[2018] MYCA 168 ENGLISH

Yeoh Jin Aik and Another v HSBC Bank (Malaysia) Bhd and Another Appeal
Suit Number: Civil Appeal Nos. W-02(NCC)(W)-2056-11/2016 & W-02(NCC)(W)-2057-11/2016 

Litigation & court procedure – Estoppel – Whether estoppel or acquiescence is available as a defence to a bank in respect of losses incurred by its customers as a consequence of forgery committed by its employee

Litigation & court procedure – Estoppel – Whether mere silence or inaction over a period of time amounts to an estoppel

Contracts & commercial – Whether lack of evidence of an intention to deceive an essential ingredient in establishing misrepresentation under the Contracts Act 1950 or the common law in a civil law action


[1] The singular issue for consideration in this case is whether estoppel or acquiescence is available as a defence to a bank in respect of losses incurred by the bank’s customers, as a consequence of forgery committed by the bank’s own employee in executing, inter alia, account opening forms in relation to a portfolio of investments?

[2] In other words, can a bank invoke estoppel or acquiescence to exculpate itself of liability for losses suffered, as a consequence of the forging of documentation by the Bank’s own employee?

[3] The estoppel relied on by the bank by way of defence to the forgery in the instant appeal comprises:

(a) Clauses in the Bank’s Investment Instruction Form which authorise investment transactions; and

(b) Monthly statements issued by the Bank to both its customers setting out the transactions that were undertaken on their behalf by the Bank over a period of some three years.

[4] The trial judge found that estoppel and/or acquiescence comprised a good defence to the customers’ claims for losses, notwithstanding forgery by the bank’s own employee.

[5] The customers who comprise the appellants in the two appeals before us contend otherwise, hence the present appeals. The Bank has filed a cross-appeal maintaining that while the learned trial judge was correct in concluding that the Bank was not liable, nonetheless the learned trial judge had erred in finding that the signatures on other requisite banking documentation were not those of the customers, and had been forged by the bank’s employee, who was the relationship manager delegated to manage and take care of these customers’ portfolio of accounts.

[6] Having perused the appeal records and considered the submissions we are of the unanimous view that the appeals should be allowed and the cross-appeal dismissed for, inter alia, the reasons set out below.

[7] There is a clear finding of fact by the learned trial judge that the Bank’s employee, Carren Wong (PW-7), the relationship manager of the plaintiffs, had forged the plaintiffs’ signatures on various banking documentation including the unit trust account opening forms, and other ancillary documents. A large number of banking documents particularly the unit trust account opening forms and terms and conditions, business guide, the top-up documentation and the switch from PCF to PruAsia Select Fund were found to be forged by the learned trial judge.

[8] We have considered the submissions of learned counsel for the Bank in relation to the cross-appeal and are not persuaded that we should interfere with the clear findings of fact. We are bolstered in our view by a consideration of the evidence of the Bank’s own employees who all agreed that the signatures were clearly mismatched. Further to this, the expert report also supports the high probability of forgery. It cannot be said in these circumstances that the learned judge was ‘plainly wrong’ in her conclusion. Therefore we dismiss the cross-appeal on the finding of forgery.

[9] Having concluded that forgery has been established it now falls to be considered whether, the learned judge was correct when she held inter alia that: “The finding of forgery of the plaintiffs’ signatures does not negate a concurrent finding of fact that the plaintiffs were aware that the PCF investment is not capital guaranteed”. She further concluded that the issue of forgery and whether the plaintiffs were aware of the PCF investment not being capital guaranteed are two independent and discrete issues.

[10] She also found that the cause of the plaintiffs’ loss was not the forgery but rather that the PCF was not capital guaranteed.

[11] Her Ladyship further speculated that even if the signatures were forged, but if the fund were capital guaranteed, the plaintiffs would not have suffered loss and would not have complained.

[12] She concluded that the plaintiffs were not entitled to a declaration that the bank had committed forgery because forgery is a “personal” offence and accordingly the bank could not be responsible for the forgery.

[13] Finally the learned trial judge also concluded that the Bank was not liable contractually by reason of the non-reliance clause in the Investment Instruction Form, which was signed by the plaintiffs. That clause reads as follows:

“I/We also confirm that I/we independently and without reliance on the Bank made my/our own judgment and decision with respect to the investments. The Bank shall be under no liability whatsoever in respect of any information or recommendation rendered by any of its employees irrespective of whether or not such recommendation was given.”

[14] Her Ladyship also found that the cause of action founded in misrepresentation as pleaded by the customers also failed for failure to establish the essential ingredient of an intention to deceive on the part of the relationship manager.

[15] We are of the view that the learned judge fell into grave error when she made these findings and conclusions.

[16] Firstly, we do not concur with the learned trial judge that the issues of forgery, and the PCF fund not being capital guaranteed to the knowledge of the plaintiffs, are two separate and discrete issues. On the contrary, the two matters are intertwined both in terms of fact and law. The issue of forgery is a fundamental issue that affects the plaintiffs’ mandate given to the Bank. The effect of the forgery is to vitiate the mandate given by the plaintiffs (see Jiang Ou v EFG Bank AG [2011] SGHC 149). This is because the customers had not in fact given their consent or authorisation for investment in the PruAsia Select Fund, or for any such switching to this fund or any top-up either. It was Carren Wong and not the plaintiffs who had consented or authorised the transaction. To that extent all those investments were unauthorised.

[17] It is not possible to sever the forgery from the far less important issue of whether or not the plaintiffs were aware that the PruAsia Select Fund was not capital guaranteed. The latter is merely an ancillary point whereas the fundamental or primary issue is the fact of, and consequences of the forgery.

[18] On the issue of the cause of the plaintiffs’ loss, the learned judge also erred in stating that the loss was caused by reason of the PCF Fund not being capital guaranteed, rather than the forgery. It is apparent that the plaintiffs could not have known that the PCF Fund was not capital guaranteed because the account opening forms for this investment fund contains the forged signatures of the plaintiffs. If their signatures were forged, they could not know whether it was capital guaranteed or not. Neither could they have authorised investments in the accounts. This deals with the switching of accounts from Prudential Country Fund to PruAsia Select Fund.

[19] This applies equally to the top up transactions, where the documentation was similarly forged.

[20] Therefore the loss could not be attributed to the fact that the subject fund was not capital guaranteed. The probable cause of the loss is the forgery of the primary essential documents relating to the investment. The evidential record supports our conclusion.

[21] The fact that the plaintiffs did not protest or object over a period of three and a half years when the Bank’s statements were received by them, does not amount to an estoppel or acquiescence (see Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1985] 2 All ER 947, [1985] 2 Lloyds Rep 313, [1985] 3 WLR 317, [1986] AC 80, Bailii, [1985] UKPC 22 (Hong Kong)). “Mere silence or inaction cannot amount to a representation unless there be a duty to disclose or act: see Greenwood’s case [1933] AC 51 at 57, [1932] All ER Rep 318 at 321. And their Lordships would reiterate that unless conduct can be interpreted as amounting to an implied representation, it cannot constitute an estoppel: for the essence of estoppel is a representation (express or implied) intended to induce the person to whom it is made to adopt a course of conduct which results in detriment or loss” (see Greenwood’s case, above).

[22] Here mere silence on the part of the plaintiffs upon receipt of statements is insufficient to amount to an estoppel because:

(i) There was simply no representation from the plaintiffs;

(ii) The Bank was not induced as a consequence of their silence to act to its own detriment.

[23] On the contrary, it was the plaintiffs who have suffered loss and detriment.

[24] On the speculation that if the PruAsia Select Fund was in fact capital guaranteed, the plaintiffs would not have complained about the forgery because they would not have suffered loss, Her Ladyship had no evidential basis on which to make such a speculative finding.

[25] With respect to the Bank being unable to commit forgery because it is a “personal” offence, the learned trial judge erred because the Bank is a person for the purposes of the Interpretation Acts 1948 and 1967 (see section 3) where a person is defined to include “… a body of persons, corporate or incorporate” and the Penal Code where the definition of a person includes “… any company or association or body of persons, whether incorporated or not”.

[26] Further, and in any event, in view of the finding that Carren Wong (PW7) as the relationship manager and thereby an employee of the Bank had committed forgery, it follows that the Bank, as principal, is liable for the acts of its employee, who is the agent. She was moreover acting well within the scope of her authority when she committed such forgery.

[27] On the issue of the exclusion or non-reliance clause, the evidence discloses that the relevant clauses relating to the PruAsia Fund were contained in the documents that were forged. The plaintiffs did not sight these documents. Neither did they sight the relevant prospectuses or brochures. Therefore the plaintiffs could have no knowledge of these documents, far less the non-reliance or exclusion clause. It follows that this clause cannot therefore bind them. Moreover the clause excludes liability for information or recommendations made by employees of the Bank. It does not expressly exclude liability for the forgery of its employees.

[28] Finally, on the issue of a lack of evidence of an intention to deceive on the part of Carren Wong (PW7) in order to establish misrepresentation, the learned judge erred because that is not an essential ingredient in establishing misrepresentation under the Contracts Act 1950 or the common law, in a civil law action.

[29] For these reasons we are satisfied that appellate intervention is required and we therefore allow both appeals with costs. We also dismiss the cross-appeal with costs.

[30] The High Court Orders is set aside.


Nallini Pathmanathan
Court of Appeal

Dated: 30th March 2018


For the Appellants: M. Thayalan, Messrs Thayalan & Associates, Advocates and Solicitors, No. 24 (First Floor), Tingkat Satu, Lebuh Pulau Pinang, 10200 Pulau Pinang

For the Respondent: Benjamin Dawson (Ooi Ai Yen, Ng Juen Yee and Quay Hui Shien with him), Messrs Benjamin Dawson, Advocates and Solicitors, C-11-5 Block, Level 11, Unit 5, Megan Avenue 2, 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur

Legislation referred to:

Contracts Act 1950

Interpretation Acts 1948 and 1967, Section 3

Penal Code

Judgments referred to:

Greenwood’s case [1933] AC 51 at 57, [1932] All ER Rep 318 at 321

Jiang Ou v EFG Bank AG [2011] SGHC 149

Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1985] 2 All ER 947, [1985] 2 Lloyds Rep 313, [1985] 3 WLR 317, [1986] AC 80, Bailii, [1985] UKPC 22 (Hong Kong)

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