3/4-475/04 &3(21)/4-1763/04
INDUSTRIAL COURT OF MALAYSIA
CASE NO : 3/4-475/04BETWEEN
BURHAN BIN LASAAND
MALAYAN BANKING BERHAD
CASE NO : 3(21)/4-1763/04 BETWEEN
ABD. JAMAL BIN AHMADAND
MALAYAN BANKING BERHAD
(Consolidated by Order of Court dated 15.1.2005)
AWARD NO : 1078 OF 2010
Before : TUAN FRANKLIN GOONTING – Chairman (Sitting Alone) Venue : Industrial Court Malaysia, Kuala Lumpur
Dates ofReference
: 8.4.2004 (Burhan Bin Lasa)1.6.2004 (Abd. Jamal Bin Ahmad)
Dates of Mention : 11.6.2004, 4.3.2005, 4.5.2005, 28.6.2005, 27.7.2005, 30.8.2005, 17.1.2006, 17.2.2006, 28.2.2007, 1.6.2007, 8.6.2007, 2.7.2007, 12.11.2007, 14.12.2007, 22.1.2008, 18.3.2008, 29.4.2009, 20.8.2009, 2.4.2010, 17.5.2010, 8.6.2010, 23.6.2010, 6.7.2010, 20.7.2010, 12.8.2010
Dates of Hearing : 29.3.2006, 16.11.2006, 11.12.2006, 2.2.2007, 7.2.2007, 27.2.2007, 13.11.2007, 1.4.2008, 25.8.2008, 14.11.2008, 17.12.2008, 24.11.2009, 25.11.2009, 19.2.2010
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Representation : Mr. V.K. Raj,From Messrs P. Kuppusamy & Co.,Counsel for the Claimants.
Mr. Steven Thiruneelakandan Mr. Shamsul Bahrin Manaf Counsel for the Bank.
Reference :
These two references made under Section 20 (3) of the Industrial
Relations Act, 1967 concern the dismissal of Burhan Bin Lasa (the 1st
Claimant) and Abd. Jamal Bin Ahmad (the 2nd Claimant) (hereinafter
referred to as “the Claimants”) by Malayan Banking Berhad (hereinafter
referred to as “the Bank”) on 7.2.2002.
AWARD
These two ministerial references concern the dismissal of Burhan
Bin Lasa (the 1st Claimant) and Abd. Jamal Bin Ahmad (the 2nd
Claimant) by the Bank, both on 7th February 2002. The references were
registered herein as case No: 3/4-475/04 and No. 3(21)/4-1763/04
respectively, and both cases were consolidated by order of court dated
15th January 2005.
The bank operates branches throughout Malaysia as well as in
Brunei. At the time of his dismissal the 1st claimant held the position of
Country Manager, Bandar Seri Begawan, Brunei branch (“the branch”)
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while the 2nd claimant was Credit and Marketing Manager of the
branch.
The bank's business includes the giving of loans to finance
construction projects. The loan amount is released in stages in this
manner: In the course of the contract works progress certificates (PCs)
are issued by the project consultants. The PC performs a dual function
i.e it (1) monitors the progress of the works and (2) regulates the interim
disbursements of the loan to the borrower, that is, the contractor
undertaking the works. The PC is required to be endorsed by the
awarder of the contract. Upon receipt of a PC and verification of such
endorsement the bank will release a specified amount, or drawdown, in
banking parlance, to the contractor/borrower according to the stage of
construction reached as certified by the PC. In the case at hand the
awarder was the Government of Brunei while the contractor/borrower
was one Lau Enterprise Company (“LEC”).
The claimants were entrusted with, inter alia, the duty to ensure
that all documentation was in order, including, especially, the PCs
before release of drawdown. In particular they had to adhere to the
bank's Standard Practice Instructions SPI No (B) FG 56, paragraph
4.1(b) of which reads as follows:
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“Releases
4.1. The advances/credit facilities may be released as
follows:
a) …
b) By way of progressive releases on OD based
on the original Claim Certificates/Bills/
Receipts presented by the customer. These
documents must be endorsed by the Awarder
before the customer is allowed to drawdown
on his OD account. In case of doubt e.g
where original invoices are not presented or
there are alterations to the invoices etc,
Branch should wherever possible call up the
Awarder for confirmation. The drawdown
amount will usually be for a percentage of
the invoice/Delivery Order/Work
Certificates/Receipts depending on the terms
and conditions as specified in the A/A.
c) …”.
(Italics added)
The bank's Brunei branch experienced a practical problem in
calling up to get the awarder's confirmation, the awarder being the
Brunei Government. So, by their joint memo dated 24th May 1999, to
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the General Manager of the bank's International Banking Division, the
claimants proposed, inter alia, as follows:
“Proposal
In view that if we were to insist on having the awarder’s
signature/endorsement on the PC submitted, then it would not
be practical for the borrower to have OD/PC line. We propose
for waiver of this requirement. However, for our confirmation
on the authenticity of the PCs submitted, a certified copy by the
Section Head/Consultant/Project Manager/Supervising Officer
(depending on the department concerned; note: (these party are
appointed by the awarder) is to be endorsed on the PCs
presented prior to advance be made.”.
The bank agreed to this proposal but with the condition that the
party certifying the PCs must be duly appointed or authorised by the
awarder.
It transpired that many of the PCs which had been approved by
the claimants for the release of drawdowns had been forged or falsified
by LEC, and this led to their being charged as follows:
The charges against the 1 st claimant
That he had :
1) Authorised for advance, authorised the computation of the
operating limit in the Register of OD against PCs and over-
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ridden the change of the operating limit for PCs No. 9 and
10 favouring A/C 50009-8 (details mentioned in Table
One) which were not endorsed by the Awarder/Consultant
thus contravening SPI (B) FG 56: Banking Facilities
Against Contract Payments/Progress Certificates (PC)/
Bills dated 29.1.1992.
2) Authorised the computation of the operating limit in the
Register of OD against PCs and over-ridden the change of
the operating limit for PCs No. 11, 12 and 13 favouring
A/C 50009-8 (details mentioned in Table One) which were
not endorsed by the Awarder/Consultant thus
contravening SPI (B) FG 56: Banking Facilities Against
Contract Payments/Progress Certificates (PC)/Bills dated
29.1.1992.
3) Authorised for advance and authorised the computation of
the operating limit in the Register of OD against PCs for PC
No. 6 favouring account No. 50186-8 (details mentioned in
Table Two) which was not endorsed by the
Awarder/Consultant thus contravening SPI (B) FG 56:
Banking Facilities Against Contract Payments/Progress
Certificates (PC)/Bills dated 29.1.1992.
4) Authorised the computation of the operating limit in the
Register of OD against PCs and over-ridden the change of
the operating limit for PC No. 1, 3, 4, 7, 10, 11, 14, 15 and
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16 favouring account No. 50186-8 (details mentioned in
Table Two) which were not endorsed by the
Awarder/Consultant thus contravening SPI (B) FG 56:
Banking Facilities Against Contract Payments/Progress
Certificates (PC)/Bills dated 29.1.1992.
5) Over-ridden the change of the operating limit for PC No. 13
and 17 favouring account No. 50186-8 (details mentioned
in Table Two) which were not endorsed by the
Awarder/Consultant thus contravening SPI (B) FG 56:
Banking Facilities Against Contract Payments/Progress
Certificates (PC)/Bills dated 29.1.1992.
6) Authorised the computation of the operating limit in the
Register of OD against PCs for PC No. 5 and 12 favouring
account No. 50186-8 (details mentioned in Table Two)
which were not endorsed by the Awarder/Consultant thus
contravening SPI (B) FG 56: Banking Facilities Against
Contract Payments/Progress Certificates (PC)/Bills dated
29.1.1992.
7) Authorised for advance, authorised the computation of the
operating limit in the Register of OD against PCs and over-
ridden the change of the operating limit for PCs No. 19
and 24 favouring A/C 60398-8 (details mentioned in Table
Three) which were not endorsed by the
Awarder/Consultant thus contravening SPI (B) FG 56:
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Banking Facilities Against Contract Payments/Progress
Certificates (PC)/Bills dated 29.1.1992.
8) Authorised the computation of the operating limit in the
Register of OD against PCs and over-ridden the change of
the operating limit for PCs No. 16, 18, 20 to 23, 26 to 31
favouring A/C 60398-8 (details mentioned in Table Three)
which were not endorsed by the Awarder/Consultant thus
contravening SPI (B) FG 56: Banking Facilities Against
Contract Payments/Progress Certificates (PC)/Bills dated
29.1.1992.
9) Over-ridden the change of the operating limit for PCs No.
2, 3, 5, 6 and 9 favouring A/C 60398-8 (details mentioned
in Table Three) which were not endorsed by the
Awarder/Consultant thus contravening SPI (B) FG 56:
Banking Facilities Against Contract Payments/Progress
Certificates (PC) /Bills dated 29.1.1992.
10) Authorised for advance, authorised the computation of
the operating limit in the Register of OD against PCs and
over-ridden the change of the operating limit for PCs No.
5 and, 6 favouring A/C 60640-9 (details mentioned in
Table Four) which were not endorsed by the
Awarder/Consultant thus contravening SPI (B) FG 56:
Banking Facilities Against Contract Payments/Progress
Certificates (PC)/Bills dated 29.1.1992.
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11) Authorised the computation of the operating limit in the
Register of OD against PCs are over ridden the change of
the operating limit for PCs No. 2, 3 and 8 favouring A/C
60640-9 (details mentioned in Table Four) which were not
endorsed by the Awarder/Consultant thus contravening
SPI (B) FG 56: Banking Facilities Against Contract
Payments/Progress Certificates (PC)/Bills dated 29.1.1992.
12) Authorised the computation of the operating limit as
indicated in the Register of OD against PCs and over-ridden
the change of the operating limit for PC No. 31 although
there were already 5 other PCs outstanding namely PCs No.
26, 27, 28, 29 and 30 favouring account No. 60398-8 thus
contravening the intention of SPI (B) FG 56: Banking
Facilities Against Contract Payments/Progress Certificates
(PC)/Bills dated 29.1.1992 and the terms of approval of the
facility that clearly states that the OD/PC facility is subject
to 5 PCs outstanding at any one time.
13) Authorised for advance and/or authorised the
computation of the operating limit as indicated in the
Register of OD against PCs and/or over-ridden the change
of the operating limit for the following PCs that had
exceeded the stipulated advance limit of $500,000 per PC
thus contravening SPI (B) FG 56: Banking Facilities
Against Contract Payments/Progress Certificates (PC)/Bills
dated 29 1.1992.
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i. PCs No. 9, 10, 12, 13 favouring A/C 50009-8.
ii. PCs No. 5, 6, 7, 10, 11, 15, 16 and 17 favouring
A/C 50186-8.
iii. PCs No. 3, 5, 6, 9, 23, 24, 26 to 31 favouring
A/C 60398-8.
iv. PCs No. 5 to 8 favouring A/C 60640-9.
The charges against the 2 nd claimant
That he had :
1) Authorised the computation of the operating limit in the
Register of OD against PCs for PCs No. 1, 6, 7 favouring
A/C 50009-8 (details mentioned in Table One) which were
not endorsed by the Awarder/Consultant thus
contravening SPI (B) FG 56: Banking Facilities Against
Contract Payments/Progress Certificates (PC)/Bills dated
29.1.1992.
2) Authorised the computation of the operating limit in the
Register of OD against PCs and over-ridden the change of
the operating limit for PCs No. 8, 14 to 16 favouring A/C
50009-8 (details mentioned in Table One) which was not
endorsed by the Awarder/Consultant thus contravening
SPI (B) FG 56: Banking Facilities Against Contract
Payments/ Progress Certificates (PC)/Bills dated
29.1.1992.
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3) Authorised the computation of the operating limit in the
Register of OD against PCs and over-ridden the change of
the operating limit for PC No. 8, 9 and 18 favouring
account No. 50186-8 (details mentioned in Table Two)
which were not endorsed by the Awarder/Consultant thus
contravening SPI (B) FG 56: Banking Facilities Against
Contract Payments/Progress Certificates (PC)/Bills dated
29.1.1992.
4) Authorised the computation of the operating limit in the
Register of OD against PCs for PC No. 10, 11, 13, 16 and 17
favouring account No. 50186-8 (details mentioned in Table
Two) which were not endorsed by the Awarder/Consultant
thus contravening SPI (B) FG 56: Banking Facilities Against
Contract Payments/Progress Certificates (PC)/Bills dated
29.1.1992.
5) Over-ridden the change of the operating limit for PC No. 5,
6 and 12 favouring account No. 50186-8 (details
mentioned in Table Two) which are not endorsed by the
Awarder/Consultant thus contravening SPI (B) FG 56:
Banking Facilities Against Contract Payments Progress
Certificates (PC)/Bills dated 29.1.1992.
6) Authorised the computation of the operating limit in the
Register of OD against PCs and over-ridden the change of
the operating limit for PCs No. 17 and 25 favouring A/C
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60398-8 (details mentioned in Table Three); (A) which were
not endorsed by the Awarder/Consultant thus
contravening SPI; (B) FG 56: Banking Facilities Against
Contract Payments/ Progress Certificates (PC)/Bills dated
29.1.1992.
7) Authorised the computation of the operating limit in the
Register of OD against PCs for PC No. 16, 18, 21 to 23, 26
to 31 favouring A/C 60398-8 (details mentioned in Table
Three which were not endorsed by the Awarder/Consultant
thus contravening SPI; (B) FG 56: Banking Facilities
Against Contract Payments/Progress Certificates (PC)/Bills
dated 29.1.1992.
8) Over-ridden the change of the operating limit for PC No. 4
favouring A/C 60398-8 (details mentioned in Table Three)
which was not endorsed by the Awarder/Consultant thus
contravening SPI (B) FG 56: Banking Facilities Against
Contract Payments/Progress Certificates (PC)/Bills dated
29.1.1992.
9) Authorised the computation of the operating limit in the
Register of OD against PCs and over-ridden the change of
the operating limit for PC No. 7 favouring A/C 60640-9
(details mentioned in Table Four) which was not endorsed
by the Awarder/Consultant thus contravening SPI (B) FG
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56: Banking Facilities Against Contract Payments/Progress
Certificates (PC)/Bills dated 29.1.1992.
10) Authorised the computation of the operating limit in the
Register of OD against PCs for PCs/No. 2, 3, 5 and 6
favouring A/C 60640-9 (details mentioned in Table Four)
which were not endorsed by the Awarder/Consultant thus
contravening SPI (B) FG 56: Banking Facilities Against
Contract Payments/Progress Certificates (PC)/Bills dated
29.1.1992.
11) Authorised the computation of the operating' limit in the
Register of OD against PCs and over-ridden the change of
the customer's operating limit for PC No. 16 although there
were already 3 other PCs outstanding namely PC Nos 13,
14 and 15 favouring account No. 50009-8 (details
mentioned in Table One) thus contravening the intention of
SPI (B) FG 56: Banking Facilities Against Contract
Payments/Progress Certificates (PC)/Bills dated 29.1.1992
and the terms of approval of the facility that clearly states
that the OD/PC facility is subject to 3PCs outstanding at
any one time.
12) Authorised the computation of the operating limit as
indicated in the Register of OD against PCs for PC No. 31
although there were already 5 other PCs outstanding
namely PCs No. 26, 27, 28, 29 and 30 favouring account
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No. 60398-8 thus contravening the intention of SPI (B) FG
56: Banking Facilities Against Contract Payments/Progress
Certificates (PC)/Bills dated 29.1.1992 and the terms of
approval of the facility that clearly states that the OD/PC
facility is subject to 5 PCs outstanding at any one time.
13) Authorised for advance and/or authorised the computation
of the operating limit as indicated in the Register of OD
against PCs and/or over-ridden the change of the operating
limit for the following PCs that had exceeded the stipulated
advance limit of $500,000 per PC thus contravening SPI (B)
FG 56: Banking Facilities Against Contract Payments/
Progress Certificates (PC)/Bills dated 29.1.1992.
i. PCs No. 1, 6, 7, 15, 16 favouring A/C 50009-8.
ii. PCs No. 5, 6, 9, 10, 11, 16 to 18 favouring A/C
50186-8.
iii. PCs No. 4, 17, 23, 25 to 31 favouring A/C
60398-8.
iv. PCs No. 5 to 7 favouring A/C 60640-9.”
Two separate domestic inquiries were held to hear the charges
against the claimants on 19th November 2001 and 21st November 2001
respectively. The 1st claimant was found guilty in respect of charge Nos
1 to 11 and not guilty in respect of charge No 12 and 13 while the 2nd
claimant was found guilty in respect of charge Nos 1 to 10 and not
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guilty in respect of charge Nos 11 to 13. Their dismissal ensued vide
the bank's separate letters both dated 6th February 2002.
Where, as in this case, a domestic inquiry has been held, the
Industrial Court's jurisdiction is limited to considering whether there is
a prima facie case against the claimants. See the High Court case of
Bumiputra Commerce Bank Bhd v. Mahkamah Perusahaan
Malaysia & Anor [2004] 7 CJJ 77 which was endorsed by the Court of
Appeal in Jye Tai Precision Industrial (M) Sdn Bhd v. Victoria
Arulsamy [2008] 1 CLJ 760. This court should first consider whether
or not the domestic inquiries held against the claimants were valid and
the inquiry notes accurate. Both claimants had been given due notice
of the respective charges against them. They had attended the separate
inquiries and had had the opportunity to cross-examine the sole
witness, one Encik Gunalan Sabapathy, who was the investigator
attached to the Bank's Audit Division and who had investigated the case
of the fraudulent PCs, and also the opportunity to give evidence in their
defence. Having perused the verbatim transcripts of the inquiry against
the 1st claimant (COB1, pages 38 – 51) and the 2nd claimant (COB1,
pages 122 – 153) as well as the exhibits tendered therein especially the
copies of the PCs tendered and referred to thereat, the court is satisfied
that the inquiries were properly conducted and the inquiry notes
accurate. Furthermore, the propriety or otherwise of the inquiries were
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not disputed by the claimants either in their pleadings or their witness
statements.
At the inquiries the said investigating officer, Mr. Gunalan,
testified that his investigations had revealed:
(i) The PCs presented by the customer, LEC, for advances were
not endorsed by the Awarder/Consultant as required by SPI
(B)FG 56;
(ii) The Brunei branch had granted advances against
photocopies of PCs without seeking confirmation from the
Awarder;
(iii) There were instances of PCs bearing an original rubber
stamp by the consultants while on other occasions the PCs
bore a photocopy of the rubber stamp. However, in all
instances the signatures were photocopied.
(iv) The advances against the PCs were well in excess of the limit
of $500,000/- per PC;
(v) The said branch had granted advances against fresh PCs
even though the advances against previous PCs had not
been fully settled; and
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(vi) The PC values submitted by LEC were grossly inflated.
On the claimants' part, basically it was their position during the
inquiry that as long as there was a signature and a company rubber
stamp, and notwithstanding the fact that these PCs were photocopies
including the signature and rubber stamp thereon, there was no
necessity to verify or conduct proper checking to determine their
authenticity. In this regard the claimants cited past practice. They also
contended that the PCs which they had approved for release of advances
appeared to be regular on their face.
After considering the evidence and the submissions of both
prosecution and defence the inquiry panels found the claimants guilty
of the main thrust of the charges, that is, the failure to obtain the
endorsement of the Awarder/Consultant on the various PCs before the
advances were granted against such PCs. It is the view of the court that
the inquiry panels had reached the correct conclusion having regard to
all the evidence, documentary and oral, adduced at the domestic
inquiries, and it so finds. In the circumstances the court concludes that
the bank has made out a prima facie case against the claimants. It was
not incumbent, therefore, on the court to hear the reference de novo.
Nevertheless, since the bank called witnesses to testify on its behalf, the
court heard these witnesses and now reviews the evidence adduced
herein by the bank.
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The bank had in its possession all the PCs submitted by LEC save
thirteen (13) of them which had been taken away by the Brunei police in
the course of their investigation. Fortunately the bank obtained the
cooperation of the Brunei police and one of its inspectors came to court
and brought along with him the police copies of the PCs for inspection
by the court as well as by the claimants' counsel after which he took
them back to Brunei. The said Gunalan (COW1) led the court through
all the PCs in the bank's bundle of documents, 13 of which
corresponded with the PCs brought by the said Brunei police inspector,
and gave his comments. I will deal with three examples in respect of
each claimant.
PCs approved by the 1 st claimant
(i) PC No. 17 (COB 6 page 31)
This PC was a photocopy but the date stamp and the endorsement
thereon were original. COW1 pointed out that it was not dated, and did
not bear the signature of Pengarah, Jalan Raya. Since LEC had
submitted a photocopy only the officer concerned should have taken
the necessary steps to confirm the authenticity of the document with
the awarder or the consultant, that is, he should have made calls to
verify its genuineness. COW1 stated that in the course of his audit he
sought verification from the consultants and they told him that the PCs
they had authorised were up to No. 15 only and anything beyond that
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was not authorised by them. In other words PC No. 17 was a non-
existent document i.e it was forged.
(ii) PC No. 27 (COB 6 page 71)
COW1 gave his reasons for circumspection concerning this PC.
Firstly, it was photocopied and therefore the officer concerned should
have sought verification from the awarder or the consultant. As
required by clause 4.1 of SPI No. (B) FG 56, in case of doubt e.g where
the original invoices are not produced, etc, the branch should wherever
possible call up the awarder for confirmation. However, the officers
concerned had failed to comply with this requirement. COW1 further
testified that he had noted that the signature of Nordin Mohd Yussof of
Jurutera Tempatan differed from an earlier PC, e.g PC No. 6 on page 55
and No. 16 on page 60. The court looked at these PCs and noted that
the signatures indeed differed. COW1 stated that this alone was a
glaring discrepancy which should have prompted the officers to check
further. Moreover, this PC was not signed by the awarder.
(iii) PC No. 6 (COB 6 page 80)
In respect of this PC, COW1 stated that firstly, it was a photocopy
and therefore the officer concerned should have called up the awarder
for confirmation, and secondly, it bore two rubber stamps of Jurutera
Tempatan, each bearing a different signature and this again was a
glaring discrepancy which would have prompted the officer concerned to
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seek verification from Jurutera Tempatan, especially since the amount
involved was substantial i.e B$919,890/-. This PC, too, was not
endorsed by the awarder and neither was it dated.
PCs approved by the 2 nd claimant
(i) PC No. 14 (COB 6, page 13)
COW1 told the court that, firstly, this PC was a photocopy and,
secondly, the amount had been altered from $386,225.85 to
$368,225.85, and that in view of that the officer concerned
should have called the awarder or the consultant for
confirmation, but did not. This PC had not been endorsed by
the awarder, and, furthermore, it did not have a valuation date
i.e the valuation date was left blank.
(ii) PC No. 15 (COB 6, page 14)
Firstly, it was a photocopy and the PC number had been
changed or amended from No. 14 to No.15. The court observed
that the amendment on the police copy appeared to be original,
and in pencil. Similarly with PC No. 14, this PC did not have a
valuation date and neither was it endorsed. The officer
concerned should, in these circumstances, have been
circumspect and called up the awarder or consultant to confirm
the genuineness of this document, but did not.
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(iii) PC No. 16 (COB, page 15)
This, too, was a photocopy, and the court observed that the only
original endorsement thereon was the “received” date rubber
stamp. It was not dated and did not bear a valuation date and
furthermore, it was not endorsed by the awarder. The 2nd
claimant should, in these circumstances, have been circumspect
and sought verification but did not.
COW2, the panel chairman of the domestic inquiry against the 2nd
claimant, identified and confirmed the verbatim transcript of the inquiry
(COB1, pages 122 to 153) and the panel's findings against the 2nd
claimant (COB1, pages 186 – 190) while COW3, a panel member of the
domestic inquiry against the 1st claimant, identified and confirmed the
verbatim transcript of this inquiry (COB1, pages 38 to 51) and the
panel's findings against the 1st claimant (COB1, pages 69 to 75).
The bank's last witness, Looi Heong Meng (COW4) its Vice
President, Head, Industrial & Employee Relations, Corporate Human
Resources, referred to clause 4.1 of SPI No. (B) FG 56 (reproduced
earlier)and the claimant's proposal vide their joint memorandum dated
24th May 1999 (also reproduced earlier) and confirmed that the bank's
International Banking Division had approved such proposal but had
stressed that the party certifying the PC must be duly
appointed/authorized by the Awarder. COW4 stated that this
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memorandum forms part of the SPI and the two should be read
together. The Section Head/Consultant/Project Manager/Supervising
Officer referred to in the memo steps into the shoes of the awarder in
relation to the SPI and assumes the requirements involving the awarder
in the SPI (particularly clause 4.1 (b)). There had been non-compliance
of the SPI by the claimants: firstly, they had authorised advances to be
made to the borrower based on PCs which were not duly endorsed by
the awarder/consultant. These PCs were only copies of purportedly
endorsed PCs. There were no original endorsements on the PCs, and,
secondly, the claimants did not call the awarder/consultant to verify the
authenticity of the PCs, despite the clear stipulation in the SPI of the
requirement to do so in the event of doubt, particularly when the
documents tendered were not originals.
Continuing his testimony COW4 stated that the domestic inquiry
had found the 1st claimant guilty in respect of charge Nos 1 to 11 and
not guilty in respect of charge No. 12 and 13, and the 2nd claimant was
found guilty in respect of charge Nos 1 to 10 and not guilty in respect of
charge Nos 11 to 13. The bank had decided to terminate the
employment of the claimants because it had viewed their acts of
misconduct very seriously. At the time of these acts of misconduct the
claimants were holding very senior positions, that is, the 1st claimant
was Bandar Seri Begawan Country Manager while the 2nd claimant was
Credit and Marketing Manager for Bandar Seri Begawan. As such they
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were expected to exercise a high degree of diligence when carrying out
their duties and to observe the highest standards of compliance with
banking rules and procedures. Further, their negligence exposed the
bank to a potential loss of approximately B$13,000,000/-. The bank
had lost its trust and confidence in the claimants and therefore had
exercised its managerial prerogative to dismiss them.
In his defence the 1st claimant testified that he had ensured that
the party certifying the PCs was duly appointed by the awarder of the
contract by referring to the contract itself. It was common practice for
the project consultants to endorse the PCs. Upon receipt of these PCs
he complied with the amended SPI (B) FG 56 by double checking with a
copy of the original contract in the branch's records to ensure that the
project consultants mentioned on the presented PCs were in fact the
project consultants named in the contract. This practice was carried on
all along since 1999 and there were no complaints whatsoever from any
parties until he was transferred back to Kuala Lumpur to head the
Bank's Setapak business centre. There had been yearly audits carried
out when he was Country Manager, Brunei, wherein in at least one of
them this problem had been highlighted but after the branch's proposal
in 1999 the issue was put at rest. Hence he was shocked and puzzled
when he received a letter of suspension from the bank. In his opinion
he had done everything necessary to ensure compliance with the
amended SPI (B) FG 56 and the existing practices of the bank at the
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material time. Concluding his testimony-in-chief the 1st claimant stated
that when the branch received the PCs referred to in the charges against
him, it (the branch) did not have any reason to doubt their authenticity,
since, going by the approved amendment, photocopies could be
accepted if they were endorsed by the awarder or the consultant. All the
photocopied PCs had been so endorsed and therefore he had complied
with the bank's requirements.
Under cross-examination the 1st claimant agreed that the PCs
referred to in charge Nos 1 to 11 (reproduced earlier) were all
photocopies. He agreed that some of the PCs were undated and some
did not bear valuation dates and yet he had approved advances against
them. He agreed further that he had approved an altered PC i.e PC No.
14 altered to No. 15 (COB 6, page 14). At this stage Mr. Raj objected
that alterations or absence of valuation dates were not elements to the
charges. After hearing arguments on both sides the court overruled the
objection for two main reasons : firstly, the respondent's counsel was
entitled, by way of cross-examination, to challenge the 1st claimant's
assertion that he had no reason to doubt the authenticity of the PCs
and, secondly, should it find the charges proven, the court is duty-
bound to look for mitigating circumstances when considering the
appropriateness of the punishment imposed on the 1st claimant and if,
in the process, unearths aggravating circumstances, then, such
circumstances, too, would be a relevant factor for the court to consider.
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During further cross-examination the 1st claimant asserted that
while calls were not made to the awarder he did make calls to the
consultants. However, when pressed further he changed this stand
somewhat by adding the words “wherever possible”. When referred to
his defence at the domestic inquiry he conceded that nowhere therein
had he said that he called the consultants. He further conceded that
such an assertion was not even in his evidence-in-chief. This obvious
ground-shifting leads the court to find him to be not a truthful witness.
Enough said at this stage.
The 2nd claimant in his defence stated that it was he who had been
instrumental in discovering that LEC had submitted inflated PCs. Its
managing director had admitted that LEC was not being paid by the
Government of Brunei because it had inflated its claims against the
Government of Brunei. He denied contravening SPI (B) FG 56. In
Brunei there was a problem of getting the original PCs, so, by the said
proposal (reproduced earlier) the Brunei branch had proposed that the
requirement of the original PC be waived and that, as an alternative, the
photocopy of the PC presented to the bank ought to be a copy certified
by the Section/Consultant/Project Manager/Supervising Officer
concerned. This proposal was accepted by the General Manager of the
Bank's International Banking Division with a condition that the
certifying party must be duly appointed/authorised by the awarder of
the contract. As far as he could remember he had ensured that such
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certifying party was duly appointed by the awarder by reference to the
contract itself. Upon receipt of the PCs he had complied with the
amended SP1(B) FG 56 by double checking with the copy of the original
contract in the branch's records to ensure that the project consultant
mentioned in the PCs presented were the consultants named in the
contract. This practice was carried on all along since 1999 and there
were no complaints whatsoever from any parties until the customer LEC
applied for additional facilities some time in April/May 2001. Thus, in
his (the 2nd claimant's) opinion, he had done everything necessary to
ensure compliance with the amended SPI (B) FG 56 and the existing
practices of the bank at the material time.
Under cross-examination the 2nd claimant conceded that he did
not call either the awarder or the consultant. He acknowledged as
correct counsel's restatement or summary of his defence viz : No. 1, he
took the position that as far as he was concerned all the PCs were duly
endorsed by the awarder or consultant, No. 2, regular spot checks were
made either by him or his credit officer to determine the progress of the
project, No. 3, that he had no doubt as to the authenticity of the PCs,
and, No. 4, the reputation of LEC. He conceded that he did not have
technical knowledge and that the spot checks were purely visual. He
also agreed that all the PCs mentioned in the charges (reproduced
earlier) were photocopies. He insisted that he took the PCs at face
value, and, when counsel referred him to some PCs which were
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undated, and to some PCs which did not bear the valuation date, he
maintained that despite all these omissions he had no reason to be
circumspect. He held this ground even when confronted with PCs on
which the signatures purportedly of Noordin Mohd Yusof of Jurutera
Tempatan differred. He agreed that it was on the basis of this stand
that he did not take any steps to verify the authenticity of the PCs.
Evaluation and findings
It is common ground that all the PCs presented by the borrower
LEC to the bank's Brunei branch and approved by the claimants for
loan drawdowns, were photocopies. It has also been established by the
evidence reviewed above that the claimants did not call up the awarder
or the consultant to seek verification of the endorsements on such PCs
or the genuineness of such PCs. By clause 4.1, SPI No. (B) FG 56 (the
SPI) the claimants were specifically required to call up the awarder
for confirmation in case of doubt, e.g “… where original invoices are not
presented or there are alterations to the invoices, etc ...”. They
acknowledge this requirement but take the position that with the
acceptance by the bank of their joint proposal dated 24th May 1999
(reproduced earlier) this requirement to call up the awarder or even the
consultant had been done away with where the photocopied PCs
presented for drawdown were certified by the consultant. The issue,
therefore, is whether the said SPI has been “amended” (the word used
by the claimants) to the extent suggested by the claimants.
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The reason why the bank had agreed to the claimants' said
proposal is clear : It was to solve the problem faced by the Brunei
branch of obtaining confirmation of the authenticity of the PCs by the
Brunei Government/awarder. So, instead, PCs bearing the certification/
endorsement of the consultant could now be accepted. By this revised
arrangement the consultant stepped into the shoes of the awarder.
However, in no way can the approved proposal be said to have
superceded the SPI. The requirement to seek verification of the PCs in
case of doubt, e.g where the original PCs were not presented or where
there were alterations on the PCs, remained intact. In the case at hand
some of the photocopied PCs presented by LEC bore the original
endorsement of the consultant but some bore photocopies of
endorsements. Some PCs were altered. Some were undated. Some did
not bear valuation dates. These were clear warning signs which the
claimants should have heeded, and they should have taken steps to
seek verification of the authenticity or genuineness of these PCs.
Whereas hitherto, under the SPI, they were required to call up the
awarder, now, under the revised procedure, they were required to call
up the consultants for such verification. Under cross-examination the
1st claimant made a claim, from out of the blue as it were, that he did
call up the consultant. His ground-shifting aside, he thereby let slip his
acknowledgement of the need to call up the consultant. Counsel's deft
cross-examination had borne fruit here. How else could the claimants
obtain verification, if not by calling up the consultant? But all that they
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did, if they are to be believed, was to “double check” with a copy of the
original contract in the branch's records to ensure that the consultants
mentioned in the PCs were in fact the project consultants named in the
contract. This falls far short of complying with the mode of verification
expressly prescribed by the SPI, and by thus bypassing such prescribed
mode the claimants were guilty of shirking their duties and
responsibilities as very senior officers of the bank. The claimants'
counsel, Mr. Raj, submits that making such phone calls is not foolproof,
and points out that COW4 admitted as much under cross examination.
(By analogy, and to stretch counsel's argument, might one ignore road
traffic rules just because compliance with these rules does not wholly
guarantee against accidents happening?). The short answer to this
submission is that this does not exonerate the claimants from their
obligation, in the first place, to call up the consultant, not only to
confirm due execution of the PCs but also to verify the particulars
thereon, especially the amount, as a precaution against post-execution
alterations. The claimants cite past practice, but, with respect, even if
it did exist, such practice cannot override the clear terms of the SPI
which was meant to prevent losses through fraud. The very thing that
the SPI was intended to avoid the claimants walked slam-bang into by
their dereliction of duty. In the circumstances it is the finding of the
court that the bank has established the acts of misconduct referred to
in the charges against the claimants.
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The court next has to consider whether such proven misconduct
constitutes just cause or excuse for the dismissal of the two claimants.
See Milan Auto Sdn Bhd v. Wong Seh Yen [1995] 4 CLJ 449 at 455
per Mohd Azmi Bin Kamaruddin FCJ. In this regard the court must ask
itself whether a reasonable employer would have dismissed the
claimants. In British Leyland UK Ltd. v. Swift [1981] IRLR 91 it was
held as follows:
“...The correct test is : Was it reasonable for the employers to
dismiss him? If no reasonable employer would have dismissed him,
then the dismissal was unfair. But if a reasonable employer might
reasonably have dismissed him, then the dismissal was fair. It
must be remembered that in all these cases there is a band of
reasonableness, within which one employer might reasonably take
one view: another quite reasonably take a different view. One
would quite reasonably dismiss the man. The other would quite
reasonably keep him on. Both views may be quite reasonable. If it
was quite reasonable to dismiss him, then the dismissal must be
upheld as fair; even though some other employers may not have
dismissed him.”.
In considering the reasonableness of what a reasonable employer
would have done the court must not substitute its own views as to what
was the appropriate penalty for the claimants' acts of misconduct for
the view of the bank. See Southern Bank Bhd. v. Kamarudin
Othman & Anor [2005] 6 CLJ 387.
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The banking industry belongs to a special kind of business and
services rendered to the public. It is entrusted with other people's
money. Therefore a high quality of discipline and conduct of the highest
order is expected of its staff to win public confidence. The bank
demands from its employees absolute honesty and impeccability. See
Perwira Habib Bank (M) Bhd v. Tan Teng Seng @ Lim Teng Ho
[1997] 2 ILR 839 per Y.A Tan Kim Siong.
The claimants held very senior positions and the bank rightly
expected them to exercise a high degree of diligence when carrying out
their duties and to observe the highest standards of compliance with
banking rules. Further, their negligence exposed the bank to a potential
loss of about B$13,000,000/-. The bank had lost its trust and
confidence in the claimants and had therefore had exercised its
managerial prerogative to dismiss them. Aside from being mindful of
the principle of non-interference endorsed by the Southern Bank case
(supra) the court is of the view that the bank had properly exercised its
managerial prerogative to dismiss the claimants. On the facts of the
case a reasonable employer would have dismissed them. The dismissal
was with just cause and excuse.
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