30 Questions
What is the predominant business of a banker?
Banking
What services does a banker provide to customers according to the Sabah Development Bank v SKBS Sdn Bhd & Ors case?
Accepting current accounts, paying cheques drawn on himself, and collecting cheques for customers
What is the definition of a bank according to the Financial Services Act 2013?
The business of accepting current, deposit, and savings accounts or other similar accounts, paying or collecting cheques drawn by or paid by customers, and finance provision
What is the definition of a customer according to the Financial Services Act 2013?
A person entitled to the repayment of a deposit, whether the deposit was made by him or another person
What is the requirement for a short-term relationship with a bank to be considered a customer relationship?
The bank accepts the deposit and agrees to pay out checks based on account balance
What is the status of someone cashing a cheque without a bank account?
Not a customer
What is the basis of all banking transactions?
Contract law
What is the definition of a bank according to the Bills of Exchange Act 1949?
A body of persons, whether incorporated or not, who carry on the business of banking
What is the condition for a banker's right to set-off, and what does it imply?
The condition is that the sum owed is certain, due, and there is no express or implied agreement to the contrary. It implies that the bank has the right to use the customer's valuables, such as fixed deposits, to cover a debt owed to the bank.
In the case of Rahimah bt Abdullah v Bank Bumiputra Malaysia Berhad (1994), what was the outcome, and what did it imply about the bank's actions?
The court ruled in favor of the bank, implying that the bank's actions were valid in taking the money from Rahimah's fixed deposit to cover the debt.
What is the main principle outlined in Section 133 of the Financial Services Act, and what is the penalty for breaching this principle?
The main principle is the duty of confidentiality, which requires banks and their staff to keep customer information confidential. The penalty for breaching this principle is imprisonment.
What exception to the duty of confidentiality involves a person who isn't a bank officer but is also a third party or ex-banker?
Section 133(3) of the Financial Services Act involves a person who isn't a bank officer but is also a third party or ex-banker.
What is the relationship between the bank and the customer in the context of the right to set-off?
The bank and the customer have a contractual relationship, where the customer agrees to allow the bank to use their valuables to cover a debt.
What is the significance of the Letter of Set-Off in the context of Rahimah bt Abdullah v Bank Bumiputra Malaysia Berhad (1994)?
The Letter of Set-Off allowed the bank to use Rahimah's fixed deposit to cover the debt owed by Malrich Holdings.
What is the nature of the relationship between a banker and a customer?
The relationship between a banker and a customer is a contractual relationship, where the parties intend to create a legal relationship.
What are the two types of relationships that exist between a banker and a customer?
The two types of relationships that exist between a banker and a customer are debtor-creditor relationships and agent-principal relationships.
What is the role of the bank in a debtor-creditor relationship?
In a debtor-creditor relationship, the bank acts as a creditor, and the customer acts as a debtor, where the bank lends money to the customer, and the customer repays with interest.
What is the bank's obligation in a debtor-creditor relationship?
The bank's obligation is to hold the customer's deposited money safely and return it when demanded.
What is the role of the bank in an agent-principal relationship?
In an agent-principal relationship, the bank acts as an agent, carrying out mandates on behalf of the customer, such as setting up standing orders and collecting checks.
What is a fiduciary relationship, and how does it apply to a banker and customer?
A fiduciary relationship is one where a party places trust and confidence in another, and the banker has a high level of responsibility to manage the customer's account, avoiding conflicts of interest and undue advantage.
What are the responsibilities of a banker in a fiduciary relationship?
A banker's responsibilities in a fiduciary relationship include managing special accounts like trust funds, recommending investments, and avoiding conflicts of interest and undue advantage.
What is the significance of the court's decision in Robinson v Midland Bank Ltd 1925?
The court's decision in Robinson v Midland Bank Ltd 1925 established that the intention to create a legal relationship is essential for a contractual relationship between a banker and a customer.
What is the breach of trust that occurs when a bank benefits from a company repaying a loan with invested money?
The bank breaches the trust when it benefits from the company repaying the loan with the invested money.
What are the elements required to establish a bank as a constructive trustee according to Barnes v Addy 1874?
The elements required are: (1) bank offered assistance, (2) bank had actual or constructive knowledge, and (3) there was dishonest and fraudulent intention or act.
What was the outcome of the Lipkin German v Karpnale Ltd & Lloyd’s Bank case?
The bank was not liable as they didn’t provide knowing assistance.
What are the four essential elements required to establish a claim against a stranger who assists in a fraudulent design, according to Tan Kok Ming, Philip v Royal Brunei Airlines 1994?
The elements are: (1) existence of trust, (2) dishonest and fraudulent design on the trust, (3) assistance of stranger in that design, and (4) knowledge of the stranger’s dishonesty.
What is the right of a bank to charge a customer commission and service charges for keeping an account, clearing cheques, and others?
This is a banker’s right, fixed by the Association of Bankers, and no service charge or commission is applicable for deposit accounts.
What are the two types of interest that a bank can charge on loans and advances?
The two types of interest are: (1) agreed-upon interest, set clearly in a contract between the customer and the bank, and (2) implied interest, which can arise from everyday banking activities, like overdrafts.
What is the right of a bank to set off or combine accounts to reduce its liability to repay a customer?
The bank has the right to set off or combine accounts when a customer has an amount in credit in one account and owes money to the bank in another account.
What is the significance of a bank having actual or constructive knowledge in a fraudulent design?
Having actual or constructive knowledge implies that the bank is aware of the fraudulent design and is therefore liable as a constructive trustee.
Study Notes
Banker-Customer Relationship
- A banker is an individual, partnership, or corporation whose primary business is banking, accepting money on current account, paying cheques, and collecting cheques for customers.
- The bank's role is to hold money safely and return it when demanded.
Customer
- A customer is a person entitled to repayment of a deposit, whether made by them or another person.
- A short-term relationship with a bank still qualifies as a customer relationship as long as the bank accepts the deposit and agrees to pay out checks based on the account balance.
- Someone cashing a cheque without a bank account is not a customer, and the bank is simply providing a one-time service.
Nature of Banker-Customer Relationship
- The relationship is based on contract law, with implied and express terms.
- The intention to create a relationship between the banker and customer must exist.
- The bank holds deposits and collects payments, while the customer borrows and repays with interest.
Debtor-Creditor Relationship
- The customer is a debtor, and the bank is a creditor when the customer deposits money with the bank.
- The customer is a creditor, and the bank is a debtor when the bank lends money to the customer.
Types of Banker-Customer Relationship
- The customer must make a demand to withdraw their deposited funds.
- The bank can use the customer's deposited money for business purposes, but remains responsible for repaying the full amount on demand.
Agent-Principal Relationship
- The customer (principal) gives the bank (agent) mandates to manage their account, such as setting up standing orders and collecting cheques.
- The bank acts on the customer's behalf as an agent, carrying out the mandates.
Fiduciary Relationship
- A party places trust and confidence in another, with the bank managing special accounts like trust funds with high responsibility.
- The bank acts as an advisor, recommending investments based on the customer's needs, but does not pressure them.
- The bank must avoid taking undue advantage and conflicts of interest.
Constructive Trustee and Beneficiary
- If a customer holds money in trust for someone else and deposits it in the bank, the bank cannot use that money for anything that goes against the trust.
- To establish the bank as a constructive trustee, there must be:
- Bank offered assistance
- Bank had actual or constructive knowledge
- There was dishonest and fraudulent intention or act
Banker's Rights and Duties
Banker's Right to Charge Commission and Service Charges
- The bank has the right to charge a customer commission and service charges for keeping the account, clearing cheques, and others.
- The fixed commission rate is set by the Association of Bankers for deposit accounts.
Banker's Right to Interest
- The bank has the right to charge interest on loans and advances, with both agreed-upon and implied interest.
- Implied interest can arise from everyday banking activities, like overdrafts.
Banker's Right to Set-Off
- The bank has the right to set off or combine accounts, reducing its liability to repay the customer by setting off the amount owed.
- This requires the sum owed to be certain, due, and with no express or implied agreement to the contrary.
Duty of Confidentiality
- Financial institutions and their staff cannot share information about customer accounts with anyone else.
- This includes documents, account details, and information about past and present directors, officers, or agents.
- The duty of confidentiality also applies to third parties and ex-bankers.
Understand the nature of the relationship between a banker and a customer, including the banker's role in accepting money and paying cheques. Learn about the characteristics of a banker and their business.
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