IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN

ALBERT ROSSIGNEUX,
US Citizen currently residing at Palisi near Apia.
Plaintiff

AND

NATIONAL BANK OF SAMOA LIMITED
Bankers of Apia
Defendant

Counsel: TRS Toailoa for plaintiff
S Hazelman for defendant

Hearing: 27 September 2002
Judgment: 4 October 2002

JUDGMENT OF SAPOLU CJ

Evidence

The plaintiff is a 60 year old American who had operated a wine bar in American Samoa where he employed one Jennifer Tilliam. The plaintiff suffers from a certain disease and has real difficulties seeing with his eyes. In fact he was not able to read any of the documents that was given to him in the witness stand to read. He looks much older than his age and somewhat frail. Perhaps this is due to the disease which he says he has.

In the year 2000, the plaintiff came to Samoa with his 89 year old mother and stayed with Jennifer Tilliam with the latter’s family at Letogo. He had two bank cheques made out to his name Albert Rossigneux from the ANZ Bank in Apia. The cheques were crossed and marked “not negotiable”. One cheque was for $14,500 and the other was for $9,500. The cheques were intended to cover the plaintiff’s visa credit card account. The plaintiff put the two cheques in his mother’s bag which was locked with a padlock. On 22 March 2000 when the plaintiff and his mother were to fly to American Samoa, the plaintiff discovered that his mother’s bag had been cut and his two bank cheques, his passport and many other personal properties which were inside the bag had been stolen by someone. He immediately notified the police. The plaintiff testified that the police later told him that their investigation had found that Jennifer Tilliam had cashed his cheques with the defendant bank, the National Bank of Samoa.

Jennifer Tilliam did not testify in this case. Judgment by formal proof has already been entered for the plaintiff against her for the total value of the two cheques plus interest and costs. The evidence given by the plaintiff and given for the defendant bank clearly suggests that it must have been Jennifer Tilliam who had cut open the bag in which the plaintiff’s cheques and passport were locked and stole those items.

The testimony given by the witness Kaialani Aiono Strickland, who was a teller for the defendant bank at the relevant time, and was called by the bank, is that on 13 March 2000 Jennifer Tilliam came to the bank. She wanted to open an account under her name. She had with her two bank cheques which were made out to the plaintiff as payee. Each cheque was crossed and marked “not negotiable”. Each cheque was also purportedly endorsed by the plaintiff, the payee, by signing his name on the back. Jennifer Tilliam also had with her the plaintiff’s passport and a handwritten note purportedly prepared and signed by the plaintiff in which the defendant bank was requested to open a new account under the name of Jennifer Tilliam and to deposit the two cheques into her account. Jennifer Tilliam also told Mrs Strickland that the payee of the cheques was her foster father which was not true.

Earlier the plaintiff had testified that his cheques and passport were stolen from his mother’s bag which was locked with a padlock by someone cutting the bag open. The plaintiff had also earlier testified that he did not give his cheques or passport to Jennifer Tilliam or signed his name on the back of any of the cheques. The plaintiff had also earlier testified that he did not write or sign any note to authorize Jennifer Tilliam to open an account with the defendant bank under her name and to deposit the cheques into such an account. The clear inference from all the circumstances is that Jennifer Tilliam had stolen the plaintiff’s cheques and passport from the bag in which they were kept and forged the plaintiff’s signature on the back of each cheque. She then fraudulently prepared a note purporting to be from the plaintiff authorizing her to open an account under her name with the defendant bank and to deposit the cheques into that account. She forged the plaintiff’s signature on that note. In other words, when Jennifer Tilliam, appeared at the defendant bank on 13 March 2000 before the teller, what she had with her were two stolen bank cheques made payable to the plaintiff with a forged signature on the back of each cheque, a stolen passport and a note of authorization which was a forgery.

The teller said that when Jennifer Tilliam asked her to open an account under her name and to deposit the two cheques into that account, she asked Jennifer Tilliam for a note of authority from the owner of the cheques which of course was the plaintiff. Jennifer Tilliam produced the forged note of authorization which has been produced in evidence as an exhibit. The teller said she then verified the signatures on the back of the cheques and on the note of authority by comparing them with the plaintiff’s signature in the passport. The passport was not produced in evidence so that the Court can make the same comparison for itself, but it was correctly pointed out by counsel for the plaintiff during the cross-examination of one of the bank’s witnesses that there is a difference in the manner in which the letter “A” is written at the beginning of the two signatures on the back of the two cheques. However, the teller testified that she was satisfied with the signatures after comparing them with the plaintiff’s signature in the passport. As the teller was not at the time aware of who Jennifer Tilliam was, she asked her for identification of herself. Jennifer Tilliam replied that Silipa a member of the defendant bank’s staff knew her. Silipa, who was then working in the bank, was asked about the defendant and he identified Jennifer Tilliam to the teller and he told the teller that the owner of the cheques was staying with the family of Jennifer Tilliam. After that the teller gave Jennifer Tilliam two signature cards, one to be filled in by Jennifer Tilliam herself, and the other to be filled by the owner of the cheques. A signature card is a card which contains particulars that the defendant bank requires every person who wants to open a new account with the bank to fill out and sign. The purpose of the card that was to be filled out by the owner of the cheques was for him to confirm his authority to have the cheques lodged into Jennifer Tilliam’s new account. It appears from the evidence of the teller that Jennifer Tilliam then took the signature cards away. 

When Jennifer Tilliam returned to the bank with the cards the same day, one of the cards apparently had been filled out and signed by Jennifer Tilliam herself. Written into that card was Jennifer Tilliam’s home phone number at Letogo which was where the plaintiff, the owner of the cheques, was staying at the time. The other card was purportedly filled out by the plaintiff and signed by him. In that card, next to the plaintiff’s purported signature, are the words: “Father’s signature to okay cheques for his daughter’s account.” It is clear from the evidence of the teller herself that the cards were not filled out and signed in the bank before her as Jennifer Tilliam took the cards away. So the teller did not see the owner of the cheques fill out and sign the card intended for him. It is also clear from the teller’s evidence that she did not call the owner of the cheques on the home phone number that was written on the card filled out by Jennifer Tilliam to authenticate the card purported to have been filled out and signed by him. This was notwithstanding the fact that the teller was told by Silipa, who had earlier the same day identified Jennifer Tilliam to her, that the owner of the cheques was staying at the home of Jennifer Tilliam. According to the teller it was not necessary for her to call the owner of the cheques on the phone as she considered that the information she had, which included the “endorsed” cheques, the authority note purported to be signed by the owner, the owners passport with his signature therein and the cards, was sufficient to satisfy her for the purpose of opening the account requested by Jennifer Tilliam. The effect of the plaintiff’s evidence on this matter is that he did not fill out or sign any signature card. Thus the clear inference is that Jennifer Tilliam herself filled out and forged the plaintiff’s signature on the card.

After the teller was satisfied with the information provided by Jennifer Tilliam, she took that information to her supervisor for checking and approval. The supervisor approved the opening of a new account under Jennifer Tilliam’s name. The two cheques, one for $14,500 and the other for $9,500, totalling $24,000 were then lodged into that account. Jennifer Tilliam then made a withdrawal from the account. According to the supervisor the withdrawal was for $23,000 or $24,000 but she could not recall whether it was $23,000 or $24,000. Thus Jennifer Tilliam opened a new account at the defendant bank, lodged the two cheques in it and then immediately withdrew the whole value or almost the whole value of the cheques. She did not give any of that money to the plaintiff who was not aware of what has been done with his cheques. Apparently none of the money has been recovered. The plaintiff and the defendant bank are now contesting in Court who should bear the loss. Judgment though has been entered by formal proof for the plaintiff against Jennifer Tilliam for the total value of the two cheques but she does not appear to be a person of any real means. However, we are not concerned with that in the present proceedings. Nothing more will be said about it.

I am satisfied that Jennifer Tilliam stole the two cheques each crossed generally and marked “not negotiable” from the plaintiff who is shown as payee on both cheques. She then fraudulently endorsed in blank both cheques by forging the signature of the plaintiff on the back of each cheque. The effect of this, if the endorsements were genuine, was to make the two cheques payable to bearer: s.34(1) of the Bills of Exchange Act 1976. But the endorsements were forgeries. They were therefore wholly inoperative in terms of s.24 unless there were circumstances which would preclude the party against whom payment of the cheque is sought from setting up the forgeries. I am also satisfied that the note of authority purported to have been signed by the plaintiff and was presented together with the two cheques to the defendant bank by Jennifer Tilliam was also forged by Jennifer Tilliam for the purpose of deceiving the defendant bank into lodging the cheques in an account she asked to be opened under her name. I am also satisfied that she forged the signature card which the bank gave her to be filled out by the plaintiff. She also stole the plaintiff’s passport which she presented to the bank undoubtedly to mislead the bank into believing that she was being honest and genuine. I am also satisfied that the plaintiff is not and has never been a customer of the defendant bank as he has never had any contact with the defendant bank. Jennifer Tilliam on the other hand became a customer of the defendant bank when she opened the account under her name with the bank even though that relationship was only of short duration.

I want to refer to briefly now to s.76(1)(b) of the Bills of Exchange Act 1976 which was mentioned in the submissions by counsel for the plaintiff. In terms of that provision, each of the two cheques which Jennifer Tilliam lodged in the account she fraudulently opened with the defendant bank was a crossed cheque marked with the words “not negotiable”. Section 76(1)(b) provides:

“(1) Where a cheque bears across its face an addition of:

(a) ………..

(b) Two parallel transverse lines simply, either with or without the words ‘Not “Negotiable’ –

that addition constitutes a crossing, and the cheque is crossed generally.”

Thus a crossing across the face of a cheque with or without the words “not negotiable” added between the two parallel lines is a general crossing. This is different from a special crossing which occurs when the name of a bank is added between the two parallel lines either with or without the words “not negotiable”. In the present case each of the two cheques is crossed and marked “not negotiable”. So the cheques are crossed generally. 

Applicable law

The Bills of Exchange Act 1976 which deals with both bills of exchange and cheques (as we do not have separate legislation for cheques as in other jurisdictions) provides in s.82:

“Where a person takes a crossed cheque bearing on it the words ‘Not Negotiable’, he shall not have and shall not be capable of giving a better title to the cheque than that which the person from whom he took it had.”

Section 82 clearly serves a warning to any person, including a bank, who takes a cheque which is crossed with the words “not negotiable” being added that he acquires no better title to it than the person from whom he takes the cheque. Applied to the circumstances of the present case, it would mean that as Jennifer Tilliam had stolen the cheques and forged the signature of the plaintiff the true owner on the back of the cheques she had no title to the cheques. As the cheques were crossed with the words “not negotiable” being added, the defendant bank will also have no title to the cheques as it cannot have a better title to the cheques than Jennifer Tilliam from whom it took the cheques had. I need only refer to two English cases on this point.

In Great Western Railway Co v London and County Banking Co Ltd [1901] AC 414, Huggins a rate collector falsely represented to the appellants that they were liable to pay rates. As a consequence the appellants made out a cheque payable to Huggins or order then crossed it and marked it “not negotiable”. The purpose of the cheques was to pay for the appellants rates. Huggins then took the cheque to the respondent bank and fraudulently cashed it. When the fraud was discovered, the appellants sought to recover the full amount of the cheque from the respondent bank. One of the issues that was dealt with in that case was s.81 of the Bills of Exchange Act 1882 (UK) which is identical in terms to s.82 of our Bills of Exchange Act 1976. All the five Law Lords who heard the appeal by the appellants were unanimous that the appellants should recover the full amount of their cheque from the respondent bank. Lord Brampton at p.422 said in his judgment:

“The object of s.81 is obvious. It is to afford to the drawer or the holder (s.77) of a cheque who is desirous of transmitting it to another person as much protection as can reasonably be afforded to it against dishonesty or accidental miscarriage in the course of its transit, if he will only take the precaution to cross it, with the addition of the words ‘not negotiable’, so as to make it difficult to get such cheque so crossed cashed until it reaches its destination.

To apply that section to the present case, there can be no doubt that a person who obtains from another, by a fraudulently false pretence, a cheque so crossed with the intent to appropriate the proceeds to his own use, as Huggins did, could not make any real title to such cheque; practically it would be the same as if he had stolen it. Having no title himself, he had none to give to anybody else.”

In Wilson and Meeson (a firm) v Pickering [1946] KB 422 a partner of the plaintiffs which was a partnership firm of real estate agents, signed a cheque and then crossed it with the words “not negotiable” printed on it and handed it to the plaintiffs’ secretary with instructions to fill it up with a specified amount and put in the name of the Commissioners of Inland Revenue as payees. The plaintiffs’ secretary fraudulently filled in a different amount and put in the name of the defendant with whom she had a debt as payee. The plaintiffs’ secretary then gave the cheque to the defendant to pay the debt she owed the defendant. Payment for the cheque was then obtained by the defendant through her bank. The plaintiffs when they discovered the fraud sought to recover the full amount of the cheque from the defendant.

Lord Greene MR at p.429 held that the plaintiffs’ secretary who had fraudulently filled in the cheque contrary to the instructions given to her by a partner of the plaintiffs had no title to the cheque. As the cheque was crossed and the words “not negotiable” printed on it, the defendant who took the cheque from the plaintiff’s secretary had no better title to the cheque than the plaintiff’s secretary had. In his judgment Morton LJ at pp430-431 said:

“Having regard to s.81 of the Act, the words ‘not negotiable’ amounted to an express statement to any person taking the cheque that he would get no better title than that possessed by the person from whom he took it.”

The plaintiffs were thus held entitled to recover the full amount of the cheque from the defendant.

Applying those English cases to the present case, Jennifer Tilliam who had stolen the plaintiff’s cheques had no title to the cheques. As the cheques were crossed generally and marked “not negotiable” the defendant bank which took the cheques from Jennifer Tilliam acquired no title itself. The plaintiff still had the title to the cheques. Consequently, the plaintiff is entitled to recover the total amount of his cheques from the defendant bank unless the latter has a valid defence.

Defences by the defendant bank

Miss Hazelman for the defendant bank with her customary industry and ability sought to find protection for the bank in s.82(5) of the Act and raised that provision as a defence. Section 82(5) provides:

“Where a banker in good faith and without negligence:

(a)	receives payment for a customer of an instrument to which this subsection applies; or

(b)	having credited a customer’s account with the amount of any such instrument receives payment thereof for himself, -

and the customer has no title, or a defective title to the instrument, the banker shall not incur any liability to the true owner of the instrument by reason only of having received payment thereof.”

There is really no dispute that the defendant bank acted in good faith. In the circumstances placed before the Court there is nothing to show that the bank acted with anything other than honesty. Section 91 of the Act provides:

“A thing is deemed to be done in good faith within the meaning of this Act where it is in fact done honestly, whether it is done negligently or not.”

The real question for determination in relation to s.82(5) then becomes: did the defendant bank act without negligence. In the Australian case of Commercial Bank of Australia Ltd v Flannagan (1932) 47 CLR 461 the plaintiff (respondent) drew a cheque payable to “State tax or bearer” on the defendant bank for a certain sum of money to pay his income tax. He crossed the cheque generally and marked it “not negotiable”. The plaintiff (respondent) then gave the cheque to one Coffey who was a taxation expert engaged by the plaintiff to prepare and settle his income tax returns. Coffey was required by the plaintiff to use the cheque to pay the plaintiff’s income tax. Instead, Coffey fraudulently presented the cheque to the defendant bank for payment into his own current account. When the bank officer asked Coffey as to why he was paying the cheque into his own personal current account when the cheque was payable to “State tax or bearer”, Coffey replied the cheque included his fees. The bank officer then accepted payment of the cheque and credited the amount of the cheque to Coffey’s personal current account. When the plaintiff discovered Coffey’s fraud, he brought an action against the bank for conversion of the cheque and for its proceeds. In the local Court of South Australia the bank was held liable to the plaintiff for the proceeds of the cheque. The bank then appealed to the Supreme Court of South Australia but its appeal was dismissed. The bank then further appealed to the High Court of Australia but that was again without success. It relied as a defence on s.88 of the Bills of Exchange Act 1909 which is identical in terms to s.82(5) of our Bills of Exchange Act 1976. Even though the judgments of the High Court of Australia which have been reported make reference to the fact that the cheque in that case was crossed generally and marked “not negotiable”, they focused mainly on the effect of s.88 of the Bills of Exchange Act 1909 which was raised as a defence for the appellant bank. Gavan Duffy CJ and Starke J in their joint judgment said at p.467 in relation to s.88:

“Did the Bank act without negligence? It is for the Bank to establish affirmatively that it did so act. The words ‘without negligence’ do not mean without a breach of duty on the part of the Bank towards itself or towards the person who is its customer. The phrase means ‘without want of reasonable care in reference to the interests of the true owner.’”

A little further on in their joint judgment their Honours said:

“Whether a banker in any given case has acted ‘without negligence’ is necessarily a question of fact. It is impossible to lay down rules or statements which will determine what is negligence and what is not. Each case must be determined on its own circumstances: Commissioner of Taxation v English, Scottish and Australian Bank [1920] AC 683, 688-689. If there is in the appearance and details of the cheque, the nature of the persons dealing with it anything unusual or suspicious and suggesting the necessity for inquiry in the interests of the true owner, then it is for the Bank to exercise due care for the protection of those interests (London and Montrose & Co v Barclays Bank Ltd (1925) 31 Com. Cas at p.73”.

Flannagan is significant for the present case for several reasons. These are: (a) it shows that a bank, as in this case, may rely on s.82(5) of the Bills of Exchange Act 1976 as a defence to an action by the true owner of a cheque crossed generally and marked “not negotiable” where someone else, without the knowledge or consent of the owner, steals and pays such cheque into a bank and the bank credits the amount of the cheque to that person’s current account; (b) the words “without negligence” used in s.82(5) imposes a duty on the bank to exercise reasonable care towards the interests of the true owner of a cheque; (c) the question of whether the bank has exercised reasonable care, that is, acted without negligence, towards the true owner of a cheque which has been paid into the bank is one of fact which is to be determined having regard to the circumstances of each case; (d) if the circumstances are such as should put the bank on inquiry regarding a cheque someone other than its true owner wants to pay into the bank, then the bank’s duty of care towards the true owner of the cheque requires that inquiry should be made; (e) the onus is on the bank to establish to the required standard that it acted with reasonable care, that is, without negligence; and (f) if the bank can successfully establish that it acted with reasonable care then it will be held, in terms of s.81, not liable to the true owner of the cheque.

Now Miss Hazelman for the defendant bank placed much reliance on the English case of Marfani Co Ltd v Midland Bank Ltd [1968] 2 A11 ER 573. In that case a cheque was drawn by the managing director of the plaintiff company and crossed in favour of one individual named Eliaszade (E) with whom the plaintiff company had business dealings. The managing director of the plaintiff company then went overseas and left the cheque with the office manager of the plaintiff company to pay to E. The office manager then devised a very cunning scheme to deceive the defendant bank. He approached the defendant bank and presented himself in a respectable and business-like manner as E whose named appeared on the cheque as payee. He told the bank clerk he was dealing with that he was thinking of going into the restaurant business which was a lie. When the bank clerk asked for referees, the office manager of the plaintiff company gave the name of Mr Ali who was a longstanding and satisfactory customer of the bank and who had introduced several satisfactory customers to the bank in the past. The plaintiff’s office manager had in fact purposely acquainted Mr Ali for some time before he approached the bank and had dishonestly convinced Mr Ali that his real name was E with full knowledge that Mr Ali was a longstanding customer of the defendant bank. The plan by the plaintiff’s office manager was to subsequently use Mr Ali as a referee to vouch for him to the defendant bank with whom he was going to pay the plaintiff’s cheque in an account to be opened under his name. Mr Ali fell into the trap set for him by the plaintiff’s office manager and gave a favourable reference for him as E to the defendant bank which then opened an account for the plaintiff’s office manager under name of E. The plaintiff’s office manager then deposited the plaintiff’s cheque crossed to the real E into that account. A few days later he had withdrawn the whole amount of the cheque from that account and absconded overseas. When the plaintiff company discovered what had happened, it brought an action against the defendant bank for conversion of the said cheque. The trial Judge decided in favour of the defendant bank on the ground that the defendant bank was protected by s.,4 of the Cheques Act 1957 (UK) as on the facts of the case it had acted in accordance with the ordinary practice of careful bankers and had discharged the onus of showing that it acted without negligence. The plaintiff company appealed to the Court of appeal which dismissed the appeal on the ground that the bank had acted with reasonable care by taking every reasonable step that could have been taken to satisfy itself that the plaintiff’s office manager was in fact E as he represented himself to be. Section 4 of the Cheques Act 1957 (UK) which was at issue in that case is identical in terms to s.82(5) of our own Bills of Exchange Act 1976.

Diplock LJ who delivered the leading judgment in the Court of Appeal pointed out that even though a bank was strictly liable at common law to the owner of a cheque which the bank has collected from a customer who had no title to the cheque, the strictness of that common law liability has been progressively mitigated by statute, the latest being s.4 of the Cheques Act 1957 (UK). His Lordship said at p.578:

“If the customer is not entitled to the cheque which he delivers to his banker for collection, the banker, however, innocent and careful he might have been, would at common law be liable to the true owner of the cheque for the amount of which he receives payment…..

So strict a liability, so absolute a duty, on bankers would have discouraged the development of banking business. It was accordingly progressively mitigated by statute, first by s.82 of the Bills of Exchange Act 1882, then by the Bills of Exchange (Crossed Cheques) Act 1906, and finally by s.4 of the Cheques Act 1957, which is the current statute with which we are concerned”.

His Lordship then pointed out that in his view the true intention of s.4 of the Cheques Act 1957 (UK) and its statutory predecessors was to replace the absolute duty owed at common law by a banker to the true owner of a cheque with a qualified duty to take reasonable care to satisfy itself that his own customer’s title to the cheque which is delivered to the bank for collection is not defective in the sense that no other person is the true owner. Diplock LJ said at p.579:

“[The] usual matter with respect to which the banker must take reasonable care is to satisfy himself that his own customer’s title to the cheque delivered to him for collection is not defective, i.e., that no other person is the true owner of it. Where the customer is in possession of the cheque at the time of delivery for collection, and appears on the face of it to be the ‘holder’ i.e., the payee or indorsee or the bearer, the banker is, in my view entitled to assume that the customer is the owner of the cheque unless there are facts which are known, ought to be known, to the banker which would cause a reasonable banker to suspect that the customer is not the true owner.”

A little further on His Lordship said:

“What the Court has to do is to look at all the circumstances at the time of the acts complained of, and to ask itself were those circumstances such as would cause a reasonable banker possessed of such information about his customer as a reasonable banker would possess, to suspect that his customer was not the true owner of the cheque.”

It does appear clear that the test Diplock LJ is laying down is an objective test. It is what a reasonable banker will be expected to do in the circumstances and not necessarily what a defendant banker has or has not done in those circumstances. If the circumstances are such as to make a reasonable banker suspicious that a customer may not be the true owner of a cheque, then it is no answer for a defendant banker to say that the circumstances were not suspicious to it all. If the circumstances are also such as to cause a reasonable banker not only to become suspicious but to make inquiries about a customer and the cheque in his possession, then again it is no answer for a defendant banker to say that the circumstances sounded no warning to it to make any inquiries at all. In determining those matters current banking practice will be very much a significant factor to be taken into account and evidence of such practice may be given at trial: Commissioner of Taxation v English, Scottish and Australian Bank Ltd [1920] AC 683, 689; see also Marfani at p.579.

The second case that Miss Hazelman relied on is New Zealand Law Society v ANZ Banking Ltd [1985] 1 NZLR 280. In that case the true owner made out two cheques payable to a particular company for the purchase of two vehicles. The cheques were then given to the solicitor who was also a director of the company from which the vehicles were to be purchased. Instead of paying the cheques to the company, the solicitor paid them to his own trust account with the defendant bank and embezzled the proceeds. The New Zealand Law Society reimbursed the owner of the cheques from its fidelity guarantee fund and was assigned the rights of the owner in respect of the two cheques. The New Zealand Law Society then brought an action against the defendant bank for conversion of the two cheques. The defendant bank relied on s.5 of the Cheques Act 1960 (NZ) which is identical in terms to s.82(5) of our Bills of Exchange Act 1976. Davison CJ applied the principles as stated by Diplock LJ in Marfani to the facts of that case and concluded that the defendant bank had discharged the onus placed on it of showing that it acted in the circumstances without negligence in terms of s.5 of the Act. The action against the bank was accordingly dismissed.

However, Davison CJ said at p.286:

“There are in the reports numerous cases illustrating circumstances where a banker has been held to be negligent or a banker has been held to be not negligent, but the issue to be determined is one fact in each case.”

I respectfully agree. The question whether a banker has acted without negligence and therefore entitled to the benefit of the statute is one of fact to be determined on the circumstances of each case.

There is one other matter of law I should refer to briefly and that is whether Jennifer Tilliam was a “customer” for the purpose of s.82(5) of the Act. In Commissioners of Taxation v English Scottish and Australian Bank [1920] AC 683, a fraudster opened an account under his name with the defendant bank and fraudulently deposited a stolen cheque into that account. Within four days after his account was opened, the fraudster had drawn out the full amount of the cheque and then disappeared. In an action brought by the true owner of the cheque against the defendant bank for conversion of the cheque, the Privy Council held that the fraudster in that case was a “customer” of the bank when he opened his account with the bank even though the bank/customer relationship was only of five days duration. Lord Dunedin who delivered the judgment of the Privy Council said at p.687:

“Their Lordships are of opinion that the word ‘customer’ signifies a relationship in which duration is not of the essence. A person whose money has been accepted by a bank on the footing that they undertake to honour cheques up to the amount standing to his credit is, in the view of their Lordships, a customer of the bank in the sense of the statute, irrespective of whether his connection is of short or long standing.”

Whilst it is not necessary to set out every definition of the word “customer” given in the case law, I am satisfied that in terms of the definition of “customer” given by Lord Dunedin, Jennifer Tilliam was a customer of the defendant bank for the purpose of s.82(5) when she opened an account under her name with the bank and paid the stolen cheques into it. It is implicit in such circumstances that the defendant bank would honour withdrawals made by Jennifer Tilliam up to the amount of the cheques credited to her account. It is irrelevant that she almost immediately withdrew the total or almost the total value of the cheques.

The second defence raised by Miss Hazelman for the defendant bank is founded in estoppel. I am of the respectful view that estoppel cannot succeed in this case. Essentially what counsel submitted is that when the plaintiff became aware that his cheques were stolen he did not inform the bank and he has never informed the bank that his cheques were stolen. It is to be remembered that the cheques must have been stolen on or prior to 13 March 2000 for it was on that date Jennifer Tilliam presented the cheques to the defendant bank to be paid into an account to be opened under her name. The plaintiff did not become aware that his cheques had been stolen until 22 March. By that date the full value of the cheques must have been withdrawn by Jennifer Tilliam who had withdrawn $23,000 or $24,000 on the very same day she paid the cheques into the account that was opened under her name. The plaintiff could not have known that Jennifer Tilliam had paid his cheques to the defendant bank as to alert him to call the defendant bank before the total value of the cheques was withdrawn. But even if he had called the defendant bank on 22 March when he discovered the theft of his cheques, it was then too late, the money had been withdrawn from the bank.

The cases of Greenwood v Martin’s Bank Ltd [1932] All ER 318 and Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1985] 2 All ER 947 where the defendant bank raised estoppel as a defence were concerned with the question of the duty of a customer to inform the bank of any forgery of a cheque purportedly drawn on the customer’s account as soon as the customer becomes aware of the forgery. Failure of a customer to exercise such a duty on his part may give rise to an estoppel. The plaintiff in this case was not a customer of the defendant bank with whom he has never had any contact. It is Jennifer Tilliam who was a customer of the defendant bank. Thus what is said in Greenwood and Tai Hing Cotton Mill about the possibility of an estoppel arising from the failure of a customer to exercise his duty of informing the bank when he becomes aware of a forgery of a cheque that belongs to him, will not apply to the facts of this case as the plaintiff was not a customer of the defendant bank. No other kind of estoppel was raised. 

Did the defendant bank act without negligence?

In my view, the circumstances of this case show a want of proper care on the part of the defendant bank for the interests of the plaintiff who was the true owner of the cheques. Jennifer Tilliam was unknown to the bank teller she approached to open an account under her name. Another member of the bank’s staff identified Jennifer Tilliam to the bank teller and said to the teller that he knew the payee of the cheques was staying with the family of Jennifer Tilliam. When the teller gave two signature cards to Jennifer Tilliam, one to be filled out and signed by herself, the other card to be filled out and signed by the payee of the cheques, Jennifer Tilliam esd allowed to take the two signature cards away. When she returned to the bank the card filled out and signed by herself had her home phone number while the other card was purportedly filled out and signed by the plaintiff, the payee. I agree with counsel for the plaintiff that in the circumstances, the teller should have exercised more care and caution and called the plaintiff on the home phone number shown on the card filled out by Jennifer Tilliam. That is because the teller had learnt earlier on the same day from the member of the bank’s staff who identified Jennifer Tilliam that the payee of the cheques was staying with the family of Jennifer Tilliam. If that had been done, this case would most likely not have come about. In my view, not calling the payee on the home phone number shown on the card filled out by Jennifer Tilliam was not exercising proper care and caution.

I am also of the view that there was want of proper care for the interests of the true owner of the cheques when the bank teller gave the two signature cards to Jennifer Tilliam to be filled out by herself and the payee of the cheques and allowed Jennifer Tilliam to take away the card to be filled out and signed by the payee. The teller should have insisted that the payee be brought to the bank and fill out and sign the card before her. That seems to have been the safest way to go about this matter given the circumstances. To give the cards to Jennifer Tilliam and allow her to take the cards away from the bank was to give Jennifer Tilliam the opportunity, if she was a forgerer as she turned out to be, to forge the card that was intended for the payee. Jennifer Tilliam was unknown to the teller, yet the teller seems to have allowed herself to depend entirely on Jennifer Tilliam that the latter will honestly take one of the cards to the payee to fill out and sign. As it turned out the teller’s dependence on Jennifer Tilliam was seriously misplaced. It is clear that the reason for the teller requiring the payee to fill out and sign one of the cards was to satisfy her of Jennifer Tilliam’s credibility. However, the way the teller went about to achieve that purpose by giving both cards to Jennifer Tilliam and allowing her to take them away instead of insisting that the payee should fill out and sign the card before her (the teller) was lacking in caution.

There is also a difference in the way the letter “A” is written in the purported signatures of the payee on the bank of the cheques. That discrepancy was apparently not spotted by the bank. Given the substantial amount of each cheque, the fact that the payee shown on each cheque was not Jennifer Tilliam but the plaintiff, the fact that the cheques were crossed generally and marked “not negotiable”, and the fact that Jennifer Tilliam was unknown to the teller, more caution should have been exercised. The teller tried to exercise more caution by requiring that the payee should fill out and sign one of the cards. But that method was also lacking in care and caution when Jennifer Tilliam was allowed to take the cards away to be filled out and signed, one of them by the payee. A fraudster will easily see and use that as an opportunity to commit further forgery. How can the teller be reasonably confident that the card returned by Jennifer Tilliam to the bank was signed by the plaintiff when she did not see the card being filled in and signed. Yet dependence was in effect placed entirely on Jennifer Tilliam even though the teller had not known her before. Then the almost immediate withdrawal of the total value or almost the total value of the cheques by Jennifer Tilliam after the cheques were paid into an account under her name should have aroused suspicion.

Evidence was called by the plaintiff from the ANZ Bank and evidence was also given by the defendant bank as to what is the current practice amongst bankers in Apia in a situation like the one in this case. The evidence given by the two banks is inconsistent with each other and I think it will not be proper to accept any of that evidence as representing what is the current practice amongst bankers in a situation like the one that has arisen in this case. The evidence given by the representative of the ANZ Bank favours the position taken by the plaintiff and the evidence given by a representative of the defendant bank favours the position taken by the defendant bank. I cannot detect a current practice common amongst bankers from such evidence.

With respect, I am of the view that in all the circumstances the defendant bank did not act without negligence. It therefore cannot successfully rely on the immunity given by s.85(2) of the Act. The defendant bank is thus liable to the plaintiff for the total value of the cheques.

Punitive damages

As this Court said in Timo Duffy v George Young (2002) (unreported judgment delivered on 25 July 2002) exemplary or punitive damages may in an appropriate case be now awarded in a case where the negligence of a tortfeasor amounts to flagrant and outrageous disregard of the plaintiff’s safety. This is not such a case. After all, the defendant bank seems to have acted in good faith though negligently. The plaintiff’s claim of $50,000 for punitive damages is dismissed.

Judgment

Judgment is given for the plaintiff in the sum of $24,000 which is the total value of the two cheques. As this is a novel case and the plaintiff has succeeded in the main part of its claim but fail in its claim for punitive damages, I will award costs of $1,200 to the plaintiff plus reasonable disbursements to be submitted in a memorandum by counsel.

Notwithstanding the outcome of this case which should be no reflection on the industry and ability of counsel for the defendant bank, I wish to thank her for her helpful citation of authorities.

CHIEF JUSTICE
Solicitors:
Toailoa Law Office for plaintiff
Stevensons Lawyers for defendant