Naked protection

Mr. Gershon P. Anumu

The old curtains of 2017 have fallen and given ways to the beaming rays of expectancy for the new year. This is the year for recapitalisation! The clock is ticking fast and counting down to 31 December 2018. We must work harder to realise the recapitalisation plans which we have submitted to the Bank of Ghana. This is also the year the digitisation drive will be heightened in the banking sector to deepen competition and give customers the warmth of personalised experience.

Indeed, cheques will continue being relevant to the payment system. We envisage their use reducing, but it will not go extinct anytime soon, though strong, radiating waves from the channels of digital banking stare at it. Therefore, we should not gloss over the rudiments of this instrument as bankers and customers alike in our contractual relationship. The focus of this opening article in the year is on one of the conventional practices we have lived with as bankers to dishonour properly drawn cheques. I witnessed one of these incidents a few days ago, and would like to engage in a conversation with you on the observation.

A customer at one of the banks issued a crossed cheque to a vehicle dealer for the payment of a new vehicle she had bought from the dealer. As at the time she issued the cheque, there was more than sufficient funds in the account to meet the amount on the face of the cheque. Also, there was no issue concerning operations on the account to prevent the cheque from being honoured. After three days the car dealer – steaming with rage – brought the cheque back with ‘drawer confirmation not received’ noted on it.

My interaction with the drawer revealed that she has a call-back arrangement with her bankers but did not receive any phone call from them to confirm or not payment of the cheque. Again, her unanswered call log did not show any attempt by her bankers to reach her. To note, she enquired from the bank why she was not called but had her cheque returned. In fact, the same cheque was honoured later through the clearing system. To help me lay the foundation of my opinion on why sometimes cheques are returned with ‘drawer confirmation not received written on them, I decided to relook at the bank account opening forms of some banks.


Account Opening Forms -Terms & Conditions

It is important to state that the forms provide a column that seeks from prospective account holders their willingness to pre-inform the bank when they issue cheques, and to indicate the threshold of amounts as such with an authorised signature. The bank makes a telephone call back to the customer whenever a cheque is presented on the account to make doubly sure that it is acting on the account-holder’s authority. It is an undeniable fact that many individuals and corporate entities have signed onto this call-back’ arrangement with their banks.

Regarding the terms and conditions, it is revealing to note the replica of this statement: The bank shall have the right whenever it deems appropriate to confirm the issuance of a cheque drawn on a current account failing which the cheque may be returned with drawer confirmation required endorsed thereon.

In the same way, to protect the accounts of customers, the banks go further to state that customers must ensure that their cheques books are kept under lock and key and at a secured place to prevent unauthorised persons from gaining access to same and neglect of this precaution may be a ground for any consequential loss being charged to your account. This word-for-word cheque protection policy template, which is being used by almost all the banks, is understandable because they are exposed to the same risks.

Contractual Relationship

It is of interest to state that any person(s) who upon satisfying all the necessary requirements as applicable, and therefore has an account opened for him/her, enters into a contractual relationship with a bank. The crux of the binding relationship is that after the person has read through the account-opening terms and conditions, and agreed with the bank on how their relationship should be managed, they have their minds set to a mutual contract.

In this respect, one would expect both the bank and customer to adhere strictly to their contractual vows. As a lawyer would say, contracts that were mutually entered into between two parties with the capacity to contract are binding obligations, and may not be set aside due to a sudden change of mind by one party or the other unless a statute provides to the contrary.

To help me establish whether the contractual terms and conditions regarding cheques as indicated on the account-opening forms are flawless and cannot be set aside, I found a companion in the Bill of Exchange Act 1961 (Act 55) to support me in giving an informed opinion.

As a principle a bank must pay its customers’ cheques provided they are properly drawn, signed in accordance with the mandate it holds, backed by adequate funds and free of legal and constructive bars revoking the mandate”. What then constitutes the mandate which the bank holds in respect of the account of the drawer (customer) I am referring to? Can we conclude that the authorised signature on the cheque is inconclusive and should not be honoured when it is not supported by the ‘call-back’ confirmation?

A school of thought may aver that since the customer provided a specimen signature(s) and agreed on a call-back with the bank, these therefore constitute the mandate the bank holds on this account which should fully complied with. This is the reasoning that went into the decision to dishonour the cheque in this incident.

Early on, I pointed out a protection clause in the account-opening terms and conditions that makes it permissible for a bank to return cheques when it does not receive confirmation from the drawer (customer). It will suffice to say that the above-mentioned clause with indemnity attached to it, in addition to the cheque safe-keeping precaution for customers, is adequate to secure the banks in running the accounts.

Indeed, among all the varied operative reasons for returning cheques, it is only the “drawer confirmation required” that has been expressly stated in the account-opening terms and conditions. The main purpose of inserting such a clause is obvious, and can be accentuated as a risk management ‘weapon’ to attack impostors. Nonetheless, it is inferior and alien to the protections a bank is clothed with – either as a paying banker or collecting banker under Sections 79 and 81 of the Bill of Exchange Act 1961(Act 55). Therefore, it is set aside in a court of law. In short, it is the weakest line of defence in the face of the statute.

Decided Case

This was a case between Akwasi Boakye Osei and Standard Chartered Bank in which judgement was delivered in 2014.The customer issued a number of cheques drawn on his account at the bank for the benefit of third-party payees. Two of the cheques were in favour of some religious institutions. The bank dishonoured two (2) of the cheques with “drawer’s confirmation not received” written on them. The customer subsequently instituted a civil action against the bank for wrongfully dishonouring his cheques and exposing him to sanctions from the Bank of Ghana and a possible criminal prosecution. In its defence, the bank pleaded that dishonouring the cheques in the absence of the call-back from the customer was in accordance with industry practice and custom, and was also meant to protect customers of the bank from fraudsters.

In his judgement, with respect to the cheques which were dishonoured for “drawer’s confirmation not received”, the presiding judge, Justice K. A. Ofori-Atta, stated: the call back system upon which the defendant relies to have refused may not be practicable, reasonable or convenient in all cases”. He added that “it is not the telephone confirmation that authenticates the cheques. It is the regularity and completeness of the mandate on the cheque that vests the authority to pay cheque”. The court finally entered judgement in favour of the customer (the businessman) and ordered the bank to pay him US$14million as damages. Whoops! This money means a lot to recapitalisation.

To the layperson, ‘regularity and completeness means that the beneficiaries’ names (the religious institutions) were correctly written on the cheques, the amount in words and in figures were the same on the cheques, and the cheques were properly dated and signed in accordance with the authorising signature the customer used to open the account.

As bank officers we may have been aware of this case, but it seems we have not learnt our lessons from it. We still witness the same breaches. Our current disposition can be likened to a beautiful lady in her best outfit standing at the roadside. A valuable object she was holding fell on the ground. In her efforts to pick it up, something else happened. An onlooker drew closer and whispered a word to her. Alas! She flared up and screamed, “I am aware, is that your concern?”

Indeed, the judgement in the Akwasi Boakye Osei Case reinforces my assertion that the good intentions behind the drawer confirmation not received” clause have been torn apart. To a litigant customer who is aware of this situation, all that he would need to do to milk the system is open an account with a bank and sign onto the call-back system. He then deposits sufficient funds into the account and issues a properly drawn cheque to a third party. He hatches a plan with the third parties and later goes incommunicado for few days and waits for the cheque to be returned. He moves to institute legal action, pleads damages (nominal or substantial) and then cites the Akwasi Boakye Osei Case among other relevant ones. Bingooo! Judgement goes in his favour. As bankers, do we want to be rendered naked through drawer confirmation not received”?  Happy New Year to you. I am grateful for your time; God Bless!      


The writer is a Chartered Banker

Email: [email protected]

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