A bank may be held liable for allowing payments on forged cheques where it fails to verify signatures against established mandates; however, a plaintiff can be found partially responsible if it neglects adequate internal controls and checks.

[1] The appeal before us was from a decision of the High Court at Bintulu which had allowed the plaintiff 's claim against the defendant.

The appellant/defendant was a commercial bank operating a branch at Bintulu and where the respondent/plaintiff maintained a current account (No: 1106-0010193057)(bank account).

[2] The respondent's/plaintiff 's action was essentially premised on the allegation that the appellant/defendant had unlawfully and/or without mandate or authority honoured forged cheques drawn on the respondent's/plaintiff 's bank account thereby causing loss to and/or conversion of respondent's/plaintiff 's monies. The respondent/plaintiff sought for recovery of those sums wrongfully debited from their current account.

[3] After having considered the submission of the respective counsel for the parties, we had on 14 November 2013 set aside the orders of the High Court.

In this grounds now issued for our decision, the appellant/defendant will be referred to as the bank, while respondent/plaintiff as just the plaintiff, to best capture the factual context in which the controversy between the parties had arisen.

Background

[4] The plaintiff was a Kuala Lumpur based company with an office in Bintulu manned by a single-staff, namely, a Manager overseeing all its administrative and financial matters. The Manager at the material time of the impugned transactions was one Altar Roland Anak James Nyandang (AR).

[5] The bank account was opened in 2001 and in the related plaintiff 's company resolution of 19 May 2001, it was provided that the bank account would be operated on the following mandate:

(a) By the signatures of any two of the following for drawing of amounts not exceeding RM3,000.00:

(i) Clair Sawat Mai @ Anne Mai (Director C)

(ii) Nik Roslizaini binti Nik Abdullah (Director N)

(iii) AR

(b) By the signatures of both the following for drawing of amounts in excess of RM3,000.00:

(i) Director C

(ii) Director N

[6] An imprint of the plaintiff 's rubber stamp/chop, ostensibly to be used on the cheques to be drawn by the plaintiff, was affixed at the bottom of the plaintiff 's company resolution. However there was no specific requirement stated that such affixed rubber stamp/chop would constitute part of the mandate for clearance of cheques.

[7] Following the aforesaid plaintiff 's company resolution, the bank had obtained on its standard specimen signature cards, the signatures (separately, that is) of Director C, Director N and AR. Similar specimen signatures were also provided by the three signatories on the Bank's Signature Scanner Form.

[8] The plaintiff 's rubber stamp/chop was however included for in the Signature Scanner Form (termed by the learned trial judge as the 'mandated company chop') and this was in the following manner:

"Panaron Control Sdn Bhd

Co. No. 471527-V

...........................................

Authorised Signatures"

[9] The complaint of the plaintiff was that some 196 cheques (the suit originally cited 206 cheques) drawn on the plaintiff 's account with the bank had been honoured and paid out (individually for sums below RM3,000.00) when at least one of the two signatures thereon was forged and was not signed by either Director C or Director N.

[10] During the later stages of the trial, a further point taken by the plaintiff wa