Denying liability

Denying liability
04/05/2004 The Star Articles of Law with Bhag Singh

IT is common to read newspaper reports of people who are sued by banks or financial institutions for not repaying car or housing loans that they did not apply for. In some cases such people may be unaware of court proceedings and realise their problems only when they find that judgment in default has been obtained. Sometimes bankruptcy proceedings may even have been started against him or her.

A reader asks whether this can happen. The answer is that it obviously can. But how does this come about? Broadly this can be said to arise through the victim being careless or too trusting or through fraudulent or criminal acts by third parties. There are occasions when a person signs blank documents trusting a friend or a relative not knowing or caring to ask what those documents are for. In such a case the individual may have absolute trust in the relative or friend.

Where a person does not care to find out what he or she is signing and does so in blind faith it can be said that such a person is indifferent and reckless. In such a case when the person is called to make payment there is hardly any justification for denying liability. However there are situations where a person is physically or mentally disabled and relies on another person to assist him in his daily life. In the process of such assistance the third party takes advantage to mislead the person who signs the documents unaware of their true nature.

In such a case the person who has in effect applied for the facilities and unwittingly given instruction for their utilisation has in a manner been deceived and is not as culpable as in the case in the earlier example. Even here much would depend as to whether the person who has been misled into signing the documents is to be liable.

The surrounding circumstances would have to be considered. It would also be relevant to consider whether the intermediary was acting on behalf of the bank or the deceived “borrower”.

This is because if the deceiving intermediary was acting on behalf of the “deceived borrower” then the responsibility for the use of such a person cannot be placed on the shoulder of the bank. This is because the bank is not in anyway involved in initiating the application.

On the other hand if the deceived borrower is already a customer of the bank and the bank is aware of his condition then there is a greater burden borne by the bank in discharging its obligations in ensuring that the customer's interest has been adequately considered so that the bank has not been negligent .

Another situation is where a person is neither aware nor involved in applying for a loan . There are cases where a person's identity card is either stolen or a doctored identity card has been used.

Here it is clearly a criminal act by the person who committed the act. If it is alleged that the documents are signed by the person whose name appears, it is clearly a forgery.

When a person's signature is forged, such a person is not at all liable. But the person who forged the signature can be held liable if he/she can be identified. But this would usually be an exercise in futility.

In some cases, the signature is attested by a witness. Such a witness could be a professional person or a government officer or it could be a bank officer . In such a situation the witness would be able to throw light on whether the person in question did indeed sign the document .

When the witness is unrelated to the person who signed the document, he may not be able to remember the person who actually appeared before him.

On the other hand there could be cases where the witness could confirm that a person was indeed the “borrower” who signed the document. Yet the “borrower” may deny that he signed the document or that he even ever met the witness.

In the event of such a conflict the court will have to decide who is telling the truth. It could suggest that the “borrower” is not telling the truth to avoid meeting his obligation or the witness is negligent in verifying the identity of the “borrower” or is in collusion with an unknown party,

This situation will also show why a witness is important and in signing as a witness, every effort should be made to ensure that the identity of the person whose signature is being witnessed is adequately determined.

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