N3405

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 893 OF 2005

BETWEEN:

RICHARD MANUI
Plaintiff

AND:

ANZ BANKING GROUP (PNG) LIMITED
Defendant

Waigani: Gavara-Nanu, J

2007:	25 September
2008: 	1 July

NEGLIGENCE – Duty of care owed by a bank to its customers – Duty of a bank to protect its customers’ Accounts against fraud – Where forgery is obvious on the face of bank documents – A bank claiming signatures on bank documents belong to the customer – Bank has the onus to prove its assertion – Bank acting to its own peril in failing to prove its assertion.

Cases cited:

Papua New Guinea Cases
Bank of Hawaii (PNG) Limited v. Papua New Guinea Banking Corporation Limited & 2 Ors (2001) N2095
MVIT v. Etape [1994] PNGLR 596
MVIT v. Pupune [1993] PNGLR 370
Papua New Guinea Institute of Medical Research v. Papua New Guinea Banking Corporation N1934

Overseas Cases
Commercial Bank of Australia v. Flannagan (1932) 47 C.L.R. 461 
Commissioner of Taxation v. English, Scottish & Australian Bank [1920] A.C 683
Kolta Development Pty Ltd & Ors v. The State & Ors N1470
Lloyds Bank v. Savory [1933] A.C. 201
London Bank of Australia v. Kendall (1920) 28 C.L.R. 401
Marfani v. Midland Bank Limited [1968] 1 W.L.R. 956
Midland Banking Limited v. Reckitt [1933] A.C. 1
Orbit Mining & Trading Co. Limited v. Westminster Bank Limited [1963] 1 Q.B. 794
Saving Bank of South Australia v. Wallman (1935) 54. C.L.R 688
Shaw v. The C’wealth of Australia [1963] PNGLR 119
Supreme Court Ref. No. 4 of 1980 (No.2) [1982] PNGLR 65 

Counsel:
T. Tingnni, for the plaintiff
C. Makail, for the defendant 

1 July, 2008 

1	gavara-Nanu, J:	The plaintiff claims K18, 790.00 in damages against the defendant with interest at 8% and costs. The plaintiff was a Prime Customer with the defendant and held a Bonanzer Account No. 11202904 (the Account) at the Boroko branch of the defendant. The plaintiff’s claim arises out of the allegation by the plaintiff that between 3 August and 26 October, 2004, the defendant, without authority debited the amount claimed against his above Account. The plaintiff alleges that in the period mentioned above, he did not make any withdrawals from the Account or authorized withdrawals totalling K18, 790.00. The plaintiff alleges that the defendant paid out K18, 790.00 from the Account without any authority either express or implied from him. 

2	The plaintiff’s claim is based on negligence, in that it is claimed that the defendant breached a duty of care owed to him as its customer to look after and protect his funds in his Account in accordance with safe banking practices. Thus the plaintiff says that the defendant was negligent in paying out the K18, 790.00 from his Account without his authority. 

3	In the period stated above, the plaintiff alleges that there were 21 unauthorized withdrawals from his Account amounting to K18, 790.00. 

4	In the Statement of Agreed and Disputed Facts filed on 27 July, 2006, the parties agreed that the plaintiff was a Prime Customer with the defendant and at all material times operated the said Account with the defendant’s Boroko branch. It was also agreed that K18, 790.00 was debited against the Account through withdrawals made with withdrawal forms or slips in the period stated above. It was also agreed that the proof of plaintiff being a customer of the defendant was by plaintiff’s specimen signature which was kept by the defendant. It was further agreed that the plaintiff did lay a complaint with the defendant resulting in the defendant directing a "stop payment" on the Account and an internal investigation being conducted by the defendant on the plaintiff’s complaint. 

5	What is in dispute is the plaintiff’s claim that the payments or 21 withdrawals totalling K18, 790.00 against his Account were unauthorized. The defendant claims that all the withdrawals were made personally by the plaintiff by signing all the withdrawal forms. The defendant therefore says that the plaintiff authorized the debiting of various amounts totalling K18,790.00 against his own Account. The defendant says all the withdrawal forms bear the plaintiff’s signature which it says is the proof that he made the withdrawals. 

6	The plaintiff has claimed that in the period stated above, which is when the withdrawals were made he was in Wewak trying to run his PMV business. The defendant disputes this and says that plaintiff was in Port Moresby at that time and says that plaintiff personally made the withdrawals from the Account. The defendant therefore denies liability. 

7	The issue to be determined is whether the withdrawals made in the period mentioned above totalling K18, 790.00 which was debited against the plaintiff’s Account were made by the plaintiff personally. If it is determined that the withdrawals were made by the plaintiff as claimed by the defendant then that will be the end of the matter. But if it is determined that withdrawals were made by someone other than the plaintiff without the plaintiff’s authority then the next question will be whether the defendant was negligent in not preventing such unauthorized withdrawals. And if the defendant was negligent then it will follow that it is guilty of breaching the duty of care it owed to the plaintiff by failing to protect the plaintiff’s funds from being illegally withdrawn.
 
8	The next issue that will arise is the measure of damages for the plaintiff.

9	The plaintiff relied on his two affidavits, one was sworn on 21 September, 2006 and the other was sworn on 14 September, 2007. He also relied on an affidavit sworn by Mr Sam Bangui on 2 August, 2006. The plaintiff and Mr Bangui also gave evidence at the trial. The gist of plaintiff’s affidavit and oral evidence is that from 29 August, 2004 to 14 November, 2004, which is the period in which all the withdrawals were made, he was in East Sepik Province trying to get start his PMV business, with a vehicle he bought in Port Moresby, which was a Toyota Dyna, which he had shipped to East Sepik Province. He says the vehicle arrived at the Wewak wharf on 6 September, 2007, and he stayed in Wewak for almost three months. 

10	Before the plaintiff went to Wewak, he told Mr Bangui to check his Post Office Box for his incoming mail. He authorized Mr Bangui to open all incoming mail and read them and inform him of any urgent matters. Plaintiff’s bank statements were in one of those incoming mail and when Mr Bangui checked the statements, he noticed that there were withdrawals made by someone totalling K18, 790.00. Mr Bangui then phoned the plaintiff on 25 October, 2004 and informed him of the withdrawals. As a result the plaintiff travelled to Port Moresby from Wewak on 14 November, 2004. The plaintiff has adduced evidence of his dates of travel to and from Wewak by producing copies of his airline tickets. The period between those dates of travel is consistent with the period he says he was in Wewak. 

11	On 25 October, 2004, when Mr Bangui informed the plaintiff about the withdrawals, he instructed the defendant through Mr Francis Waranduo, an employee of the defendant to put "stop payment" on his Account. However, after "stop payment" was put on the Account, on the next day which was 26 October, 2004, the last withdrawal was made from the Account for the amount of K590.00. 

12	The defendant as I alluded to earlier denies liability to plaintiff’s claim and maintains that withdrawals were made personally by the plaintiff. In its denial, the defendant relies on evidence given by two of its staff, Mr Leo Kamara who is the Manager, Commercial Banking and Ms Seneka who is the Branch Manageress who at relevant times was working at the defendant’s Boroko Branch. The evidence by Mr Kamara covered the internal investigations he conducted into the complaint made by the plaintiff, including his interview with an employee of the defendant Ms Patricia Patapul on 29 December, 2004. 

13	In his evidence, Mr Kamara told the Court that all withdrawals made against the plaintiff’s Account were made in accordance with normal and accepted banking practices and procedures. He said all the necessary safe guards and banking requirements to effect proper and valid withdrawals were followed and complied with by the defendant and said that the defendant made those payments from the plaintiff’s Account only after it was satisfied that withdrawal forms bore the plaintiff’s signature. In other words the defendant was satisfied that all the withdrawals were made personally by the plaintiff. 

14	Ms Seneka’s evidence was that she interviewed Ms Patapul who was a teller with the defendant who had served the plaintiff on most times when he went to the bank to withdraw money from his Account. In the interview, Ms Patapul told Ms Seneka that as far as she could remember all the withdrawals were made by the plaintiff personally. Ms Seneka also told the Court that she compared one of the signatures in one of the withdrawal forms with the plaintiff’s specimen signature kept by the defendant and both signatures matched. She also told the Court that the plaintiff was present in her office when she questioned Ms Patapul regarding the withdrawals and said that the plaintiff was angry and was uncooperative and kept saying to her that withdrawals were unauthorized. She said because the plaintiff was not co-operating, the discussion between her, Ms Patapul and the plaintiff ended abruptly. Ms Seneka said that when she saw that one of the signatures on one of the withdrawal forms matched the plaintiff’s specimen signature she formed the opinion that all the signatures in the rest of the withdrawal forms belonged to the plaintiff.

15	It should be noted that the plaintiff confirmed that he made some withdrawals before Ms Patapul before going to Wewak and when making one of those withdrawals, Ms Patapul told him to change his old specimen signature that was with the defendant because the old specimen signature was easy to forge. As a result, the plaintiff changed his specimen signature and the plaintiff says that the signature that was forged in the withdrawal forms is the new or the second specimen signature he made before Ms Patapul. 

16	It should also be noted that Ms Patapul was going to be called as, I think, the principal witness for the defendant, but she failed to turn up. The trial was adjourned several times over two days to allow her to give evidence but despite Mr Makail’s determined efforts to locate her, including going to her residence and to the Port Moresby General Hospital after information was given to Mr Makail that she had gone to the hospital, she could not be found. The Court was told that she turned up on the first day of hearing but she could not give evidence because other witnesses were still giving evidence. On the subsequent days, she failed to turn up in Court although she knew that she was still required to give evidence as a witness for the defendant. Her failure to give evidence resulted in the defendant closing its case without her evidence. It should also be noted that when this matter came on for trial, Ms Patapul was no longer employed by the defendant because she was terminated sometime back over some disciplinary matters. Her termination was effected sometime after her interview with both Mr Kamara and Ms Seneka over this matter. 

17	Mr Tingnni submitted that the plaintiff’s cause of action is based on negligence because the defendant being the plaintiff’s banker owed a duty of care to the plaintiff as its customer to protect the funds held in his Account. It was submitted that the defendant breached that duty of care by allowing unauthorized withdrawals to be made from the Account.

18	Mr Makail on the other hand had submitted that these proceedings should be dismissed because there is no cause of action as the relationship between the defendant and the plaintiff was one based on contract. The action by the plaintiff being based on negligence, it was submitted that this action cannot possibly succeed. In the alternative, it was submitted that even if the plaintiff has correctly based his claim on negligence, there was no duty of care owed to the plaintiff by the defendant because the defendant had done everything it could to protect the plaintiff’s funds. Furthermore, as soon as a complaint was receive from the plaintiff, internal investigations were carried out by the defendant in which it was found that the disputed signatures on all the withdrawal forms actually belonged to the plaintiff. Thus the defendant having complied with all its safe banking requirements it did not breach its duty of care to the plaintiff. 

19	It was also submitted that onus is on the plaintiff to prove his claim that the disputed signatures did not belong to him by calling expert witness to prove his claim or assertion. Thus it was argued that plaintiff having failed to discharge that onus, the plaintiff’s claims should be dismissed. 

20	It was however argued that if the Court found in favour of the plaintiff and found that defendant is liable then the plaintiff can only be entitled to judgment for K12, 000.00 and not K18, 790.00 because claim for K18, 790.00 has not been properly pleaded. It was also submitted that general damages has not been pleaded in the Statement of Claim therefore no general damages should be awarded to the plaintiff. 

21	In my opinion, the facts in evidence reveal that plaintiff’s action is properly based on negligence thus there is a cause of action against the defendant based on negligence. I form this opinion on the basis that the issue to be determined relates to whether there was negligence by the defendant in allegedly failing to protect the plaintiff’s funds from being fraudulently withdrawn from his Account. 

22	A number of cases were cited by counsel. Mr Tingnni relied mainly on Papua New Guinea Institute of Medical Research v. Papua New Guinea Banking Corporation N1934. Mr Makail on the other hand relied on a number of cases including Bank of Hawaii (PNG) Limited v. Papua New Guinea Banking Corporation Limited & 2 Ors (2001) N2095 and Papua New Guinea Institute of Medical Research v. Papua New Guinea Banking Corporation (supra). 

23	I have read both Bank of Hawaii (PNG) Limited v. PNGBC (supra) and Papua New Guinea Institute of Medical Research v. Papua New Guinea Banking Corporation (supra), which are the two main cases relied upon by counsel and I find that the circumstances in those two cases are different from the circumstances of this case, in that in Bank of Hawaii, the rogue who committed fraud was identified and in Papua New Guinea Institute of Medical Research the person who committed fraud was convicted. Thus in both cases the persons who committed fraud were identified. In the case before me, as far as the plaintiff is concerned, the person who allegedly committed fraud has not been identified and established by evidence. The plaintiff is therefore asking the Court to infer from evidence that someone forged his signature and illegally withdrew the amounts totalling K18, 790.00 from his Account. The plaintiff says this happened because of defendant’s negligence. The defendant as I alluded to earlier denies the plaintiff’s claim and says that all the withdrawals were made personally by the plaintiff. 

24	In spite of the differences in circumstances between this case and the two cases referred to above, I find the principles stated in those cases relevant and applicable here. 

25	The defendant has also argued that the plaintiff has failed to plead negligence in that particulars of negligence have not been properly pleaded. Thus it was argued that even if the plaintiff has properly based his claim on negligence, the failure to properly plead negligence should provide an alternative basis for the Court to dismiss the plaintiff’s claims.

26	I am of the opinion that negligence has been properly and sufficiently pleaded in paragraphs 5 and 6 of the Statement of Claim, in which the plaintiff alleged that payment of K18, 790.00 by the defendant was unauthorized. In my opinion, this sufficiently pleads negligence or carelessness on the part of the defendant. Thus negligence having been pleaded as the basis of plaintiff’s action, the failure by the plaintiff to plead s. 29 of the Bill of Exchange Act chapter No. 250 is not fatal. 

27	Furthermore, even if particulars of negligence may not have been properly or sufficiently pleaded in the Statement of Claim there were further particulars provided by the plaintiff regarding defendant’s alleged negligence. Thus the defendant had been fully informed of the claim of negligence against it and the basis of such claim. This overcomes any insufficiency in pleading negligence in the Statement of Claim by the plaintiff. 

28	More significantly, the parties having fought out the issue of the defendant’s liability on the claim of negligence by the plaintiff at the trial, the defendant cannot now hack back and complain that negligence has not been properly pleaded. See, MVIT v. Etape [1994] PNGLR 596 and MVIT v. Pupune [1993] PNGLR 370. The defendant therefore cannot now raise an objection to the plaintiff relying on negligence.
 
29	Whether the defendant was negligent or not is to be decided subjectively from the standard of a reasonable man carrying on business of banking and endeavouring to do so in such manner as is calculated to protect itself and its customers against fraud. See Lloyds Bank v. Savory (1933) A.C. 201 at 221 per Lord Warrington. This entails the duty owed by every bank to its customers. 

30	In Orbit Mining & Trading Co. Limited v. Westminster Bank Limited [1963] 1 Q.B. 794 at 824, Harlan L.J in discussing the term "negligence" said "negligence, I think, is equivalent to carelessness."

31	In the same case, Sellers L. J. at 813 said:

"A Bank’s decision as to whether it can properly accept a cheque has to be made at the time when the cheque is handed in at the counter or when it is received by post or soon after that before the cheque and paying-in slip are separated and the cheque is sent forward to the clearing house. This may involve the bank and its officials taking reasonable care to acquaint themselves and those of their servants who will handle a customer’s transactions with the character and position of a customer at the opening of an account and thereafter, and of the subsequent manner of using the account."
 
32	These principles were reiterated by Diplock L.J in Marfani v. Midland Bank Limited [1968] 1 W.L.R. 956 at 972 where his Lordship said:

"What facts ought to be known to the bank, i.e. what inquiries he should make, and what facts are sufficient to cause him reasonably to suspect that the customer is not the true owner, must depend upon current banking practice changes." 

33	The principles expressed in these cases would in my respectful opinion apply generally to any banking document that may be used to access funds held in a customer’s Account; such as cheques, withdrawal slips, deposit slips and so on.

34	Thus, generally, it is expected that where there is something either on the face or back of a document including a cheque, taken in relation to a customer for whom it is collected or made, which should put the bank to query, the bank would ignore it at its own peril. In cases where inquiries have to be made, such inquiries should be made in light of circumstances antecedent and present, See Midland Banking Limited v. Reckitt [1933] A.C. 1 and Commissioner of Taxation v. English, Scottish & Australian Bank [1920] A.C 683. Needless to say that it is always incumbent on the bank to take every precaution necessary to protect the interest of the true owner of the document. See Lloyds Bank v. Savory (supra). See, also London Bank of Australia v. Kendall (1920) 28 C.L.R. 401; Commercial Bank of Australia v. Flannagan (1932) 47 C.L.R. 461 and Saving Bank of South Australia v. Wallman (1935) 54. C.L.R 688. 

35	Having regard to these principles, the question here is, in what way was the defendant negligent if indeed it was negligent? The plaintiff has adduced evidence that he was in Wewak when payments were made from his Account, thus without his authority. He has also given evidence that as soon as he discovered the fraud he instructed the defendant to put a stop to any further payments from his Account. However, a day after the defendant put stop payment on his Account, there was one last payment made from the Account. 

36	The plaintiff travelled to Port Moresby and immediately lodged complaints with the police and the defendant and maintained his denial to the claim by the defendant that he made the withdrawals from his Account or authorized the payments personally. 

37	The defendant as I said earlier has contended that plaintiff had made the withdrawals himself and the withdrawal forms bear his signature, thus implying that in the period the plaintiff says he was in Wewak, the defendant says the plaintiff was in fact in Port Moresby.

38	It was argued by the defendant that it was incumbent on the plaintiff to call expert evidence to prove that the signatures on the withdrawal forms did not belong to him. The law is, he who asserts must prove. See Shaw v. The C’wealth of Australia [1963] PNGLR 119; Supreme Court Ref. No. 4 of 1980 (No.2) [1982] PNGLR 65; Kolta Development Pty Ltd & Ors v. The State & Ors N1470 and Bank of Hawaii (PNG) Limited v. Papua New Guinea Banking Corporation & Ors (supra). In my view, this proposition applies to the defendant, because the assertion is coming from the defendant in which it is saying that the signatures on the withdrawal forms belong to the plaintiff; thus it is incumbent on the defendant to prove its assertion. 

39	As to the duty of care owed to the plaintiff by the defendant, it is a normal banking practice that the defendant was expected to have checked the initials and signatures on the withdrawal forms. In that regard, although Mr Kamara and Ms Seneka say that signatures on the withdrawal forms matched the plaintiff’s specimen signature held by the defendant, my own examination of the signatures on all the withdrawal forms reveal a telling difference between the signatures on all the withdrawal forms and the plaintiff’s specimen signature which appears in Exhibit "I". By comparison, the signatures on all the withdrawal forms have a long loop at the bottom whereas the specimen signature in Exhibit "I" does not have such a loop at the bottom. The difference is in my observation so telling and conspicuous that it should have put the defendant upon an enquiry. Thus the defendant should have properly enquired whether the signatures on all the withdrawal forms were genuine by engaging the services of an expert, a document examiner, to verify if those signatures did belong to the plaintiff. This should have been done as part of the defendant’s case. It was in the defendant’s own interest to make such enquiry because it owed a duty of care to the plaintiff as its customer which included protecting his Account against fraud. 

40	In fact the difference between the signatures on all the withdrawal forms and the specimen signature is so obvious that it did not need a hand writing expert to detect it. As I alluded to earlier, the defendant having asserted that the signatures on all the withdrawal forms belonged to the plaintiff, the onus was on it to prove it. By shifting this burden to the plaintiff to prove that signatures on the withdrawal forms did not belong to him, the defendant had acted to its own peril. The end result is the defendant was negligent in not confirming that the signatures on all the withdrawal forms were genuine and that they belonged to the plaintiff. I am not sure whether Mr Kamara examined the signatures on all the withdrawal forms at all. If he did, all that can be said is, he carelessly ignored the telling difference between the signatures on the withdrawal forms and the plaintiff’s specimen signature. In regard to Ms Seneka, she said she only looked at one of the signatures on one of the withdrawal forms against the plaintiff’s specimen signature and concluded that the signatures on all the withdrawal forms belonged to the plaintiff. She was also negligent in that regard because first, she should have examined and compared the signatures on all the withdrawal forms against the plaintiff’s specimen signature and secondly, even by examining only one signature, she should have detected the obvious difference between the signature she examined and the specimen signature because as I said, the signatures in all the withdrawal forms were strikingly different to the plaintiff’s specimen signature. Thus, by comparing only one signature on one withdrawal form with the plaintiff’s specimen signature, Ms Seneka was even more careless and hence negligent.

41	In my view a thorough investigation into this matter could have revealed a clear case of fraud. In that regard, I consider that investigations made by Mr Kamara and Ms Seneka were carelessly made thus both were negligent in not discovering the fraud. The conduct of Mr Kamara and Ms Seneka as employees of the defendant binds the defendant. In this regard, I find on the balance of probabilities that the plaintiff was at Wewak at the relevant times when the withdrawals were made from his Account. Needless to say that he has adduced evidence through airline tickets proving that at the material times, he was in Wewak. This lends support to his claim that the signatures on all the withdrawal forms do not belong to him and that they were forged. 

42	The failure by Ms Patapul to turn up and give evidence for the defendant throws more suspicion on this case against her and the defendant. It is not for the Court to speculate but there are basis to be suspicious about the conduct of Ms Patapul. For instance, she served the plaintiff most times when he went to the bank to do banking before he went to Wewak and she told the plaintiff to change his specimen signature which he did before her and the signature forged is the one he made before her at her direction. As noted earlier in the judgment she was supposed to be the principal witness for the defendant and knew that she was required to give evidence. She turned up on the first day of the trial to give evidence for the defendant but she did not give evidence because other witnesses called before her were still giving evidence. On the next day and the day after, she deliberately failed to turn up in Court to give evidence. She could have shed more light on this case had she given evidence. This in my view leaves a big gap in the defendant’s case. I am therefore inclined to find in favour of the plaintiff. 

43	In the result, I find that the defendant is liable to plaintiff.

44	As to whether the plaintiff is entitled to claim general damages, I find that the plaintiff has not pleaded general damages thus he is not entitled to general damages. As to whether the plaintiff is entitled to claim K18, 790.00 or K12, 000.00, the latter being the amount suggested by the defendant, I find that the plaintiff has pleaded the amount of K18, 790.00 by alleging that signatures on all the withdrawal forms did not belong to him. This is supplemented by the further particulars provided by the plaintiff in the respect of his claim for negligence. The amounts from all the withdrawals altogether amount to K18, 790.00. I therefore  find that the plaintiff is entitled to K18, 790.00, which I now award.

45	I award interest at 8% from the date of the writ which is 16 June, 2005 to the day of judgement (1 July, 2008). For this period, I calculate the interest at K4, 581.18.

46	The total amount awarded to the plaintiff in damages and interest is K23, 371.18.

47	The defendant will pay the plaintiff’s costs.

Orders accordingly.

____________________________
Rageau Manua & Kikira Lawyers: Lawyers for the Plaintiff
O’Briens Lawyers: Lawyers for the Defendant