FAKULTI UNDANG-UNDANG

UUUK 4633
BANKING LAW
SEMESTER II SESSION 2019/2020

CASES REVIEW

KAMALA BHAIE MG PILLAI v. STANDARD CHARTERED BANK MALAYSIA BHD

[2007] 10 CLJ 289

RAHIMAH BTE ABDULLAH v. BANK BUMIPUTRA MALAYSIA BHD

[1994] 1 MLJ 477

PREPARED FOR:

PROF. MADYA DR. RUZIAN BINTI MARKOM

PREPARED BY:

BIL. NAMA NO. MATRIK

1 NURAINI SHAPARIAH BINTI ABDUL RASHID A162667

2 NURUL FARHANI BINTI KAMARUDIN A162687

3 NAIMI SYAHIRA BINTI MOHAMAD A162722

 KAMALA BHAIE MG PILLAI v. STANDARD CHARTERED BANK MALAYSIA
BHD [2007] 10 CLJ 289
HIGH COURT MALAYA, KUALA LUMPUR
ABDUL WAHAB PATAIL J

FACTS OF THE CASE:

The plaintiff in this case had opened a current account in the name of her legal firm in
the defendant bank’s branch in Seremban. As of November 1999, the credit balance of the
aforementioned account stood at RM160, 941.45. However, on 2nd November 1999, about 11
am, the plaintiff was robbed by at the plaintiff’s firm which resulted the plaintiff to be forced
to sign two cheques amounting RM178,000. The robbers went to the bank around 11.40 am to
cash the cheque and the plaintiff received a phone call at about 12 noon, from the bank asking
if it was in order to pay out on the cheque since the cheque were cash cheque. Considering the
safety of her employees’, customers and acquaintances at her office, the plaintiff answered
‘yes’. The bank honoured the cheques, and an amount of RM17, 058.55 which were the extra
of the initial balance were set to be paid out as overdraft on the account. The plaintiff argued
that she asserted the cheques under duress, threat or order of the robbers. She then claimed for
the return of RM160, 941.45 which was said to be removed from her account by the bank. She
also contended that the action of the bank paying out the robbers was in fact a breach of
fiduciary duty or duty of care to her. The bank denied the existence of any such duty, and in
any case counter-claimed for the extra sum of RM17,058.55 which it treated as overdraft
aforesaid.

PLAINTIFF’S CASE
It was in the plaintiff’s case by the statement of claim that she was robbed and forced
to sign two cheques amounting to a sum of RM 178,000. Two of the robbers went to the bank
to cash the cheques and around at 12 noon, the plaintiff received a call from a person who
introduced himself as Syed (the defendant’s employee) who asked about the confirmation of
the cheque being cashed out. All the act done by the plaintiff was claimed to be because of
duress and/or threat and/or order of the robbers threatening her and her employees’ safety
and/or her customers and/or her acquaintances who were in her office including the approval
of “Yes” by plaintiff upon asked. The robbers left her office at around 12.30 pm. As there is
only a sum of RM160,941.45 in the plaintiff’s account, there is an overdraft amount of
RM17,058.55.
 The plaintiff further objects on the basis that she has never agreed for an application of
overdraft prior to that date. This results to that, the plaintiff had breached the terms of their
contract and/or its duty of care and/or fiduciary duty resulting in the loss of that sum, and that
the plaintiff in a state of fear cannot be said to have applied for an overdraft. The plaintiff then
supplied for particulars of breach of fiduciary duty and or duty of care as she suffers from
emotional and mental distress as result of the incident which also affects his capability as a
lawyer and mother/wife. It is also contended that the defendant knew that the account was the
customer’s account of legal firm thus making the existence of constructive trustee. It was also
explained on how there has been no habit of plaintiff to cash out a large sum of money and that
there is an attempt of forgery by a third party about a month ago.

THE DEFENCE:
In regards to the plaintiff’s case, the defendant denies all liabilities and averred that any
contractual or other relationship is governed by the express and/or implied terms and conditions
of the Business Account Opening Form, the Business Account Signature Form and the Sole
Proprietorship Account Form, all of which were signed by the plaintiff on 25 June 1998. The
act of Syed, the defendant’s employee to confirm upon the issuing of the cheque was done
accordingly with the expressed confirmation by plaintiff. The defendant also denies
responsibilities as the defendant has knowledge of what was happening in the plaintiff’s firm.
As result, the defendant counter-claimed for an amount of RM17,058.55, interest thereon at
3.5% + BLR from 3 November 1999 until date of full and final settlement, costs and other
further reliefs.

ISSUES & JUDGEMENTS:

(i) Whether the bank is in breach of fiduciary duty and duty of care towards the
plaintiff?
Contractual relationship exists between bank and its customer where the bank acts
as an agent for the customer. It has to be noted that the duty of care of an agent is to act
with reasonable care and skill in interpreting, ascertaining and acting in accordance with
the instructions given by the customer. However, where cheque orders the payment of
excess of the sum in the customer’s account, a bank is not obliged to pay out the excess
monies. The case of Verjee v. CIBC Bank Trust Co [2001] stated that a bank would have
to consider whether to honour the customer’s cheque or otherwise, with additional
 circumstances such as credit worthiness and the interest of the bank to maintain a person
as its customer also should be taken into consideration. The sum of excess in this case only
just over 10% of the amount in the plaintiff’s account. Moreover, the plaintiff has answered
‘yes’ when being asked by the defendant with regards to the order of the cheques.
Therefore, there is no breach of fiduciary duties on the part of the defendant as the bank
acted in accordance with the instruction given by the plaintiff.

(ii) Whether the bank is liable for the loss faced by the plaintiff?
Technically, the act of the bank removing a sum of RM160, 941.45 from the
plaintiff’s account is an authorized act as permission were acquired by the bank from the
plaintiff herself. It has to be noted that there is no evidence that the defendant knew of what
happened to the plaintiff’s office, in which she has been robbed and under duress or threat
when asserting the order of the cheques payment. It is unreasonable to expect the bank to
foresee that there is robbery by looking at the sum of the cheques which has exceeded the
amount in the account by just over 10%. The plaintiff in other hand should easily have
caused the bank to dishonour the cheques by a defective signature, but has failed to do so.
Thus, the bank is not liable for the loss faced by the plaintiff as the bank acted in a
reasonable manner.

CONCLUSION:
The plaintiff’s action was dismissed with costs and the defendant’s counter-claim was
allowed with costs:
1) It is an established law that the relationship between a bank and a customer is purely
contractual. This includes bank as agent to act with full duty of care but only limited
to sum of funds available in the customer’s account.
2) The cheques in the matter were issued by a legal firm whose members shall be full
of integrity. Any instruction done by any of the members shall be fulfilled
accordingly by the defendant.
3) The bank is not obligated to pay monies in excess of the amount available. Thus,
the act done to advance money was done rightfully upon the confirmation from the
plaintiff.
4) There is no knowledge on behalf of the defendant about what happened in the
plaintiff’s office. It is contended that only the plaintiff could foresee the robbery.
STUDENTS REVIEW:

Nuraini Shapariah Abdul Rashid (A162667)

The judgment given by Abdul Wahab Patail J was clean-cut and just in which I agree
to the grounds of the judgement itself. It is reasonable and clear to myself that even though a
bank acted as an agent, the bank should not be said to know of what happened at the premises
or events occurring to the customers. It is unreasonable to expect the bank to foresee that there
is robbery which has caused the customer to declare the order of the cheques payment to be
valid. The bank is not in breach of fiduciary duty and it has to be noted that the customer should
have given a defective signature in order for the bank to dishonour the cheques, in which the
plaintiff in this case has failed to do so. Moreover, the act of the bank paying monies in excess
of the amount in the customer’s account is not an unreasonable and reckless act as it is just
over 10% of the amount of the customer’s account, in which the bank has considered the
circumstances of the customer herself. Therefore, the bank (the defendant) act is valid and
should not be held liable for the loss faced by the plaintiff.

Nurul Farhani Kamarudin (A162687)

It is in my opinion that the decision was seemed to be morally unjust to the plaintiff.
The fact that there has been an attempt to forge the plaintiff’s account a month ago should be
taken into account. Although the overdraft was less than 10% of the plaintiff’s sum of money,
it should be measured that the act per se was not of a plaintiff’s normal behaviour as she has
been reportedly not often to issue such a lump sum of cheques. I opinionated that the court
was too dependent on the affirmative statement of plaintiff when she was threatened. It was
done with no option in hands for her and others’ safety. The judge was seemed to take a very
conservative approach and not trying to look at all circumstances of the cases. This also
includes directing the plaintiff to pay for the overdraft when the plaintiff has already suffered
such a huge amount, not to be forgotten emotional distress.

Naimi Syahira Mohamad (A162722)

I agree with the decision made by the judge on this case to dismiss the plaintiff’s
application as the defendant had carried out his duty with care. The payment was made after
he obtained the confirmation from the plaintiff through the phone call. Furthermore, the
defendant was clearly unaware about the plaintiff’s situation and it would be very unreasonable
to extend the duty of care on the defendant.
 RAHIMAH BTE ABDULLAH v. BANK BUMIPUTRA MALAYSIA BHD
[1994] 1 MLJ 477
HIGH COURT KUALA LUMPUR
ZAKARIA YATIM J

FACTS OF THE CASE:

The plaintiff had deposited RM300,000 on fixed deposit with the Bank. The plaintiff
alleged that the Bank uplifted the fixed deposit without the plaintiff’s consent and credited it
to the account of Malrich Holdings Bhd (‘Malrich’) pursuant to an alleged lien in favour of the
Bank as a pledge for a loan granted to Malrich. The plaintiff contended that the Bank’s action
in uplifting the sum of Rm300,000 in the fixed deposit and crediting it to the account of Malrich
amounted to an act of conversion on the part of the Bank. The Bank denied the alleged act of
conversion and alleged that the plaintiff had given her consent and approval to the Bank to
uplift the RM300,000 in the fixed deposit to pay into the account of Malrich as directed by and
agreed upon by the plaintiff in a document dated 22 October 1982 (‘the plaintiff’s letter’).

PLAINTIFF’S CASE:
Counsel for the plaintiff contended that the money deposited with the Bank could not
constitute a security over which it could be exercise a lien as the fixed deposit represented the
Bank’s indebtedness to the plaintiff. To support his contention, he referred to the case of
Halesowen Presswork & Assemblies Ltd v Westminster Bank Ltd. Buckley LJ in his
judgement said that a lien did not exist in that case. The money or credit which the bank
obtained as the result if clearing the cheque became the property of the bank, not the property
of the company. No man can have lien on his own property and consequently no lien can have
arisen affecting that money or that credit. While Lord Denning MR was of the view that a
banker’s lien was no true lien because it has no resemblance to any other kind of lien.

THE DEFENCE:
Counsel for the Bank refuted the claim on the ground that a fixed deposit could be the
subject of lien. This principle can be seen in the case of Manuel Misa v Raikes Currie, G
Grenfell Glyn & Ors. Lord Hatherley in his judgement said that all moneys paid into a bank
are subject to a lien, and that all documents as well as moneys deposited with a banker may be
subject, on the banker’s part, to a lien in respect of any balance that may be due to him from
his customer.
ISSUES AND JUDGEMENTS:

(i) Whether the fixed deposit receipt created a valid lien in favour of the Bank as security
for an overdraft facility which was granted by the Bank to Malrich?
Any money credited into the account of a customer in a bank represents
indebtedness by the bank to the customer. The bank has no lien upon its own indebtedness
to the customer, even if the customer has another account in the same bank which is
overdrawn or frozen. The bank, however, has a general lien on all securities deposited with
the bank by a customer. Where the customer gives instructions in writing to a third party
requesting the third party to pay the customers’ bank the sum due and owing by the third
party to the customer, that sum is subject to lien.
The fixed deposit per se is not subject to a lien. However, if the fixed deposit is
considered together with the plaintiff’s later dated 22 October 1982, it could be argued that
the Bank has a lien on the money kept in the fixed deposit. Nevertheless, the court more
inclined to hold that the money kept in the fixed deposit is a security for the payment of
any money owing by the third party to the Bank.

(ii) Whether the act of the Bank in uplifting the fixed deposit on the ground that there
was lien was bad in law?
The plaintiff’s later dated 22 October 1982 gave the Bank the liberty to withdraw
the fixed deposit and apply the proceeds thereof to discharge the amount owing by the third
party, Malrich Holdings Bhd without any reference to her. Therefore, the Bank’s action
was valid if it is done in accordance with the terms of the said letter.

CONCLUSION:
In conclusion, the bank has a general lien on all securities deposited with the bank by a
customer. Where the customer gives instructions in writing to a third party requesting the third
party to pay the customers’ bank the sum due and owing by the third party to the customer, that
sum is subject to lien. Therefore, the judge dismissed the plaintiff’s application and ordered
that the costs of the application be paid by the plaintiff to the Bank.
STUDENTS REVIEW:

Nuraini Shapariah Abdul Rashid (A162667)

In my opinion, Zakaria Yatim J in this case has given just and rational judgement to
which I agree with the grounds stated by him. He has referred several cases which has laid
down principles of lien to which he holds that the money kept in the fixed deposit is a security
for the money payment of any money owing by the third party to the Bank, which then stated
that if the amount in the fixed deposit was uplifted and credited to the account of the third party
according to the plaintiff’s letter, the Bank’s action was valid in law. He has showed that the
plaintiff’s letter has given the Bank liberty to withdraw the fixed deposit and hence, it was valid
in law.

Nurul Farhani Kamarudin (A162687)

It is in my observation that the judge in this case has acted rationally. He referred to
cases quoted by both counsels which include Manuel Misa and Halesowen Presswork by
defendant and plaintiff respectively. Facts of the cases were laid down to see the similarities
and differences as thus he reached to the conclusion that the fixed deposit per se is not subject
to lien. The primary evidence was seen strong to hold that the money kept in fixed deposit is
security for the payment by third party is of the plaintiff’s letter dated 22 October 1982. This
letter holds a clear through judgement of how the bank was given liberty to withdraw the fixed
deposit.

Naimi Syahira Mohamad (A162722)

I agree with the high court decision on this case based on two justifications. First,
concerning the issue on the validity of lien, since the fixed deposit was considered together
with plaintiff’s letter, therefore it could be argued that the lien was valid. Second, with regards
to the act of the Bank in uplifting the fixed deposit, the plaintiff clearly gave consent to the
Bank to uplift the fixed deposit without the plaintiff’s approval or authority through the said
letter. Therefore, the defendant’s action was valid in law.