proximity and foreseeability tests. The Plaintiff failed to prove that the Defendants breached their duty of care due to the absence of evidence establishing the expected standard of care for banking operations. The Court noted that the Defendants acted upon instructions from credible banks and did not foresee the fraudulent nature of the transactions. However, the 1st Defendant was found negligent for failing to act upon a notice of fraud. (Paras 9-10, 19-39, 55-64)
(B) The Court ruled that the Plaintiff's failure to provide expert evidence on the standard of care expected from bankers contributed to the dismissal of most claims against the Defendants. (Paras 30-32, 38-39)
Facts of the case:
The Plaintiff was a victim of a fraudulent scheme involving unidentifiable fraudsters who manipulated banking transactions through accounts held by the Defendants. The Plaintiff claimed damages for negligence in banking operations. The Defendants denied negligence, asserting that they acted under proper banking procedures.
Findings of Court:
The Plaintiff's claims against the 2nd to 4th Defendants were dismissed, while the claim against the 1st Defendant was allowed for RM263,178.30 due to negligence in responding to a fraud notice.
Issues: The main issues included whether the Defendants owed a duty of care to the Plaintiff and whether they breached that duty.
Ratio Decidendi: The Court established that a duty of care exists even without a direct client relationship, but the Plaintiff must prove the breach of that duty. The Defendants were not found negligent except for the 1st Defendant's failure to act on a fraud notice.
Result: The claim against the 2nd to 4th Defendants was dismissed; the claim against the 1st Defendant was allowed for RM263,178.30.
| Table of Content |
|---|
| 1. fraudulent scheme details and plaintiff's claims. (Para 1 , 2 , 4 , 5) |
| 2. defendants' alleged negligence and denial of claims. (Para 6 , 7 , 8) |
| 3. duty of care and standards expected from banks. (Para 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18) |
| 4. analysis of negligence claims against defendants. (Para 19 , 21 , 22 , 23 , 24 , 26 , 27 , 28 , 29 , 31 , 32) |
| 5. court's evaluation of actions taken by defendants. (Para 39 , 40 , 42 , 43 , 45 , 46 , 47 , 55 , 56 , 58 , 60) |
| 6. final orders and conclusions of the court. (Para 70) |
A. Introduction - Background Facts
[1] The Plaintiff is a victim of a fraudulent scheme or scam undertaken by an unidentified group of individuals. Participants in this scheme allegedly include one Siti Mah Penggawa through her accounts held in the name of Matt Advance Trading or Weez Global Trading in the banks identified as Defendants.
[2] The Plaintiff contends that its lawyer, Messrs Chrysses Demetriades & Co, was duped by unknown individuals to cause funds from its account held in the Bank of Cyprus to be paid to Matt Advance Trading or Weez Global Trading. The following sums were transferred from the Bank of Cyprus to the aforesaid accounts as particularized below:
All these payments were made under transactions undertaken through the Swift system. The Defendants had credited payments to these bank accounts after receiving the appropriate instructions from the instructing banks in accordance with the notices issued according to the Swift system.
[3] I do note that Amlslamic Bank Berhad did also receive the sum of about Euro 80,000.00 on 2 January 2014 but this issue was not pleaded by the Plaintiff as part of its claim against the Defendants. Therefore, I must disregard the said transaction as it was not specifically pleaded.
[4] Various notices concerning the invalid payments or fraudulent transactions were issued by the following entities to the Defendants which are identified below:
(A) AmBank Islamic Bank Berhad
(B) Alliance Islamic Bank Malaysia Berhad
(C) Al-Rajhi Bank Berhad
[5] The Plaintiff claims that the Defendants had been negligent in undertaking their business as bankers in Malaysia and that their aforesaid negligence caused damages to the Plaintiff. Notices of demands and meetings were held with the said Defendants. Unhappy with the responses, the Plaintiff brought this action which led to the trial held on 28 October 2021 and 7 March 2023. The following witnesses gave evidence:
Plaintiff's witness
a) Sinelnik Yury (WSP-W1)
1st Defendant's witness
b) Mohd Zulhaini ZuallCobbey (WSD-W1) 2nd Defendant and 4th Defendants' witness
c) Anizan Mohamad AN (WSD-W2)
d) Rozita Talib (WSD-W3)
3rd Defendants witness
e) Suzzana Alysa Surul (WSD-W4)
f) Edrian Mohd (WSD-W5)
B. Plaintiff's Claim And Defence
[6] The Plaintiff claims that the Defendants were:
(i) negligent in allowing the said fraudsters to open and operate their accounts with the bank.
(ii) negligent in not ensuring that these fraudulent transactions are identified and stopped.
(iii) negligent by failing to monitor inbound payments to identify potentially suspicious activities or turning a blind eye to suspicious activities.
(iv) negligent in allowing fraudsters to abuse and misuse the banking system to commit fraud.
(vii) negligent by failing to comply with regulatory requirements to prevent money laundering.
(viii) negligent by failing to verify the authenticity of payment orders as the parties, Nemonia and the fraudsters (Matt Advance Trading and Weez Global) did not have any relationship earlier.
(ix) negligent by facilitating or making it easier for the fraudster to undertake their scheme against the Plaintiff.
[7] The Defendants deny the above claims and allege that they were not negligent, especially taking into account that (i) they had acted under the instructions given by the paying bank (Deutsche Bank and Society General) and/or (ii) that they did not owe any duty of care to the Plaintiff as it was not their client
