8/13/2019 LFIS

1/22

TUTORIAL

PRESENTATIONTiew Han LunYaoh Han San

Phua Kien Han

8/13/2019 LFIS

2/22

PART A

8/13/2019 LFIS

3/22

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 theaccount has a credit balance, then the relationship is that

of debtor (banker/bank) and creditor (customer).

8/13/2019 LFIS

4/22

Features of the banker-customer relationship

Borrowing and lending of money

Providing safe custody facilityGranting 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 customerMust 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.

8/13/2019 LFIS

5/22

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 accountThe 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.

8/13/2019 LFIS

6/22

Right of a customer

A customer who has deposited money can draw check on his account up to theextent 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 tomaintain 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

8/13/2019 LFIS

7/22

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.

8/13/2019 LFIS

8/22

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 isstolen. 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.

8/13/2019 LFIS

9/22

PART BTrue False Questions

8/13/2019 LFIS

10/22

1. In Australia, there are legal restrictions on the use of

the terms bank or banker.

True

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 thedefinition of bank customer

8/13/2019 LFIS

11/22

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 BankCorp [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.

8/13/2019 LFIS

12/22

5. According to the case ofFoley 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

bank.

6. A bank customer may take the form of a soletrader 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 arecustomer of the bank

8/13/2019 LFIS

13/22

7. Credit providers should be cautious about extending

credit to minors.

True

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

8/13/2019 LFIS

14/22

False

Joint account is account that is opened in the name of two ofmore customers.

In the absence of any agreement, the cheques should bearthe signatures of all the account holders

Account owners can decide which signature are required oncheques.

It is now common for Australian banks to take a mandate

which authorises the operation of the account on a singlesignature

8. A joint account operated is one that is operated bytwo persons, either or both of whom may access it

as signatories.

8/13/2019 LFIS

15/22

9. In the case of a partnership account, each partner is jointly

and severally liable for the indebtedness of the account

True

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.

8/13/2019 LFIS

16/22

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 ownclient 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.

8/13/2019 LFIS

17/22

PART CGlossary

8/13/2019 LFIS

18/22

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.

8/13/2019 LFIS

19/22

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 friendsor 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 liabilityCivil 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.

8/13/2019 LFIS

20/22

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.

8/13/2019 LFIS

21/22

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 relationshipOne-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.

CorporationRefers 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.

8/13/2019 LFIS

22/22

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.

Thank You