Topic 1: Introduction

History of Banking Law

‘Bank’ is derived from the Italian ‘banca’ which is derived from German and means ‘bench’.
Money lenders in Northern Italy originally did business in open areas, or big open rooms, with
each lender working from his own bench or table.
Bank = an institution that holds a banking license granted by financial supervision authorities
that provides banking and other financial services.
Oldest Central Bank known as Sveriges Riksbank or simply as the Bank of Sweden is located in
Sweden. The Bank of England formed by Royal Charter on 27th July 1694 came to be the first
bank of issue to assume the position of a Central Bank. The Bank of England is today generally
recognized as developing the fundamentals of the art of Central Banking.

International Regulatory Authorities (When was there a first international law to

govern banks?)
After World War II – a period of economic downfall due to the war, therefore nations around
the world came together to co-operate on several issues including economic development which
meant regulating international banking. This saw the ratification of the Bretton Woods
Agreements in 1944 and the inauguration of three main world financial institutions.
1. The International Bank for Reconstruction and Development (IBRD)
Better known as the World Bank, came into existence on 27th December 1945 following
international ratification of the agreements reached at the Bretton Woods Conference of 1st – 22nd
July 1944 The IBRD was established mainly to
(i) aid in reconstruction of Europe and Japan after World War II,
(ii) foster economic growth in developing countries in Africa, Asia and Latin America
(iii) provide advice and assistance to developing countries on almost every aspect of economic
development
(iv) works with 4 affiliated agencies the International Finance Corporation established in 1956
the International Development Association established in 1960 and the Multilateral Investment
Guarantee Agency established in 1988
2. The International Monetary Fund (IMF)
The International Monetary Fund is an international organization responsible for managing the
global financial system and for providing loans to its member states to help alleviate balance of
payments problems
3. The Bank for International Settlements
The Bank for International Settlements is an international financial organization established
under the Hague agreements of 1930 in Switzerland. It was later joined by the IMF and World
Bank set up under the Bretton Woods Agreements of 1944. Essentially, the BIS seeks to
influence reserve policy and set international standards in banking among the central banks of
member nations.
The Basel Committee on Banking Supervision (BCBS)
established at the end of 1974 under the administration of the BIS. Countries are represented by
their central banks and also by the authority with formal responsibility for the prudential
supervision of banking business in their respective countries. It formulates broad supervisory
standards, guidelines and recommendations for best practice. Its objective is to achieve
international harmonization and common standards without interfering in the member countries'
supervisory techniques.

The Development of the Central Bank in Malaysia

1. Central Banking is the apex of the monetary and banking structure of a country, performing
the following characteristic functions:
(i) The regulation of currency in accordance with the requirements of business and the general
public It is granted the sole right of note issue
(ii) The performance of general banking and agency services for the government
(iii) The custody of the cash reserves of the commercial banks
(iv) The custody and management of the nation’s reserves of international currency
(v) The provision of credit facilities to commercial banks or other financial institutions in the
capacity of a banker’s bank and the general acceptance of the responsibility of lender of last
resort
(vi) The settlement of clearance balances between the banks and the provision of facilities for the
transfer of funds between all important centres
(vii) The control of credit in accordance with the needs of business and the economy generally
and for the purpose of carrying out the broad monetary policy adopted by the government
2. Originally n Malaysia there was initially no specific banking legislation to control banking
activities. It was initially regulated by the Companies Ordinance 1940
The idea of a Central bank was first mooted by the World Bank in its 1955 report on the
Economic Development of Malaya Consequently the government of Malaya appointed Sir
Sydney Caine the former Vice Chancellor of the University of Malaya and Mr G.M. Watson an
executive from the Bank of England to advise on the appropriate form of Central Bank to be set
up This resulted in the Watson Caine Report 1956.
In 1958 the government appointed W H Wilcock the assistant Governor of the Commonwealth
Bank of Australia as banking advisor to prepare for the establishment of a Central Bank.
Thus on 24th January 1959 Bank Negara Tanah Melayu was officially opened by the Yang Di
Pertuan Agong.
3. The Banking Ordinance (BO) 1958 and the Central Bank of Malaya Ordinance 1958 (CBMO
1958) were the first two pieces of legislation that laid down the powers, functions and duties of
the Central Bank
S.3 CBMO 1958 provides for the statutory establishment of the Central Bank and S.4 sets out its
objectives namely:
(i) to issue currency in the Federation and to keep reserves safeguarding the value of the currency
(ii) to act as Banker and financial advisor to the government
(iii) to promote monetary stability and a sound financial structure
(iv) to influence the credit situation to the advantage of the Federation
4. Thereafter a series of Acts were passed
• BO and CBMO revised in 1965 and 1968
• The Banking Act 1973 further 5 amendments being the The Banking Amendment Acts 1978,
1984, 1985
• the Banking and Borrowing Companies (Amendment Act 1979)
• Central Bank of Malaysia and Banking (Act 1982)
• the Banking and Financial Institutions Act 1989 (BAFIA) replacing the 1978 Act and its
amendments.
5. S. 2 (1) BAFIA 1989 ‘banking business’ has been defined as
(i) receiving deposits on current accounts, savings account or other similar account
(ii) paying or collecting cheques drawn by or paid in by customers
(iii) provision of finance or
(iv) such other business as the Central Bank with the approval of the Minister may prescribe.
S. 2 FSA 2013 banking business, bank as per Central Bank Act 2009,
“Bank” means Bank Negara Malaysia (BNM ) or in English, the “Central Bank of Malaysia”

English Law as a source of banking law

(i) the Bills of Exchange s. 101 (2) the rules of the common law of England including the law
merchant shall apply to bills of exchange, promissory notes and cheques.
(ii) English Common Law
(iii) Reception of English law
Civil Law Act 1956 s.3(1) & s. 5
s. 5(2) CLA 1956: continuing reception of Eng. Common law and the rules of equity, in civil
cases subject to :
• no local law governing the issue
• suitable to local customs and circumstances prevailing in Malaysia

The Banking System

1. The Central Bank or Bank Negara Malaysia (BNM) is the apex bank with
authority to supervise and regulate 2 categories of institutions:
(i) all monetary institutions i e BNM and commercial banks including Islamic Banks,
(ii) other non-monetary financial institutions, eg Finance companies, Investment Banks, discount
houses, merchant banks, representative offices of foreign banks, money brokers, development
financial institutions, insurance and reinsurance companies, insurance broking companies,
adjusting business, financial advisers, takaful and retakaful operators, payment systems operators
and moneychangers
2. Thus the Central Bank has been given the authority to monitor, regulate and supervise the
operation of all financial institutions in the country in order to promote monetary stability and a
sound financial structure.
BNM also supervises and regulates:
• the insurance industry,
• money changers and
• development finance institutions.
• and other non-traditional finance institutions like payment systems operators eg. Debit cards,
credit cards, pre-paid cards, money changers etc.

Sources of Banking Laws

1. Central Bank of Malaysia Act 2009
2. BAFIA (REPEALED) prior to the FSA 2013
3. Financial Services Act 2013 (FSA 2013)
4. Islamic Financial Services Act 2013
5. Financial Ombudsman Scheme
6. Loan Ordinance 1959
7. Treasury Bills Act 1946 (Revised 1977)
 8. Government Investment Act 1983
9. The Islamic Financial Services Act 2013
10. The Takaful Act 1984
11. Money Services Business Act 2011 (MSBA 2011)
12. The Anti Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful
Activities Act 2001 (AMLATAFA) (amended 2020)
S.3 Interpretation:
"proceeds of an unlawful activity " means any property, or any economic advantage or economic
gain from such property, within or outside Malaysia
(a) which is wholly or partly
(i) derived or obtained, directly or indirectly, by any person from any unlawful
(ii) derived or obtained from a disposal or other dealings with the property referred to in
subparagraph (i); or
(iii) acquired using the property derived or obtained by any person through any disposal or other
dealings above or
(b) which, wholly or partly, due to any circumstances such as its nature, value, location or place
of discovery, or to the time, manner or place of its acquisition, or the person from whom it was
acquired, or its proximity to other property referred to in subparagraph (a)( i ), (ii) or (iii), can be
reasonably believed to be property falling within the scope of subparagraph (a)( i ), (ii) or (iii)
"property"
means
(a) assets of every kind, whether corporeal or incorporeal, moveable or immovable, tangible or
intangible, however acquired; or
(b) legal documents or instruments in any form, including electronic or digital, evidencing title
to, or interest in, such assets, including currency, bank credits, deposits and other financial
resources, raveller's cheques, bank cheques, money orders, capital market products, drafts and
letters of credit, whether situated within or outside Malaysia, and includes a legal or equitable
interest, whether full or partial, in any such property;
"transaction" includes an arrangement to open an account involving two or more persons and any
related transaction between any of the persons concerned and another;
"dealing", in relation to any property, includes
(a) receiving or acquiring the property;
(b) concealing or disguising the property (whether by concealing, or disguising its nature, source,
location, disposition, movement or ownership or any rights with respect to it or otherwise);
(c) disposing of or converting the property;
(d) bringing the property into or removing the property from Malaysia;
(e) using the property to borrow money, or as security (whether by way of charge, mortgage or
pledge or otherwise); or
(f) where a debt is owed to the person holding the property, making a payment to any person in
reduction of the amount of the debt.
"serious offence " means
(a) any of the offences specified in the Second Schedule
(b) an attempt to commit any of those offences; or
(c) the abetment of any of those offences;
"foreign serious offence " means an offence
(a) against the law of a foreign State stated in a certificate purporting to be issued by or on behalf
of the government of that foreign State; and
(b) that consists of or includes an act or activity which, if it had occurred in Malaysia, would
have constituted a serious offence;
S. 4 defines the offence of money laundering as one who
(a) engages, directly or indirectly, in a transaction that involves proceeds of an unlawful activity
or instrumentalities of an offence
(b) acquires, receives, possesses, disguises, transfers, converts, exchanges, carries, disposes of or
uses proceeds of an unlawful activity or instrumentalities of an offence
(c) removes from or brings into Malaysia, proceeds of an unlawful activity or instrumentalities of
an offence or
(d) conceals, disguises or impedes the establishment of the true nature, origin, location,
movement, disposition, title of, rights with respect to, or ownership of, proceeds of an unlawful
activity or instrumentalities of an offence,
commits a money laundering offence and shall on conviction be liable to imprisonment for a
term not exceeding 15 years and shall also be liable to a fine of not less than five times the sum
or value of the proceeds of an unlawful activity or instrumentalities of an offence at the time the
offence was committed or five million ringgit, whichever is the higher.
s. 4 (2) it may be inferred from any objective factual circumstances that
(a) the person knows, has reason to believe or has reasonable suspicion that the property is the
proceeds of an unlawful activity or instrumentalities of an offence or
(b) the person without reasonable excuse fails to take reasonable steps to ascertain whether or not
the property is the proceeds of an unlawful activity or instrumentalities of an offence
(3) For the purposes of any proceedings under this Act, where the proceeds of an unlawful
activity are derived from one or more unlawful activities, such proceeds need not be proven to be
from any specific unlawful activity
(4) A person may be convicted of an offence under subsection 1 irrespective of whether there is a
conviction in respect of a serious offence or foreign serious offence or that a prosecution has
been initiated for the commission of a serious offence or foreign serious offence
S.4A (3) In determining whether a transaction was conducted in contravention of this section,
(structure, or direct, assist or participate in) the following matters may be taken into
consideration
(a) the value of the money or property involved in each transaction
(b) the total value of the transactions
(c) the period of time over which the transactions took place
(d) the interval of time between any of the transactions
(e) the locations at which the transactions took place
s. 14 Report by Reporting Institutions (suspicious transactions)
(1) A reporting institution shall promptly report to the competent authority
(a) any transaction exceeding such amount as the competent authority may specify
(b) any transaction where the identity of the person involved, the transaction itself or any other
circumstances concerning that transaction gives any officer or employee of the reporting
institution reason to suspect that the transaction involves proceeds of an unlawful activity or
instrumentalities of an offence;
(c) any transaction or property where any officer or employee of the reporting institution has
reason to suspect that the transaction or property involved is related or linked to, is used or is
intended to be used for or by, any terrorist act, terrorist, terrorist group, terrorist entity or person
who finances terrorism.
s.16 Due Diligence
(1) A reporting institution
(a) shall not open or operate any anonymous account or any account which is in a fictitious ,
false or incorrect name;
(b) shall not establish or conduct any business relationship, transaction or activity involving a
fictitious, false or incorrect name; and
(c) shall maintain
(i) accounts in the name of an account holder; and
(ii) records or information of any business relationship, transaction or activity in the name of a
customer.
(2) A reporting institution shall undertake customer due diligence measures of :
(a) establishing or conducting a business relationship, conducting any transaction with a
customer or carrying out any activity for or on behalf of a customer, whether the customer is an
occasional or usual customer, including when opening a new account or passbook, entering into
any fiduciary transaction, renting of a safe deposit box, performing any other transaction or
activity as the competent authority may specify;
(b) the transaction or activity to be carried out exceeds such amount as the competent authority
may specify
(c) there is reasonable suspicion of the commission of a money laundering offence or a terrorism
financing offence;
(d) there is reasonable doubt about the veracity or adequacy of previously obtained customer
identification data.
(3) A reporting institution, in undertaking customer due diligence measures, shall
(a) ascertain the identity, representative capacity, domicile, legal capacity, occupation or
business purpose of any person, whether he is an occasional or usual customer;
(b) verify, by reliable means or from an independent source, or from any document, data or
information, the identity, representative capacity, domicile, legal capacity, occupation or
business purpose of any person, through the use of documents which include identity card,
passport, birth certificate, driver's lisence, constituent document or any other official or private
document as well as other identifying information relating to that person, whether he is an
occasional or usual customer;
(c) verify the identity and authority of any person purporting to act on behalf of a customer in the
opening of an account, the conduct of any transaction or the carrying out of any activity;
(d) take reasonable steps to obtain and record information about the true identity of any person
on whose behalf an account is opened or a transaction or activity is conducted if there is
reasonable doubt that the person is not acting on his own behalf, particularly where the person is
not conducting any commercial, financial or industrial operations in a foreign State where the
person has his headquarters or domicile; and
(e) take reasonable steps to verify the identity of natural persons who own or exercise effective
control over a customer who is not a natural person.
13. Currency Act 2020
14. Guideline on Electronic Money
15. The Development Financial Institutions Act 2002 (DFIA)
16. Essential (Protection of Depositors) Regulations 1986
17. Malaysia Deposit Insurance Corporation Act 2011

Payment system in Malaysia

Malaysian Electronic Payment System (1997) Sdn .Bhd. (MEPS)
as the national infrastructure service provider, is responsible for performing all switching,
clearing and settlement for Financial Process Exchange (FPX) transactions
Real Time Electronic Transfer of Funds and Securities (RENTAS)
major wholesale payment system in the country, settling funds and scripless securities between
participating institutions on a real time basis. criteria for participating in the RENTAS system:
•Financial institutions regulated by BNM and universal brokers regulated by the Securities
Commission;
•Major clearing houses that facilitate settlement in the money market and capital market; and
•Institutions whose average share of settlement consistently exceeds 0.1% of the value of
RENTAS transactions
Sistem Penjelasan bagi Imej Cek Kebangsaan (SPICK)
check truncation for faster clearing and settlement between the 3 SPICK regions Kuala Lumpur,
Penang, and Johor Bahru.
Inter bank Giro (IBG)
a secure interbank fund transfer system/channel for all sorts of payments through direct debiting
of the customers’ account(s) and crediting into the beneficiaries account; with any IBG
participating banks

Other Laws related to Banking Contracts

1. Digital Signatures Act 1997
2. Electronic Commerce Act 2006
3. Electronic Government Activities Act 2007
4. Consumer Protection Electronic Trade Transaction Regulations 2012

TYPES OF ACCOUNT
ACCOUNTS OF CUSTOMERS
natural persons, companies, partnerships, sole proprietorship, societies etc minors, trustees,
lawyers, agents, etc
Accounts may be opened for natural persons who are
(i) of the age of majority, for current accounts savings maybe 12 above or trust accounts)
(ii) Not disqualified by law from contracting
Ladbroke & Co.v Todd
Facts: Here the fraudster had opened up an account in the defendant’s bank to withdraw a cheque
belonging to the plaintiff. He disguised himself as the plaintiff and the defendant without doing
any further checking allowed the fraudster to open the account and withdraw the proceeds of the
cheque.
Held: a banker must not only receive a cheque in good faith, but he must also receive payment of
it without negligence and for a customer, therefore the defendant was liable here.
Principle: A banker is guilty of negligence towards the drawer of a cheque crossed "account
payee only" if he opens an account for the person presenting the cheque and collects the money
for it without making any inquiries concerning the respectability of the customer by requiring
references or otherwise (When opening an account duty to ensure identity of customer).
1.7. 1995 Code of Good Banking Practice
(i) need to verify the identity of the person seeking to open an account
(ii) banks to provide prospective customers details of the identification needed
(iii) BNM’s Know Your Customer Policy incorporates BCBNS guidelines to combat fraud and
money laundering.
(iv) when opening an account, a banker takes a mandate from his customer instructions
authorization. Takes specimen signature, ID, address, references etc.
JOINT ACCOUNTS
(i) banker needs to confirm the mandate ( and liability of each party to the account
(ii) needs written mandate signed by all parties to the account re signatories, carry out
instructions, mode of operation of account Without such a mandate a bank cannot pay on a
cheque unless signed by all the parties to the joint account
(iii) mandate given may be revoked at any time by the parties eg Stopping payment on a cheque
(iv) mandate is revoked automatically upon death, bankruptcy or mental incapacity of any of the
parties and the banker should stop the account as soon as he has notice of it.
(v) A banker should not lend money to the joint account holders without obtaining from all the
account holders concerned an undertaking to be jointly and severally liable to repay any loans
Devaynes v Noble, Clayton’s case 1816 1 Mer 572 – Death Rule
Facts: Mr Clayton opened an account with Devaynes, Dawes, Noble and Co a partnership of a
banking firm. Devaynes died in 1809. Clayton had deposited a total of £1, 717 with the firm. The
partners had repaid Mr Clayton more than the amount of £1, 717. In 1810, the company went
into liquidation and Mr Clayton sued the estate of the deceased partner.
Held: payments through the account which exceeded the original debt had discharged the debt
and any debts on the account were not the responsibility of the bank’s deceased partner incurred
after he ceased to be a partner Generally described as the “first in, first out" rule.
Principle: any debts incurred after the death of a partner, is not the responsibility of the bank’s
deceased partner. This rule is known as the “first in, first out” rule.
Date Credit (RM) Debit (RM) Balance
15-01-2021 20, 000 15, 000
20-2-2021 10, 000 15, 000
15-03-2021 15, 000 25, 000
5-04-2021 45, 000 55, 000 -10, 000
10-04-2021 25, 000
Total 45, 000 80, 000 - 35, 000

Assuming a partnership exist between A, B and C and C dies as of 5th April 2021. According to
the Clayton’s rule, C’s estate is only liable for the debt until 5th April 2021, which is RM10, 000.
C will not be liable for the further debt of RM25, 000 incurred on 10th of April 2021.
New Ace Digital Print Sdn Bhd Anor v Public Bank Bhd [2017] 9 CLJ 439
Facts: Here a joint account between Loo Keng Tatt (‘LKT’) and Lim Chi Wan (‘LCW’) through
was registered in the respondent’s bank. LCW and LKT had an agreement that when
withdrawing the money, both signatures are required. When LKT had died, LCW had forged
LKT’s signature to withdraw a cheque amounting to RM500, 000. The appellant’s sued the
defendant for their negligence, however the High court dismiss their claim due to the
survivorship principle. The appellants appealed.
Survivorship Principle - When joint owners hold an asset as joint tenants, on the death of one
of the joint owners the asset passes to the surviving owner (or owners) automatically
Held: The court allowed the appeal with cost. A survivorship clause without more is just a
contractual arrangement between the bank and the joint account holders as to how to deal with
the money in the joint account. It is not conclusive evidence of the parties’ intention as to
ownership of the money in the joint account. The parties’ intention overrides the survivorship
clause.
Principle: A survivorship clause indicates a prima facie intention only, which is by no means
conclusive and can be displaced by circumstances.
UNSOUND MIND
Prem Singh ors Kirpal Singh 1989 2 MLJ 89
Facts: An application is made by the applicants under section 3 of the Mental Disorders and
Treatment Act to determine the status of the patient, their mother on whether she is of sound or
unsound mind.
Held: disallowed the application
Principle: Section 3(1) of the Act clearly gives a discretion to the court to determine whether in a
particular case where a person is alleged to be mentally disordered, an inquiry should be ordered.
Re Claire 1846
Principle: a person who is insane but living at home and is judiciously looked after may be left
alone
See Wan Chon v Chua Ka Bu 1990 2 MLJ 460
Principle: a person who loses the use of his mental faculty as a result of an 'accident' (ie any
unforeseen event) is a person of unsound mind for the purpose of the common law.
Chow Yee Fah Anor v Choo Ah Pat 1978 2 MLJ 41 PC
Facts: In this case the deceased who was suffering from some mental disability, who had prior to
his death drawn a cheque for $60,384.80 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 in trust. The
respondent or plaintiff tried to claim for the money as administratrix of the estate of the deceased
in argument that the deceased had no full possession of his mental faculties during the signing of
the document.
Held: the intention of the deceased was clear, in which he intended to open a trust account for the
benefit of his common law wife. He was aware that his illness was serious and that he might not
live long. His reason for putting the money in trust was very probably that he knew Madam Chan
was illiterate.
Principle: Trusts are neither created nor implied by law to defeat the intentions of donors or
settlors; they are created or implied or are held to result in favour of donors or settlors in order to
carry out and give effect to their true intentions, expressed or implied.
COMPANIES
(i) An incorporated company is a separate legal entity and is not affected by the death of any
shareholder or a change in the shareholders
(ii) In its dealings with a company, a bank is generally concerned with
 The company’s capacity to maintain an account, borrow and create security
 The authority of persons purporting to act on behalf of the company in relation to specific
transactions
 The form of the company’s cheques
Royal British Bank v Turquand 1856 6 EB 327 - Rule in Turquand’s case
Principle: Any third party who is dealing with a company or business entity is entitled to assume
the person representing themselves to be a person of authority, actually has the authority
(internal management rule).
Eg. A was a manager for ABC co. A was fired, but during his position as a manager he was
known to deal with ABC co. customers. After being terminated A continues to deal with the
customers, pretending to be the manager of ABC. The customers are entitled to assume that A
still works with ABC, unless ABC has informed their customers that A does not work with ABC
anymore.
PARTNERSHIPS
(i) Governed by the Partnership Act 1961 and Limited Liability Partnerships Act 2012 Anyone
with legal capacity maybe a partner
(ii) In opening an account for a partnership the bank has to note
 Its legal entity no personality of its own The identity of the partners, account mandate and
account operation details, specimen of the firm’s rubber stamp Should conduct a search at the
Business registry
 Accounts,
 Liability
 Termination
IAC S’pore Pte Ltd v Koh Meng Wan 1979 2 MLJ 9 - A guarantee agreement entered into by a
partner to answer for debts of the partnership does not amount to a guarantee
Facts: The defendant and the plaintiff became partners of AAC on 26th of February 1970 and the
defendant ceased to be the partner on the 30th of June 1975. On the 9th of April 1975, the
defendant and plaintiff had signed a document in favour of the plaintiffs in which the former
jointly and severally agreed to be answerable and responsible for the payment of air conditioners
supplied to AAC by the plaintiffs not exceeding $100,000. The High Court made judgment
against the plaintiff and the plaintiff now would like to sue the defendant for $100, 000. The
defendant argued that the guarantee made on the 9th of April 1975 was bad in law.
Issue: One of the issues posed before the court was whether a person could guarantee the
payment of his own debt
Held: the alleged contract of April 9, 1975 was not a guarantee. The plaintiffs had no cause of
action accruing to them from it.
Principle: A person cannot guarantee the payment of money by himself. guarantee is essentially
a promise to answer for the debt, default or miscarriage of another, and it does not include as
such the case of a person incurring an additional liability in respect of a sum of money for which
he is already liable.
(iv) When partnerships are given credit facilities, and sued for the debt, a usual defence for a
partner would be that he had retired

a partner would remain liable for debts incurred before his resignation/ retirement
Malayan Banking Bhd v Lim Chee Leng Anor 1985 1 MLJ 214
Facts: Here the respondents are partners in a firm called Berjasa Corporation. The appellants
sued the respondents under the trust receipt where it was payable to them on the 14th of June
1975. The first and fourth respondent resigned from the company on the 26th of August 1976.
They rejected the claim on the grounds that they were no longer associated with the company.
Held: the respondents incurred the debt on the trust receipt before their resignations or retirement
and they cannot escape liability by merely pleading resignation or retirement.
Principle: a partner would remain liable for debts incurred before his resignation/ retirement

Third parties are entitled to treat a withdrawing partner as still being a member of the
firm until they receive notice of the change
Maybank Finance S’pore Ltd v Yap Thiam Sen Anor 1991 1 MLJ 204
Facts: The plaintiff is a finance company, while the two defendants are motor car dealers dealing
under a partnership of a firm ‘Fulsoon’. They entered into a master agreement with the plaintiff
regarding hire purchase agreements. On the 5th October 1984, the first defendant informed the
plaintiffs by a letter dated on the 6th October 1984 that he was withdrawing as a partner from
Fulsoon. The plaintiff received the letter on the 9th of October 1984. The plaintiff’s brought
action against the two defendants for amounts owed until the 9th of October 1984.
Held: The court allowed the plaintiff’s claim in part.
Principle: Third parties are entitled to treat a withdrawing partner as still being a member of the
firm until they receive notice of the change

 Notice of withdrawal must be given to all

Tan Sin Moh v Lebel Ltd 1988 2 MLJ 51
Facts: Here the appellant had withdrew from the company but failed to notify the respondent.
Held: the respondent was, on the evidence available, a person who had habitual dealings with the
partnership and was therefore to be specifically notified of the withdrawal of the appellant from
the partnership, something which the latter had omitted to do.
Principle: Notice of withdrawal must be given to all partners within the partnership.

 Where a partnership has been terminated a cause of action could still be maintained so long as
the action accrued before the termination of the partnership