OBJECTIVE

1. Identify the bank management with more depth, especially about the joint
account.

2. To know the legal standing of the various types of financial institutions.

3. Understand the legal relationship between financial institutions and

customers.

4. Identify and acquire working knowledge of areas of law affecting the

banking and finance sector.

5. Apply the areas of law studied to practical situations and problems.

6. To develop a working knowledge of the nature and structure of financial

institutions.

7. To identify the actual role of joint account.

8. To understand the implication of breach the contract when open up the joint
account.

9. To understand the nature of the banker-customer relationship is contractual

and most of the terms of the contract are implied.

1|Page
 EXECUTIVE SUMMARY

Joint account is a bank account shared by two or more individuals. Any

individual who is a member of the joint account can withdraw from the account and
deposit to it. Usually, a joint account is opened by individuals with a close family or
business relationship, parents/children, married or unmarried couples, business co-
owners, particularly gay partners that don’t have access to marriage or partnership
rights under state or country law and etc.

Some participants in a joint account can restrict access by requiring two

signatures on checks or withdrawal slips. There may choose ‘either both to sign’ or
‘either one to sign’. Joint account can be divided in two which is current account
and saving account. Mostly for the purpose of business, they choose to open
current account to make a loan or issue cheque. Other relationship they usually
choose to open the saving account.

Joint accounts are often created in order to avoid probate. If two

individuals open a joint account and one of them dies, the other person is entitled
to the remaining balance and liable for the debt of that account.

Sometimes a temporary joint account is opened by two parties entering into

a transaction where one party needs a security for the fulfillment of the
transaction and the other party has to pay the sum (deposit), being the security
for the other party. Any payment from the joint account or return of the deposit
from the joint account will only be possible if both parties sign a joint written
instruction to the bank. It is not possible that only one of the both parties gives
instruction for payments of the joint account.

A joint account is considered to be riskier than two separate accounts, but

many people find that pooling income into a common account makes bill paying
easier. Married couples with dual incomes may open a joint account for routine
expenses and individual accounts for other obligations. Elderly parents may
consider opening a joint account with their adult children in order to pay household
bills or avoid probate court complications after death.

One aspect of a joint account is the right of survivorship. If two people open
a joint account and one dies, the other party is usually entitled to the remaining
balance of that account. Other types of individual accounts may be subject to
probate court restrictions, which can keep much-needed funds out of the hands of
survivors for months or years. Those who enter into a joint account should have
the understanding that the other partner will always have the right to use all of

2|Page
the money in that account. This is why joint accounts should be limited to people in
whom you have complete trust. Joint account holders need to keep track of
current balances, deposits and outgoing expenses. Both parties can be held liable
for overdrafts and bounced checks, unless one party is restricted by the 'two-
signature' requirement.

Because a joint account carries more risk than individual accounts, young
couples considering marriage or living together need to discuss the pros and cons
of both types of banking. If one party has substantial loan obligations or automatic
deductions, the other party of a joint account should be comfortable with the
situation. Creditors view a joint account as they would an individual account, so
funds can be legally deducted even if only one party actually owes the debt. An
elderly joint account holder should also be comfortable with the fact that the
other party can withdraw all of the funds at any time without prior notice. Joint
accounts work best when both parties have established a solid level of trust
between them.

People shouldn’t necessarily be afraid of having to keep all money in the joint
account. If both parties want spending money or money they don’t have to account
for to the other partner, each partner could have a savings account or could simply
pull out walking around money in cash after depositing paychecks. This can be very
helpful if one person is drawn to impulse purchases and understands purchases can
only be made out of the withdrawn money. Some also argue that couples are closer
when they share and plan their financial lives together (though there are
exceptions), and having joint accounts accomplishes this. Moreover married couples
may already have access to each other’s funds and responsibility for each other’s
debts if they live in a community property state.

Some people do argue against having a joint checking account. People with
huge debt coming into a marriage might, if sued, end up costing their partners any
money that’s held in the joint account. Others have very different spending habits
and don’t want to have to modify these or account for how they spend their money.
The decision not to hold money jointly can be problematic though, because it does
mean that people will have to do extra coordination to get the bills paid on time if
they are equally sharing in rent, food, and utility payments. In some cases, its
recommended people don’t share a joint checking account. Those living together,
for instance, may not have any type of legal protections if one person removes all
money from an account.

3|Page
 JOINT ACCOUNT

A joint account is an account which is conducted by two or more persons. Although

most joint accounts are opened by husband and wife, they may also be opened by
person who not related to each other. The guidelines adopted for the opening of
account for individuals, such as verifying the identity of customer, would also apply
to joint account.

Mandate for Joint Account

The guidelines adopted for the opening of accounts for individuals, such as
verifying the identity of the customer, would also apply to joint accounts. However,
in the case of joint accounts, the bank has to obtain a mandate from the joint
account holders covering the execution of documents. The mandate must be in
writing which is usually a standard printed form is used, signed by all the parties
and contain instruction regarding the signing of cheques.

If the mandate does not authorize the bank to act on one signature, cheques and
other payment instruction must be signed by all parties.
A landmark English decision on joint accounts is illustrated below:

Catlin v Cyprus Finance Corpn (London) Ltd

Facts: In this case, a husband and wife maintained a joint account with the
defendant bank. The customer mandate specified that no payment should be made
out of the account except on the joint signatures of both account holders. In
breach of that mandate and without notifying the wife, the bank transferred some
money out of the account on the instruction of the husband.

Held: The court refused to follow an earlier decision which held that the plaintiff
could only succeed if both parties were in a position to sue, as the bank’s obligation
was to both parties jointly. In arriving at its decision, the court held that the
parties in the joint account have also entered into the agreement severally with
the bank. Accordingly, the plaintiff was entitled to damages equal to her half-
shares of interest in the money transferred.

4|Page
In the absence of any agreement to the country, one joint account holder has no
power to countermand payment of a cheque drawn on the account. Normally the
‘mandate for joint account’ would contain a clause that any of the parties would be
able to revoke the mandate by giving written instruction to the bank. When this
happen, the bank should inform the other party or parties as soon as possible. The
mandate would also come to end impliedly if any of the following events happen:

 Death,
 Mental Incapacity; or
 Bankruptcy one of the parties.

As a precaution whenever one of these events take place, the bank should stop the
account to prevent the operation of the Rule in Clayton’s case.

Doctrine of Survivorship

Generally when a customer dies, any credit balance in the customer’s account vests
in his or her personal representatives. However, in the case of a joint account the
survivor and the personal representatives of the deceased customer may be
entitled to the whole balance in the account. In England in the absence of a clear
mandate, the tendency for courts in modern times has been against the doctrine of
survivorship. If the account mandate contains a survivor clause and one of the
parties dies, the bank should obtain the authority of the surviving parties to
transfer the balance to a new account in the name of the surviving parties. It is
important to note that despite the transfer of funds to the survivor’s account, it
does not necessarily mean that they are beneficially entitled to the money.
Therefore in practice, the bank may not pay the survivor the balance if the amount
is large. In which case, the matter would have to be resolved in court between the
surviving parties and the personal representatives.

Legal incapacity of one joint holder

If one of the joint account holders becomes bankrupt or mentally incapacity, no

withdrawals should be permitted on the account. Any withdrawals should be only
made with the consent of the Official Assignee and the solvent parties (in the case
where one party is bankrupt), or the guardian ad litem of the mentally

5|Page
incapacitated party and the other sane parties (in the case where one party is
mentally incapacitated). Example in case of:

Chow Yee Wah & Anor v Choo Ah Pat

Facts: The deceased had prior to his death drawn a cheque for RM60, 384.80 and
paid it into a joint account which he opened in his name and the name of the first
defendant for the benefit of his common law wife. One of the issues raised was
whether the deceased was in full possession of his mental faculties when his
thumbprint was affixed to the cheque and document. The High Court decided the
question in the affirmative but the decision was reversed on appeal to the Federal
Court.

Held: On further appeal, the Privacy Council held that the transfer of money was
valid as it was the deceased’s intention to transfer the money for the benefit of
his common law wife.

***************************************

6|Page
MENTAL INCAPACITY

There is widespread support for the view that the mental incapacity of a customer
terminates the banking relationship. As soon as the banker learns that the one of
the customer of the joint account is mental incapacity, the banker has the right to
stop the customer account. The one of the partner should provide the certificate
from the doctor to announce that one of their member is in mental incapacity.
In case of temporary insanity, the bank will freeze the joint account as a security
to their account.

BANKRUPTCY

In case of bankruptcy, when bankruptcy proceedings are initiated against the

customer, the bank should freeze their joint account to prevent the operation of
the relation back principle. When the customer has been adjudged a bankrupt by
the creditor, the Department of Insolvency will notify the entire bank that the
customers have to close the account with the bank.

DEATH

‘Both to sign’, if one of the person of joint account death automatically the joint
account will terminated. ‘Either one to sign’, if one of the person of joint account
death the bank will advice to close the account but depend on the consent of the
partner whether to continue or to close the joint account. If the partner chooses
to continue, give the death certificate. However, if the partner chooses to
terminated, they may withdraw all the money in the joint account, then close it.

PROCEDURE

7|Page
 1. The bank will ask about the purpose to open a joint account.

2. After that, the bank requested identification card to verify the details
yourself.

3. The bank will inform about the conditions to open a joint account. Between
terms is the maximum of 3 members (different bank use different
mandate).

4. Members of the joint account will be given the option procedure to make
such transactions require a signature or with only one member is required to
sign.

5. Identity cards will be confirmed with thumbprint verification by using the

Bio-Metric reader.

6. Photocopy of identity card is required by the bank.

7. Applicant data to be entered into the system, called as Customer

Information Form (CIF). Use of CIF is to be sent to all CIMB Bank branches
through Internet channels.

8. Members must sign an agreement known as a mandate at the printed CIF to

open a joint account.

9. After all agreements agreed upon, the bank will issue a pass book.

10. Minimum deposit of RM250 is required to open a joint account after the
passbook was issued by the bank.

11. To terminate the account, penalty of RM10 will be charged if the account is
still within 3 months from account opening date.

CONCLUSION

In conclusion, joint accounts can be interpreted as the account is operated

by two or more person. The important thing is taken into account before the
account is opened by selecting either 'either one to sign' or 'both to sign. Risk will

8|Page
be borne by the account holder if the parties choose to either one to sign 'to
withdraw money.

Each bank has a mandate that vary according to policy set by bank
management respectively. Therefore, before opening a joint account, it is
important to understand the contents of the mandate so that no such damage
occurred due to the contract.

9|Page
10 | P a g e