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CCJ orders bank to repay customer money transferred from its account without authorisation

Published:Tuesday | January 31, 2023 | 7:32 PM
Rosemore, a customer of Caye Bank, had successfully sued the bank in the High Court of Belize to recover money deducted from its account without its authorisation or consent. - CMC photo

PORT OF SPAIN, Trinidad, CMC – The Caribbean Court of Justice (CCJ) on Tuesday ordered the Belize-based Caye International Bank Limited to repay more than US$170,000 to the Panama-based Rosemore International Corporation after dismissing an appeal by the bank.

The five-member CCJ panel of judges in a ruling read out by Justice Andrew Burgess, held that Caye Bank breached its care of duty to Rosemore and that it ought to have contacted the company given the red flags that had been raised during the transaction.

Rosemore, a customer of Caye Bank, had successfully sued the bank in the High Court of Belize to recover money deducted from its account without its authorisation or consent.

Caye Bank, is an international bank, operating in Belize and providing online funds transfer services to its customers. Rosemore, is a company registered in Panama, and was one of Caye Bank's online banking customers in accordance with a Depository Agreement and an Indemnity Agreement between the two.

Caye Bank offered Rosemore, as it did for all its customers, the use of its secure online banking portal to conduct online transactions and gave it two sets of unique credentials to access the online banking portal known only to Rosemore.

The dispute arose over the sum of US$175,000 which Caye Bank transferred on April 23, 2015 from Rosemore's account into an account located in Canada.

At the time when the funds were transferred, Caye Bank believed that the transfer was on the instruction of Rosemore. In fact, the instruction was sent via a compromised email account, to which the fraudster had gained access and he sent a message that appeared to be a legitimate request from Rosemore.

When Rosemore discovered the fraud, it notified Caye Bank, but the bank refused liability for the transaction, claiming it had properly processed the transaction.

On March 30, 2016, Rosemore sued Caye Bank and the fraudster claiming damages for breach by Caye Bank of the express and implied terms of the Depository Agreement and in the alternative, damages for negligence by Caye Bank, its agents and/or servants.

The fraudster took no steps in the proceeding and a default judgment was entered against him.

However, the claim continued against Caye Bank and the High Court gave judgment for Rosemore, holding that Caye Bank had breached its express and implied duties to Rosemore to exercise reasonable skill and care. Caye Bank appealed to the Court of Appeal, which upheld the judgment of the High Court.

On February15 last year, Caye Bank appealed the decision of the Court of Appeal to the CCJ, which reviewed the verification clause of the Depository Agreement and found that there was no evidence that Caye Bank did not properly follow the verification and identification process contemplated by that clause.

Nevertheless, the CCJ decided that Caye Bank was subject to 'the Quincecare duty', an implied term which imposed a negative duty to refrain from executing a customer's order if the bank was 'put on inquiry' that its customer may be subject to a fraud; and a positive duty to do something more than simply not comply with a payment instruction.

The CCJ found that Caye Bank was put on inquiry as there were several red flags including the substantial amount requested to be transferred was suspicious given that the history of the account showed that there had been only one insubstantial withdrawal in the amount of US$1,915.76 in 2012.

In addition, the CCJ found that the request came from an address which was not the domain address on record for Rosemore; and there were observable differences between the signature on the wire transfer request form and the authorised signature.

“Given the red flags a senior official from Caye Bank ought to have contacted Rosemore to verify the transaction, which was not done. The Court, therefore, held that Caye Bank breached its Quincecare duty to Rosemore,” the CCJ said, ordering Caye International Bank Ltd also to pay costs.

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