Don't 'Swed' it: Court finds husband not responsible for wife's fraudulent telephone banking withdrawals and secret gambling

28/10/2015

A recent NSW Supreme Court case highlights the importance of complying with electronic banking codes of conduct in keeping your banking passwords and PIN numbers secure.


In 2004 Mr Swed took out a $400,000 loan from the National Australia Bank, which was used to purchase property in NSW. Mr Swed also set up an associated bank account with NAB which could be accessed using a keycard.


Following Mr Swed’s failure to make payments and subsequent defaults under the loan, the bank commenced court proceedings seeking possession of the NSW property in National Australia Bank v Swed (No. 2) [2015] NSWSC 1322.


Mr Swed, who spoke limited English, denied being in default of the loan and eventually came to believe that it was in fact his wife who had been withdrawing money through the phone banking system and using this money to gamble on the poker machines – a fact which he claimed he had no knowledge of. The bank argued that Mr Swed had disclosed his password to his wife voluntarily or, alternatively, had acted with ‘extreme carelessness’ in his failure to protect his bank passwords and PIN numbers from his wife.


Mrs Swed had a history of gambling problems which had previously resulted in financial loss for her family. Accordingly, Mr Swed had taken a number of precautions in order to prevent her from accessing the money in his accounts, or to feed her gambling addiction. He did not disclose his password or PIN numbers to his wife at any time, placed his wife’s name on a register to exclude her from gaming venues in the local area, and informed the bank in 2005 that his wife had no authority to operate or make any withdrawals on his accounts.


Even when using the ATM to withdraw cash, Mrs Swed was not allowed to stand next to her husband and was required by him to stand a metre and a half back from the machine. However, Mrs Swed later admitted that from this angle she was still able to look over her husband’s shoulder and memorise the PIN number that he entered, and could access his customer identification number which was printed on the back of his keycard. She also intercepted and destroyed any bank statements or letters sent by the bank which confirmed that a withdrawal had been made, including going to such lengths as to forge his signature on documents from the bank saying the loan was in arrears.


The husband gave evidence that he would ask his wife to ring the automated phone banking service and follow the prompts to check the amount owing on the loan. When the time came for a password to be entered, Mrs Swed would then pass the phone to her husband who would enter in his password. Mrs Swed admitted that when her husband passed the phone back to her, she was able to see (and memorise) the password entered on the phone’s LED screen.


Mrs Swed disclosed that in order to hide the true balance of the home loan account, when the time came for the balance to be stated, she would instead put the amount that could be drawn down on loud speaker for her husband to hear, and pretend that the figure read out was the balance of the loan. She would also write down the doctored ‘balances’ in a diary, giving the illusion that the loan amount was declining.


Ultimately, the judge concluded that Mr Swed did what he could to keep his passwords and PIN numbers secret, particularly from his wife. Judge Davies noted that Mr Swed had not acted with extreme carelessness when entering in his password and passing the phone back to his wife, as it was not reasonable to conclude that he would have considered his wife would remember the password numbers, nor that she would be able to look over his shoulder at the ATM to see him entering his PIN.  


Had Mr Swed not gone to the lengths he had to protect his passwords from others, his carelessness may have been in breach of the bank’s electronic banking code of conduct and potentially liable for the defaults under the mortgage, even though it was his wife drawing out the money from the loan account.


This case highlights the importance of complying with banking codes of conduct; in particular, keeping your password and PIN numbers completely secret. While it may not be necessary for all of us to go to the lengths that Mr Swed did to protect his account balance from his wife, this case does highlight that you can never be too careful and should take as many precautions as possible when dealing with potential spendthrifts who may be able to access your account.
 

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.