ASB Bank has lost an early bout in the latest John Waugh case filed at the High Court at Auckland.
Devonport Law's heavy-hitter Waugh, a former banker himself, has taken on several major banks in recent years for cases relating to banking fraud.
His latest case will now go to trial after his clients, Joe and Zena Clark, opted to launch legal action against ASB for breach of contractual duty of care, negligence and dishonest assistance.
Justice Sarah Katz handed down her judgment on Feb 2 in which she declined a strikeout of the case. She said the dispute must go to trial.
The case against ASB came about after an employee of accounting firm Tandem Group defrauded the Clarks, who are dairy farmers, by inserting his own name as the payee of a cheque he arranged for Zena Clark to sign.
When the fraud was discovered, the employee, Shaun Quigley, who had a gambling problem, committed suicide.
As there was no money in his estate, Tandem paid the Clarks their $200,000. It then launched the current legal action against ASB with the support of the Clarks.
ASB claims it was excluded from the action through its terms and conditions.
How the fraud took place
According to Justice Katz’s judgment, Quigley had asked them to sign a cheque in 2016 for the IRD but told the Clarks he wasn’t sure of the exact account.
He said Zena Clark should sign the cheque and he would fill in the payee name once he confirmed who it would be. Quigley then filled his own name in and banked it into his account that day.
Zena Clark emailed her personal banker at ASB the same evening to inform them that they’d given the accountants the cheque.
ASB verified the cheque and paid it into Quigley’s account.
However, two weeks later, another Tandem client had their cheque dishonoured after it was identified as fraudulent.
A day after the fraud was discovered, Quigley sent an email in which he confessed to defrauding the Clarks and other clients of Tandem. After this, he committed suicide.
ASB banking assistant Debbie Counsell said she followed procedures in line with protocols, including asking Zena Clark to verify the cheque. She claims to have rung Zena Clark and asked her about the payee name, to which Zena Clark responded along the lines of, “that’s my accountant, so it's okay”.
Zena Clark challenged this and said she didn’t even know Quigley’s surname until the fraud was discovered.
The judge said this showed the dispute must go to trial.
“For the reasons I have outlined, it is my view that although Tandem’s case appears relatively weak, none of its causes of actions can be said to be untenable or unarguable.”
ASB said it could not comment on the matter as it's currently before the court.
What next
Waugh told BusinessDesk, “we are waiting to find out whether the bank will be appealing their loss on this application, we’ve had no indication since the judgment on their attitude".
“Settlement has been resisted to date,” he said, adding, “it wouldn’t be appropriate to comment further”.
Other cases Waugh has taken on behalf of clients include suits against ANZ and BNZ for alleged flaws in their online banking system.
In 2014, a case against BNZ settled. It was alleged the bank’s flawed products allowed an accountant to steal $5.5 million over 10 years from Edge Protection and associated companies.
In 2015, NBR reported that another case, this time against ANZ, was settled. A Distribution Control employee had stolen $1m by inserting her name into the payee field for online payments meant to go to her employer.
Where to get help:
Need to talk? Free call or text 1737 any time for support from a trained counsellor
Lifeline 0800 543 354 or 09 522 2999 or free text 4357 (HELP)
Suicide Prevention Helpline 0508 828 865 (0508 TAUTOK0)
Youthline 0800 376 633 or free text 234
Samaritans 0800 726 666.
Supporting Families in Mental Illness 0800 732 825
