3/4-475/04 & 3(21)/4-1763/04

INDUSTRIAL COURT OF MALAYSIA CASE NO : 3/4-475/04 BETWEEN BURHAN BIN LASA AND MALAYAN BANKING BERHAD

CASE NO : 3(21)/4-1763/04 BETWEEN ABD. JAMAL BIN AHMAD AND MALAYAN BANKING BERHAD (Consolidated by Order of Court dated 15.1.2005) AWARD NO : 1078 OF 2010 Chairman (Sitting Alone)

Before : TUAN FRANKLIN GOONTING Venue Dates of Reference Dates of Mention : : :

Industrial Court Malaysia, Kuala Lumpur 8.4.2004 (Burhan Bin Lasa) 1.6.2004 (Abd. Jamal Bin Ahmad) 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 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

Dates of Hearing

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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 awarders 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 1st 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 overridden 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. ii.

PCs No. 9, 10, 12, 13 favouring A/C 50009-8. 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 2nd 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 Certificates (PC)/Bills Contract dated

Payments/ 29.1.1992.

Progress

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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. ii.

PCs No. 1, 6, 7, 15, 16 favouring A/C 50009-8. 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 Arulsamy [2008] 1 CLJ 760. v. Victoria

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. instances the signatures were photocopied. However, in all

(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 of documents, 13 of which

all the PCs in the bank's bundle

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 1st 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 2nd 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. concerned should, in these circumstances, The officer 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 by certifying Awarder.
21

the

PC

must stated

be that

duly this

appointed/authorized

the

COW4

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memorandum forms part of the SPI and the two should together.

be read

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)). of the SPI by the claimants: There had been non-compliance

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 2 nd 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 24 th 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 have taken steps to

claimants should have heeded, and they should

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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The claims of the claimants are hereby dismissed.

HANDED DOWN AND DATED THIS 17th DAY OF AUGUST 2010

Signed ( FRANKLIN GOONTING ) CHAIRMAN INDUSTRIAL COURT, MALAYSIA KUALA LUMPUR

k-Ud-13.8-12.00 3.30-save

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