Tort Law Essay Example | Topics and Well Written Essays - 1000 words

Tort Law - Essay Example The banks received and paid some cheques worth approximately HK$5.5 million. The cheques appeared to be genuinely drawn by the company and they bore the signature of Mr. Chen who was one of the authorized signatories for the company to the cheques. In each of the instances, the banks used each cheque to debit the companys account. However, these cheques were forgeries and not the companys cheques. An accounts clerk had forged Mr. Chen’s signature on each cheque. The main issue in the appeal is to determine who was to bear the loss arising from the forgeries. The question of general principle was to determine the nature and extent to which a customer has a duty of care to his bank in relation to the operation of his current account. The companys submission was that, where no other agreement exists between the banker and customer, the customers duty could only be limited to two sets of circumstances. In drawing his cheque, the customer must exercise due care. A cheque having a forged signature is not the customer’s and the bank therefore cannot pay it. The customer must also bring to the attention of the bank any forgery, which he discovers so that the bank may take precautions to avoid loss. If any breach of such duty by the customer leads the bank to make payments on the forged cheque, the customer is liable to bear the loss. The banks’ submission on the issue was that from the relationship between banker and customer, the latter has a duty to the former to take precautions to prevent the presentation of forged cheques to the bank and to check his periodic bank statements. That is so as identify and report to the bank any items, which he may not have authorized. The duty is both in contract and in tort (Hodgson and Lewthwaite, 2004, p. 417). In delivering the Lordships’ ruling, Lord Scarman said that their Lordships believed there was nothing to the advantage of the laws development in trying to find a liability in tort