- 20 Marks
LRB – APR 2023 – L2 – Q1 – Bank’s Defences in Cheque Forgery Dispute
Explain the bank's potential defences using statute and case law if a company disputes debits from forged cheques paid by the bank, where signatures matched records but proceeds went to an unauthorized messenger.
Question
The Lambusie Branch of ADES BANK LTD holds an account in the name of the Lambusie Cotton Ginneries Ltd (LCG Ltd). The mandate on the account required that the signatures of any two of the four Directors of the company could constitute enough authorization for the bank to honour cheques drawn on the account. Between 15th February 2020 and 18th May 2020, the Lambusie Branch honoured 30 cheques drawn on the account with a total value of GHS $47,412.40$. The signatures on those cheques compared favourably with those you hold in your records. In the employ of LCG Ltd was one Kofi Brokeman, who was a messenger attached to the Finance Department. Kofi Brokeman’s duties included going to the bank to cash and deposit cheques and collecting bank statements and cheque books. The proceeds of all 30 cheques were paid to Kofi Brokeman. A week ago, LCG Ltd wrote a letter to your branch at Lambusie disputing the debits and asking for reimbursement of the proceeds of GHS47,412.40 as those debits were without the authority of the signatories to the account. The Manager of the branch, Jacob Okromouth, in his response to the letter, did not deny paying those cheques and insisted that if the signatures were forgeries, then it was the complainant who failed in its duty of care to refrain from drawing cheques in such a manner that facilitated fraud and forgery. The branch Manager contended that LCG Ltd had been negligent in failing to scrutinize its monthly statements and informing the Bank in a timely manner of the forgeries. In any case, concluded Jacob Okromouth, the signatures on those 30 cheques were so similar to those of the authorized signatories on the account that they had not been negligent by mistaking them to be those of the authorized signatories of the Directors of LCG Ltd. Aggrieved by the response of the Branch, LCG Ltd has instructed its Lawyers, AZANTILOW CHAMBERS, to write to the Head Office of the ADES Bank, where you are the Legal Officer in charge of Branch Operations. The Lawyers of LCG Ltd have given you a week within which to reimburse their clients or face them in Court. Using statute and case law, explain if the ADES Bank has any defences if the case goes to full trial?
(20 Marks)
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