Khoo Tian Hock and Another v Oversea-Chinese Banking Corp Ltd (Khoo Siong Hui, Third Party)

• Jurisdiction: Singapore
• Judge: Woo Bih Li JC
• Judgment Date: 01 September 2000
• Neutral Citation: [2000] SGHC 178
• Docket Number: Suit No 1451 of 1999
• Date: 01 September 2000
• Published date: 19 September 2003
• Year: 2000
• Plaintiff Counsel: Kenneth Koh (Kenneth Koh & Co)
• Citation: [2000] SGHC 178
• Defendant Counsel: CS Rajah and Chew Kei-Jin (Tan Rajah & Cheah)
• Court: High Court (Singapore)
• Subject Matter: Cheques,Bills of Exchange and Other Negotiable Instruments,Bank paying on forged cheques without calling customer to check,Whether knowledge of bank officer of history of fraudulent conduct attributable to other bank officers,Whether customer owing duty of care to bank not to facilitate fraud,Banking,Duties of bank and customer,Whether breach causing loss,Whether bank negligent in paying on cheques,Whether customer breaching duty,Customer allowing person with history of fraudulent conduct to have access to cheques,Whether standard of proof for forgery met,Forged signature on cheque

: Introduction

In this judgment:

(a) an affidavit of evidence-in-chief will be referred to as `AEIC`,

(b) an affidavit used in the application for summary judgment will be referred to as `AISJ`,

(c) a reference to the notes of evidence will start with `NE` followed by the page number and the alphabet reference.

Background

The plaintiffs are husband and wife. Prior to 1996, the plaintiffs` business Kim Hwee Leong Agency & Co (`KHLA`) had an account with United Overseas Bank Limited (`UOB`). One of the officers who was servicing that account was Lim Poh Leong. The business was run by the first plaintiff. At some point in time, he was assisted by the third party who is a son of the plaintiffs.

In 1990 Lim Poh Leong left UOB to join Four Seas Bank Ltd.

On 21 August 1993, KHLA opened an account with Four Seas Bank Ltd at its main branch at Robinson Road.

In January 1994, the plaintiffs opened a joint personal current account with Four Seas Bank Ltd also at Robinson Road. The number of this account was 601-0584800-001 (`the account`). The mandate was for either one of the plaintiffs to sign cheques drawn on the account.

In February 1994, the plaintiffs were allowed to operate the account at the Jalan Sultan Branch of Four Seas Bank Ltd (in the course of the trial, this branch was also referred to as the Textile Centre Branch). Since then, the third party has deposited money into the account and presented for payment cash cheques drawn on the account. This evidence came from an officer of the defendants Serene Cheong but she did not elaborate whether the third party had deposited cash into the account. On the other hand, the defendants did identify at least eight cheques from 17 July 1996 to 27 December 1997 which were encashed by the third party. The identification was from the I/C number and name written on the reverse of such cheques. The defendants` position is that the third party might have encashed more cash cheques prior to 3 July 1999 but the other cash cheques might not have the name or I/C number of the recipient clearly stated on the reverse thereof. The sums that the third party encashed up to 27 December 1997 from each of the eight cheques ranged from $18,240 to $385,000.

In July 1998, Four Seas Bank Ltd was merged into the defendants.

The account was transferred to the defendants` main branch at OCBC Centre at Chulia Street. However the plaintiffs were allowed to continue operating the account at the Jalan Sultan Branch.

On 4 June 1999,UOB contacted the first plaintiff to inform him that a payment was due from KHLA to UOB. UOB had granted letter of credit/trust receipt facilities to KHLA and the third party was authorised to operate such facilities. The third party had applied to UOB on behalf of KHLA for a letter of credit to be issued for $730,088. 58 without the authority of the first plaintiff. This letter of credit was in favour of another party in Johore Bahru which the first plaintiff knew nothing about. I will refer to this as `the UOB incident`.

Upon learning about the UOB incident on 4 June 1999 the first plaintiff instructed UOB to delete the third party as an authorised signatory for operating the credit facilities granted by UOB to KHLA. Presumably, this instruction was carried out by UOB.

On the same day, the first plaintiff also informed Lim Poh Leong about the UOB incident and gave a similar instruction in respect of credit facilities granted by the defendants to KHLA. This instruction was carried out.

Neither the first plaintiff nor Lim Poh Leong informed the Jalan Sultan Branch of the defendants about the UOB incident. The first plaintiff did not make a police report about the same at that time.

On or about 3 July 1999, the third party went to the Jalan Sultan Branch and opened a current account with the defendants. He informed one of the officers there, one Mdm Chew Soo Mooi that he was getting married soon and his father, the first plaintiff, was giving him money to buy a new home. Having completed the formalities of opening an account, the third party then presented three cheques drawn on the account purportedly signed by the first plaintiff. These cheques were:

(a) Cheque No 469701 dated 3 July 1999 for $51,500 payable to the third party or Bearer (`the first cheque`).

(b) Cheque No 469716 dated 3 July 1999 for $2,000 which was a cash cheque (`the secondcheque`).

(c) Cheque No 469742 dated 3 July 1999 for $82,000 payable to the third party or Bearer (`the third cheque`).

The moneys from the first and third cheques were credited into the third party`s account. The third party received cash from the second cheque.

On 5 July 1999, the third party went to the Jalan Sultan Branch and presented a fourth cheque drawn on the account again purportedly signed by the first plaintiff. This was cheque No 469748 dated 5 July 1999 for $350,000 and was a cash cheque (`the fourth cheque`). Although this was a cash cheque, the moneys from it were credited into the third party`s account.

Thereafter, on the same day, the third party went tothe defendants` main branch at OCBC Centre and withdrew from his own account $483,450, leaving a balance of $50.

On 9 July 1999, the third party went to the Jalan Sultan Branch. He presented a fifth cheque drawn on the account purportedly signed by the first plaintiff. This was cheque No 469845 dated 9 July 1999 for $125,000 and was a cash cheque (`the fifth cheque`).

On this occasion, the defendants tried to contact the first plaintiff to verify that he had signed the fifth cheque. However, they were not successful in reaching the first plaintiff. A decision was made to pay the moneys over the counter to the third party.

However soon thereafter and on the same day, the defendants managed to contact the first plaintiff to ask if he had issued the fifth cheque. The first plaintiff replied that he had not. Arising from that conversation, the first plaintiff proceeded to the Jalan Sultan Branch on the same day with the second plaintiff. He brought along five cheque books.

From the Jalan Sultan Branch the first plaintiff contacted Lim Poh Leong (who was at the head office). They discussed stopping payment on other cheques. A Stop Payment Instruction was prepared by the Jalan Sultan Branch and signed by the second plaintiff and then faxed to Lim Poh Leong from the Jalan Sultan Branch. The cheque numbers in the Stop Payment Instruction were inserted by Lim Poh Leong after he received the fax. There were two amendments made to the cheque numbers in the Stop Payment Instruction but it is unknown who made those amendments as Lim Poh Leong said he did not do so. The amendments must have been made by some other officer of the defendants but in any event they are not material.

From the Jalan Sultan Branch, the first plaintiff said he went to the Criminal Investigation Department and was told that he should report the matter to the police. He claimed that he then went home and called the police.

A police report was made by the first plaintiff on that same day, ie 9 July 1999.

Subsequent to 9 July 1999, the defendants arranged for the third party to come to the Jalan Sultan Branch on 19 July 1999 and then called the police whereupon the third party was arrested.

After the arrest, the second plaintiff put up bail to secure the release of the third party from police custody.

Parties` positions in the pleadings

I will try to summarise the parties` main positions as stated in the pleadings.

The plaintiffs alleged that the signatures on the five cheques were forgeries. If they are correct, then prima facie, the defendants have wrongly debited the account with the total amount of the five cheques.

The plaintiffs also asserted negligence against the defendants. However the statement of claim did not assert specifically that the defendants owe the plaintiffs a duty of care or what that duty was or whether the duty was based on an implied term in contract or tort or both.

The main thrust of the plaintiffs` case on negligence was that the defendants should have contacted the first plaintiff to verify if the plaintiffs had issued the cheques. This appeared to be based on an alleged practice between the first plaintiff and the defendants whereby the defendants would contact the first plaintiff to verify that a cash cheque had been issued by the plaintiffs before paying thereon if the first plaintiff did not first call the defendants to inform them about the cash cheque.

The plaintiffs also relied on the fact that Lim Poh Leong had been informed about the UOB incident on 4 June 1999 and sought to attribute this knowledge to the defendants generally so that the defendants could be said to be aware of the third party`s fraudulent conduct in relation to the UOB incident.

On the defendants` part, the forgeries were not admitted.

The defendants also asserted that the plaintiffs were estopped from setting up the forgeries or were negligent. However, like the statement of claim, their defence did not assert specifically that the plaintiffs owed a duty of care except to assert an implied duty regarding the drawing of cheques. This duty was irrelevant in any event as the fraud was not caused by careless drawing of the cheques. The defence also did not assert specifically what the duty of care attributed to the plaintiffs was or whether that duty was based on an implied term in contract or tort or both.

The defendants relied on the following matters for their assertions of estoppel and negligence:

16 Despite the matters referred to in paras 14 and 15 herein, the plaintiffs failed and/or neglected to:

(i) inform and/or warn the defendants of such fraudulent and/or dishonest misappropriation of moneys belonging to the plaintiffs and/or the first plaintiffs` business; or

(ii) otherwise put the defendants on notice that:

(a) Khoo Siong Hui ought not to be carrying out any banking transactions for and/or on behalf of the plaintiffs; and/or

(b) any cheque belonging to the...