The document discusses various cases related to a customer's duties regarding their bank account. It summarizes: 1) At common law, a customer only has two duties - to not sign cheques in a way that facilitates fraud, and to inform the bank of any forgeries or fraud as soon as they become aware. They do not have a duty to prevent forgeries by employees. 2) Cases have established that while customers must exercise reasonable care, the risk of wrongful payments is borne by the bank unless a clear contract shifts this risk to the customer. 3) For a conclusive evidence clause imposing additional duties on a customer to be valid, it must be unambiguous and bring the full extent

1. Azri Nadiah bt MohdYani LEB120016
Fatin Nur Athirah bt Zainudin LEB120030

3. JOACHIMSON V SWISS BANK
CORPORATION
 The customer has an
implied duty to
exercise reasonable
care in executing his
written orders so as
not to mislead the
bank or facilitate
forgery
LONDON JOINT STOCK BANKV
MACMILLAN & ARTHUR
 Lord Haldane:
 The customer contracts
that in drawing his cheques
he will draw them in such a
form as will enable the
banker to fulfill his
obligations and therefore
in a form which is clear
and free from ambiguity.

4. FACTS
 A bank customer left 5
cheques signed in blank with
his wife so she could use
them to pay the wages of his
workers while he was away.
The wife instructed a clerk to
fill in a cheque for £50 2s. 3d.
While filling in the cheque,
the clerk left spaces in
between the words and the
figures expressing the
amount payable. She then
raised the amount on the
cheque to £350 2s. 3d.
COURT HELD
 A customer was acting in
breach of his duty of care
towards the bank when he
signed a blank cheque to be
filled in by a 3rd party. It was
manifest that the legal blame
attached solely to the
customer for leaving the
blank cheque with his agent
who caused it to be filled up
in an unusual way by failing to
ensure that at least a line was
drawn to fill up the interval
before the word fifty

5.  -A guy named MrWilliam
Gates was employed by Ps
company as secretary. Gates
was the son of one of the
directors of the company. As
the company’s secretary,
Gates was entrusted with the
custody of the company’s
cheque books and its bank
pass-books. Gates forged the
signature of one of the
authorized signatories and the
cheques were duly paid by the
bank.The company claimed
that the bank had no authority
to make payment on the
cheques.
 The bank relied on 2 main defences ie:
 (i) It alleged that Gates’s father who was
a director of the company was aware
that his son had committed forgery
before he became the secretary of the
company and he should have told the
bank.
 (ii)The company was negligent in failing
to supervise its secretary and failing to
check its bank pass-books.
 Court held that the negligence of the
customer could not be relied upon by the
bank unless it actually facilitated the
fraud. In this case the forgeries did not
result from the company’s failure to
supervise its secretary and pass-books.

6.  -D opened acc at A’s bank. His account’s clerk
forged cheques and were honoured by A’s bank.
at common law a customer owes his banker
only two duties ie refrain from drawing a
cheque in such a manner as may facilitate
fraud or forgery and duty to inform the bank
about the forgery/fraud as soon as the customer
becomes aware of it.

7.  Bond had signed 3 blank cheques and gave it to his
secretary to fill in the details for payment to Fruits
Sdn Bhd.
 The fact of the case id distinguished from Lewes
Sanitary Steam Laundry Co v Barclays, Bevan & Co
as his act obviously facilitated the act of forgery
because his secretary can fill in the figure apart from
what had been ordered; payment for Fruits Sdn Bhd.

8.  There is a duty to take reasonable care
when drawing a bank cheque in such a
manner as may facilitate fraud or forgery.

9.  Can conclusive evidence clause be used
against customer?

10.  General rule at common law:
the customer does not have a
duty to check his bank
statements periodically
 Conclusive Evidence Clause has
been used by banks to impose
duty on the customer to check
his bank statements and to
notify immediately within the
stipulated time of any errors in
entries
 Different applications in
Commonwealth countries
 Canada:ArrowTransfers Co Ltd v
Royal Bank of Canada
 Singapore(useUnfair Contract
Terms Act): Consmat Singapore Ltd
v Bank of America NationalTrust &
Savings Association, Pertamina
EnergyTrading Ltd v Credit
Suisse(differ betw commercial
customer and non-commercial
customer)
 United Kingdom: Burnett, Bache &
Co Ltd v BanqueVernes Et
Commerciale De Paris SA
 Malaysia: Chairman, Sarawak
Housing Developers Association v
Malayan Banking Bhd, Principal
Salute Sdn Bhd v RHB Bank Bhd

12.  In the absence of fraud, the construction of
the banker-customer contract does not place
the customer under a duty to peruse his
account statement or the entries in a pass-
book.

13.  Lord Scarman:
 In the absence of express
agreement to the contrary, the
risk of wrongful payments was
borne. Banks offer a service,
which is to honour their
customr’s cheques when drawn
upon an account in credit or
within an overdraft limit.
 If they pay out upon which the
cheques are not [the
customer’s], they are acting
outside of their mandate and
cannot plead his authority in
justifications of their debit to his
account.
 The risk is a risk of service which
it is their business to offer.
 clear and unambiguous
provision is needed if the banks
are to introduce into the
contract a binding obligation
upon the customer who does not
query his bank statement to
accept the statement as
accurately setting out the debits
items in the accounts.

14.  P maintained a bank account
with D bank.The P later
discovered that their
signature on 15 cheques were
forged.
 clause 3(c)
 Verify statements etc &
inform discrepencies etc
within 7 days
 If not, it shall be conclusive
evidence that bank is
excluded of liabilities except
for things notified.
Court applied a wider approach by stating
that an amount drawn by forged or
unauthorized cheque which has been
debited to the account is a “debit wrongly
made” and is also an incorrect entry in the
account which squarely fall within the
ambit of clause 3(c).
 “it is indeed difficult for anyone reading
clause 3(c) of the contract to realize that his
right to raise the issue of forgery is being
taken away seven days after the bank send
him a bank statement. If a bank wished to
shift its responsibility for verifying a
customer’s signature to the customer
himself, then it should say so in clear
terms rather than hide it in clause which
refers to something else.”
 reiterates the principle that customers do
not (in the absence of express agreement)
owe a duty to prevent forgeries or check
their bank statements

15.  The customer had agreed,
in a form executed when
he opened his account, to
verify all account
statements sent to him
and to notify the bank of
any errors and inaccuracies
within a given period.
 Thereafter, the account as
kept by the bank was to
constitute conclusive
evidence of entries’
correctness.
 A clerk who occupied a
responsible position in the
customer’s service, forged a
number of cheques.
 SUPREME COURT
 Majority: customer was bound
by the clause in question.
Failure to notify the bank of
the discrepancies disables him
to contest the genuineness of
the cheques.

16.  Laskin J:
 Customer’s persistent
failure to peruse the
statements and to verify
the state of his account
precluded him from
disputing the entries is
based on the forged
cheque.
 Verification clause must
be construed narrowly in
line with the
interpretation of
exemption clause
 The clause did not
exempt the bank from its
liability for the payment
of the forged cheques,
even where the customer
had failed to peruse the
statements s rendered to
him.
 no reference to customer’s
duty to verify genuineness
of cheques forming the
basis of entries

17. CANADIAN PACIFIC HOTELS
LTDV BANK OF MONTREAL
 Le Dain J rejected the
contention in ArrowTranfer
 Existence of a duty to
peruse bank statement was
not established even in the
case of ‘sophisticated
customers’ such as
business corporation.
PERTAMINA ENERGYTRADING
LTDV CREDIT SUISSE SUISSE
 Existence of such duty
would have to depend
upon the proof of a
commercial usage and the
evidence of practice
constituting such a custom
or usage to support it.

18.  Conclusive evidence clause is in conformity
with the spirit of English Law concerning
performing bonds and first demand
guarantees.
 There is no public policy against it … on the
contrary public policy is in favour of enforcing
it.

19. CANADIAN PACIFIC HOTELS
LTDV BANK OF MONTREAL
 Le Dain J = Lord Scarman
 To be effective, it has to be
made an integral term of the
contract between banker and
customer.
 It cannot be done by adding
such clause at the foot of the
bank statement, as this
document does not evidence
the terms of the contract
between the parties.
TAI HING CASE
 It is not enough to include in
the doc signed by the
customer when the acc is
opened an informal
verification clause that falls
short of imposing on the
customer a duty to check his
statements.
 The clause must be
sufficiently drafted to
convey the customer that it
is conclusively binding.

20.  The P claims for an amount of
money wrongly honoured by D
through 186 cheques signed
solely by Obeng, executive
secretary of SHDA who was
tasked with the administrative
duties of SHDA.
HELD:
 At Common Law, a banker who
pays out on a forged instrument
drawn on his customer’s account
is absolutely liable to make good
for such loss regardless of his
unawareness of the forgery or
the reasonable care that was
taken.
 There’s no further duty to take
precautions to prevent forgeries
on the part of his servants.
 There’s no duty to inspect his
periodical bank statements to
ensure that his account is being
properly maintained by the
bank.

21.  Clause 18
 Customer must examine the
statement (rendered 0nce a
month) and report any error found
within 14 days. If not, the
statement shall be treated as
conclusively settled as between
the customer and the bank.”
 ‘Error’ not necessarily included
forgery/fraud. If u want put in the
CEC to include forgery or fraud
then u must put in expressly.
 this clause is insufficient as it is
far from being a clear and
unambiguous provision.
 Customer reading clause 18
might be inclined to think that the
said clause merely refers to some
incorrect mathematical calculations
in the account or failure to take into
account legitimate credits and
debits to the account rather than
more serious matters of forgery or
fraud.
 The burden of the objection and
of the sanction imposed had not
been brought home to the plaintiffs
in this case.

22. Subject to the provisions of this Act, where a signature on
 a bill is forged or placed thereon without the authority of
the person whose signature it purports to be, the forged or
unauthorized signature is wholly inoperative, and no right to
retain the bill or to give a discharge therefore or to enforce
payment thereof against any party thereto can be acquired
through or under that signature, unless the party against
whom it is sought to retain or enforce payment of the bill is
precluded from setting up the forgery or want of authority:
 Provided that nothing in this section shall affect the
ratification of an unauthorized signature not amounting to a
forgery.

23.  Clause 3(c) is a conclusive evidence clause
 LPThean J : the customer was under
obligation to notify the bank of forgery due
to the existence of clause 3(c).The case was
governed solely by S24 BEA while UCTA was
not applicable
 S24 BEA – forged cheques were wholly
inoperative and bank is liable unless customer
is precluded from setting up the forgery

24.  Whether an employer has a duty to
prevent fraud by his employee
towards banks

25.  Facts
 The respondent had an account in the appellant’s
bank.The Respondent’s accounts clerk who was not
an authorised signatory to the cheques forged several
cheques of the respondent drawn on the appellant
bank.The cheques were honoured by the appellant.
Upon discovering it, the respondent sought to
recover the sum of the total forged cheques from the
appellant.

26.  Customer’s duty under
the Common Law:
 MacMillan duty – duty for
the customer not to
engage in acts that may
cause the bank to
facilitate fraud and/or
forgery
 Greenwood duty – duty
to inform the bank as soon
as the customer is aware
of forgery or fraud that is
taking place on his
account(s)
 The customer don’t have a
duty to take precautions
in the general course of
his business to prevent
forgeries on the part of
his servants.
 In the absence of a
contract to the contrary, a
customer does not have a
duty to inspect his
periodical bank statements
to ensure that his account
is being properly
maintained by the bank.

27.  Facts:
 Pf kept an account with 3 different banks. Over a
period of years, the company’s clerk
misappropriated some HK$7 million from the
company’s bank accounts through the use of forged
cheques.The pf tried to recover HK$5.5 million from
the banks
Privy Council:
The banker and customer relationship did not impose
a duty on the customer to prevent the forgery of his
cheques. Plus, the customer did not owe a duty to
check his bank statements.

28.  Facts:
 A company secretary forged the signatures of two directors
on a number of cheques.The defendants, the company’s
bankers, made payment on the cheques.The company
contended that the cheques were paid by the bank without
its authority.The bank alleged that the customer owed a
duty to the bank to take reasonable precautions to prevent
its servants from forging its signature.
 Held:
A customer did not owe a duty to the bank to
prevent the forgery of his signature.

29.  Customers’ duties under the common law
are:
 1) Not to engage in any acts that may cause the
bank to facilitate fraud and/or forgery
 2) Notify the bank of forgery and/or fraud as soon
as he’s aware of it
 He’s not under the duty to prepare means to
prevent fraud or forgery on his employees:
Tai Hing,Tai Soon Heng Construction