It is common practice, especially for smaller businesses, to send employees to the bank to cash cheques on behalf of the business. Often, the employee cashes a cheque for the weekly wages.

In the case of ABC (a close corporation), all business cheques required the signatures of both members of the close corporation. During July 2009 the business ascertained that an administrative employee had fraudulently cashed cheques totaling R 197 490.04 at the bank where the business holds its account.

One of the members of the business queried the matter with the bank. The member was advised that since the two signatures, purportedly that of the two members of the close corporation, appear on the cheques, the bank had paid out in the accordance therewith.

The bank therefore denied liability.

Upon investigation by the OBS it transpired that one of the members of the close corporation had indeed signed the cheque and handed it to the employee. The employee had been instructed to obtain the signature of the other member to the cheque and thereafter to cash same for the weekly wages

The employee did not go to the second member but instead forged that member's signature and thereafter presented the cheque to the bank. The employee received payment and pocketed the money.

In law, the cheque did not constitute the customer's mandate since the signature had been forged and appended to the cheque without the authority of that member. The cheque was also invalid since the forged or unauthorised signature renders the instrument invalid.

In this event, and should the bank pay out upon presentation of such an invalid instrument, the bank would not be entitled to debit the customer's account.

The legal position was pointed out to the bank.

The bank agreed to refund the complainant the sum of R197 490-04 in settlement.