Lack of banking standards 12/04/2005 The Star Articles of Law with Bhag Singh
Almost everyone has dealt with banks and finance companies which are
governed by the Banking and Finance Institutions Act 1986.
Banks are certainly efficient in sending out statements and immediately
imposing interest or other charges on the costumer on which in the usual
course of events it is difficult to mount a challenge.
Unfortunately banks sometimes are not so efficient when they are required
to fulfil their obligations to a customer. A reader complains that a bank
that he applied for a loan from has taken its own sweet time to sign and
return the Release and Reassignment relating to the Deed of Assignment
when the loan was not utilised and eventually cancelled. This happened
because the security documents were signed in contemplation of the
transaction being carried out. As a result the reader encountered delays
in getting the refund from the developer. The reader wants to know whether
he can sue the bank.
If the act of the bank has caused a loss to a customer then on legal
principles the customer can file an action against the bank. It would
appear in this case that the bank is in breach of an implied obligation to
sign and return the documents within a reasonable time unless there are
acceptable reasons.
However, the difficulty for the customer is that unless actual loss is
suffered he will find it difficult to achieve any meaningful success.
The more offensive aspect of the matter in this case would be the
annoyance, irritation and inconvenience caused by the conduct of the bank.
Unfortunately the law does not provide for compensation in such
circumstances.
Courts in the past have given recognition to what have been called
“conclusive evidence clauses” where on the basis of a certificate signed
by an officer of a bank, the court would consider the matter settled and
beyond any dispute.
Based on such clauses the courts in the past have deemed not to go any
further in order to decide in favour of the bank. This is reflected in the
judgement of Raja Azlan Shah CJ (Malaya) when in deciding a case in the
Malaysian Courts and after referring to the English case of Dobbs vs The
National Bank of Australasia, he had this to say:
“In the present case the guarantee contains a clause which enables the
bank by producing a certificate of indebtedness by its officer to dispense
with legal proof of the actual indebtedness of the respondents. It means
that, for the purpose of fixing liability of the respondents, the
company's indebtedness may be ascertained conclusively by a certificate.”
The reason for such a perception has been long acknowledged. Recently Lord
Denning giving his judgment in the case of Bache & Co (London) Ltd v
Banque Vernes Et Commerciale De Paris SA said: “This commercial practice
of inserting conclusive evidence clauses is only acceptable because the
bankers of brokers who insert them are known to be honest and reliable men
of business who are most unlikely to make mistakes. Their standing is so
high that their word is to be trusted so much so that a notice of default
given by a bank or a broker must be honoured.”
While on the subject, the writer recollects an occasion where a letter
written to a finance company forwarding the monthly instalment for a hire
purchase agreement and asking to be advised of the balance outstanding so
that the remaining sum can be paid, received no reply.
Two further instalments were forwarded with a reminder to be advised of
the balance outstanding and again there was no response.
On a personal follow-up with an officer the initial response was that it
was possible the letters were not received. However, when told that the
cheques enclosed with the letters had been cleared the matter took a
different turn.
It was then explained by the officer that there was a tendency by some
individuals who received a letter with a cheque to assume that it was
merely to forward the cheque. As such the cheque was banked and the letter
thrown away without it being read.
Coming back to the question posed the position would be as stated earlier.
However, practical difficulties stand in the way of the customers who feel
aggrieved and wish to pursue legal remedies. Such a customer may in the
end be better off adopting other options.
Public interest in such a situation would be better served by the
regulatory authorities creating better and more effective avenues for such
complaints to be dealt with as well as providing a formula for aggrieved
individuals to be compensated. This could prompt such institutions to be
more serious about not being oppressive to the individual who is obviously
entrapped in a relationship of unequal bargaining strength.
