In PT Asuransi Tugu Pratama Indonesia TBK v Citibank NA, the Court of Final Appeal allowed the plaintiff’s claim for most of the aggregate amount of unauthorised debits from its account with the defendant bank. In an important unanimous judgment by one of the Court’s highly respected non-permanent judges (from another common law jurisdiction), the Court held that the limitation period for the plaintiff’s primary claim in debt commenced upon its demand as a customer for payment of the debt. Further, the Court held that the bank was not entitled to a partial defence of contributory negligence with respect to the plaintiff’s claim in debt. As the judgment notes at the beginning:
“This is a dispute about limitation. In reality however, it is about one of the oldest and most litigated questions in commercial law, namely the rights of a corporate customer against a banker who has paid money out of its account on the dishonest instructions of an authorised signatory.”
The judgment is a good example of the importance of considering at the outset of a dispute the reliefs that a party should seek (pursuant to their cause(s) of action). As the judgment states:
If a bank has debited an account without authority, damages will be nominal because an unauthorised debit is a nullity. The customer is entitled to disregard it and require the account to be reconstituted as it should have been. In that case, what is reconstituted is simply the bank’s records. It is not the bank’s liability, which has always been for the balance undiminished by the unauthorised debits. The customer’s only effective financial remedy is accordingly in debt for the reconstituted balance of the account, and that debt is likewise payable on demand.