Case note: financial institution liability for forgeries

The law relating to financial institution liability for honouring a withdrawal request made under a forged customer signature without the customer’s involvement is well-settled: the financial institution is liable to its customer as the debit was not authorised.

In Campbell v Bank of Queensland Ltd [2011] QSC 122 the Supreme Court of Queensland allowed a claim by the bank’s customers for recovery of money paid out by the bank based on forged signatories to a line of credit.

The major issue at trial was whether the Bank was protected by the provisions of the “all purpose authority and indemnity” given by the customer as a condition for being able to send instructions by facsimile. The trial judge decided that the indemnity did not protect the Bank as it only applied to instructions given by the customer and not to forged instructions.

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