Question

Harry and Megan Royal have been married for ten years and are also general 

partners in a law firm, Royal Law. They entered into a partnership agreement 12 years 

ago, at which time they also registered the business name and applied for an 

Australian Business Number for the partnership. The partnership had funds of $52,000 

in their transaction account (formerly known as a cheque account) held by Crooked 

Bank, a bank with authority to operate as an Approved Deposit Taking Institution.

Six months ago, Megan started an extra-marital relationship with an old university

friend, Simon. She and Simon planned to marry and start a law partnership after she 

divorced Harry. Megan withdrew $36,000 from the Royal Law transaction account in 

order pay for three months rental of a flat in Melbourne as well as three months rental 

of office premises that will be used by Megan and Simon for their law firm.

Harry was informed by Crooked Bank this morning that the cheque he had written on 

the transaction account to pay staff salaries was dishonoured due to insufficient funds. 

When he asked for further information, he found out about Megan’s withdrawal. 

Megan and Simon have flown to Bali for a romantic get-away and neither can be 

contacted. Harry now wishes to sue Crooked Bank for paying out on the cheque as 

the partnership agreement lodged with the manager of the bank when the account 

was opened stated that both partners must sign cheques for amounts of over $10,000. 

The new manager says he is unaware of any such partnership agreement.

Advise Crooked Bank as to whether Harry will be able to successfully sue them for the 

unauthorised withdrawal of $36,000 made by Megan. Refer to relevant statute and 

case law in your answer.