Bintai Kindenko Pte Ltd v Sanwa Bank Ltd and Another

• Jurisdiction: Singapore
• Judge: Goh Joon Seng J
• Judgment Date: 24 June 1994
• Neutral Citation: [1994] SGHC 171
• Citation: [1994] SGHC 171
• Defendant Counsel: NM Mahtani and L Kuppanchetti (Arthur Loke & Pnrs),Chee Wei Lin (PK Wong & Advani)
• Published date: 19 September 2003
• Plaintiff Counsel: Low Chai Chong and Tan Joo Thye (Rodyk & Davidson)
• Date: 24 June 1994
• Docket Number: Suit No 463 of 1991
• Court: High Court (Singapore)
• Subject Matter: Proper approach to be taken,Only liable in conversion,ss 64 & 80 Bills of Exchange Act (Cap 23),Whether customer estopped from claiming against bank even if fraud could have been discovered with reasonable care by bank,Customer's duty not to facilitate fraud in drawing cheques,Liability to owner of materially altered cheque,Whether duty breached,Payment by bank to the wrong person because of alterations,Section 85 of Bills of Exchange Act does not apply,s 85 Bills of Exchange Act (Cap 23),Material alterations to crossed cheque,Bills of Exchange and Other Negotiable Instruments,Altered,Not liable for money had and received when proceeds of cheque had been paid over to drawee,Exclusion clauses,Bank not entitled to protection under s 80 of the Bills of Exchange Act,Collecting banker,Whether defendant bank excluded from liability in negligence,Banking,Contract,Cheques,Contractual terms,Material and apparent alterations in cheque drawn by customer

Cur Adv Vult

The plaintiffs are a trading company. On 4 September 1979 they applied to the first defendants for the opening of a current account. By the said application which was accepted, the plaintiffs agreed `to observe the clauses of the agreement on the back hereof and undertake to hold your bank free from any loss whatsoever resulting through my/our failure to abide by such clauses` (the opening clause). Among the clauses on the reverse side are:

(i) Clause 2(a): `I/we am/are to comply with the requests printed on the cover of the cheque book.`

(ii) Clause 13: `I/we will not hold the bank liable in any way for any loss whatsoever incurred by me/us as a result of the operation of any account opened by me/us with the bank save where such loss is directly attributable to the bank acting otherwise than in good faith.`

The requests so far as relevant and referred to as `caution` on the cover of the cheque book (AB14) read:

All cheques to be filled up in ink. Any alteration to be confirmed by the full signature of the drawer in filling up a cheque the amount to be written in words, commencing on the left hand side close to the word `Dollars` without any space between the words, and the figures made close to the `$` and as plainly as possible.

For your security in sending cheques through the post, or otherwise paying them away, you should `cross` them thus:

& Co

They can then only be paid through some bank, and when you are acquainted with the name of the bank of the person to whom you send or pay a cheque, you should write the name of that bank in the crossing before the words `& Co` and the cheque will then be paid only to that particular bank.

This book to be kept in a place of security, and when a new book is required the printed request form to be filled up and signed and presented or sent to the bank.

Do not write anything in the 5/8" band at the bottom-edge of the check [sic]. Do not mutilate your checks [sic]. It is also advisable not to fold your checks [sic]. Do not leave staples or pins attached to your checks [sic].

On or about 10 May 1990, the plaintiffs issued a cheque crossed `Not Negotiable. A/C Payee Only` No 391542 (the said cheque) in the sum of $260 payable to GD Printing Services. The said cheque drawn on the first defendants was handed to the receptionist for posting to GD Printing Services on 11 May 1990. It never arrived. The amount was eventually altered to $126,260 and the payee to one `Chong Sau Kam IC No 7494646`.

On or about 14 May 1990, a female purporting to be `Chong Sau Kam` opened a savings account at the Bukit Timah branch of the second defendants.

On 15 May 1990, the said cheque was deposited into the account of `Chong Sau Kam` at the second defendants` Robinson Road branch for collection. The second defendants as collecting bank cleared the cheque for collection. On 16 May 1990 the first defendants paid over to the second defendants the sum of $126,260 and debited the plaintiffs accordingly.

On 17 May 1990 `Chong Sau Kam` made a withdrawal of $900 at the second defendants` Bukit Panjang branch followed by a further withdrawal of $95,000 at the second defendants` Bukit Timah branch, thus leaving a balance of $30,360 in that account.

Upon receiving from the first defendants the statement of account for the relevant period, this matter came to light and the plaintiff notified the first defendants that they did not authorize the debit. A report was then made to the police. Pending direction of the court or disposal enquiry, the $30,360, under an order of seizure by the police, now remains `frozen` in the account of `Chong Sau Kam`.

On 7 March 1991, the plaintiffs commenced these proceedings claiming:

(i) against the first defendants, a declaration that the purported debit to the plaintiffs` account of $126,260 and interest thereon was without authority and of no effect and, alternatively, payment of the sum of $126,260, interest and costs;

(ii) against the second defendants, damages for conversion in the said sum of $126,260 and alternatively payment of the same as money had and received. The plaintiffs also claimed interest and costs.

As against the first defendants, the plaintiffs` case is that a banker who pays on a materially altered cheque does so without the customer`s mandate. In Hall & Anor v Fuller & Ors , a cheque for £3 was altered by the holder to £200 in such a way that no one in the ordinary course of business could have observed it. It was held that the bank could not charge the customer anything beyond the sum for which the cheque was originally drawn. In giving his judgment, Bayley J said at p 757:

The banker, as the depository of the customer`s money, is bound to pay from time to time such sums as the latter may order. If, unfortunately, he pays money belonging to the customer upon an order which is not genuine, he must suffer, and to justify the payment he must show that the order is genuine, not in signature only, but in every respect. This was not a genuine order for the customer never ordered the payment of the money mentioned in the cheque.

In the present case, not only was the amount altered, the payee`s name was also altered. The first defendants, however, denied liability contending that:

(i) having acted in good faith and without negligence, they are protected by s 80 of the Bills of Exchange Act (Cap 23) (the Act);

(ii) the plaintiffs themselves were in breach of their duty to exercise reasonable care in drawing up the said cheque, thereby facilitating the alterations, and the plaintiffs are therefore estopped;

(iii) they are excluded from liability by the exclusion clauses.

On (i), s 80 of the Act reads:

Where the banker, on whom a crossed cheque is drawn, in good faith and without negligence pays it, if crossed generally, to a banker, and if crossed specially, to the banker to whom it is crossed, or his agent for collection, being a banker, the banker paying the cheque, and, if the cheque has come into the hands of the payee, the drawer, shall respectively be entitled to the same rights and be placed in the same position as if payment of the cheque had been made to the true owner thereof.

The alterations to the said cheque were clearly material alterations in the light of s 64(2) of the Act. The said cheque was thus avoided by s 64(1) of the Act.

Section 64 of the Act reads:

(1) Where a bill or acceptance is materially altered without the assent of all parties liable on the bill, the bill is avoided except as against a party who has himself made, authorized or assented to the alteration, and subsequent indorsers:

Provided that where a bill has been materially altered, but the alteration is not apparent, and the bill is in the hands of a holder in due course, such holder may avail himself of the bill as if it had not been altered, and may enforce payment of it according to its original tenor.

(2) In particular the following alterations are material, namely, any alteration of the date, the sum payable, the time of payment, the place of payment, and, where a bill has been accepted generally, the addition of a place of payment without the acceptor`s assent.

In Slingsby & Ors v District Bank Ltd , the plaintiffs, executors of a will, kept an executors` account with the defendants, and retained a firm of solicitors, Cumberbirch & Potts, who used to assist them in matters connected with their testator`s estate. The acting member of the firm was one James Cumberbirch. The plaintiffs, in conference with James Cumberbirch, decided to invest through John Prust & Co, stockbrokers, a sum of 5000 l, part of the estate lodged on deposit with the defendants. James Cumberbirch accordingly drew out a form of cheque for signature by the plaintiffs. It was in the form `Pay John Prust & Co or order` and was drawn on the plaintiffs` deposit account with the defendants. The cheque was signed by the plaintiffs and left with James Cumberbirch to be posted to John Prust & Co with instructions to invest the money. James Cumberbirch instead of posting the cheque to John Prust & Co fraudulently inserted the words `per Cumberbirch & Potts` in the blank space between the payees` name and the words `or order`; he then indorsed the document with the names `Cumberbirch & Potts` and paid it so altered and indorsed into the Westminster Bank to the credit of a company in which he was interested and which had an account at that bank. The document was accepted without question by the Westminster Bank and passed through the clearing house, and the account of the plaintiffs with the defendants was debited, and that of the company with the Westminster Bank was credited, with the amount on the face of the document. In an action by the plaintiffs against the defendants for conversion, negligence and breach of duty, the Court of Appeal in dismissing the appeal by the defendants held, inter alia, that the cheque had been `materially altered` within the meaning of s 64 of the Bills of Exchange Act 1882, (the English Act) and was avoided as between the plaintiffs and defendants by that section, and that, therefore, the defendants could not rely upon ss 60 and 80 thereof as excusing them for paying the cheque and that, in leaving a blank space between the name of the payee and the words `or order`, the plaintiffs were not guilty of any breach of duty towards the defendants.

In the course of his judgment, Scrutton LJ said, at p 559:

This cheque, having been signed by the executors in a form which gave Cumberbirch no rights, was fraudulently altered by Cumberbirch before it was issued and, it was not disputed, altered in a material particular, by the addition of the words `per Cumberbirch & Potts`. The cheque was thereby avoided under s 64 of the Bills of Exchange Act ...

The protection given by ss 80 and 82 is excluded in my opinion by the...