Shortly after retiring from my post as a legal consultant, I received a telephone call from an old friend in arms. Thomas Aung, who still ran his legal practice although he was close to eighty, wanted my advice on the payment of fraudulently drawn cheques. As I now had ample time on my hands I agreed to discuss the case with him on the next day.
The facts that unfolded during our conversation raised my eyebrows. The victim, a Mr. Lim who died at the ripe age of 92, had migrated to Singapore from China early in the 20th century. A poorly educated man, who had never mastered English, he succeeded to build up a reasonably prosperous sweetmeats business. Naturally, he needed a current cum savings account and, eventually, opened it with a bank that had a branch near to his enterprise. Being unable to sign his name in Latin characters, he used his Chinese signatures and a rubber stamp (a ‘chop’) setting out the name of the business.
He maintained his account with the same branch for many years, although his original bank had been taken over by another local bank. Being a smart entrepreneur, he arranged to have a special rate of interest paid to him on a monthly basis. He did not give a power of attorney – or drawing rights – to anybody. Further, he did not trust his three sons. The only person he gave a glimpse into the details of the account was the adopted daughter of the oldest son.
That adopted granddaughter, one Lena, was always present when Mr. Lim drew a cheque. Usually, she inserted the details in English, entered the details of the cheque in Chinese characters in an account book, and watched how Mr. Lim signed the cheques. She then attached to each cheque the rubber stamp and arranged for its dispatch.
Lena had a somewhat unusual life. She fell in love with a married man, shacked up with him and gave birth to two children. Initially, she got a salary from Mr. Lim for the execution of her secretarial duties. But when she moved out of the family home, she ceased to work for him. Instead, she got a job with an international bank. During it she became familiar with general banking practices and, in particular, with the clearing of cheques.
Mr. Lim could not do without Lena’s assistance. Accordingly, it was arranged that she work for him on a part time basis, coming over to his house either before going over to her post or late in the afternoon. She and the late Mr. Lim became very close and, apparently, he trusted her without reservations.
Regrettably, the business of Lena’s paramour had its up and downs, getting occasionally virtually insolvent. Quite naturally, he asked for Lena’s financial assistance. Being in love, she obliged.
Her ploy was simple. Initially, she prepared cheques for Mr. Lim’s signature but left some details in blank. In some cases, she inserted “cash” in the space meant for the payee. In others, she made the cheques payable to her paramour’s firm, raised the amount substantially and did not strike out the words “or bearer” printed on the forms. As time passed, she became increasingly bold. She started to forge Mr. Lim’s signature on blank cheque forms, made the cheques payable to cash and presented them for payment at the Bank’s counter. The employees at the branch paid her cash although some cheques were for amounts well above $150,000. They decided to comply with her requests as she was well known and, further, as the manager was aware of her banking background.
To hide her tracks, she entered false details in Mr. Lim’s account book. Further, each month, the bank’s genuine statements of Mr. Lim’s account were removed from the letter box and substituted by forged statements. These were neatly prepared and tallied with Mr. Lim’s expectations. He was further assured by Lena’s advice that all was well.
The frauds came to light when the bank did not settle Mr. Lim’s monthly electricity bill. When he called the branch manager, he was told the account had a zero balance. When Mr. Lim and his sons confronted Lena, she broke down and confessed. She ended up with a sentence of four years in prison.
Mr. Lim was shocked by the discovery of the real facts. Shortly thereafter, he had a heart attack which, partly due to his age, proved fatal. The heirs – the estate – demanded that the Bank reverse the unauthorized debit entries. Upon the Bank’s refusal they took the matter to court.
On the face it, the pleadings assumed the ordinary form. The estate claimed that the bank had to reverse debit entries incurred without the authority expressed in a genuinely signed cheque. The Bank averred that the late Mr. Lim had assisted the perpetration of the frauds by his failure to exercise control over Lena. In addition, the Bank relied on a clause in the terms and conditions which, they averred, applied to the case. Under this ‘verification clause’ Mr. Lim could not rely on any error or inaccuracy of any entry in the bank’s statement, unless he notified it to the Bank within 15 days.