Lucas George v Bank of Baroda (CS 06/19 )  SCSC 342 (26 June 2020);
Faute : failure to transfer funds on time, the responsibility of the SWIFT payment system as intermediary : obligation of transmitting bank.
- The Plaintiff avers that the Defendant is a corporate body carrying out banking services and that he had retained the services of the Defendant as a banker and had a bank account in credit with it at the material time.. He avers that on the 14th of March 2016 he instructed his agent, namely his wife, to proceed to the Defendant bank and there to transfer a sum of SCR 50,000 from this bank account to another bank of the Plaintiff, which he held with the Barclays Bank Seychelles. The Plaintiff avers that that on the same day the Defendant, acting through its employees, agent or prepose, deducted his bank account in the instructed sum of SCR 50,000 plus SCR 50 as service charge for the said transfer. The Plaintiff avers that he his wife was given the assurance by the employees or prepose of the Defendant that the transfer would be completed and the Barclays Bank account of the Plaintiff will also be credited on the same day.
- The Plaintiff avers that, acting upon the assurances and representation of the Defendant, acting through its employees, agents or prepose,on the 18th of March 2016 he proceeded to issue two cheques to be presented against his Barclays Bank account, namely a cheque for the sum of SCR 3,104 to Seychelles Public Transport Corporation (the “SPTC”) and a cash cheque in the sum of SCR 12,000.However, to his dismay they were both returned for insufficient funds and could not be honoured against his Barclays Bank account.
- According to the Plaintiff the instruction given to the Defendant pertaining to the transfer of funds were purposely calculated and given so as to ensure the honouring of both cheques. He avers that despite the sum being debited from his bank account on the 14th of March and despite the assurances of the Defendant, acting through its employees, agents or prepose, that the money would be transferred and credited to his Barclays Bank account on the same date, the transfer only took place on the 28th of March 2016, without him being informed of same.
- As a result the Plaintiff avers that the act of the Defendant, acting through its employees, agents or prepose, amounts to a faute in law, of which the Defendant is vicariously liable to make good in damages to the Plaintiff.
- The Plaintiff avers the particulars of faute to be the Defendant’s failures to transfer the sum of SCR 50,000 as per instructions; the Defendant’s failure to act diligently and/or prudently upon his instruction; the Defendant’s failure to give accurate and/or proper assurances as to when the transfer was to be effected and completed; the Defendant’s failure to deduct and/or transfer from the Plaintiff account to Barclays Bank account; the Defendant’s failure for having allowed the Plaintiff to rely on false representations as regards to the date as to when the transfer was to be made; and the Defendant’s failure for having allowed the Plaintiff to issue two bank cheques after having been informed of the date as to when the transfer was to be completed.
- The plaintiff avers that these has caused him inconvenience, anxiety and distress, which he assessed to come to the sum of SCR250,000; moral damages, which comes to the sum of SCR 125,000; and shock, pain and humiliation, which comes to SCR 125,000.
- Accordingly, the Plaintiff prays that this Court enter a judgment in his favour for the total sum of SCR 500,000 against the Defendant, with interest at the commercial rate from the date of the judgment of the Court.
- The Defendant filed a Statement of Defence. In its defence it does not deny the fact that the Plaintiff is one of its client, the fact that the wife of the Plaintiff came to the bank and did the two cheques transactions on the 14th of March 2016 is also not denied. However, except that the Plaintiff’s Barclays Bank account was credited on the 28th of March 2016 and that it received a letter of demand from the Plaintiff’s Counsel, the rest of the Plaint is categorically denied by the Defendant.
- The Defendant avers that it did remit payment instruction for SCR 50,000 for transfer to the Plaintiff’s Barclays Bank account on the 14th of March 2016. However, it avers that it has no control over the electronic transfer mechanism operated by SWIFT, used by banks to effect transfer of funds, and that contrary to its instructions SWIFT did not credit the Barclays Bank account. The Defendant avers that following its further instructions, SWIFT completed the transfer.
- The Defendant avers that the Plaintiff should have waited for the Barclays Bank to issue a credit advice of the funds or should have checked with the Barclays Bank if the funds had been credited to his bank account before issuing cheques drawn against this account.
- At any rate it is the contention of the defendant that a claim of SCR 500,000 as damages for an alleged delay of two weeks is grossly exaggerated, frivolous and vexatious and an abuse of process and, as a result, prays for the Plaint to be dismissed with cost in its favour.
- The Plaintiff testified and called one witness, being his wife and agent for the purposes of this case. The Defendant called its Senior Manager.
- The Plaintiff testified that he is a Sport Coordinator in Seychelles and that he and his wife have a joint account held with the Bank of Baroda and that the account was in credit on the 14th of March 2020. On that date his wife, Janet George, was instructed to transfer the sum of SCR 50,000 from this account to his account held at Barclays Bank. The purpose of the transfer was for him to fund the Barclays Bank account so that he could issue a cheque in favour of the SPTC and a cheque to some workmen, to whom he was indebted.
- According to the Plaintiff his wife went to the bank and did the transaction. He waited for a couple of days and then issued the cheques. On the 24th of March he was informed by his workmen that the cash cheque had bounced as there was no funds in his Barclays Bank account. The Plaintiff personally went to verify with the bank and he was informed that his account had no funds. Therefore, he immediately went to the Baroda Bank, where he met the bank manager. The manager informed him that it was not their mistake, they had already done their part and the money should have been transferred. Finally, the sum was transferred on the 28th of March. However, following that, the same bank manager came to see him at his office and informed him that sometimes mistakes happen, whilst not fully apologising.
- The Plaintiff says that the bouncing of his cheques has led him to lose face and to be humiliated in public. The Plaintiff gave an instance where the SPTC workers were talking behind his back saying how can a prospective politician issue bounced cheques? As a result he claims that he had to withdraw his candidacy in the upcoming National Election and that this also diminished his prospect of becoming a member of any international sport organisation, which takes financial creditworthiness very highly.
- Mrs. Janet Georges has confirmed that she went to the Defendant’s bank in order to carry out the transfer of the SCR 50,000 on the 14th of March. According to her, this was not the first time that she has done these sorts of transfers at the said bank and that usually if the Baroda Bank account is debited in the morning, the other account would be credited by the afternoon. She was not informed by the bank staff of any difficulties with the transfer. She remembers receiving a call from her husband that there was no money in his Barclays Bank account and that two cheques he had issued against the account have been returned due to lack of funds. Following this, both of them went to the bank in order to inquire further. At the bank she waited at the door, whilst the Plaintiff went inside as it was after working hours.
- The Defendant on the other hand, called Mr. CJ Ramparsad, its current Senior Manager. The Chief Executive Officer who was in the office at the material time in the pleadings and who dealt with the Plaintiff, having already left the office. The witness confirmed the transaction was effected by Janet Georges on the 14th of March 2016. According to him, the transfer was done through the SWIFT system. He produced the SWIFT message that was used to effect this transaction. He testified on its content and gave his opinion on what caused the money not to be transferred. He further testified that the SWIFT system has its platform in Belgium. The message will be received by SWIFT and then conveyed to the receiving bank, without their intervention. The Defendant sent the message on the 14th of March, however according to him, it happens, one in hundred cases, that the receiving bank might not receive the transfer, notwithstanding the message being sent. In these instances they will send a tracer message on the SWIFT system platform to find out why the transfer failed to occur. According to him, this was done in this case after the Plaintiff complained.
- Mr. CJ Ramparsad said further that the Defendant, as the sending bank, has no control of the SWIFT system. That there was no negligence on the part of the transmitting bank or that of its staff in the said transaction. He has verified the records and all the entry details were complied with, which shows that the payment had gone out from the bank, unfortunately it did not go through because of technical issues with the SWIFT; and that the Plaintiff had carried out similar transactions, including one on the 9thof March that had been successful.
- Both parties filed written submissions.
- It is the submissions of the Learned Counsel for the Plaintiff that the Plaint is maintainable in pursuant to Article 1382(1) of the Civil Code of Seychelles, which states that,“every act whatever of man that causes damages to another obliges him by whose fault it occurs to repair it”; and that Article 1382(3) describes fault as “an act or omission the dominant purpose of which is to cause harm to another, even if it appears to have been done for a legitimate interest”. According to his submissions, the Defendant has admitted that the transfer was acted upon by its employees and that the only issue raised in their defence is that liability is to be attributed not to them but to SWIFT. On the basis of the authority of the case of MCB(Sey) LTD V m/s Kantilal of Mumbai and Anor SCA 53,11, Counsel submitted that this cannot offer a defence to the Defendant.
- As far as the submissions of the Defendant are concerned, it is submitted that although, there was a contractual relationship between the Plaintiff and the Defendant as the client and the banker, and that the Defendant was obliged to effect the transfer of SCR 50,000, this did not create an obligation de result at but one of an obligation de moyen by virtue of Article 1147 of the Civil Code of Seychelles.
- It is the Counsel’s submission that the transfer was properly effected on the part of the Defendant’s bank: the SWIFT message having been sent and the forwarding bank’s account having been debited. The Defendant would therefore have completed its duties in relation to the transfer. According to him as the forwarding bank does not have control on the rest of the transaction the responsibility is then devolved upon the SWIFT and the receiving bank.
- Moreover, it is submitted that there arises a duty on the customer to notify the bank if the funds had not been received. Therefore, according to him, the issuing of the two cheques without ascertaining whether the money has been credited lies solely on the fault of the plaintiff who should have verified first.
- As to the quantum of damages claimed by the Plaintiff, it is the submission of the Counsel that the claim is grossly exaggerated and that, at any rate, it must be specifically proved as it consist of claim for special damages.
- It is further submitted by the Learned Counsel that the assurances by the Defendant to the Plaintiff amount to a faute in law as the former acted on same to issue the cheques, something that he waited for two days prior to doing in order to ensure that the transaction was completed.
- As to damages the Counsel submitted that the Plaintiff has testified to the embarrassment he was made to suffer after the two cheques were returned. This coupled with the fact that the Plaintiff was made to withdraw his candidacy for the 2016 National Assembly election shows that the sum claimed under each heads are justified.
- The provisions of the law governing the matter in issue in this case can be found in the following articles of the Civil Code of Seychelles.
“The debtor shall be ordered to pay damages, if any, either by reason of his failure to perform the obligation or by reason of his delay in the performance, provided that he is unable to prove that his failure to perform is due to a cause which cannot be imputed to him and that in this respect he was not in bad faith.”
“1. Every act whatever of man that causes damage to another obliges him by whose fault it occurs to repair it.
2. Fault is an error of conduct which would not have been committed by a prudent person in the special circumstances in which the damage was caused. It may be the result of a positive act or an omission.
3. Fault may also consist of an act or an omission the dominant purpose of which is to cause harm to another, even if it appears to have been done in the exercise of a legitimate interest.”
“Agency or power of attorney is an act whereby a person called the principal gives to another called the agent or proxy the power to do something for him and in his name.
The contract is made by the acceptance of the agent.”
“Agency is a gratuitous contract unless there is evidence to the contrary.”
“It is either special and for one case or certain cases only, or general covering all the cases of the principal.”
“The agent shall be under an obligation to give effect to the agency agreement for as long as he remains bound by it; and he shall be liable for damages which may arise from his failure to perform.
He shall be likewise bound to complete any act which he had begun at the death of the principal if there is any risk of damage through delay.”
“The agent shall be liable not only for fraud but also for negligence in the course of his management.”
“Every agent shall be held to render account of his management and to deliver and pay to the principal all that he has received by virtue of his power of attorney, even though what he receives is not owed to the principal.”
“The agent shall be answerable for any person whom he has put in his place in charge of management: 1st when he has no authority to substitute another; 2nd when such authority is vested in him without reference to a specified person and the person he has selected was well known to be lacking in ability or was insolvent.”
Analysis and Determination
- According to the Cambridge Dictionary 2020 edition, the term SWIFT stands for Society for Worldwide Interbank Financial Telecommunications. It is an electronic system used by banks and financial organizations around the world for sending payments to each other.
- A SWIFT transaction is functionally equivalent to a cable transfer or air mail transfer in that all involve a direction to a foreign correspondent to set up a credit for, or to make a payment to, a specified person. As held in the case of American Union Bank v. Swiss Bank Corp., 40 F.2d 446, 450 (2d Cir. 1930). 37.
- The case law governing international bank transfers would normally revolve around three major issues: the applicable law, the nature of the legal relationship between the transmitting bank and the receiving bank, and the standard of care.
The applicable law would be the law of the place where the customer paid for the credit transfer as decided in American Union Bankv Swiss Bank Corp (supra). In the case before the court it would therefore be the laws of Seychelles that will be applicable as evidence led before me has revealed that the credit transfer was instructed by the Plaintiff in Seychelles to the Defendant bank, located in Seychelles and the payment for the transaction was paid by the Plaintiff to the Defendant bank in this jurisdiction. All the persons involved in this transaction are based in Seychelles, except the intermediary, the SWIFT, which is found in Belgium.
- The characterisation of the legal relationship between the transmitting bank and the receiving bank often depends on the nature of the relationship between the customer who wishes to make a payment and the transmitting bank. The courts generally characterise the customer and the transmitting bank relationship as one of a contract of agency, in which the customer (payer) is the principal and the transmitting bank is the agent. The customer, being the principal, gives to the agent bank the power to do something for him and in his name, namely to effect the money transfer.
- It is a general agency when it comes to keeping and maintaining the customer’s account and it is a special agency when it comes to a specific money transfer. In accordance with the provisions of the Civil Code regulating this specific contract as above referred, the agent, transmitting bank, shall be under an obligation to give effect to the agency agreement for as long as he remains bound by it in the sense that as long as the banker-client relationship remains, and he shall be liable for damages that may arise from his failure to perform the obligation. Further, the transmitting bank agent shall be answerable for any person whom he has put in his place in charge of management: firstly, when he has no authority to substitute another; secondly, when such authority is vested in him without reference to a specified person and the person he has selected was well known to be lacking in ability or was insolvent.
- On the other hand, I find that the SWIFT would be an agent of the transmitting bank in the sense that it operates on behalf of the agent, transmitting bank, in order to complete the transaction on behalf of the customer. The bank that would eventually receive the funds transfer would be the agent of the customer if it is the customer that selects the bank, to which the transfer is made. See, Sneed and Morrisson, Bank Collections – A comparative Study, 29 Tex. L. Rev. 713, 727-28, Gage v Boston National Bank, 257 Mass.449, 452 154 N.E 74). However, if it is the transmitting bank that selects the bank, which receives the funds, the receiving bank would become the subagent of the transmitting bank.
- As an agent, the transmitting bank must act in good faith and exercise ordinary care under the circumstances in accordance with the Article 1992 of the Civil Code. In this respect it may also be liable to the customer if it fails to use due care in selecting any subagent in the transfer processor if the subagent was known to lack the ability to carry out the agency in accordance with Article 1994 of the Civil Code.
- If the court considers the receiving bank a subagent, the transmitting bank might be liable to the customer on three grounds. Firstly, the transmitting bank may be liable if it fails to use due care in selecting the receiving bank or any intermediary agents who complete a transfer to the receiving bank. Secondly, the transmitting bank may be liable for the receiving bank’s failure to follow the customer’s direction as communicated to it by the transmitting bank. Thirdly, the transmitting bank may be liable for the negligence of the agent receiving bank or the agent intermediary. Thus, if the transmitting bank delays in setting up the credit, it may be liable to the customer for breach of contract. See, Richard v American Union Bank, 253 N.Y.166,170 n.e 532. That same liability would apply if an intermediary agent, contracted to assist in the transfer, delays in setting up the credit or in completing the transfer. The liability would rest on the general principle that an agent is liable to its principal for the negligence of its subagents as characterised by the Code.
- Banks may disclaim liability for the acts of correspondents, carriers, and other necessary subagents. The courts will enforce these provisions unless the transmitting bank selects an unsuitable subagent, see Sommer v. Taylor, 190 N.Y.S. 153, 154 (N.Y. Mun. Ct. 1920).
- In this case the Defendant contacted the services of the SWIFT as an agent to assist it generally to complete the transfer of money in electronic forms. This agency agreement has not been produced in this case, however, I am of the view that it need not been proven as this relationship has never been disputed. The swiftness of the SWIFT and its general efficiency in that regard may have been the factor that prompted the defendant to subcontract. This as it may, the Defendant would be liable if it failed to use due care in selecting it as subagent in the transfer process or if this subagent is known to lack the ability to carry out the agency in accordance with Article 1994 of the Code.
- The Defendant could have disclaimed liability for the acts of the SWIFT in its contract with the Plaintiff. If that was the case this Courts could have enforced these provisions. However, in the absence of evidence to this effect this Court would assume that no such disclaimer exist in their contract.
- The facts of this case show that the Plaintiff, through his wife, did a transaction on the 14th of March 2016 with the Defendant bank. The transaction was to transfer a sum of SCR 50,000 to a bank account that he held with the Barclays Bank. The paper work for the transaction took place on the same day. Under the ordinary course of event the money would have been transferred on the same day. The Plaintiff, however, usually debits the money transfer from his receiving bank in two days. Accordingly, he drew the cheques on the 16th, however, on this occasion the cheques presented against this account bounced and he obtained the transfer only four days after the cheques were returned and 14 days after the transaction took place. The Defendant used the SWIFT as the intermediary in the transfer and it says that it completed its part of the process and that its agent failed to complete their part for reasons that appears unclear to the Plaintiff, acting as principal.
- I have carefully scrutinised the facts of the case in the light of the applicable legal principles and the issues relating to the credibility of witnesses. Having done so, I find that the Defendant is liable towards the Plaintiff. It freely chose the SWIFT as an intermediary, without the input of the Plaintiff, in so doing it is answerable for the SWIFT, whom he has put in its place, albeit, not to take charge of management, but at least to do something that the customer would have assumed should have been under its complete management, namely that of efficient money transfer to another of his bank.
- As far as the Plaintiff is concerned, as per his contract with the defendant, he contracted with it as principal in order for the latter to do a money transfer. The bank as an agent is obliged to perform same under this contract. If it contracts any part of this activity to another person, and that other person, in this case the SWIFT, fails to complete it on time, in law it would be answerable to the act of the SWIFT. This is so especially if this failure is one that falls below the acceptable standard of care, namely the usually acceptable time. The customer does not know SWIFT and in the nature of things he is not even meant to be aware of this intermediary. As far as he is concerned, he could rightly assumed that the Defendant would carry out his instructions in accordance with his contract. Hence, I find that the Defendant bank committed a faute when its subagent, that it had appointed to complete a bank transfer on time, failed to carry out this obligation.
- The Defendant, however, would not be liable under the two other limbs of Article 1994 as the Defendant’s authority to substitute another person or to extend part of his obligation to the SWIFT was not excluded under the agency. Further, it has not been proven that the SWIFT was well known to be lacking in ability or was insolvent. To the contrary, it is proven that generally the intermediary is well known to have the ability to assist in quick international and local bank-to-bank money transfers.
- Furthermore, contrary to the Defendants submissions, I do not find Article 1147 of the Civil Code applicable in this case. The obligation for transfer of funds by a banker on behalf of a customer cannot be qualified as an obligation de moyen but one of de result at. The bank guarantees the customer that, provided there are funds in his account and provided that the bank’s internal procedures and the laws have been complied with, the transfer will take place within time in accordance with existing practices. It runs contrary to good business practices and common sense for a bank to say that it cannot guarantee its customer that a sum of money, which has purportedly been transferred in accordance with its internal procedure as a transmitting bank, may not reach its ultimate destination on time.
- The whole modern financial system relies on the trust and confidence that participants in the system have, that a result is guaranteed for any transactions performed, provided certain preconditions are met. In this case the customer met these preconditions. The guaranteed result was the obligation on the Defendant to transfer the fund at least within two days. If it could not fulfil the said obligation, whether as a result of its own act or omission or that of one of its agent, it should have notified the Plaintiff of this fact on time. The Defendant has failed to do so. The Defendant is by reason of his failure of its delay in the performance of its obligation, namely the timely transfer of the Plaintiff’s funds; and this delay is in law imputed to him and not a third party.
- If a court holds the transmitting bank liable to the customer as a result of the commission of a faute, it is entitled to indemnify the customer. However, the amount of recovery for loss due to delay or failure to perform the funds transfer would depend upon whether the customer elects to rescind the contract or to sue for damages.
- In this case the Plaintiff, as the customer, accepted the delayed performance and elected to sue for damages. He could have refused to accept the delayed transfer of the funds and rescind the contract of agency that he has with the Defendant and could have closed his account with the latter altogether. The potential loss that he would have suffered could have been substantially higher here. However, he chose not to do so and instead accepted the transfer, albeit late, and sued for damages.
- The damages that the plaintiff says he suffered are mostly in the form of moral damages and are prospective. He does not sue for any direct loss that he could have incurred as a result of the two creditors of his receiving late payments as a result of his two cheques being returned for lack of funds. Instead, he sued for the moral damages for the loss of reputation in the eyes of certain members of the public. Here he made reference to some people at the SPTC terminal, whom he overheard saying that he could not be an upright politician, given that he issues bounced cheques.
- He also claimed that as a result he had to withdraw his candidacy as an independent member of the National Assembly in a general election, claiming that the facts connected with the two cheques had caused such damage to his reputation that he did not see a fighting chance in the said election. The Plaintiff also testified that his prospect to be a board member of any international sport organisation had been dashed as a result of the incidents, given the amount of due diligence that these organisation makes on the financial history of the candidate. The Plaintiff did not produce any additional evidence beside his testimony in that regard.
- However, to my mind, a mere delay in the performance of Defendant’s obligation cannot give rise to special damages by itself unless the claimant pleads and proves that he suffered special damages incurred as a result of the delay. General damages are awarded to compensate for the direct effects of the accident, where the claimant’s injuries can be clearly linked to the defendant’s actions or behaviour. Special damages are awarded to compensate for actual out-of-pocket expenses that a claimant has incurred as a direct result of the defendant’s actions or behaviour. The exact categories that a claimant may be able to claim for will vary depending on their specific circumstances.
- It is because of this firmly established legal principle that I will I agree with the submission of the Learned Counsel for the Defendant that a claim for special damages must be specifically pleaded and proved with a degree of certainty and particularity, as held by the Learned Chief Justice in Rose v Civil Construction Company Ltd(2012) SLR p207.However, I will add that degree and certainty must necessarily depend on the circumstances and the nature of the act complained of.
- The degree of certainty and particularity would depend on the nature of the acts complained of. This statement finds its echo in Bowen LJ’s judgment at 532-533 in Ratcliffe v Evans QB 524, an English leading case of pleading and proof of damage, in which it was held:
“The character of the acts themselves which produce the damage, and the circumstances under which those acts are done, must regulate the degree of certainty and particularity with which the damage done ought to be stated and proved. As much certainty and particularity must be insisted on, both in pleading and proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry.”
- Hence, the fact that damages cannot be assessed with certainty does not relieve the wrong doer of the necessity of paying damages for his breach of contract.
- I have gone over the plaint in this case again and I find that no special damages are pleaded. The Plaintiff’s particulars of loss and damages are for general damages. On the other hand, I find that the Plaintiff has testified and given evidence mainly as to special damages as aforementioned, that is in respect of losses incurred as a result of pulling out of a National Election. These, however, not only fly in the face of his own pleading to the extent that they are not pleaded and are ultra petita, but they are also not supported by any independent evidence. In the circumstances, I find the plaintiff is entitled only to some moral damages he incurred as a result of his cheques being unexpectedly returned and the delay in them being honoured. However, the facts show that the cheques were duly honoured by the Plaintiff’s bank within 12 days. There was hence some restoration and mitigation of any loss to the moral and pain and suffering of the Plaintiff. Nonetheless, some inconvenience, anxiety, pain and suffering would have been caused to the Plaintiff in the meantime. In my considered view, therefore, the sum of SCR50,000/- would be fair and reasonable amount payable under this head.
- In my final determination I therefore award to the Plaintiff the sum of SCR 50,000 as damages caused by the faute of the Defendant.
Signed, dated and delivered at Ile du Port on26thday of June 2020