Sun | Nov 18, 2018

Lawyer countersues NCB and loses

Published:Friday | March 11, 2016 | 12:00 AMBarbara Gayle

The Supreme Court affirmed that National Commercial Bank (NCB) Jamaica acted appropriately when it deducted funds from a client's accounts to cover payments on an outstanding loan, and now the client, who is a lawyer, may have to answer to the General Legal Council on issues related to the case.

Attorney-at-law Humphrey Lee McPherson borrowed $7.1 million from NCB in December 2008, before which he had instructed the bank to debit funds from two accounts one of which was his client's trust account totalling $1.55 million, convert the funds to US dollars and place them on fixed deposit to secure the loan. The fixed deposits totalled US$76,800.

Under the agreement with NCB, McPherson would service the loan at $195,086.40 per month. He last made a payment on October 30, 2009.

McPherson complained that NCB had withdrawn funds from a trust account, which Supreme Court Justice David Batts observed served to reduce the loan balance. In January 2014, the bank assessed the outstanding balance at $1,984,559.26, and deducted the funds from one of McPherson's accounts, to which he objected.

NCB took the matter to court seeking a declaration that it was entitled to apply the US$76,800 and $1,984,559.26 held in McPherson's accounts towards the loan.

The lawyer countersued, challenging the size of the indebtedness. In his counterclaim filed March 20, 2015, he contended that the loan amount was $6.53 million and not $7.1 million. He denied instructing the bank to deduct payments from his current account, and claimed that it was a separate fund of US$19,300 that was to be used as security for the loan, and not his fixed deposit accounts.

But Supreme Court Justice David Batts dismissed his claim, and made a declaration that NCB was entitled to apply US$76,800 and $1,984,559.26 held in McPherson's accounts towards the outstanding loan balance.

The judge also directed the Registrar of the Supreme Court to forward a copy of his judgment to the General Legal Council, saying it was a matter of concern that McPherson had instructed the bank to withdraw funds from a trust account belonging to his client to secure a loan.

Justice Batts, in his judgment issued last month, noted that McPherson had decided to represent himself in the case.

"Regrettably, he has paid no heed to the adage about an attorney who chooses to represent himself," the judge wrote.

During the case, McPherson admitted that he stopped making payments on the loan but claimed it was due to the bank's failure to issue a promissory note underlying a letter of commitment, failure to address issues raised in letters to NCB, and that the bank made withdrawals from his trust account without his permission.

He contended that the bank's application of the fixed deposits and US dollar holdings to the loan account was fraudulent and sought damages for alleged unauthorised use of his funds.

McPherson also sought an order of accounting from the bank. He contended he owed no money to NCB as there was no operative account or promissory note for the letter of commitment dated September 24, 2009 for the $6.5 million purportedly loaned. He demanded that his fixed deposit of US$76,800 be returned.

Stopped making payments

Outlining his reasons for striking out McPherson's claim - which was based on an application by the attorney representing NCB, Hadrian Christie of the law firm Patterson Mair Hamilton - Justice Batts said the lawyer admitted he stopped making payments on the loan.

"The defendant does not, anywhere in his affidavit, deny that money was borrowed nor does he say that the loan was repaid. He, however, repeatedly denies owing any money," the judge said. Accountants retained by McPherson had confirmed the accuracy of the bank's statement of account, Justice Batts emphasised.

"If, as alleged, the bank wrongfully or unlawfully withdrew monthly repayments from a trust account without authorisation, then it means the defendant's debt to them was reduced accordingly. This is a benefit to the defendant," he wrote.

If the funds were deducted from the wrong account, it was McPherson's duty to bring the error to the bank's attention "and to transfer funds from the account from which those debits were to be raised and place them into or to the credit of the trust account," the judge contended.

Batts added that, alternatively, NCB ought to re-credit the trust account and debit the accounts from which the funds should have been withdrawn.

The judge also ruled that the size of the loan, whether $6.5 million or $7.1 million, was not pertinent to the issue to be decided, which was whether the funds were wrongfully withdrawn from the accounts. NCB, however, had produced documents showing that the loan was for $7.1 million.

"There is, in any event, unchallenged documentary evidence that the defendant instructed that funds from the trust account were to be combined with other funds to purchase currency of the United States, all of which was then to be held on fixed deposit. There is documentary evidence that the claimant was authorised to apply balances on fixed deposits to secure the loan account," the judge said.

"I think I have said enough to demonstrate why to allow this matter to go to trial would be an unwise use of the resources of the court. The defendant on the material before me cannot succeed," Justice Batts ruled.

McPherson was ordered to pay the bank's legal costs.

Regarding his decision to alert the General Legal Council to his ruling, the judge said he had cautioned McPherson that this could happen.

"The defendant did not heed my caution. Having considered the evidence, and in particular documentation emanating from the defendant, it is a matter of concern that an officer of this court appears to have instructed a financial institution to: (a) withdraw funds from his client's trust account; (b) combine those funds with other funds to purchase United States currency; (c) place the combined funds on fixed deposit; and (d) use the fixed deposit to secure a loan or loans," Judge Batts wrote.

It is up to the chairman of the General Legal Council to determine whether to pursue an investigation or take other action, he said.