The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian attorney yesterday failed to overturn the rejection of his “gross negligence” claim against Scotiabank (Bahamas) after two “fraudulent” bank drafts left his account overdrawn by $165,000.

Glendon Rolle, who trades as Lord Ellor & Company (Ellor is Rolle spelled backwards), represented himself in trying to persuade the Court of Appeal to alter the original verdict by then-Justice Indra Charles which also dismissed his “breach of fiduciary duty” claim against the Canadian-owned commercial bank.

But appeal justice Milton Evans, in a unanimous verdict, said that - while the Supreme Court’s “conclusion seems unfair” - Mr Rolle was bound by the terms of the small business financial services agreement (SBFSA) contract that he had signed with Scotiabank. This both gave the bank “full immunity” because a fraudulent instrument was involved and the right to recover the overdrawn funds.

“The relationship between the parties was expressly stated to be governed by the bank’s standard terms and conditions for business accounts, namely the ‘Small Business Financial Services Agreement’ (the SBFSA),” appeal justice Evans wrote.

“The appellant [Mr Rolle] was the holder of a US dollar checking account with the respondent and, on July 20, 2017, he deposited a bank draft said to be drawn on CIBC, Toronto, Canada, to his US dollar checking account in the sum of $196,920.

“It was accepted by the parties that the bank’s internal policy (which was known to the appellant) required that funds deposited by way of cheques /drafts were held at least 14 days to ensure clearance before allowing any withdrawals from those funds deposited. There is no dispute that in this instance the bank did not adhere to their policy and allowed the transfers to take place.”

Neither the Court of Appeal nor the Supreme Court verdicts give any indication as to who was responsible for the “fraudulent” CIBC FirstCaribbean bank drafts, worth a combined $428,000, that were deposited by Mr Rolle and became central to his dispute with Scotiabank (Bahamas).

The first CIBC bank draft, for $196,920, was credited to Mr Rolle’s account on or before end-July 2017 He then instructed Scotiabank (Bahamas) to wire transfer some $143,774 from the same account to the Mizuho Bank in Tokyo, Japan, for the benefit of his client, Verhenz Japan Company Ltd, on July 31, 2017.

The wire transfer was made the same day, leaving a $55,269 balance. Mr Rolle subsequently withdrew a further $33,025 in a series of transactions up until August 15, 2017. And, on August 8, he had deposited the second CIBC bank draft to the account for the sum of $231,811.

Mr Rolle, on August 16, 2017, then instructed Scotiabank (Bahamas) to make a second wire transfer worth $164,019 to the same bank and client in Japan. This, too, was carried out the same day, but this coincided with when Scotiabank discovered that the first bank draft was a counterfeit or forgery. This was never recovered, but the second wire transfer for $164,019 was reversed.

The net result of the “fraudulent” bank drafts, and first $143,774 wire transfer that could not be recovered, was that Mr Rolle’s business account with Scotiabank was overdrawn by some $173,794 as at September 14, 2017. The bank demanded repayment, advising that same day that the second CIBC bank draft was “rejected”. An incoming $9,164 wire transfer in early 2018 was applied to the overdrawn sum, which Mr Rolle refused to pay.

He accused Scotiabank of “failing to exercise reasonable skill and care” in carrying out his instructions and not ensuring the first CIBC bank draft had properly cleared before he withdrew the additional $33,000-plus. He claimed on several grounds, including loss of prospective earnings and reputation damage.

Scotiabank, though, held fast to the Small Business Financial Services Agreement that Mr Rolle signed when opening the bank account. Leif Farquharson QC, a Graham, Thompson & Company attorney and partner acting for the bank, argued that his client could not be held liable for “any indirect, special, consequential, exemplary or punitive damages or losses in connection with the account” due to the contract’s terms.

The Court of Appeal, in its verdict, noted that Lauryn Cartwright, Scotiabank’s assistant manager of service and support, admitted that the two bank drafts were credited to Mr Rolle’s account within seven days “contrary to the bank’s policy” of 15 working days and that holds should still have been in effect when the wire transfers were made.

It added that the key issue for it to determine was whether the SBFSA agreement gave Scotiabank a “shelter” from Mr Rolle’s negligence claim and provided it with “immunity”. Noting the agreement was 84 pages, the appeal court said: “There is no doubt that the appellant had full capacity to contract and, as a counsel and attorney-at-law would have been fully aware of the danger of signing a document which he did not have the opportunity to review. He makes no allegation that he was acting under duress.”

Also pointing out that Mr Rolle did not challenge the agreement’s fairness, the Court of Appeal found that it was a legal and binding contract. However, it took note of then-justice Charles’ finding that “the bank took a risk by making the funds available before conclusively determining the validity of the bank drafts” as “significant”.

“To my mind this is tantamount to saying that the bank’s conduct was undertaken with actual appreciation of the risks involved, but with serious disregard of or indifference to an obvious risk,” appeal justice Evans wrote. “In my view the bank was operating on the basis that any loss which resulted from the risk which they took would fall on the appellant [Mr Rolle].

“This was unacceptable in circumstances where the appellant was not aware of the risk, and the instructions which he gave were based on a misrepresentation made by the bank. I therefore conclude that this was gross negligence and willful misconduct.

“We were not assisted with any information so as to determine whether the conduct was inconsistent with any applicable law or an industry code to which the bank has publicly committed. What we do know, however, is that the handling of the transactions was inconsistent even with the bank’s own internal policy.”

However, while finding that Mr Rolle was “penalised for something over which he had no control”, appeal justice Evans said that he nevertheless had agreed to such a position by signing the SBFSA. This specifically states that neither Scotiabank, nor its directors, officers and employees, can be held liable for “a forged, unauthorised or fraudulent use of services, cheque or instruction”.

“In the final analysis the conclusion seems unfair but I cannot say that it is not consistent with the terms of the agreement. The appellant being of sound mind and meeting all the requirements of capacity signed the agreement of his own free will. He has not shown that the agreement breached any law or was inconsistent with any regulatory or industry requirements,” appeal justice Evans wrote.

“It is clear that her [Justice Charles] finding was, firstly, that the respondent had full immunity under the SBFSA specifically because a fraudulent item was involved, and secondly, the SBFSA specifically gave the respondent the right to recover the funds claimed in the counterclaim. In these circumstances I am constrained to the view that his appeal must fail.”