Dy-Mark (Aust) Pty Ltd v Bank of Queensland Ltd

[1993] QCA 140

IN THE COURT OF APPEAL  [1993] QCA 140

SUPREME COURT OF QUEENSLAND

Appeal No. 244 of 1992

Brisbane

[Dy-Mark (Aust) Pty. Ltd. v. Bank of Queensland]

BETWEEN:

DY-MARK (AUST) PTY. LTD.
  (Plaintiff)     Respondent

- and -

BANK OF QUEENSLAND LIMITED
  (Defendant)      Appellant

- and -

KATHRYN LEIGH WOODWARD alias
                KATHRYN LEIGH HOECHT alias
                  SHARLENE VIDA WOODWARD
  (Third Party)

The President

Mr Justice McPherson

Mr Justice de Jersey

Judgment delivered  22/04/93

Judgment of the Court

APPEAL DISMISSED WITH COSTS TO BE TAXED.

CATCHWORDS:       BILLS OF EXCHANGE - CHEQUES - whether sufficient evidence that bank paid on misappropriated cheque without negligence - Cheques and Payment Orderws Act, 1986, s.95

Counsel:Mr B. O'Donnell for the appellant

Mr W. Cochrane for the respondent

Solicitors:R. Buddle for the appellant

Messrs. Rogers Matheson Clark for the respondent

Hearing Date(s):   22/04/93

THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 244 of 1992

Brisbane

Before    The President
         Mr Justice McPherson
         Mr Justice de Jersey

[Dy-Mark (Aust) Pty. Ltd. v. Bank of Queensland)]

BETWEEN:

DY-MARK (AUST) PTY. LTD.
  (Plaintiff)     Respondent

- and -

BANK OF QUEENSLAND LIMITED
  (Defendant)      Appellant

- and -

KATHRYN LEIGH WOODWARD alias
                KATHRYN LEIGH HOECHT alias
                  SHARLENE VIDA WOODWARD
  (Third Party)

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 22/04/93

On 17 October 1988, the respondent drew a cheque, number 240704, for $22,716.40 on its account with the National Bank of Australia Limited. The cheque, which was made payable to K. Hoecht or bearer, crossed and marked not negotiable, was misappropriated by the respondent's employee, the third party in the action, Kathryn Leigh Woodward.
     On 18 October, the third party opened an account in that name with the appellant and deposited $11.00. There were no further transactions on that account until 22nd October, when the third party deposited the cheque which she had misappropriated from the respondent.
     The appellant then collected the value of the cheque from the respondent's bank and credited the third party's account on 24 October.
     The trial between the appellant and respondent was conducted on the footing that the appellant was liable to the respondent unless the appellant established that, when it received and processed the cheque, it did so in good faith and without negligence within the meaning of section 95 of the Cheques and Payment Orders Act 1986 (Commonwealth). The issue on this appeal is whether the trial judge was correct in his conclusion that the appellant was negligent. It was accepted by both parties that the onus lay on the appellant to disprove negligence.
     The only relevant evidence came from one Lucas, the manager of the appellant's Redbank Plains branch at which the third party deposited the cheque. Lucas had no recollection of the transaction but accepted that he was involved because his handwriting appeared on the reverse of the cheque and gave evidence of what he thought he probably would have done.  It is likely that Lucas made the decision to accept the deposit of the cheque into the account in the name of the third party. His note on the reverse of the cheque is "Married name. Sighted marriage certificate (copy) dated 24 September 1988." The trial judge concluded that the third party presented a copy of a document purporting to be a marriage certificate in relation to the marriage of a female by the name of the third party to a Mr Hoecht and that that document either was, or was a copy of, a forgery.
     His Honour said:

"It seems to me most improbable or most unlikely that whoever presented the cheque would have had a genuine marriage certificate showing a marriage of a female by the name of Kathryn Leigh Woodward to a Mr Hoecht, but the quality of that document is something which I cannot make any appraisal of at all. I do not know whether its quality was such that Mr Lucas should have been immediately put on notice or whether it was such a good one that he might easily have been beguiled into accepting it as a genuine document. He, of course, cannot recall the document but simply assumes that one must have been presented to him because he made the notation that is on the cheque."

Later, his Honour said:

"I am not able to make any findings as to what Mr Lucas did other than that I accept that he was shown a document which he took to be a photocopy of a marriage certificate between a woman named Woodward and a man named Hoecht, that marriage being celebrated on 24 September 1988. As I have already observed, I cannot make any findings as to whether or not it was reasonable for him to accept that document at face value or not".

In concluding that the appellant was negligent, his Honour pointed to a number of circumstances, including that the alleged marriage preceded the date upon which the third party opened her account with the respondent in her maiden, not her married, name, that the account name included the "appellation of Miss", and that "the account had had a deposit of only $11.00 for those six days or so, but no other movement in the account."  His Honour said:

"That he should have exercised caution, I think, is perfectly clear. To begin with, the cheque was not made out to Woodward, it was made out to another person altogether, and there is, of course, no similarity, or apparent similarity, between the names. He would have discovered had he checked the computer screen and, of course, I just do not know whether he did or did not, that the account into which this cheque was to be deposited had been recently opened and opened by a woman using her maiden name. It seems to me that in those circumstances to have made a phone call to the plaintiff would have been a reasonably quick and cheap way of safeguarding the interests of the plaintiff and, indeed, of the defendant bank, but that course, of course, was not followed.

...

It seems to me that the difficulty that the defendant has in this case is in showing what, in fact, was done. I am not persuaded that whatever steps Mr Lucas took demonstrate that he, on behalf of the defendant, was acting without negligence in accepting the cheque. I am simply not prepared or able, as it seems to me, on the state of the evidence to find that at the relevant time the defendant acted without negligence."

The notice of appeal and appellant's outline of argument were directed to a number of findings which, it was asserted, the trial judge had erroneously made or failed to make.
     However, in the course of argument, Mr O'Donnell, who appeared for the appellant, frankly and correctly acknowledged the difficulties which he faced in view of the appellant's need to negative negligence.
     Mr Lucas' evidence provided little, if any, basis for conclusions as to what in fact occurred or, more particularly, as to what Mr Lucas did.  However, even if inferences favourable to the appellant on some such matters could be drawn, there remained fundamental gaps in the evidence necessary to establish that Mr Lucas acted reasonably.
     For example, while it might be correct to conclude that Mr Lucas initially had his suspicions aroused by the difference between the name on the cheque and the name of the account and subsequently had his suspicions allayed by the production of the marriage certificate, there is nothing to indicate that it was reasonable for his suspicions to be allayed in this fashion or for him not to have taken other steps which were available to him.
     It is impossible for the appellant to discharge the burden upon it and, accordingly, the appeal must be dismissed with costs to be taxed.