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BANK OF CEYLON v. KOLONNAWA URBAN COUNCIL
NLR51V73
1949 Present : Dias and Windham JJ.
BANK OF CEYLON, Appellant in No. 421, and KOLONNAWA URBAN COUNCIL, Respondent
S. C. 421-432-D. C. Colombo, 16,562 M
Banker and customer-Banker
paying forged cheque-On whom does loss fall?- Bills of Exchange Ordinance (Cap.
68), s. 24--Onus-Estoppel.
A banker who pays out money on a cheque bearing the forged signature of a
customer cannot charge the amount so paid out to the account of the customer,
unless facts or circumstances exist which in law preclude or estop the customer
from pleading that his signature was forged.
Where a banker sets up the genuineness of a signature which is alleged by the
customer to be forged, the burden of proof is on the banker.
" As between a bank and its customer there is no implied agreement by the latter
to take precautions, in the general course of carrying on his business, against
forgeries on the part of his servants. Such estoppels will arise if, after
knowledge of a forgery, the customer does anything to mislead the bank and the
position of the bank is thereby prejudiced."
APPEAL
and cross-appeal from a judgment of the District Judge, Colombo.
S. J. V. Chelvanayagam, K.C., with G. S. Barr Kumarakulasinghe and
Izaadeen Mohamed, for the plaintiff appellant in 422 and respondent in
421.-The plaintiff Council sued the defendant Bank for the recovery of Rs.
27,000 covered by cheques Dl, D2 and D3 for Rs. 3,000, Rs. 4,000 and Rs. 20,000
respectively. The plaintiff's case was that the payment by the defendant Bank on
these cheques and debiting the plaintiff's account with these sums was unlawful
in that the signatures appearing on these cheques were not the genuine
signatures of the persons authorised to sign on behalf of the Council, i.e.,
Chairman and the Secretary, but were forgeries. The defendant's case was that
the debiting to the plaintiff's account of such sums was perfectly lawful as the
signatures were genuine. The defendant also pleaded that the plaintiff was
estopped from denying that the signatures were genuine but that plea of estoppel
was abandoned in the course of the trial. The District Judge held for the
defendant Bank with respect to Dl and D2 but with respect to D3 he held for the
plaintiff. It is submitted that the finding of the trial judge with respect to
D3 is correct but the finding with respect to Dl and D2 cannot be supported on
the evidence in the case.
The relationship between customer and bank is the same as that between creditor
and debtor. The law on this point is clear and authorities all point the same
way. The Bank is authorised to pay out money only on a mandate of the customer
and unless the Bank proves that cheques were signed by the customer the Bank
cannot evade liability. It may be that under certain circumstances the plea of
estoppel may be available to the bank- But estoppel though pleaded has been
abandoned in the course of the case. The only question which arises in this case
is whether or not the cheques in question or any one or more of them were signed
by both the Chairman and the Secretary. For the defendant to succeed in respect
of any of these cheques both signatures on such cheque must be genuine. The
initial burden to prove that signatures on these cheques are genuine is on the
bank. See Bennet v. London and County Bank [(1385-6) 2 T. L. R. 765.].
Mere negligence on the part of a customer is no defence to a bank to deny
liability with respect to money paid out on forged cheques. See Kepitigala
Rubber Estates Limited v. National Bank of India Limited [{1909)L. R. 2 K. B.
1010.]
A careful analysis of the evidence shows that there is no reliable evidence
at all to prove that any signature on any of these cheques is genuine. The
finding of the trial judge with respect to Dl and D2 is based on theories not
founded on evidence. The plaintiff should have been given judgment for Rs.
27,000 and costs.
N. .E; Wee
