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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO. 854 OF 2017 (CC3)
BETWEEN
TIMON AWARI trading as AMA CONTRACTORS
Plaintiff
AND
AUSTRALIA & NEW ZEALAND BANKING GROUP (PNG) LIMITED
Defendant
Waigani: Linge A J
2021: 17th & 25th November
CONTRACT – Banks Fiduciary relationship with client – duty of care-allegation of fraud – use of Cheque – breach of duty – implied contract.
The Plaintiff claims that his cheque book was stolen, and several transactions were conducted by a third-party using cheque from the stolen cheque book. The transactions were conducted even after the Plaintiff allegedly reported the loss of the cheque book. Defendant denied any reporting of the loss of the cheque book prior to the transactions in dispute and counter that the transactions took place following usual bank’s practice of honoring the Plaintiff’s payment order or signature and therefore they have not breached any duty of care.
Held
Cases Cited:
Papua New Guinea Cases
Kennedy Amun v Bank of South Pacific Ltd (2008)
Pija Grannies Ltd v Rural Development Bank Ltd (2010) N5829
Manui v ANZ Banking Group (PNG) Ltd (2008) N3405
Overseas Cases
Joachimson v Swiss Bank Corporation [1921] 3 KB 110
Llyods Bank Limited v EB Savory & Company [1933] AC 20 [1932] AH ER 105
Orbit Mining & Trading Co. Limited v Westwasher Bank Limited [1963] 1 QB 794
Marfani v Midland Bank Limited [1968] 1 WLR 956
Barclay Bank P/C v Quincecare Ltd [1992] 4 ALL ER 363
Counsel:
Mr. H Babe, for the Plaintiff
Ms. E Noki, for the Defendant
JUDGMENT
26th November, 2021
1. LINGE A J: This is a Judgment on a cause of action issued by the Plaintiff emanating from loss of cheque book belonging to him which was allegedly used by a third party to conduct unauthorized transactions with the ANZ Banking Group (PNG) Limited. Plaintiff claimed breach of duty by ANZ Bank resulting in loss of funds and consequential damages and loss.
2. Trial was conducted on the 25 November 2021. Counsel tendered written submissions.
Brief Facts
3. The Plaintiff was the owner of Cheque Account No. 12918256 at the Australia & New Zealand Banking Group (PNG) Limited (ANZ).
4. On or about 21 April 2013 in Lae, the Plaintiff allegedly lost his Cheque Book, and, on the 23 April 2013, he allegedly reported the loss to the Lae Branch and allegedly filled out the Customer Instruction form for the ANZ bank to issue a new/replacement cheque book.
5. The alleged lost cheque book contained 50 cheques with serial numbers from 000100 up to 000150.
6. Timon Awari conducted last transaction using the old serial numbered cheque of 000112 on the 23 April 2013 in the amount of K 50, 000.00, claiming that it was a signed cheque leaf he luckily had in his possession.
7. On the 28 May 2013 and 31 May 2013, Plaintiff conducted two transactions using the new cheque book issued to him on the 27 May 2013. The two cheques cashed were 000151 and 000152 for K 10,000.00 and K100,000.00 respectively.
8. Account balance after the last transaction of 31 May 2013 stood as K40,165.11, the plaintiff claims.
9. The plaintiff claims that five fraudulent transactions were conducted on his account 12918256 at the defendant bank by persons other than himself. The dates and amounts in the cheques illegally cashed are:
(i) 13 June 2013 Cheque No. 00000121 K 7,640.00
(ii) 24 June 2013 Cheque No. 00000127 K 9,400.00
(iii) 24 June 2013 Cheque No. 00000125 K17,800.00
(iv) 16 July2013 Cheque No. 00000131 K 9,700.00
(This Cheque was dishonoured as an over withdrawn)
(v) 2 August 2013Cheque No. 00000117 K 4,000.00
10. The plaintiff then formally lodged a complaint to the ANZ Bank on the 8 August 2013 claiming that he lost his cheque book on the 21 April 2013. He claimed that the five transactions on his new cheque book were fraudulently withdrawn by other persons from his cheque account using the stolen cheque book.
11. Plaintiff filed this cause of action claiming liquidated amount of K35,240.00 plus damages, costs and interest.
Issues
12. The issues to be determined are:
Evidence
Plaintiff
13. Plaintiff tendered four (4) affidavits all sworn by Timon Awari on the 22 October 2018, 19 February 2019, 25 February 2019 and 15 August 2019.
14. In his affidavit sworn on the 22 October 2018 the plaintiff deposes that he lost the cheque book on the 21 April 2013 and reported the loss on the same day and purportedly filled out the purported Customer Instruction form for issuance of a new cheque book.
15. Timon Awari also stated in his affidavit of 22 October 2019 that the new cheque book was issued to him on the 27 April 2013 which he picked up on the same date.
16. He also confirmed the dates, serial numbers and amounts contained in the five (5) cheques referred to in the Facts, he claimed were fraudulently withdrawn.
17. On the 19 February 2019, the plaintiff deposed another affidavit amending his statement to say that he reported the loss of the cheque book on the 23 April 2013 and picked up the new cheque book on the 27 May 2013 and not 27 April 2013.
18. He also deposed in the above referred affidavit that on the 8 August 2013 he lodged his “formal complaint” of the alleged fraud committed on his cheque account and report of loss and filled out a Customer Instructions form.
19. The plaintiff’s affidavit sworn on the 25 February 2019 was in support for and to amend the Statement of Claim. Thus, the Writ of Summons was amended so that the date of the application for new cheque book was changed to the 23 April 2013, the issue of the new cheque book was changed to 27 May 2013, date of the discovery of illegal transaction mentioned as 6 August 2013 and the lodgement of formal complaint by the plaintiff was pleaded as 8 August 2013.
20. The amended Writ of Summons also plead that the phone numbers on the back of the lodged cheques did not correspond with each other, and the contact number given by the plaintiff to defendant.
21. Timon Awari’s fourth affidavit is in support of his motion seeking discovery of documents those relating to his account opening in 2007.
Defendant
22. Defendant tendered three (3) affidavits sworn by Ria Gia, Lily Benoma and Jenifer Ben Goma, all Bank officers in the then employ of the Defendant.
23. The affidavit of Ria Gia refutes any report of loss of cheque book on the 21 April 2013. He deposed that there is no record in the ANZ Bank about the loss. He also provided as an annexure to his affidavit a copy of the Plaintiff’s Statement of Account from January 2013 to March 2018.
24. The Statement of Account is a record and proof of transactions conducted in account 12918256 of the plaintiff. The Statement of Account confirmed that on the 8 August 2013 a “Stop” cheque notice was placed therein.
25. The entry in the Statement of Account for 23 April 2013 showed a cheque withdrawal of K50,000.00 with serial number 000112.There was no Stop notice in the Statement of Account regarding the alleged loss of the cheque book.
26. Lily Benoma tendered documentation on record pertaining to the Plaintiff’s account opening in 2007 and the account reopening in 2017. She attests that the signatures that appeared in the five (5) cheques match the signature of the Plaintiff in all the documents signed by him and his sample signature obtained at time of the account opening in 2007.
27. Jenifer Ben Goma deposes to how cheques are cleared. She states that in relation to cheques 121, 125 and 127, these were interbank receipts from BSP and Westpac and that she posted them online on the ANZ’s beam journal to be cleared as it is the practice in the Bank.
Submission of Counsels
Plaintiff
28. Mr. Babe, counsel for the Plaintiff pointed out the different cheque numbering in the 5 questionable cheques, all with serial numbers between 100 and 150, and the two cheques cashed by the Plaintiff later than the 5 cheques bearing serial numbers 151 and 152 as clear evidence that the latter are from the replacement cheque book.
29. He submits that the Defendant and its servants ought to have noticed or known that the 5 cheques drawn after the Plaintiff’s usage of his new cheque book were from the lost or stolen Plaintiff’s cheque book.
30. Counsel also referred to the multiplicity of mobile phone numbers on the back of the fraudulent cheques which were different from the mobile phone number of the Plaintiff he registered when he opened the check account facility in 2007.
31. Another glaring factor that ANZ bank had not picked up are the different signature types/slants found on the 5 purported fraudulent cheques. The difference was not only among themselves but also with the Plaintiff’s sample signature on record since 2007. He submits that Timon Awari’s real signature slants to the left as he is a lefthander and that the other signatures slants to the right.
32. The Plaintiff’s counsel also submits that the Defendant’s case must fall by failing to set out what steps it took to confirm and or clear the fraudulent cheques before payment other than posting on the online ANZ bean journal and submitting for clearance. That, as the amounts are substantial, the Defendant ought to have undertaken better verification before clearance of the alleged fraudulent cheques he submits.
33. Mr. Babe then submits that the withdrawals were not made by the Plaintiff but another person without Plaintiff’s authority.
34. It follows that the Defendant is guilty of breaching its duty of care it owes to the Plaintiff by failing to protect his funds from being illegally withdrawn.
35. He submits therefore that the Defendant is negligent and has breached its duty of care to the Plaintiff and the Defendant is liable for all losses suffered by the Plaintiff.
Defendant
36. From the outset, Counsel for the Defendant Eunice Noki acknowledges that the Defendant’s duty of care extended in so far as to detect any unusual activity on the Plaintiff’s account.
37. She submits that there is nothing unusual about the cheque transactions that were conducted on the Plaintiff’s account during the material times under scrutiny when considering the following:
(i) The plaintiff had transacted on his cheque account on a regular basis, and it was not unusual or strange warranting the Defendant and its officers to raise questions.
(ii) The defendant was never aware of the alleged missing cheque book until 8 August 2013.
(iii) Even though the Plaintiff purportedly lost his cheque book on the 21 April 2013, he admitted to conducting cash withdrawal of K50,000.00 using a cheque with serial number 000112 on the 23 April 2013, claiming that it was a signed cheque leaf he luckily had in his possession.
38. Ms Noki further submits that the actions of the Plaintiff do not support his assertions and allegations of a lost cheque book, his reporting of same and that he was defrauded of the use of the cheque book after its purported loss.
39. About the signatures used in copies of documents tendered in court including his original account creation, personal details and cheques, Counsel submits that the signatures match even the plaintiff’s signature in the affidavits. She submits that this fact is distinguished with the case of Richard Manui v ANZ Banking Group (PNG) Ltd, [2008] N3405 where not all the signatures in the alleged fraud were examined.
40. As regards the differing mobile telephone numbers quoted in the alleged fraudulent cheques Ms Noki concedes that even the plaintiff gave different mobile phone numbers in 2007 account opening and in the 2017 account re- opening documentations and thus submit that in as far as the Bank is concern, this does not count towards proving fraud.
41. In the end she submits that the Defendant had discharged its minimum duty owing to the plaintiff.
42. In conclusion, Counsel for the Defendant points out 6 factors which the Court ought to take into consideration:
(1) The evidence by the Plaintiff is not corroborated or supported by any other evidence.
(2) The Defendant has evidence by staff which are corroborated and support its defence.
(3) The Plaintiff has not adduced evidence to support his claim against the Defendant.
(4) At all material times the Defendant allowed the transactions on the account in the way the account had been used by the Plaintiff.
(5) The Plaintiff is not entitled to the relief claimed against the Defendant.
Law
43. Banks operate under well-established banking practices developed over many years of banking. It is settled that the relationship between a Banker and its customer is contractual, albeit implied.
43. Lord Atkin in Joachimson v Swiss Bank Corporation [1921] 3 KB 110 at p. 127 aptly said:
“...though with many facts; it arises the moment the parties agree to enter into contractional relations with each other and continues until brought to an end by consent or perhaps by revocation by either party; it is a contract which is underwritten and undefined by the parties – in other words it is implied.”
44. In Kennedy Amun v Bank of South Pacific Ltd (2008) Unreported judgement by Her Honour Justice Davani, referred to by Hartshorn J in Pija Grannies Ltd v Rural Development Bank Ltd (2010) N5829, Her Honour referred to and reproduced a passage from Paget’s Law of Banking, 8th Edition 1972 at page 69 which I refer to in parts:
“...The relationship of a banker to a customer is one of contract, though for long this way of looking at the matter seemed not to have attracted much attention in courts. It follows, as in all cases, a banker must not be negligent in performing his contract, whatever it may be; what will amount to negligence must clearly depend on the facts of the particular case...”
45. Whether a bank is 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 Llyods Bank Limited v EB Savory & Company [1933] AC 20 [1932] AH ER 105.
46. In Manui v ANZ Banking Group (PNG) Ltd (2008) N3405 his Honour Gavera-Nanu J held that the bank has a duty to ensure the signature on the withdrawal slip belong to the plaintiff; the staff of the bank acted negligently and carelessly and thus is liable to the plaintiff.
47. In Orbit Mining & Trading Co. Limited v Westwasher Bank Limited [1963] 1 QB 794 for 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 part or soon after that before the cheque and the paying in slip (but) are separated and the cheque is sent forward to the clearing house. This may involve the Bank and its officials taking reasonable care to account themselves and those of their servants who will handle a customer’s transaction 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.”
48. In other words, it is incumbent upon the bank and its staff to take reasonable care when a cheque is presented at the drawing centre and taking steps to enquire and take into consideration any facts which might cause him reasonably to suspect that the customer may not be a true owner of the cheque see Marfani v Midland Bank Limited [1968] 1 WLR 956.
49. The case of Barclay Bank P/C v Quincecare Ltd [1992] 4 All ER 363,gave rise to what is referred to as Quincecare duty of care. “The ‘Quincecare duty of care’ is therefore a banks’s duty to refrain from withdrawing funds from a customer’s bank account if there are reasonable grounds for believing that the payment is part of a scheme to defraud the customer. The duty is part of bank overall duty of reasonable skill and care in executing customers’ orders. It accesses by reason of an implied term of the contract between a bank and its customer or under a co-extensive duty of care in negligence.”
Finding
50. As to the Plaintiff’s claim of loss of his cheque book on the 21 April 2013, I find no evidence of request for closure or cancellation of cheque book on the 23 April 2013. There is evidence of “Stop Cheque Notice” on the 8 August 2013.
51. The Plaintiff cashed two (2) cheques with serial numbers 8000151 and 000152 on the 28 May 2013 and 31 May 2013.
52. Five (5) cheque transactions were conducted by encashment of cheques bearing serial numbers 0000121, 0000127, 0000125, 0000131and 0000117 between 13 June 2013 and 2 August 2013.
53. The five (5) transactions conducted on the plaintiff’s allegedly using his stolen cheque book and thus allegedly fraudulent were all done prior to the 8 August 2013.
54. By my perusal of the Interim Statement of Account which was tendered by the Defendant, after the 8 August 2013 Stop Cheque notice, one of the 5 cheques, the one bearing number 0000117 was dishonoured on the 13 August 2013, however, on the 21 October 2013 there was cheque withdrawal bearing number 156.
Conclusion
55. There is no cancellation of the Plaintiff’s cheque book on the 23 April 2013 as there is no evidence adduced by the plaintiff. The only evidence that is before me as provided by the Defendant is the Interim Statement of Account that is the actual record of transactions on the plaintiff’s account from 21 January up to 31 March 2018.
56. The same Interim Statement of Account also showed that on the 8 August 2013 there was Stop Cheque notice. This was the first time they acted on the instruction of the Plaintiff to place a Stop cheque notice. I accept this as the only time the Plaintiff raised the issue of stop cheque with the Defendant.
57. I consider that all transactions conducted at the defendant bank prior to 8 August 2013 were transacted under normal banking practice. The banks duty to its customer is contractual and thus when a cheque is presented for payment, the bank is bound by its duty to pay in accordance with the order for payment. So, the bank is bound to check for verification of the authority which is the signature against the sample signature maintained at the bank.
58. This duty comes to the fore at the counter or upon presentation of the cheque. Under normal banking practice a bank must accede and pay. Of course, there may be situations where the banker might inquire more where there are facts sufficient to cause it to suspect that the customer is not the true owner of the cheque, see Marfani v Midland Bank Limited (supra)
59. The test is to decide subjectively from the standard of a reasonable man carrying on business of banking and to endeavour to act in a manner to protect itself and its customer against fraud, see Llyods Bank Limited v EB Savory & Company;Barclay Bank P/C v Quincecare Ltd.
60. In this case, the Defendant evidence is that it acted appropriately on the strength of the sample signature of the Plaintiff it has on its record. The sample signature is the authority upon which the Bank acted to cash the cheques. Sure, they would have sighted the signatures and would have made comparison, and in the end as a reasonable banker acting subjectively it made decisions to honour the payment order.
61. In evidence the Defendant through its servant decided to obey the payment order and further posted the cheques online ANZ’s beam journal for clearance. This I think is the electronic verification of the signature.
62. If the cheques were cashed after the 8 August 2013, the Bank would be in a difficult position to say that it acted appropriately. The consideration then would be whether its failure to verify the signatures are actions of a reasonable banker who has prior knowledge of the Stop Cheque notice.
63. As to the Plaintiff assertion that the Bank should have taken particular notice of the fact that the five (5) cheques from the purportedly stolen cheque book were drawn after the Plaintiff has already used two (2) cheque leaves from the new cheque book issued to him, apart from no evidence of theft, I consider this as of no consequence as it is possible and practical that a person can operate two (2) cheque books simultaneously or in tandem.
64. On the different telephone numbers provided during cash encashment of the three (3) of the five (5) cheques in question and at time of account opening in 2007 and resubmission of personal information and lodgement of complaint. I find this to be not unusual and must not be read too much into it. It certainly does not prove any fraudulent activity on the part of any person.
65. I am satisfied on the balance of probability that the Defendant exercised its duty to the Plaintiff as a reasonable banker would and there being no reasonable grounds to believe the transactions were fraudulent, the Defendant also has an obligation to comply with the Plaintiff payment order and it exercised that duty and obligation.
66. Based on the foregoing, I order as follows:
2. Parties bear their own costs.
_______________________________________________________________
Hebrew Babe Lawyers: Lawyers for the Plaintiffs
Bradshaw Lawyers: Lawyers for the First Defendants
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