The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Scotiabank (Bahamas) has been ordered to pay a former expatriate worker interest on $100,000 worth of bank drafts, following a 17-year saga that involved fraud allegations and a police complaint.

The Court of Appeal, in a unanimous verdict delivered last week, ordered the Bahamian bank to pay Scottish national, Gerard Doherty, what is now five-and-a-half years’ worth of interest on bank drafts he claimed to have lost in June 1998.

The Scot is now in line to receive the $100,000 plus interest from June 2, 2010, even though the monies in question were the subject of a 1998 theft/fraud complaint made to the Royal Bahamas Police Force.

Detailing the background to the dispute, Appeal Justice Jon Isaacs said Doherty deducted $100,000 from a bank account belonging to his former Bahamian employer, Metro Millwork Inc, on June 12, 1998.

These funds were then deposited into his personal account at Scotiabank (Bahamas), and Doherty used them to purchase two bank drafts - one for $65,000, the other worth $35,000 - the same day.

He made the drafts payable to himself, with the monies left in a non-interest bearing account at the bank.

Doherty, in his October 18, 2011, claim against Scotiabank (Bahamas) for payment of the funds, alleged that the drafts were lost that same month - June 1998 - “whilst travelling to London”.

However, more than 10 years passed before Doherty, on October 14, 2008, contacted Scotiabank to inquire about the fate of the $100,000.

“The appellant advised that he had just returned to Scotland after 10 years’ absence abroad,” Justice Isaacs noted, “[and] in 1998, when he worked in the Bahamas, he transferred money from his accounts into two drafts that he subsequently mislaid, and the bank had previously informed him that there was no time bar on these drafts.”

Scotiabank investigated Doherty’s claims, and found that Metro Millwork had sought the police’s assistance to recover the $100,000, claiming the monies belonged to it.

Higgs & Johnson, acting on the company’s behalf, had reported to the police on September 28, 1998, that Doherty has taken $100,000 from its account without permission.

The Bahamian law firm had also contacted Scotiabank (Bahamas) a month later, providing it with a copy of the police complaint and asking that it assist any investigation by releasing relevant documents.

However, Vann Gaitor, a Higgs & Johnson attorney, advised Scotiabank (Bahamas) one decade later, on June 24, 2008, that he had been unsuccessful in contacting his Metro Millwork client.

Appeal Justice Isaacs said Doherty had initially asked for Scotiabank (Bahamas) to trace the missing drafts, but he received a response from the bank in late 2008, informing him that they were the subject of a police investigation.

As a result, the $100,000 was frozen until the probe was completed, and the results known.

“The criminal investigation can only relate to the alleged complaint lodged by Higgs & Johnson on behalf of Metro Millwork in 1998, more than 10 years ago,” Appeal Justice Isaacs said.

Doherty subsequently sent several e-mails in 2010 to then-Scotiabank (Bahamas) managing director, Barry Malcolm, which went unanswered.

He ultimately received a reply from Robin Scavella, the bank’s director of compliance and legal services, who on March 12, 2011, asked Doherty to provide Scotiabank (Bahamas) with a declaration that he was the sole owner of the $100,000, and that Metro Millwork had no claim to the money.

She added that the bank also required Doherty to provide it with an indemnity and release, so that it would not be exposed to “any possible or future claims” relating to the $100,000.

Appeal Justice Isaacs said Ms Scavella’s e-mail showed that Scotiabank (Bahamas) had completed its investigations, and only required a declaration and indemnity from Doherty before it could return the monies to him.

However, Scotiabank (Bahamas) then abruptly reversed course due to concerns that it might be exposed to legal action by Metro Millwork should it release the funds to Doherty.

Following consultation with its own attorneys, and Higgs & Johnson on Metro Millwork’s behalf, Scotiabank (Bahamas) launched what is called an ‘interpleader’ action on August 30, 2011, in which it sought protection from any liability by getting the Supreme Court to authorise payment to Doherty.

The Scot subsequently launched his own action to force Scotiabank (Bahamas) to release the $100,000, and the two cases were consolidated into one by Justice Stephen Isaacs at the Supreme Court level.

The Appeal Court, though, ruled that Scotiabank (Bahamas) ‘interpleader’ action was “brought unnecessarily”, since the bank was at no real risk of liability/exposure to legal action if it released the funds to Doherty.

This was because Higgs & Johnson had been unable to contact Metro Millwork, its client, as far back as 2008. And there had been no contact between the company and Scotiabank (Bahamas) since 1998, even though it had an account with the latter.

As a result, Appeal Justice Isaacs said there was no “real foundation” for Scotiabank (Bahamas) to fear it might be sued by Metro Millwork, describing the ‘interpleader; action as “misconceived”.

He added that it was “intriguing” that Scotiabank (Bahamas) made no attempt to contact Metro Millwork, as its customer, to discover the status of its complaint and claim to the funds before starting the ‘interpleader’ action.

Observers may be wondering why the Bahamian courts have ordered monies subject to a theft/fraud complaint to be released, but it appears from the judgments that Metro Millwork had long ceased to function as a business, while any probe by the police or bank was inconclusive - meaning Doherty was to be viewed as ‘not guilty’.

When Scotiabank’s attorney was asked by the Court of Appeal why it had launched the ‘interpleader’ action, he said the bank “had been faced with an allegation of misappropriation of the funds from Metro and a police investigation on the one hand, and the claim to the funds by [Doherty”.

“The respondent was seeking, it seems, to protect itself by insulating itself from a future lawsuit with an order of the Supreme Court,” Appeal Justice Isaacs found.

Yet he added: “The respondent [Scotiabank Bahamas] was aware from as early as 24 June, 2008, that Higgs & Johnson were not in contact with Metro and could not, in those circumstances, confirm whether the claim made in 1998 was being maintained.

“There does not appear to be any real foundation upon which the respondent could expect to be sued by Metro. The adverse claim alleged to have been made on Metro’s behalf in 1998 may have been viable for a period following but, at the time the interpleader action was brought, the [bank] knew that from June 2008 Metro was not in contact with Higgs & Johnson, their attorneys, who could not act without instructions; and there was no communication between Metro and the [bank] subsequent to 1998, a period of some ten years.”