1. Action for conversion against a bank for payment of cheques allegedly bearing forged signatures of an authorized signatory. (Para 1 , 3 , 6 , 14 )
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2013 MarsdenLR 2141
HIGH COURT (KUALA LUMPUR)
ROSILAH YOP, JC
McLaren Saksama (M) Sdn Bhd – Plaintiff
Versus
Hong Leong Bank Bhd – Defendant
SUIT NO S-22–372 OF 2008
Advocates:
N Krishna Moorthy (Farrah Dina bt Alodin with him) (Fauzi, Ngah & Neasa) for the plaintiff.
Andrew Chiew (CB Loh and Sara Ann Chay Sue May with him) (Lee Hishammuddin Allen & Gledhill) for the defendant.
N Krishna Moorthy (Farrah Dina bt Alodin with him) (Fauzi, Ngah & Neasa) for the plaintiff.
Andrew Chiew (CB Loh and Sara Ann Chay Sue May with him) (Lee Hishammuddin Allen & Gledhill) for the defendant.
Important Points
In civil cases, the burden of proving forgery rests on the plaintiff on a balance of probabilities. Expert handwriting opinions without cogent grounds, a detailed process, or comparison with specimen signature cards are considered bare opinions and lack evidentiary value.
Subject
Banking Law - Forgery and Conversion
Act Referred
Bills of Exchange Act 1949: S.73A, S.24
Civil Law Act 1956: S.12
Evidence Act 1950: S.101(1), S.102, S.114(g), S.51
Civil Law Act 1956: S.12
Evidence Act 1950: S.101(1), S.102, S.114(g), S.51
Headnote
(A) Bills of Exchange Act 1949 - Sections 24 and 73A - Civil Law Act 1956 - Section 12 - Evidence Act 1950 - Sections 51, 101(1), 102 and 114(g) - Action for conversion regarding payment of cheques - Allegation of forged signatures - Burden of proof - Standard of proof for forgery in civil proceedings is on a balance of probabilities (Paras 16-17) - Onus rests on the plaintiff to establish the alleged forgery throughout the trial (Paras 18-20).
(B) Expert Evidence - Handwriting expert opinion - The principal object of expert evidence is to assist the court in forming its own opinion (Para 41) - A bare expression of opinion without cogent grounds or a detailed process showing how the conclusion was reached has no evidentiary value (Paras 42-45) - Failure to examine the specimen signature card is fatal to the party seeking to rely on the expert report (Paras 49-52).
(C) Hearsay Evidence - Statements made by a person not called as a witness are inadmissible (Para 37) - The court may draw adverse inferences from a plaintiff's decision not to call a witness who possesses key knowledge of the facts (Para 39).
Facts of the case:
A customer of a bank brought an action for conversion, alleging that the bank wrongfully paid 105 cheques by honoring forged signatures of an authorized signatory. The bank contended that the signatures were genuine or, alternatively, that the customer was precluded from claiming breach of mandate by the terms and conditions of the current account, or was estopped by conduct, or had negligently contributed to the loss.
Findings of Court:
The court found that the customer was bound by the current account rules as receipt had been acknowledged. The allegation of forgery was not proven because the signatory's testimony was inconsistent with undisputed cheques from the same period, the alleged admission of forgery by a third party was inadmissible hearsay, and the handwriting expert's report was a bare opinion lacking a stated basis and failing to analyze the specimen signature card.
Issues: The main issues were whether the customer was bound by the current account rules and whether the signatures on the 105 cheques were forged.
Ratio Decidendi: The burden of proving forgery lies with the plaintiff on a balance of probabilities. Expert handwriting evidence is merely assistive and must be supported by cogent data and a comparison with specimen signatures to be given weight; without such concrete footing, the report is a bare expression of opinion with no evidentiary value.
Result: Plaintiff’s claim dismissed with costs.
(B) Expert Evidence - Handwriting expert opinion - The principal object of expert evidence is to assist the court in forming its own opinion (Para 41) - A bare expression of opinion without cogent grounds or a detailed process showing how the conclusion was reached has no evidentiary value (Paras 42-45) - Failure to examine the specimen signature card is fatal to the party seeking to rely on the expert report (Paras 49-52).
(C) Hearsay Evidence - Statements made by a person not called as a witness are inadmissible (Para 37) - The court may draw adverse inferences from a plaintiff's decision not to call a witness who possesses key knowledge of the facts (Para 39).
Facts of the case:
A customer of a bank brought an action for conversion, alleging that the bank wrongfully paid 105 cheques by honoring forged signatures of an authorized signatory. The bank contended that the signatures were genuine or, alternatively, that the customer was precluded from claiming breach of mandate by the terms and conditions of the current account, or was estopped by conduct, or had negligently contributed to the loss.
Findings of Court:
The court found that the customer was bound by the current account rules as receipt had been acknowledged. The allegation of forgery was not proven because the signatory's testimony was inconsistent with undisputed cheques from the same period, the alleged admission of forgery by a third party was inadmissible hearsay, and the handwriting expert's report was a bare opinion lacking a stated basis and failing to analyze the specimen signature card.
Issues: The main issues were whether the customer was bound by the current account rules and whether the signatures on the 105 cheques were forged.
Ratio Decidendi: The burden of proving forgery lies with the plaintiff on a balance of probabilities. Expert handwriting evidence is merely assistive and must be supported by cogent data and a comparison with specimen signatures to be given weight; without such concrete footing, the report is a bare expression of opinion with no evidentiary value.
Result: Plaintiff’s claim dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Plaintiff alleges forgery and non-binding account rules; defendant contends signatures are genuine, plaintiff was negligent, and statutory defenses apply. (Para 7 , 8 , 9 , 10 , 11 , 12 , 21 , 22 , 23 )
3. The plaintiff failed to prove forgery due to inconsistent testimony, inadmissible hearsay, and an expert report lacking cogent grounds or specimen signature analysis. (Para 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 46 , 47 , 48 , 49 , 51 , 52 )
4. Forgery in civil cases is proven on a balance of probabilities; expert handwriting opinions must be supported by cogent data and specimen comparisons. (Para 16 , 17 , 18 , 19 , 20 , 41 , 42 , 44 , 45 , 50 , 53 , 54 )
6. What is the standard of proof for forgery in civil proceedings?
The onus is on the plaintiff to establish forgery on a balance of probabilities. The evidential burden only shifts to the defendant once the plaintiff has discharged this original burden. (Para 16 , 17 , 18 , 19 , 20 , 54 )
7. How does the court treat admissions of forgery made to parties but not testified in court?
Statements made by a third party admitting to forgery are inadmissible as hearsay if that person is not called as a witness. Failure to call such a witness may lead the court to draw an adverse inference. (Para 37 , 38 , 39 )
8. What are the requirements for a handwriting expert's opinion to be given evidentiary weight?
Expert opinions are not conclusive and must be supported by cogent grounds and the process used to reach the conclusion. Failure to examine the specimen signature card is often fatal to the evidence. (Para 41 , 42 , 44 , 45 , 47 , 48 , 49 , 50 , 52 , 53 )
Rosilah Yop JC:
THE PLAINTIFF’S CASE
[1]The plaintiff was a customer of the defendant and having the current account No 00100063923. The authorised cheque signatories of the said plaintiff’s current account are:
(a)Wong Kern Chen;
(b)Lum Siew Wai; and
(c)Leong Yee Fook.
[2]Anyone of these signatories can endorse cheques for RM5,000 or less. Cheques exceeding RM5,000 required joint endorsement by any two of the above authorised signatories.
[3]Between July 2000 and September 2002, the defendant paid various cash cheques amounting to RM465,040 purporting to be drawn by the plaintiff payable to bearer and debited the plaintiff’s account with the amount thereof.
[4]The particulars of the 105 cheques are pleaded in para 6 of the statement of claim.
[5]The plaintiff did not draw the said cheque or authorise the drawing of the said cheques.
[6]The signature on each of the said cheque was not that of the authorised signatories. The signatures were forged. The defendant had paid out the said cheques to the third party. In the premise, the plaintiff had suffered losses.
THE DEFENDANT’S CASE
[7]The defendant denies that the signatures of Leong Yee Fook were forged. It is the defendant’s case that Leong Yee Fook signed the cheques.
[8]The plaintiff did not notify the defendant that the signatures of the cheques, which were cleared between July 2000 and September 2002, were purportedly forged notwithstanding that the plaintiff knew and was obliged to do so. The plaintiff protested only for the first time that the signatures of the cheques were forged on 8 August 2003.
[9]In all the circumstances, the plaintiff is precluded by the rules, which form the terms and conditions for the current account, from contending the cheques were honored in breach of mandate, in the alternative, the plaintiff is estopped by conduct from doing so.
[10]Further and in the alternative, the defendant contends that the plaintiff negligently contributed to the alleged forged signatures on the cheques. The defendant contends that:
(a)the plaintiff’s directors failed to check or take responsible steps to check the plaintiff’s statement of accounts on monthly basis and hence, failed to detect the alleged irregular transactions involving the cheques;
(b)the plaintiff’s directors also failed to undertake regular review of its cheques and conduct regular reconciliation of cheques paid with the plaintiff’s monthly statement of account;
(c)the plaintiff’s directors failed to ensure that the cheques books were kept under the custody, control and/or possession of the plaintiff’s duly authorised signatories or persons authorised by the plaintiff to confirm the transactions of the cheques drawn against the current account; and
(d)the plaintiff’s directors failed to exercise reasonable care in supervising the plaintiff’s employees who during the material times had custody, control and possession of the plaintiff’s cheques book.
[11]The defendant had acted in good faith in clearing the cheques.
[12]Therefore the defendant is entitled to either a complete statutory defence under s 73ABills of Exchange Act 1949 s 12Civil Law Act 1956
ISSUES TO BE TRIED
[13]The agreed issues to be tried were stated in document marked as ‘R’ and reproduced as follows:
(1)Samada Plaintif adalah tertakluk kepada ‘Kaedah-Kaedah Akaun Semasa’ dan / atau ‘Kaedah-Kaedah Akaun Semasa Terpinda’ dalam pengendalian dan pengurusn akaun Plaintif di Defendan.
(2)Samada tandatangan pengisu cek dalam 105 cek-cek yang merupakan perkara subjek tuntutan (‘Cek-Cek’) ini telah dipalsukan.
(3)Samada Plaintif diestop daripada mendakwa Cek-Cek telah dipalsukan dan Defendan berhak untuk bergantung kepada Seksyen 24Akta Pertukaran Bil 1949
(4)Samada Defendan berhak kepada pembelaan di bawah s 73AAkta Pertukaran Bil 1949
(5)Samada Plaintif telah melakukan cuai sumbangan dalam pengeluaran Cek-Cek dan kerugian Defendan seharusnya dikurangkan sebahagian atau secara keseluruhan di bawah Seksyen 12Akta Undang-Undang Sivil 1956
ANALYSIS OF EVIDENCE AND FINDI
