IN THE COURT OF APPEAL MALAYSIA (APPELLATE JURISDICTION CIVIL APPEAL NO: NO-Q-02-841-09
MALAYAN BANKING BERHAD [3813-K]
Level 1, Wisma Satok,
… Appellent / Defendant
SARAWAK HOUSING DEVELOPERS ASSOCATION
An association registered under the Societies Act 1966 under registration No. 33/93 (Sarawak) and having its registered address at Lot 8796,
Pending Court, 93450 Kuching and a place of Business at 1st Floor, Lot 2335, Bormill Estate,
Jalan Tun Ahmad Zaidi Adruce, 93150 Kuching,
… Respondent / Plaintif
[In the matter of Suit No. 22-30-2004 III (II) in teh High Court of Sabah and Sarawak at Kuching
SARAWAK HOUSING DEVELOPERS ASSOCATION
MALAYAN BANKING BERHAD [3813-K]
ZAINUN BINTI ALI, JCA
ALIZATUL KHAIR BINTI OSMAN KHAIRUDDIN, JCA ANANTHAM KASINATHER, JCA
ANANTHAM KASINATHER, JCA DELIVERING JUDGMENT OF THE COURT
1. As the background facts are set out in great detail in the judgment of the Learned Trial Judge, we propose to recite only those facts which are relevant to our judgment.
2. The respondent was the Chairman of the Sarawak Housing Developer’ Association (‘SHDA’) for the period 2002 till 2004 and is suing the appellant on behalf of the respondent association. By a letter dated 6th October 1992, SHDA applied to open a current account with the appellant bank at its branch at Wisma Satok, Jalan Satok, Kuching, Sarawak. SHDA’s application included the following documents:
i) Malayan Banking Application forms;
ii) Copy of the Rules and Regulations / Constitution of SHDA;
iii) List of Current Board Members of SHDA and
iv) Resolution of SHDA for the opening of the account .
3. This application was handled by one Chung Than Tsho (DW 1). DW 1 confirmed the receipt of the documents of SHDA set out in paragraph 2 hereinbefore. According to DW 2, the terms and conditions upon which SHDA was allowed to open the account was also made known to the respondent and that the terms included the following:
I/We agree to examine and notify the Bank of any
errors, irregularities, discrepancies, claims or
unauthorized debits or items whether made, processed or paid as a result of forgery, fraud, lack of authority, negligence or otherwise by any person whatsoever.
I/We further agree that if I/We fail to advise you in writing of the non-receipt of the statement and obtain the statement from you, or to notify you to any errors, discrepancies, claims or unauthorized debits or items in the statement within twenty-one (21) days from the date of the statement, the Bank’s accounts or records shall be conclusive evidence of the transaction entries and balances in such accounts and I/We shall be deemed conclusively to have accepted all matters contained in the statement as true and correct in all aspects.
(Conclusive evidence clause)
The conditions printed on the cover of the cheque book are to be strictly observed”.
4. The SHDA’s current account bearing the number 0-1111320591-2 (current account) was opened following notification of its mandate as regards the persons allowed to operate its account. In this respect, one of the Rules and Regulations /
Constitution of SHDA made known to the appellant at the time of the opening of the account contained in paragraph 9.3 the following:
“All cheques or withdrawal notices on the Association’s account shall be signed jointly by the Chairman (or in his absence the Vice-Chairman) and the Treasurer. In the absence of the Treasurer the Assistant Treasurer shall sign in his place”.
The knowledge of the appellant of this provision is evident from the fact that on 10th May 1993, the then pro-tem secretary, Richard Tan Yoke Seng forwarded the mandate and the rules and regulations / constitution of SHDA to the appellant.
5. Following the 3rd executive committee meeting of SHDA on 11th
April 2002, one Miss Obeng who was appointed the executive secretary of the respondent sometime in 2011 altered the minutes of the meeting of 11th April 2002. The alteration was significant as Obeng unilaterally included herself as a signatory of the cheques of SHDA in respect of cheques having a face value of less than RM 2,000.00. Following the alteration of the minutes, Obeng on 18th May 2002 informed the appellant of the inclusion of her name as an additional signatory based on the forged minutes. The letter including this information purportedly signed by the Chairman actually bore the scanned signature of the Chairman.
6. Following the notification to the appellant of her authority to sign cheques of the respondent for less than RM 2,000.00, the said Openg then proceeded to issue cash and cheques in favour of third parties. The aggregate value of these cheques exceeded RM 300,000.00. The fraudulent acts of Obeng were not discovered until the end of April 2003 when the respondent’s auditor highlighted irregularities in the accounts of the respondent. The discovery of the fraud perpetrated by Obeng resulted in the appellant being informed of the fraud and the lodging of a police report against Obeng. This was followed by the filing of the claim against the appellant for the recovery of all the proceeds of the cheques signed by Obeng and honoured by the appellant.
7. The principal defence of the appellant was as regards the capacity of the Chairman of the respondent to institute the suit in the name of SHDA. Learned Counsel for the appellant contended that by virtue of Section 9 (c) of the Societies Act 1966 which states:
“A society may sue or be sued in the name of such one of its members as shall be declared to the Registrar and registered by him as the public officer
of the society for that purpose, and, if no such person is registered, it shall be competent for any person having a claim or demand against the society to sue the society in the name of any officer-bearer of the society”
the only person authorized by law to commence proceedings on behalf of an association such as the respondent was its public officer. Since the Chairman of the respondent was not its public officer, the suit is defective and ought to be struck out summarily. It not being in dispute that the respondent had not registered any public officer. Learned Counsel also contended that any submission that it was a representative action pursuant to O15r12 (1) RHC ought to be rejected since there was non compliance with the provisions of this Order. The non compliance consisting of the absence of any reference in the statement of claim to the representative nature of the claim in that the statement of claim did not state that the respondent is suing in a representative capacity.
8. The other submission of Learned Counsel related to the burden of proof vested on the respondent to prove that Obeng was not authorized to sign the cheques of the respondent. The suggestion being that the version of the minutes of the meeting of 11th April 2002 authorizing Obeng to sign the cheques of the respondent was not a forgery. Another submission was that, in any event, the appellant was exempted from reimbursing the
appellant by reason of clauses 9.2 and 9.3 of the terms and conditions of the contract between the parties. The inference being that these clauses serve to create a duty of care in favour of the appellant.
9. This final submission of Learned Counsel for the appellant was no doubt designed to overcome the decision of the Supreme Court in the case of United Asian Bank Berhad v. Tai Sun Heng Construction Sdn Bhd  1 MLJ182. This authority which is binding on the Learned Trial Judge provides that a customer of the bank such as the respondent does not owe a duty of care to a bank such as the appellant. Learned Counsel for the appellant sought to distinguish this case on the grounds that unlike in the case of United Asian Bank Berhad v. Tai Sun Heng Construction Sdn Bhd (supra), the contract between the parties included terms and conditions which served to impose a duty of care on the respondent. The duty of care consisting of the duty to check the monthly statements and to notify the appellant of any errors. Failure to do so in a timely manner serving to conclusively preclude the appellant from making any claim for conversion against the appellant (see clauses 9.2 and clause 9.3 in paragraph 3 of this judgment). For good measure, Learned Counsel for the appellant cited the ratio in the two cases of Pertamina Energy Trading Limited v. Credit Suisse  SGCA 27 C.A and Public Bank Bhd v. Anuar Hong & Ong  20051 CLJ289 in support of this proposition.
10. As regards the capacity to sue, the respondent contended that it was the pleaded case of the respondent that the chairman of the association was suing on behalf of the association and not in his personal capacity. Furthermore, since the claim of the Chairman that he was suing on behalf of the respondent association was not challenged by the appellants during crossexamination, the respondent contended that the appellant is estopped from raising this issue. It was also contended that the failure to register one of its officers as a public officer was not fatal and that, in any event, in the absence of a registered public officer, the respondent is entitled in law to institute the proceedings in the name of the Chairman.
11. As regards the issue of the authority of Obeng to sign its cheques, the position of the respondent is that Obeng was not only not an authorized signatory but allowing her to sign its cheques is against its rules and constitution. The respondent’s case is that the second version of the minutes of the executive committee meeting of 11th April 2002 appointing Obeng as its authorized signatory were unlawfully altered by Obeng and the signature of the Chairman in the letter dated 18th May 2002 a forgery.
12. On the third issue of the scope and impact of clauses 9.2 and 9.3, learned Counsel for the respondent contended that the appellant should not be allowed to rely on the same since the scope of these clauses were not brought to its attention and that, in any event, Obeng precluded the accounting staff of the respondent from becoming aware of the true state of its current account with the appellant. Learned counsel for the respondent also highlighted the fact that throughout the period that Obeng unlawfully signed cheques, the appellant had never contacted any of the office bearers of the respondent other than Obeng in connection with its current account. The final submission of Learned Counsel for the respondent was that the appellant had failed to act in conformity with the constitution of SHDA. The fact of the matter was that Obeng was neither a member or office bearer of the respondent and consequently not authorized to sign the cheques of SHDA.
DECISION OF THE HIGH COURT
13. The effect in law of a registered society commencing proceedings in the name of an officer of the society other than the public officer was considered by this court in the case of Chin Mee Keong & Ors. V. Pesuruhjaya Sukan  5 CLJ 363 C.A. James Foong JCA (as he then was) writing the leading judgment of the court opined that:
“From these authorities, it is clear that the approach should be these: firstly, for certain, an association cannot sue in its own name. preferably an action should be commenced by its registered public officer. If none is registered as such, then it is permissible for any office bearer of the association to mount a claim for and on behalf of its members.
This would put him on the same footing as a representative for others having the same interest in the proceeding which is permitted under O15r12 (1) of the RHC”.
The Learned Trial Judge adopted the reasoning of the Court in the case of Chin Mee Keong & Ors. V. Pesuruhjaya Sukan (supra) in ruling in favour of the respondent. In this case, the Chairman of SHDA instituted the proceedings in his capacity as the Chairman of the respondent but for and on behalf of the members of SHDA. It not being in dispute that the respondent had not registered any of its office bearers as its public officer.
14. On the second issue, the Learned Trial Judge made a finding of fact that the respondent never authorized Obeng to sign cheques on its behalf. His Lordship’s finding was based on the evidence of the respondent’s witnesses that the official minutes of the Third Executive Committee Meeting of 11th April 2002 had been forged by Obeng to unlawfully include herself as one
of the signatories for cheques with a face value of less than RM2,000.00. In this respect, His Lordship observed that since the opening of the current account with the appellant only office bearers of the respondent had the right to sign cheques of its current account, to the knowledge of the appellant. The earlier resolutions to this effect being consistent with the constitution of the respondent. For this reason, His Lordship concluded that it is not reasonable to expect an association like the respondent to have passed a resolution allowing a person like Obeng who was neither a member nor an office bearer to sign cheques for the current account. Since the forgery of the signature of the Chairman and the unlawful tampering of the minutes by Obeng was only discovered by the respondent in May 2003, the Learned Trial Judge ruled the 186 cheques of the respondent executed by Obeng during this period to be unlawful. Since the respondent had honoured these cheques, the Learned Trial Judge ruled that by honouring these cheques the appellant had converted these cheques and consequently liable to indemnify the respondent for the proceeds of these cheques. His Lordship’s ruling was primarily based on the decision of the Supreme Court in the case United Asian Bank Berhad v. Tai Sun Heng Construction Sdn Bhd (supra).
15. The Learned Trial Judge rejected the final submission of Learned Counsel for the appellant that the authority of United Asian Bank Berhad v. Tai Sun Heng Construction Sdn Bhd (supra) was not applicable to the facts of this case. According to the
Learned Trial Judge, the ratio of the two cases of Pertamina Energy Trading Limited v. Credit Suisse (supra) and Public Bank Bhd v. Anuar Hong & Ong (supra) had no place on the facts of this case because:
7 start off by restating the basic premise of the relationship between a bank and customer. Fundamental to this contractual relationship is that the bank is only mandated to debit the account of the customer when that instruction is validly given in the form of a signature. When that instruction or signature is forged, the bank has no authority to act on the mandate. In my opinion, any attempt to water down that fundamental term of the relationship by way of inclusion of a conclusive evidence clause amounts to an attempt to introduce an exemption clause which would exclude liability for a fundamental breach. Hence to determine whether the conclusive evidence clause (see clause 9.3 set out above) is effective in the factual matrix of this case, I must now look at the general principle of law applying to exemption clauses excluding a fundamental breach as opposed to clauses limiting liability”.
16. The Learned Trial Judge then proceeded to explain why in His Lordship’s view the appellant was precluded from relying on the full force of clauses 9.2 and 9.3 in the following terms:
“As stated by me earlier, the exclusion clause is in fact a clause excluding a fundamental breach which on the authority of the case of Karsales (supra) cannot be relied on by the defendant in this case. Accordingly I find that the conclusive clause and the other conditions connected to it have no legal effect on the Plaintiff”.
17. His lordship went on to hold that for a clause in the nature of clause 9.2 and 9.3 to apply, the appellant must discharge the burden of proving that the contents of the exclusionary clause and its meaning were made known to the respondent. His Lordship put it this way:
“If banks wish to impose upon their customers an express obligation to examine their monthly statements and to make those statements in the absence of query, unchallengeable by the customer after expiry of a time limit, the burden of the obligation and of the sanction imposed must be brought home to the customer. In their Lordship’s view, the provisions which they have set out above do not meet this undoubtedly rigorous test. The test
is rigorous because the bankers would have their terms of business so construed as to exclude the rights which the customer would enjoy if they were not excluded by express agreement”.
Since the Learned Trial Judge was not satisfied that the contents and meaning of clauses 9.2 and 9.3 had been sufficiently brought to the notice of the respondent, His Lordship held the clauses to be inoperative.
DECISION OF THE COURT
18. As regards the first issue, apart from the decision of this Court in the case of Chin Mee Keong & Ors. V. Pesuruhjaya Sukan (supra), our Federal Court had occasion to pronounce on the validity of proceedings commenced by an association such as the respondent. In the case of S. Kulasingam & Anor v. Commissioner of Lands, Federal Territory & Ors  CLJ 65 Eusoffe Abdoolcader J (as he then was) by way of obiter opined that proceedings commenced by an office bearer of an association when no public officer had been registered with the Registrar of Societies were valid. His Lordship opined as follows:
“First, the Association as such has no standing and is incompetent to sue as a Plaintiff. It is a body registered under the Societies Act and Section 9 (c) thereof specifically provides that a society may sue in the name of its registered public officer. If there is no member registered as such, but we have not been told that that is so, then we would think that if it was at all necessary for the Association to sue jointly as a Plaintiff a representative claim by one or more of its office bearers on behalf of all the members would be a solution
19. This obiter opinion of the Federal Court was adopted by this Court in the case of Chin Mee Keong & Ors. v. Pesuruhjaya Sukan (supra). In the light of the aforesaid pronouncements of the Federal Court and this Court and on a plain reading of Section 9 (c) of the Societies Act, we are constrained to uphold the Learned Trial Judge’s ruling that the Chairman of the respondent was entitled in law to commence and pursue this claim against the appellant in the form of a representative action for and on behalf of all the members of the respondent. We are in agreement with the Learned Trial Judge that it is evident from the respondent’s pleaded case and the evidence of its Chairman that this claim is being pursued by the Chairman on behalf of its members. To the extent that it is not fatal for an association to sue in the name of an office bearer in
the absence of a registered public officer, this action is clearly maintainable in law.
20. As regards whether a duty of care is owed by the respondent as a customer to the appellant as its banker, we are constrained to observe that much of the submission provided by counsel is now redundant in the light of the amendment to the Bills of Exchange Act by the introduction of Section 73A. In our judgment, the effect of Section 73A is to impose a duty of care upon the customer of a bank to be not negligent in the overall management of its account (see the well reasoned judgment of Nallini J in Malaysia Plastics Sdn Bhd v. United Overseas Bank (M) Bhd and Another Suit  9 MLJ 336).
21. Be that as it may, since the mandate communicated to the appellant by Obeng and acted upon by the appellant was contrary to the constitution of the respondent, we are not persuaded that the appellant has discharged the burden of proving negligence on the part of the respondent.
Accordingly, this appeal was dismissed with costs. Costs of RM30,000.00 to the respondent as costs here and below. Deposit to respondent towards account of costs.
ANANTHAM KASINATHER JUDGE
COURT OF APPEAL MALAYSIA PUTRAJAYA
DATE OF DECISION: 17th NOVEMBER 2011 DATED THIS: 17th JUNE 2013
COUNSEL FOR THE APPELLANT:
Mr. Chan Kay Heong Tetuan & Chan Advocates Peguambela & Peguamcara Lot 471,2nd Floor, Jalan Nanas 93400 Kuching,
COUNSEL FOR RESPONDENT:
Mr. Lim Heng Choo Tetuan Lim & Lim Advocates No. 7H, Lot 303,
Lorong 1, Jalan Rubber 93400 Kuching,
1. United Asian Bank Berhad v. Tai Sun Heng Construction Sdn Bhd  1MLJ182
2. Pertamina Energy Trading Limited v. Credit Suisse  SGCA 27 C.A
3. Public Bank Bhd v. Anuar Hong & Ong  2005 1 CLJ 289
4. Chin Mee Keong & Ors. V. Pesuruhjaya Sukan  5 CLJ 363 C.A.
5. S. Kulasingam & Anor v. Commissioner of Lands, Federal Territory & Ors  CLJ 65
6. Priva Nova Sdn Bhd v. Affin Bank Berhad