Syarikat Islamiyah

- vs -

Bank Bumiputra Malaysia Bhd

Judgment

CT Gunn J

1. The sole proprietor of a firm trading as Syarikat Islamiyah (the plaintiff) applied under Ord.14 of the Rules of the High Court 1980 for leave to enter final judgment against Bank Bumiputra Malaysia Bhd (the defendant) for the recovery of $26,800 with interest at the rate of 8% pa on the judgment sum from the date of judgment until the date of realization and costs.

2. In an affidavit affirmed by one Teh Ah Huay alias Aishah M Eusoff Teh, the administrative manager of the plaintiff, it was averred that at all material times the plaintiff was a customer of the defendant and had a current account number 081–0029770 at the defendant’s Taman Melawati branch office. The defendant paid out a sum of $26,800 on six cheques purporting to have been drawn by the plaintiff payable to bearer and debited the plaintiff’s account with the said amount The relevant particulars are as shown below:

   	Date	Cheque No.	Amount
   1. 2. 3. 4. 5. 6.	04 Sept 1984 22 Sept 1984 24 Sept 1984 25 Sept 1984 27 Sept 1984 03 Oct 1984	166301 166304 166321 166322 166323 166332	$2,000 $2,000 $5,000 $10,000 $4,000 $3,800
   			$26,800

3. The defendant paid out the said sum of $26,800 despite the fact that the cheques concerned were forged and debited the plaintiff’s account for the said amount. In para 6 of the defendant’s statement of defence filed on 21 September 1986 the defendant admitted that it had paid out the said amount on the cheques concerned and had debited the plaintiff’s account with the amount thereof, but denied the averment in para 6 of the plaintiff s statement of claim that the plaintiff did not draw the said cheques or authorized the drawings thereof and that the signatures thereon were forged by some person unknown and that in the premises the defendant had no authority to pay the said cheques

4. In an affidavit of one Md Yusuff Ahmad, the branch manager of the defendant, it was averred that the defendant paid the cheques in question in good faith and in the ordinary course of business. It was also averred that in a report lodged with the police the sole proprietor of the plaintiff had stated that the writing on the cheques in dispute was that of one Awang alias Che Mah Che Lob. The said statement is contrary to the pleading in para of the statement of claim wherein the plaintiff had pleaded that the signatures on the cheques were forged by some person unknown. The report was made to the police in 1984 with the personal particulars of the forger stated therein but since then no charges have been preferred against the said Awang who was arrested by the police but later released without being charged in court.

5. In his submission Mr. Shamsul Bahrain, counsel for the defendant, stated that there were triable issues.

   • First, he contended that the plaintiff must produce the cheques in question and prove forgery.

   • He also contended that as the defendant had paid the cheques in good faith and in the ordinary course of business, the defendant was protected under s 60 of the Bills of Exchange Act 1949, which reads as follows:

   When a bill payable to order on demand is drawn on a banker, and the banker on whom it is drawn pays the bills in good faith and in the ordinary course of business, it is not incumbent on the banker to show that the indorsement of the payee or any subsequent indorsement was made by or under the authority of the person whose indorsement it purports to be, and the banker is deemed to have paid the bill in due course, although such indorsement has been forged or made without authority.

6. Counsel also referred to the judgment of Ungoed Thomas J in the case of Selangor United Rubber Estates, Ltd v Cradock [1968] 2 All ER 1073, wherein his Lordship had referred to s 60 of the United Kingdom Bills of Exchange Act 1882, which is in pari materia with s 60 of our Bills of Exchange Act 1949. His Lordship had said that the object of s 60 was to protect the paying banker who pays ‘in good faith and in the ordinary course of business’, though negligent It was the contention of Mr. Shamsul Bahrain that that section therefore applied to an indorsement by an agent in fraud of his principal.

7. With respect to the contention of counsel, it must be pointed out that the object of s 60 of the Bills of Exchange Act 1949 is to protect the paying banker against forged or unauthorized indorsement. That section does not apply to forged or unauthorized signatures which are governed by s 24 of the Bills of Exchange Act 1949 which is as follows:

   Subject to the provisions of this Act, where a signature on a bill is forged or placed thereon without the authority of the person whose signature it purports to be, the forged or unauthorized signature is wholly inoperative, and no right to retain the bill or to give a discharge therefor or to enforce payment thereof against any party thereto can be acquired through or under that signature, unless the party against whom it is sought to retain or enforce payment of the bill is precluded from setting up forgery or want of authority: Provided that nothing in this s shall affect the ratification of an unauthorized signature not amounting to a forgery.

8. In this case although it would appear that there was no or insufficient evidence to prove beyond reasonable doubt for purposes of criminal proceedings that the signatures on the cheques concerned were forged by the said Awang, yet I was satisfied that there was evidence adduced to prove on a balance of probabilities in this case that the signatures on the cheques were not those of the plaintiff’s but were forged or placed thereon without the plaintiff’s authority and were therefore wholly inoperative. I agreed with Mr. Hisham, counsel for the plaintiff, that where the signature on a cheque is forged there was therefore no mandate to the bank: See London Joint Stock Bank Ltd v Macmillan & Arthur [1918] AC 777. If a banker pays such a cheque, he pays without a mandate and cannot debit his customer’s account.

9. In this connection I would refer to the case of Kepitigalla Rubber Estates Ltd v National Bank of India Ltd [1909] 2 KB 1010. In that case, the secretary of a company forged the signatures of two of its directors on a number of cheques. The defendants, who were the company’s bankers, paid those cheques and the plaintiffs contended that the cheques were paid without its authority. The bank on its part contended that the customer was under a duty to keep his cheque book under lock and key and if by his breach of duty, a third party is given the opportunity to forge the customer’s signature, the loss must fall on the customer. The trial judge, Bray J, whilst acknowledging that there was a duty on the part of a customer to exercise care in drawing up his order, rejected the suggestion that there was a corresponding duty on the part of the customer to take reasonable Precautions to prevent his servants from forging his signature. He was the view that it was unnecessary to imply such a term into the contract between a banker and his customer and that, as between two innocent parties, the banker was in a better position to bear the loss. His Lordship said, at p 1025:

   If the bank desire that their customers should make these promises they must expressly stipulate that they shall I am inclined to think that a banker who required such a stipulation would soon lose a number of customers. The truth is that the number of cases where bankers sustain losses of this kind are infinitesimal in comparison with the large business they do, and the profits of banking are sufficient to compensate them for this very small risk. To the individual customer the loss would often be very serious; to the banker it is negligible.

10. Reference must also be made to the recent case of Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1985] 2 Lloyd’s Rep 131 in which case the extent of the duty of care of a bank customer towards his banker was, among other matters, considered by the court and it was held by the Privy Council, inter alia, that the business of banking was the business not of the customer but of the bank. They offer a service, which was to honour their customer’s cheques when drawn upon an account in credit or within an agreed overdraft limit. If they pay out upon cheques which were not his, they are acting outside the mandate and cannot plead his authority in justification of their debit of his account. This is a risk of the service which it is their business to offer.

11. In this case the defendant had paid the said cheques without the plaintiff’s mandate and must therefore bear the loss and cannot debit the plaintiff’s account.

12. Another issue raised by Mr. Shamsul Bahrain was concerned with procedure. He stated that it was a necessary condition for proceedings under Ord.14 of the Rules of the High Court 1980 to be supported by an affidavit which complied with Ord.14 r 2(1). He pointed out that the affidavit of the said Teh Ah Huay did not comply with Ord.14 r 2(1) and in particular, Form 18 in that it did not state that the deponent verily believed that there was no defence to the action and that it was within his own knowledge that the said debt was incurred and was still due and owing. The point was raised by counsel for the defendant during argument in chambers on 23 September 1987 and counsel for the plaintiff in an effort to remedy the deficiency affirmed a supplemental affidavit sworn on 24 September 1987. During further argument in open court on 20 June 1988 Mr. Shamsul Bahrain submitted that the plaintiff’s counsel had no right to file the supplemental affidavit.

13. In reply to this point Mr. Hisham referred to the affidavit of Teh Ah Huay affirmed on 7 November 1986 and pointed out that it has been clearly stated therein that the debt is owing and due Counsel then referred to the English Court of Appeal case of Les Fils Dreyfus et Cie Societe Anonyme v Clarke [1958] All ER 459 where it was held that the court had jurisdiction to allow a defective affidavit filed in support of a summons under Ord.14 r 1 to be supplemented by further affidavits and that a defect could thus be cured In that case the original affidavit filed was defective in two respects, namely, that it neither verified the original debt nor verified the assignment of it, but the former defect had been cured by the subsequent affidavits and the latter defect had been cured by the production of the assignment before the master: Begg v Coopers (1878) 40 LT 29. It was therefore the submission of Mr. Hisham that any defect in the original affidavit was not fatal to the application for final judgment and could be rectified and was so rectified by the filing of a corrective supplementary affidavit Counsel also referred to the following passage in the Supreme Court Practice 1985 vol I at p 149:

    The evidence on an appeal to the judge in chambers should ordinarily be the same as it was before the master or district registrar; but since such an appeal is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter afresh as though it came before him for the first time, save that the party appealing has the right as well as the obligation to open the appeal, it would seem that the judge in his discretion is free to admit fresh evidence, and he frequently does so in the absence of special reasons (see Evans v Bartlam [1937] AC 73; Krakauer v Katz [1954] 1 WLR 278; [1954] 1 All ER 244, CA).

14. I have considered the short supplementary affidavit affirmed by Mr. Ahmad Hisham Kamaruddin on 24 September 1987 wherein he has simply stated that he verily believed that the defendant had no defence to the plaintiff’s claim and that the defence filed was for the purpose of delay and an abuse of the process of the court I agreed that the filing of that short supplementary affidavit to cure a minor defect did not prejudice the defendant in any way and therefore accepted it.

15. Having considered the arguments of both counsel I confirmed my decision in chambers dated 23 December 1987 when I agreed with the learned senior assistant registrar that there were no triable issues in this case and that leave for judgment should be granted for the plaintiff to enter judgment against the defendant as prayed for.

Cases

Selangor United Rubber Estates, Ltd v Cradock [1968] 2 All ER 1073; London Joint Stock Bank Ltd v Macmillan & Arthur [1918] AC 777; Kepitigalla Rubber Estates Ltd v National Bank of India Ltd [1909] 2 KB 1010; Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1985] 2 Lloyd’s Rep 131; Les Fils Dreyfus et Cie Societe Anonyme v Clarke [1958] All ER 459; Begg v Coopers (1878) 40 LT 29

Legislations

Bills of Exchange Act 1949: s.24, s.60

Bills of Exchange Act 1882 [UK]: s.60

RHC 1980: Ord.14 r 2(1), Form 18