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Tiew Han Lun Yaoh Han San Phua Kien Han


Question 1 (a)
The relationship between John Phu and his financial

institution belongs to a debtor and creditor relationship. John Phu opened a saving account. When a customer opens an account with a bank and if the account has a credit balance, then the relationship is that of debtor (banker/bank) and creditor (customer).

Features of the banker-customer relationship Borrowing and lending of money Providing safe custody facility Granting letter of credit to customers Collecting Negotiable instruments on behalf of the customer Acting as an agent on behalf of the customer Issuance of Guarantees Obligations of customer Must keep the check book issued by the bank in safe custody, if not, it is the duty of customer to report the matter immediately to the bank. It is the duty of the customer to present checks and other negotiable instruments during the business hour of the bank. The instruments of credit should be presented by the customer with in due time from their dates of issue. If a customer find any forgery in the amounts of the check issued by him. It should then immediately be reported to the bank.

Obligations of banker The banker is to honor the check of the customers provided the check are : Properly drawn The customer has balance to his credit The loan contract has been signed There is no legal bar or restriction attaching to the customers funds Standing orders Secrecy of the customers account The bank owes a contractual duty not to disclose the customers financial position without his consent Garnishee order (order of the court) It is the duty of the banker to abide by the order of the court and attached the funds of the customer to the creditors who has obtained the order in his favour.

Right of a customer A customer who has deposited money can draw check on his account up to the extent of his credit balance or according to overdrawing limit sanctioned by the bank. A customer has the right to receive statement of accounts from the bank. A customer has the right to sue the bank for compensation of a wrongful dishonor of his check. A customer has a right to sue and demand compensation if the bank fails to maintain the secrecy of his account. Right of a banker 1.Right to set off 2.Right to charge interest, commission etc 3.Right to lien

Question 1 (b)
John is dealing with the bank as a company

A company is a separate legal entity which may sue and

be sued in its own name. Characteristics of such an account Johns company might be sued but he is not liable for the legal commitment. Johns company will have a bank account under its name. What this means is that Johns power to operate account would be given by the companys directors.

Question 2
Who is liable for the stolen money???

The bank is not liable for the money stolen as the amount

of money has not been confirmed or stamped. Customer remains responsible for any money which is stolen. It is impossible for the bank to take responsibility for any which it has not physically accepted and where it has been unable to confirm the amount of the deposit. MNZ Bank is not liable for Andrinas losses.

True False Questions

1. In Australia, there are legal restrictions on the use of the terms bank or banker.

Bank is an ADI (Banking Act 1959)

An ADI must obtain an authorization from APRA to define

itself as a bank.

2. Australian law does not provides a definition of 'bank customer.

True Australian Law only defines banking business but not the definition of bank customer

3. A person can only become a customer of a bank by engaging in minimum number of transactions with that bank over a period of time.
False A person will become bank customer once he or she open a

bank account in the bank.

4. According to the case of Joachimson v Swiss Bank Corp [1921] 3 KB 110 a trust or fiduciary relationship normally exists between a customer and his or her bank.
False Fiduciary relationships exist between an agent and principal etc. These relationships demands a higher than ordinary degree of care and responsibility from the dominant or trusted party.

5. According to the case of Foley v Hill (1848) 2 HL Cas 28, money deposited in a bank account is and remains the property of the customer, not the bank.
False Once money is deposited in the bank, it is the property of the


6. A bank customer may take the form of a sole trader or partnership, but not a company .
False By definition, a bank-customer relationship is formed once the customer Have some sort of account with the bank Have a single banking business transaction with the bank Companies have all the above characteristics with the bank and thus are customer of the bank

7. Credit providers should be cautious about extending credit to minors.


Person below 21 is considered an infant.

The protection given by the law was to make the contracts

with infants voidable at the option of the infant. The consequences of contracting with an infant must still be of concern to the banker

8. A joint account operated is one that is operated by two persons, either or both of whom may access it as signatories.
False Joint account is account that is opened in the name of two of

more customers. In the absence of any agreement, the cheques should bear the signatures of all the account holders Account owners can decide which signature are required on cheques. It is now common for Australian banks to take a mandate which authorises the operation of the account on a single signature

9. In the case of a partnership account, each partner is jointly and severally liable for the indebtedness of the account

In the absence of any agreement between partners, profits

and losses must be shared equally regardless of the ratio of the partners investments. If the partnership agreement specifies how profits are to be shared, losses must be shared on the same basis as profits.

10. A lawyer does some legal work for a client and deposits an advance from the client into its trust account with a bank. The significance of this is that the account is operated by the lawyer as trustee and the lawyer s own client has a legally recognised interest in that money.
True Account deposited by lawyers for their clients are considered

to be trusts accounts. The client has a legally recognized interest in the money.

11. The signatories to a bank account operated by a private company may be the company's director
True Company directors may sign banking actions on behalf of the company.


Customer A customer is the recipient of a good, service, product, or idea, obtained from a seller or supplier for a monetary or other valuable consideration.

Bank A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers that have capital deficits to customers with capital surpluses.
Joint account A bank or brokerage account that is shared between two or more individuals. Joint accounts are most likely to be used between relatives, couples or business partners who have a level of familiarity and trust for each other, as this type of account typically allows anyone named on the account to access funds within it. Debtor A company or individual who owes money. If the debt is in the form of a loan from a financial institution, the debtor is referred to as a borrower. If the debt is in the form of securities, such as bonds, the debtor is referred to as an issuer.

Creditor An entity (person or institution) that extends credit by giving another entity permission to borrow money if it is paid back at a later date. Creditors can be classified as either "personal" or "real". Those people who loan money to friends or family are personal creditors. Real creditors (i.e. a bank or finance company) have legal contracts with the borrower granting the lender the right to claim any of the debtor's real assets (e.g. real estate or car) if he or she fails to pay back the loan.
Civil liability Civil liability gives a person rights to obtain redress from another person e.g. the ability to sue for damages for personal injury. There is also the right to obtain an injunction. For there to be an award of damages, the injured party has to have suffered an actual loss, be it personal injury, damage to property, or financial loss.

Criminal liability The liability that arises out of breaking a law or committing a criminal act In criminal matters, it is usually the state prosecuting the defendant before a magistrate, or a judge and jury in the court.

ADI (Authorised Deposit-taking Institutions) A body that has obtained APRAs consent to operate a banking business.Eg. Banks, Building Societies and Credit Unions
Non-ADI Merchant Bank is registered under the Financial Corporations Act 1974 (Cth) ans is permitted to use the descriptors merchant banker or merchant banking in the course of business Trust An equivalent obligation binding a person (trustee) to deal with the trust property over which he or she has control for the benefit of person or persons.

Trust account A trust account is an account which is held by one party who is bound by law to exercise his or her rights over the account for the benefit of some other person or persons.
Minor The age of majority is now 18 years in all Australian jurisdictions, to consequences of contracting with an infant must still be of concern to the banker. Fiduciary relationship One-person places complete confidence in another in regard to a particular transaction or ones general affairs or business. The relationship may not be formally or legally established as in a declaration of trust, but can be one of moral or personal responsibility. Corporation Refers to a body formed and authorized by law to act as a single person although constituted by one or more persons and legally endowed with various rights and duties including the capacity of succession.

Sole trader A sole trader is a simple business structure and gives the owner all the decision making power, they can still employ people if they wish. Partnership Relation between persons who agreed to share profits of a business carried on by all or any of them acting for all.

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