Cheque

BANKER CUSTOMER RELATIONSHIP

➢ CONTRACT

➢ PRACTICES AND USAGES OF BANKERS

CUSTOMER DUTIES with respect to forgery, unauthorised signature

1) Duty to take care to prevent fraudulent alterations of cheques which might cause loss to banker

Commonwealth Trading Bank of Australia v. Sydney Wide Stores which confirmed Macmillan (english case)

In absence of express agreement to contrary, customer’s duty is limited to duty to refrain from drafting a cheque in such a manner as to facilitate fraud or forgery

2) Duty to inform bank of any unauthorised cheques as soon as aware

No duty to check statements

Tai Hing Cotton Mill Ltd v. Liu Chong Hing Bank Ltd (1986)

Applying Greenwood

Attempts to expand duty have failed:

Tai Hing Cotton Mill Ltd (1986)

National Australia Bank Ltd v. Hokit (June 96)

But notice in Westpac v. Metlej (1987)-court prepared to contemplate wider duty

C6

COMMONWEALTH TRADING BANK OF AUSTRALIA V SYDNEY WIDE STORES

(1981) 148CLR 304

Sydney Wide drew cheques on CTB

➢ CAS or order

➢ Computer Accounting Services

➢ Crossed and marked Not negotiable and A/c Payee Only

Employee Prior, added H to CAS=CASH

➢ Cashed cheques

➢ Sydney Wide sued the bank and won

➢ CTB appealed to HC

Arising from the contract between banker and customer, there is a duty upon the customer to take usual and reasonable precautions in drawing a cheque to prevent a fraudulent alteration which might occasion loss to the banker

Whether there is a breach of this duty by neglecting some usual and reasonable precaution in the drawing of cheques is a question of fact

Appeal allowed and remitted back to SC

C13

TAI HING COTTON MILL V LIU CHONG HING BANK

(1986) 1 AC 80

❑ Leung was accounts clerk with Tai Hing in HK

❑ Over 5 years, forged signature MD on 300 cheques/HK D5.5m

❑ Cheques paid into accounts in names similar to real suppliers

❑ Leung took money and fled to...