005-SLLR-SLLR-2010-V-2-CEYLON-COMMERCIAL-BANK-vs.-CEYLON-TOBACCO-CO.-LTD.pdf
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CEYLON COMMERCIAL BANK VS.CEYLON TOBACCO CO. LTDCOURT OF APPEALSALAM J.
CA 872/95 (F)
DC 93650/MJULY 21, 2008
Bank – Customer relationship – Cheque Jorged – liability of theBank to pay – Bills of Exchange Ordinance Section 24, Section80 – Breach of duty of care? Conduct of the Bank – customer -accountpayee cheque-Paying in good faith – without negligence -burden to establish forgery on whom? Evidence OrdinanceSection 114.
The Appellant Bank debited the respondent customer’s currant withRs. 5,926,786/- upon the presentation of 8 cheques. The respondentcustomer maintained that the debit entries made by the bank waswrongful, unlawful and made without authority or mandate of thecustomer – in as much as the cheques contained forged signatures ofthe authorized signatories – The Appellant Bank is liable to pay bankthe aggregate amount on the cheques with interest.
The Appellant Bank contended that the disputed cheques were dulydrawn and issued by or on behalf of the customer and appeared on theface to be so drawn, and that, the cheques were specially crossed withthe endorsement “account payee” and the officers of the Bank acted ingood faith and without negligence when they honoured the cheque. TheAppellant Bank also contended that there was a breach of duty of careowed to it by the customer.
The District Court held against the Bank.
Held
Per Abdus Salam, J.
“The burden of proof of the cheques issued not having beendrawn and or issued or signed by the drawer was on the customer
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Ceylon Commercial Bank vs. Ceylon Tobacco Co. Ltd
(Abdus Salam, J.)
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notwithstanding the decision in Kolonnawa Urban Council case be ita authority or otherwise.”
Cheque which is the form of a mandate to the Bank to bear thesignature which is the duty of the Bank to compare with thespecime signature and in case the Bank finds the drawerssignature on the cheque differ from the specimen signature thatthe Bank should not honour it. Even if the signature on a chequeis a clever forgery the Bank cannot debt tjie customer’s accountwith the amount of the cheque, as it has no legal authority fromits customer to part with the funds.
It is trite law that the customer of a Bank would be precludedfrom suing the Bank for the recovery of the sum paid on a forgedcheque if it can be proved that the customer was actually aware ofthe forgery and failed to disclose it to the Bank as a consequenceof which the Bank has lost its right of action against the forger.
According to banking practice when a cheque is crossed ‘accountpayee’ the collecting Bank only guarantees the fate of the chequenamely that the proceeds of the cheque would be credited tothe “payee’. Provisions of Section 80 of the Bills of ExchangeOrdinance would apply only where a banker pays a genuinecheque which has been duly issued by its customer but creditedto the account of some other person other than the correct payeedue to a fraudulent endorsement.
The respondent customer has done everything within its powerto prevent the payment of any .cheques referred to have gonemissing and therefore cannot be said to have acted negligentlyor in a manner unbecoming of a customer or adopted the con-duct which would estopped it from claiming the recovery of thefunds paid out of its account upon presentation of the impugnedchaques.
Per Abdus Salam. J.
“The Bank having admitted that they are in possession of thespecimen signature card quite surprisingly did not produce the
same at the trial for comparison by the handwriting experts
Having considered the unusual mode of suppression of the
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specimen signature cards, admittedly in the possession of theBank I am compelled to justify the presumption impliedly drawnin the judgment of the District Judge that it has been so withheldby the Bank as the production of it could otherwise be prejudicialor adverse to the defence raised in the case.”
APPEAL from the judgment of the District Court of Colombo.
Cases referred to:-
Bank of Ceylon vs. Kalonnawa Urban Council-51 NLR 731(distinguished)
National Westminister Bank vs. Barclays Bank International – 1974- 3 All ER 834
Greenwood vs. Martins Bank Ltd. – 1933 A151
Brown vs. Westminister Bank Ltd – 1964 Lloyds Report 187
Maithri Wickramasinghe for defendant – appeallant
Romesh de Silva PC with Prasanna Jayawardene for plaintiff-
respondent.
March 16th 2009ABDUS SALAM, J.
The Ceylon Tobacco Company Ltd (hereinafter referredto as the “Customer”) was a current account holder andconstituent of Ceylon Commercial Bank Ltd (hereinafterreferred to as the “Bank”). In April 1984, the Bank debited theCustomer’s current-account with Rs. 5,926,786/-, upon thepresentation of 8 cheques. The Customer maintained that thedebit entries thus made by the Bank was wrongful, unlawfuland made without authority or mandate of the Customer,in as much as the said cheques contained the forged signa-tures of the authorized signatories and therefore the Bank isliable to pay back the aggregate amount on the said 8 chequestogether with interest.
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Ceylon Commercial Bank vs. Ceylon Tobacco Co. Ltd
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Conversely, the Bank inter alia took up the stand thatthe disputed cheques were duly drawn and issued by oron behalf of the Customer and appeared on the face to beso drawn. Consequently, it pleaded by way of substantivedefence that the cheques in question were.duly paid andthe account of the Customer was rightly debited. The Bankfurther attempted to maintain that the impugned chequeswere specially crossed with the endorsement “account payee”and the officers of the Bank acted in good faith and with-out negligence when they honoured the cheques and madepayment against them.
The Bank also attempted to attribute ‘breach of duty ofcare* owed to it be by the Customer, as the latter had failedor delayed to inform the lack of authority or proper mandate 'emanating from the cheques in question, although theCustomer had been dispatched with daily statements ofaccounts. Further the Bank alleged that the Customer hadcaused, committed or made the Bank to believe that thecheques were duly drawn, used, paid and debited to theCustomer’s account and that the Customer was thereforeestopped from denying that the cheques were duly drawn,paid and debited. The matter of the dispute proceeded to trialbefore the learned district Judge on 20 issues 7 of which wereframed at the instance of the Customer and the balance 13on the suggestion of the Bank.
The relationship between the parties as Customer andBank as alleged in the plaint was admitted. It was alsoundisputed that payments were made in respect of thepurported cheques and cheque books of specially printedleaves were made available to the Customer for use in respectof the said account.
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At the trial, on behalf of the Customer the witnesses whotestified were as follows.
R. R. Kithulgoda (Wx-Security Manager of the Customer).
Palitha Perera (Chief Inspector of the Criminal Investiga-tion Dept).
A.D.H. Samaranayake (Retired Government Examiner ofQuestioned Documents)
V. Gomez (Finance Manager of The Customer).
H. N. Jayathilake (Former Assistant Accountant of theCustomer).
M. H. S. Mohamed (A Police Constable Attached to theCriminal Investigation Dept).
7 P. H. Manathunga (Government Examiner of Questioned
Documents)
On behalf of the Bank the evidence of N. G. Sampathde Silva and M. C. A. Wijesekara was led, as they were theofficers who authorized the payment of the 8 cheques inquestion. At the conclusion of the trial the learned judgeheld that the Bank was able to successfully establish thatthe disputed cheques had not been signed by or on behalfof the Customer and that the Bank was not entitled to debitthe Customer’s current-account and therefore held that theBank is liable to make good the loss suffered by the Customerin connection with the payment of the 8 cheques. The presentappeal has been preferred by the Bank, to have the findings,judgment and decree entered against it, set aside and to havethe Customer’s action declared as having been dismissed.
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Ceylon Commercial Bank vs. Ceylon Tobacco Co. Ltd
(Abdus Salam, J.)
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Initially the Bank raised a preliminary objection beforeme as to whether the learned district Judge had misdirectedhimself with regard to the burden of proof as has been raisedin paragraph 10 (iv) of the petition of appeal. In terms ofparagraph 10 (iv) of the petition of appeal, what has beencomplained of is an alleged misdirection touching upon theoverall burden of proof in respect of the alleged cause ofaction. By order dated 10th May 2007,1 was compelled to holdinter alia that there has been no substantial prejudice causedto the Bank, as the learned district Judge has not placed anytype of initial burden on the bank to be discharged in orderto have itself absolved from the liability of having paid onthe alleged forged cheques. For purpose of completeness, letme refer briefly to the argument advanced on that occasion.The learned counsel of the Bank submitted that the deci-sion of Dias J, in the case of Bank of Ceylon vs. KolonnawaUrban Counsel*>, should not be treated as a binding authority,as regards the burden of proof, since the Customer hadvoluntarily undertaken in that case to discharge the initialburden to prove the allegation of forgery. In the circumstancesI was compelled to make the following remark in my orderdated 10 May 2007, the relevant portion of which isreproduced for the sake of easy reference.
“in passing I would like to have it placed on record that,as the learned trial judge has not followed the principle,referred to by the appellant, the question whether thedecision of Dias J, in Kolonnawa Urban Council caseshould be treated as a binding authority, for the proposi-tion of law that, Svhen a Bank sets up the genuineness ofsignature of a cheque which is alleged by the Customerto be forged, the initial burden of proof was on the defen-dant’ should be considered in an appropriate matter.”
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As far as the judgment in this case is concerned, itis abundantly clear that the learned district Judge hasapproached the problem on the footing that the initial burdento establish an allegation of forgery was on the Customer.This approach adopted by the learned district Judge isin fact favourable to the Bank and the law relating to theburden of proof in relation to claims made by Customer againstbanking authorities, arising on the repayment of the fundsdebited against forged cheques needs to be laid down in amore satisfactory and authoritative manner, so that it willhave a more convincing binding force. In view of the reasonsexhaustively dealt in the order dated 10 May 2007, thequestion relating to the position taken up by the Bank thatthe learned district Judge had misdirected himself withregard to the burden of proof in this case does not arise.
It is appropriate at this stage to mention that the partiesand the learned district Judge have treated and proceeded,right through the trial, on the assumption that the burden ofproof of the cheques not having been drawn and/or issued orsigned by the drawer, was on the Customer, notwithstandingthe decision in Kolonnawa Urban Council case, be it abinding authority or otherwise.
Let me now consider the manner in which the Customeris said to have discharged the burden of proof, it has takenupon itself to establish the allegation that the cheques inquestion not being drawn/issued/signed by or on behalf ofthe Ceylon Tobacco Company Ltd.
In presenting the case of the Customer, 108 documentswere produced in evidence marked as PI to P 108. Documentsmarked as PI to P8 were the impugned cheques. Documents
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marked as P9 to P26 and P48 to P108 contained thespecimen signatures of the authorized signatories obtainedby witness Kithulgoda and by Criminal Investigation Dept.
The chief inspector attached to the Criminal InvestigationDept testified that he had independently obtained thespecimen signatures of the alleged signatories of thecheques and submitted them to the government examiner ofquestioned documents. He categorically stated that theinvestigations carried out by them with the assistance ofthe examiner of questioned documents revealed that all 8cheques, the genuineness of the signatures on them were thematter of controversy, were in fact forged.
A. D. H. Samaranayaka, who testified on behalf of theBank had served at the Dept, of examinations of questioneddocuments since 1946 and later retired as the governmentexaminer of questioned documents. In addition to hishaving served the government of Sri Lanka, he functioned asthe Head of the Department of examiner of documents at theFederal police in Australia. He has obtained post graduatetraining in the field of questioned documents in UnitedKingdom and had been awarded with a U. N. fellowship tostudy the examination of questioned documents in the UnitedKingdom. Canada and United States of America. The witnesshas also served the government of Singapore and Malaysia,as an expert in the field of questioned documents. Havingexamined the purported cheques with the specimensignatures marked as P9 to P 26 and the cheque typewriting,witness Samaranayaka was of the firm view that the chequesin question had definitely been forged.
The evidence of V. Gomez (Finance Manager of TheCustomer Company) is of much significance as regards the
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precautionary measures taken by the Customer Companywith regard to the safekeeping to the cheques in question. Hisevidence was that the Customer Company had nominatedauthorized signatories to operate its account and the chequebooks which were in bound form, had been kept in a safeunder lock and key. The safe in which the cheque book hadbeen kept had two keys which were separately kept in thecustody of two officers.
It is quite important to note that by letters marked P34and P35, the Customer had informed the Bank of the 8 chequeleaves that had gove missing from the cheque-book andinstructed the bank to stop payment of the same. Eventhough the cheques had been paid prior to the lettersP34 and P35, it should be remembered that the Customerhad informed the Bank of the missing cheques almost twoweeks after the cheques had been paid. The learned districtjudge’s finding on this matter was that the Customer hadimmediately written to the bank as soon as it became awareof the missing cheque leaves. According to the trial judgethe question of the Customer having drawn the cheques PI toP8 in a careless manner did not arise. Further on the evidenceplaced before him the learned district Judge came to the definiteconclusion that daily statements of accounts in the month ofApril 1984 had been neither dispatched by the Bank nor hasit been received by the Customer. In the teeth of the abovefinding, it cannot be expected of the Customer to have keptthe bank notified of the wrongful debits in question. However,the fact remains that the Customer has notified the bank atleast by 17 April 1984 and thus put the bank on its guardagainst possible malpractices with regard to its account.
Both witnesses namely, V. Gomez and H.N. Jayathilakawho testified on Customer’s behalf categorically denied
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Ceylon Commercial Bank vs. Ceylon Tobacco Co. Ltd
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having signed the purported cheques that were wrongfullyhonoured by the Bank. The learned district Judgeconsidered the evidence of P. H. Manatunga, the examiner ofquestioned documents as being of considerable importancetowards the resolution of the dispute. According to witnessP. H. Manatunga the cheques in question had not beensigned by the officers who had the authority to sing them. Heexpressed no doubt whatsoever, that all 8 cheques carried theforged signatures of the officers who had the authority to signthem and was quite categorical and firm that the cheques inquestion had been nothing but a series of forgeries.
Upon the closure of the Customer’s case the Bank calledN. G. Sampath de Silva who had cleared the purported chequesPI, P3, P4, P6, P7 and P8. The payment on the chequesproduced marked as P2 and P5 have been approved byanother officer of the Bank named M. C. A. Wijesekara whoalso testified at the trial. Both of them attempted to adducetheir own reasons as to what made them believe that thecheques contained the genuine signatures of the authorizedsignatories.
The learned judge having examined the evidence ofV. Gomez and H. N. Jayathilake along with the evidence ofthe handwriting experts which evidence he considered assomewhat independent in nature, concluded that the Bankhad failed to adduce evidence of any expert to show that thesignatures appeared on the cheques concerned, were that ofthe authorized signatories. Further he commented adverselyagainst the failure on the part of the Bank to produce thespecimen signature card applicable to the current-accountmaintained by the Customer.
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Witness Sampath de Silva of the defendant Bank admittedthat the specimen signature cards containing the specimensignatures of the authorized signatories of the Customerwere available with the Bank and whenever cheques werepaid, the defendant Bank compared the signatures on thecheques against the specimen signatures to satisfy itselfas to the authenticity of the signatures appearing on thecheques. Learned president’s counsel commenting adverselyagainst the conduct of the Bank for the failure to produce thespecimen signature cards, quoted from the evidence ofSampath de Silva who stated that the Bank has not em-ployed any experts to verify the authenticity of the signaturesthat appeared on the impugned cheques, in order to assessthe credibility of the allegation made against the Bank. Thecommission to the handwriting experts to express an opin-ion as to the genuineness, of the signatures that appeared onthe cheques has been issued with the consent of the Bank.The opinion expressed by both handwriting experts being ad-verse to the bank, it could have moved for a counter commis-sion, if necessary to counteract the opinion expressed by thehandwriting experts so as to strengthen the position of theBank. According to the Bank officials, no such steps havebeen taken by the banking authority, resulting in the opinionexpressed by the handwriting experts who testified at the trailremaining uncontradicted.
Although it is not relevant, it may be appropriate atthis stage to remember that the above finding of the learneddistrict Judge, as I have referred to in my earlier order dated10th May 2008, cannot be construed as the learned districthaving misapprehended the issue as one, where the Bankwas obliged to discharge an initial burden by establishing thesignatures on the impugned cheques being identical to that
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of the authorized signatories of the Customer but merely anattempt to analyze and examine the evidence of both sideson a preponderance of evidence, being mindful of his ownapproach that the initial burden was on the Customer toestablish that the signatures appeared on them were in factforged, notwithstanding the decision in Kolonnawa UrbanCouncil case.
On the question of the delivery of thousand chequesleaves by the Bank, the trial Judge’s conclusion was that theBank had failed to prove its assertion that it did in actual facthand over the said thousand cheque leaves to the Customer,
Dealing with section 24 of the Bills of ExchangeOrdinance the learned district Judge held that the cheques inrespect of which payment had been made by the Bank werenot valid and on account of that alone the plaintiff cannotbe said to have conducted itself in a manner unbecoming ofa Customer of the Bank. Section 24 of the Bills of ExchangeOrdinance provides that…. *Where the signature on a bill isforged or placed thereon without the authority of the personwhose signature it purports to be, the forged or unauthorized
signature is wholly ioperative and no right to enforce
payment thereof against any part can be acquired through orunder that signature. ”
Therefore it would be seen that the clear finding of thelearned district Judge on the question of the validity of theimpugned cheques is that they are merely a few sham piecesof paper in as much as the cheques contained the forgedsignatures said to be that of the authorized signatories.This principle has been enunciated in the case of NationalWestminster Bank vs. Barclay’s Bank InterationaPK In the
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case of Bank of Ceylon vs. Kolonnawa Urban Council (Supra)Supreme Court held that where a chaque is forged, it istotally inoperative. Arising on the above principle of law itwould be seen that the bank has no rights whatsoever todebit the account of the Customer against a forged cheque,as long as the account holder is not guilty of conductunbecoming of a Customer. In this respect it would be ofimmense use to cite the principles laid down by Lord Tomlin inthe case of Greenwood vs Martin’s Bank Ltd*3'. The Bank in itswritten submissions tendered in the district Court has sum-marized the essential features of the principles of estoppelslaid down by Lord Tomlin in the following manner.
A representation or conduct amounting to a represen-tation intended to induce a course of conduct on thepart of the person to whom representation is made;
An act or an omission resulting from the representa-tion whether actual or by conduct, by the person towhom representation is made.
Detriment to such person, as a consequence of theact or omission.
In the case of Greenwood the facts that the wife of theCustomer of a.Bank forged the signature of her husbandon 44 cheques drawn on the husband’s account. Upon thehusband becoming acquainted with the forgery, the wiferequested the former not to disclose it to the Bank on theundertaking that the funds that may be debited against thehusband’s account as a result of the presentation of theforged cheques would be returned to the husband’s sisiter-in-law, namely the sister of the person who forged the signatureon the 44 cheques. Upon realizing that the money promised
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through the sister-in-law was not forthcoming, the husbandthreatened the wife that he would inform the bank but infact it did not do so. By reason of the threat held out by thehusband the wife shot herself. When the husband sued thebank for the recovery of the funds paid out on the forgedcheques, the Bank took up the defences of ratification,adoption and estoppel. The House of Lords held that whenthe husband came to know of the forgeries, it was hislegal duty to inform the bank. It was held that the detrimentto the bank was that it could not avail itself of its rights ofaction against the forger (wife of the Customer) prior to hercommitting suicide.
In that case it was contended on behalf of the husbandthat the initial negligence was on the part of the bank to havehonoured the forged cheques. The answer to this allegationmade against the bank by Scutton L.J, was that although thecarelessness of the bank was a proximate cause of the bank’sloss in paying the forged cheques, it was not the proximatecause of the Bank losing its right of action against the forgerbecause the failure of the husband to inform the Bank of theforgery until the death of the wife prevented the Bank fromsuing her for the recovery of the money.
In the case of Brown Vs. Westminister Bank Ltd4) theissue was the behavior of the Customer representing theBank that the cheques already paid were genuine and thatit induced the Bank to pay future cheques. This type ofconduct too was considered to be a bar to make a claimagainst the bank arising from the debit entries made inrespect of the forged cheques.
It is suitable at this stage to refer to Gupta on “BankingLaw in Theory and Practice” (2nd edition – 1992) Chapter
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24 – page 349. According to Gupta “Whenever a person ismaintaining an account with the Bank, one of the usualincident relating to the services rendered by a Bank is thatthe cheques which are issued by the Customer are hon-oured by the Bank on presentation subject to the conditionthat there are no other problems such as the non-availabil-ity of the funds in the account. The next question is thatthe cheque which is the form of a mandate to the Bank tobear the signature which is the duty of the Bank to comparewith the specimen signature and in case the Bank finds thedrawer’s signature on the check differ from the specimensignature supplied to the Bank then the Bank shouldnot honour it. Even if the signature on a cheque is cleverforgery the Bank cannot debit the Customer’s account withthe amount of the cheque, as it has no legal authority fromits Customer to part with the funds. Even the statutoryprotection to a banker is out of question. Since it is notsigned by the maker Section 5 of the Negotiable InstrumentsAct, is not applicable and therefore it is not a cheque or anegotiable instrument or a bill and the various provisionsof the Negotiable Instruments Act are not applicable. Theonly defence for the banker is the defence which flow fromthe general law of the land and is governed by the principlesof estoppel or ratification”
The fact that the Customer informed the Bank of thereal situation immediately upon the discovery of a possibleattempt to forge the cheques was considered by the learneddistrict Judge as being favourable to the Customer. To quotehim, he observed that the Bank had failed to establish thereceipt of daily statements in the month of April 1984.
It is trite law that the Customer of a Bank would beprecluded from suing the Bank for the recovery of the
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sum paid on a forged cheque, if it can be proved that theCustomer was actually aware of the forgery and failed todisclose it to the Bank as a consequence of which the Bankhas lost its rights of action against the forger.
As has been observed by the learned district Judge thefailure on the part of the Bank to prove that daily statementsfor April 1984 had not been sent, does not make it incumbentor casts a duty on the Customer to inform the Bank of thewrongful debit thus made, as the Customer would not havehad any knowledge of such debits being made against itsaccount, on the presentation of the 8 cheques. It is onlyif daily statements had been sent, the Customer can beexpected to detect the wrongful debit.
As regards the dealings of the Customer with the Bankthe evidence led at the trial had shown that the chequesdrawn by the Customer were properly and carefully writtenusing a cheque typewriter and the Customer Company hasinstructed the Bank over the phone on matters relating tothe missing cheque leaves. Thus, on the question pertainingto negligence, the learned district Judge held in nounambiguous language that the Customer has displayed nonegligence with regard to its dealing with the Bank in relationto the matter complained of.
On behalf of the Bank it was submitted that the chequeshaving been paid in April 1984, the Customer ought to havecontacted it on the matter, much prior to the date on which ithad in fact contacted. In this connection, the Bank has drawnmy attention to P 36 written on 4 June 1984. No doubt therehad been some delay on the part of the Customer to haveinformed the Bank in writing of the payment made in
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respect of the impugned cheques. However a perusal of thedocuments produced at the trial clearly shows that at leastby 17th April 1984, the Customer has informed in writingof the disappearance of at least six cheque leaves fromthe cheque-book. In the circumstances, in my opinion thelearned district Judge cannot be faulted for arriving at theconclusion that there had been no delay on the part of theCustomer to have kept the Bank informed of the missingcheque leaves, even though as at 17 April 1984 payment onthe impugned cheques had already been made.
The question that arise here is not whether the Customerhad informed the Bank of the missing cheque leaves prior toits account being debited against the said amounts mentionedin the 8 cheques but whether the Customer had informedthe Bank of this position immediately upon the discovery ofthe same, since the Bank is not entitled to any protectionagainst payments made on any forged cheques, as long as theCustomer in not found to be guilty of negligence inmaintaining the Bank account. As has been clearly heldby the learned district Judge the Customer’s conduct inmaintaining the account does not demonstrate anynegligence on its part. In the circumstances, if there be adelay that has been properly and satisfactorily accounted forthen the Customer cannot be accused of conduct unbecomingof an account holder and therefore the Bank cannot takeany undue advantage of the delay of seven days that haveoccurred in keeping the Bank informed of the missing chequeleaves.
Looking at the unfortunate incident from anotherpoint of view, emphasis should be made of the fact that thedistrict Judge has accepted the evidence of V. Gomez who
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claimed that he informed the Bank over the phone as to themissing cheque leaves prior to the payment of the impugnedcheques. This evidence of V. Gomez does not appear tohave been countered by the Bank and therefore remaineduncontradicted.
Be that at it may, the pivotal question in this appealturns on the determination of the trial judge that PI to P8were not drawn and/or issued or signed by the Customeror on its behalf by the authorized signatories. As far as thefinding of facts and the observation of the credibility of thewitnesses are concerned, the learned district Judge hadopted to rely on the evidence of the officers who testifiedon behalf of the Customer and that of the renownedhandwriting experts and rejected the version of the Bank forreasons properly addressed by him. He has been influencedby several reasons in coming to the conclusion. The reasonswhich appear on the face of the judgment and also impliedtherein can be summarized as follows.
The fact that the officers of the Customer gaveevidence disclaiming that they never signed thecheques in question.
Their evidence on that matter being corroborated byreputed handwriting experts whom the learned districtJudge rightly considered as independent witnesses ofunquestionable competence on the particular are ofskill to express an opinion as to the genuineness ofsignatures and writings.
The failure on the part of the Bank to counter theopinion expressed by the said handwriting experts ina manner satisfactory to court.
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The unsatisfactory nature of the evidence given bythe officers of the Bank in relation to the manner inwhich the signatures on PI to P8 had been examinedand verified.
The failure on the part of the Bank to producethe specimen signature cards of the authorizedsignatories, which if produced could have beenreasonably be held as adverse to the Bank.
The failure to the Bank to adduce any reason asto what prevented it from producing the specimensignature cards.
The course of practice adopted by the Customer todraw cheques by means of a cheque typewriter.
The uncontradicted position of the Customer that ithad never drawn cheques in favour of individuals, inlarge sums of amounts, as it reflected in PI to P8,except in the case of payments made to the InlandRevenue Dept.
The fact that PI to P8 had been drawn in favour ofindividuals.
The failure on the part of the Bank to prove thatit had given notice of daily statements of accountspertaining to the month of April 1984.
The Bank submitted to the learned district Judge thatit was protected by section 80 of the Bills of ExchangeOrdinance in relation to the causes of action pleaded in theplaint. Section 80 of the Bills of Exchange Ordinance providesthat where a banker on whom a cross cheque is drawn, in good
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faith and without negligence pays it, if crossed generally, toa banker, and if crossed especially, to the banker to whomit is crossed, or his agent for collection, being a banker, thebanker paying the cheque, and, if the cheque has come intothe hands of the payee, the drawer, shall respectively beentitled to the same rights and be placed in the sameposition as if payment of the cheques had been made to thetrue owner thereof.
PI to P8 bear a special crossing “Account Payee – NotNegotiable”. PI, P4 and P8 had been presented for paymentthrough the People’s Bank which had acted as thecollecting Bank and P2, P5 though Bank of Ceylon, P3,P6 and P7 through. Grindlays Bank. According to bankingpractice when a chaque is crossed “Account Payee”, thecollecting Bank only guarantees the fate of the chequenamely that the proceeds of the cheque would be credited tothe payee in whose favour the special crossing “Account Payee”has been made. As regards the protection claim by the Bank,in terms of section 80 of the Bills of Exchange Ordinancethe learned president’s Counsel of the Customer has urgedthat such provision would apply only where a banker pays agenuine cheque which has been duly issued by its Customerbut credited to the account of some person other that thecorrect payee due to a fraudulent endorsement. Hence, hecontended that section 80 of the Bills of Exchange Ordinancehas no application to the present case. It this connectionthe Learned President Counsel had quoted the statement oflaw from Paget’s Law of Banking (10th Edition) at page 206,where it is stated that “the banker is not protected if he actsupon forged or unauthorized payment”. I have no reservationwhatsoever in endorsing the view expressed by the LearnedPresident’s Counsel, as being the correct legal position.
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Relying on the above principle, the Bank has submittedthat the cheques were paid according to the drawing to abanker and indeed they were crossed “account payee” to thepayees account and the same has been paid in good faithafter the examination of the signatures on the chequesunder ultra violet lights and therefore there cannot be anynegligence on the part of the Bank in having paid out thecheques in question.
Significantly the number assigned to the account ofthe Customer is 1. The account has been in operation from1975. The Customer claimed that the Kotahena branch of thedefendant Bank was opened in 1975 and Ceylon Tobaccocompany was the first Customer open up an account at thatparticular branch. One of the officers who had authorizedpayment of some of the impugned cheques had served at theKotahena branch for a short period of one month or less.
The defendant having admitted that they are inpossession of the specimen signature cards, quite surprisinglydid not produce the same at the trial for comparison by thehandwriting experts. Learned president’s counsel of theCustomer has persistently argued that this is a classic casewhere the presumption set out in illustration (f) of section114 of the Evidence Ordinance should be drawn. Hecontends that the Bank refrained from producing thespecimen signature cards as the signatures appear on itwould be undoubtedly different from the signatures appearingon PI to P8. Having considered the unusual mode ofsuppression of the specimen signature cards, admittedlyin the possession of the Bank, I am compelled to justify thepresumption impliedly drawn in the judgment of the learned
CA
Ceylon Commercial Bank vs. Ceylon Tobacco Co. Ltd
(Abdus Salam, J.)
83
district Judge that it has been so withheld by the Bank, asthe production of it could otherwise be prejudicial or adverseto the defence raised in the case.
As regards the manner in which the Customer hasoperated its account, learned president’s counsel hassubmitted that Ceylon Tobacco Company has conducted itsaffairs in a sensible and businesslike manner which was farciy from the “amazing state of affairs which savours more ofa comic opera” which apparently prevailed in the KolonnawaUrban Council as described by Dias J, in Bank of Ceylonvs. Kolonnawa Urban Council (supra). Learned president’scounsel has adverted me to the fact that even in theKolommawa Urban Council case, the Supreme Courtheld that the “amazing state of affairs” did not prevent theKolonnawa Urban Council to recover the sums paid uponforged cheques by the Bank of Ceylon.
In the circumstances as has been contended on behalf ofCeylon Tobacco Company Ltd, the plaintiff-repondent in thisappeal, it cannot be possibly be held to have been guilty ofnegligence which directly led the defendant-appellant Bankto pay the purported cheques marked as PI to P8 or whichwould estop the plaintiff-respondents claim against thedefendant – appellant in this case.
On a consideration of the totality of the evidence ledat the trial, I am inclined to think that the plaintiff (CeylonTobacco Company Ltd) has done everything within its powerto prevent the payment of any cheques reported to have gonemissing and therefore cannot be said to have acted negli-gently or in a manner unbecoming of a Customer of a Bankor adopted the conduct which would estop it from claiming
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Sri Lanka Law Reports
12010] 2 SR1L.R.
the recovery of the funds paid out of its account uponpresentation of the impugned cheques.
For the foregoing reason I am of the opinion that thelearned district Judge cannot be faulted for the decisionthat he has arrived at or that it could be branded asperverse or ended up in a miscarriage of justice. Hence, I amnot inclined to accept the present petition of appeal. Thepetition of appeal of the defendant-appellant (CeylonCommercial Bank Ltd) therefore stands dismissed subject tocosts.
Judgment of the learned district Judge dated 21 October1995, inadvertently stated in the decree as being dated 21September 1995 stands affirmed.
appeal dismissed.