Case Notes
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Foreign exchange - traveller’s cheques - fraud - overseas scam - bank mistakenly paid out on forged traveller’s cheques - bank sought recovery of monies from customer - application of payment by mistake principles - fraught on both sides - loss to be shared between bank and its customer
Ms C had advertised for a new flatmate. She received an approach from a woman living overseas who said that she would be visiting New Zealand on an exchange and was looking for a place to live. The flatmate said that she would send Ms C a month’s rental in advance. Ms C later received some American Express travellers’ cheques to the value of USD3,500. The cheques were worth more than the first month’s rent. The flatmate contacted Ms C and said that her accountant had made a mistake in sending over all the cheques instead of just enough for one month’s rental. She asked Ms C to cash the cheques and return the remaining money to her by money transfer.
Ms C then presented the cheques at her bank, and the converted funds ($4,570) were deposited into her account. Later the same day Ms C withdrew $4,013 in cash from her account and transferred the money via Intercash NZ back to the overseas flatmate.
The following day the bank dishonoured the cheques, as they were discovered to be counterfeit. It turned out that Ms C had been the victim of a scam. The dishonour of the cheques left Ms C’s account overdrawn. The bank demanded that she repay the debt, but offered an overdraft facility free of interest and charges. Ms C was not happy and complained to me.
After investigation I concluded that the payment of the cheques to Ms C’s account should be treated as a mistaken payment by the bank. The bank had converted the travellers’ cheques to cash and credited Ms C’s account in the mistaken belief (shared by Ms C) that they were genuine.
I then applied the rules about payment by mistake with reference to section 94B of the Judicature Act 1908. There was no doubt that Ms C had altered her position by sending most of the money back overseas, leaving her with a large debt to the bank.
I concluded that Ms C had acted in good faith in cashing and depositing the cheques into her account. The story given by the fraudster seemed genuine, as was the offer to pay one month’s rent in advance.
However, I was of the view that the fraudster’s request that Ms C cash all of the cheques she had sent and immediately return most of the money by way of money transfer was rather suspicious. I found that Ms C had been careless in not making further enquiries at the time. She could have simply cashed enough of the cheques to pay the first month’s rental, and could then have returned the other cheques (uncashed) to the fraudster.
In the circumstances, while Ms C had been careless, it was not fair that she should have to repay all the money. I took into account the fact that she had been taken in by a fairly sophisticated fraudster who had “scammed” many other people. I was also concerned that the bank officer who received the cheques did not check the watermark, security thread or holographic foil on the cheque, as suggested in the acceptance procedure detailed on the reverse of all American Express travellers’ cheques.
I recommended that the loss be shared equally between Ms C and the bank, which would mean the bank writing off half the debt. The bank had already offered Ms C $250 compensation for inconvenience for the manner in which it had first handled her complaint, and I concluded that the offer was reasonable. I recommended that it should be accepted.
Both Ms C and the bank agreed to accept my recommendation for settlement.