Appellant / Defendant : FAR EASTERN BANK LTD (“FEB”)

Respondent / Plaintiff : BEE HONG FINANCE CO. LTD (“BHF”)

FEB and BHF are companies incorporated in Singapore.

FEB carries on Banking Business whereas BHF is a licensed moneylenders.

On January 17, 1969, BHF issued a cheque marked as “A/C payee only” in favour of Lee Lam as a loan on the security of 7 share certificates which were then discovered to be forged by Lee Lam.

Lee Lam after (so called) receiving the cheque went to FEB with Aw Yong San, a Customer of the FEB.

Lee Lam presented the cheque to the sub-accountant and had pursuaded him to mark the cheque for payment though he has no account with the Bank. Eventually the cheques has been credited into Aw Yong San’s account.

Immediately thereafter, Lee Lam cashed the cheque issued by Aw Yong San to him on Aw Yong San’s account.

Issue arise:-a)Whether the action by sub-accountant of the FEB, in

negotiating an “A/C payee only” (payee who has no (payee who has no account/make a conversion of the cheque to a non account/make a conversion of the cheque to a non payee account) payee account) cheque showed negligence in collecting cheque.

APPELLANT/DEFENDANT

FAR EASTERN BANK LTD FEB owed no duty of care

to Bee Hong at all, the duty of care owed only to Lee Lam as he is the true owner of the cheque.

Protection of Section 4 of

Cheques Act is applicable to FEB

Cheque of this kind (A/C Payee) was however negotiable.

RESPONDENT/PLAINTIFF

BEE HONG FINANCE CO.

LTD BHF sought a declaration

that there was a negligence on the part of FEB in collecting cheque for its customer, Aw Yong San and damages for conversion of the cheque or alternatively $10,000 for money had & received.

4. Protection of bankers collecting payment of cheques, &c.

(1) Where a banker, in good faith and without negligence,—(1) Where a banker, in good faith and without negligence,—

(a)receives payment for a customer of an instrument to which this section applies; or

(b)having credited a customer’s account with the amount of such an (b)having credited a customer’s account with the amount of such an instrument, receives payment thereof for himselfinstrument, receives payment thereof for himself;;

and the customer has no title, or a defective title, to the instrument, the the customer has no title, or a defective title, to the instrument, the banker does not incur any liability to the true owner of the instrument by banker does not incur any liability to the true owner of the instrument by reason only of having received payment thereof. reason only of having received payment thereof.

(2)This section applies to the following instruments, namely,—

(a)cheques (including cheques which under section 81A(1) of the Bills of (a)cheques (including cheques which under section 81A(1) of the Bills of Exchange Act 1882 or otherwise are not transferable)];Exchange Act 1882 or otherwise are not transferable)];

(b)any document issued by a customer of a banker which, though not a bill of exchange, is intended to enable a person to obtain payment from that banker of the sum mentioned in the document;

(c)any document issued by a public officer which is intended to enable a person to obtain payment from the Paymaster General or the Queen’s and Lord Treasurer’s Remembrancer of the sum mentioned in the document but is not a bill of exchange;

(d)any draft payable on demand drawn by a banker upon himself, whether payable at the head office or some other office of his bank.

(3)A banker is not to be treated for the purposes of this section as having (3)A banker is not to be treated for the purposes of this section as having been negligent by reason only of his failure to concern himself with absence been negligent by reason only of his failure to concern himself with absence of, or irregularity in, indorsement of an instrument.of, or irregularity in, indorsement of an instrument.

BHF had no title to sue under the common law in conversion of the cheque.

FEB had acted in a good faith, without negligent and FEB also has acted in a reasonably manner as a collecting bank by making necessary enquiries which a bank could reasonably expected to do.

The Drawer of the cheques should be the “true owner” to be regarded as “guileless(innocent) holder in due course”.

Banker owes the duty of cares towards the drawer of the cheque issued to ensure the accuracy of the transaction.

Failure on the part of the collecting bank to conduct necessary enquiries when there is a fishy, ambigious or absolute contradictory on the cheque transaction will caused negligent on the part of the collecting bank.

The standard of duty of care of the collecting bank toward the drawer is higher when it involve a “A/C payee” cheque as the drawer is treated as the true owner and “holder in due course”.

It is a norm that a drawer is dependable on the collecting bank’s advice for any obvious contradictory acknowledged by the bank.

The collecting bank SHALL beware and put extra alert and duty of care to check the FACE OF THE CHEQUE because different type of cross cheque might cause a different of law applicable and effect.

We are of the view that the judgement by the COA was too lenient and not relying strictly on the “AC Payee” cheque principle where this kind of cheque shall be transferred to the payee’s account itself only.

However, we understand that this case has took place before the amendment of the BOE in Singapore on 1992 where all crossed cheque shall be treated as non-transferable. That is the reason why the judgement more flexible and much dependable on the judge decision itself (as we know pre amendment there was NN cheque and etc).

Malaysia also has adopted the new law and had amended our BOE Act by inserting the S81A of the Bills of Exchange Act (Amendment) Act 1998, “crossed cheque are no longer negotiable instruments since its validity is restricted to the parties thereto. It is in effect a “Pay Order” to the bank by a drawer to the named payee only”

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