Mon | Sep 27, 2021

Court clears NCB of responsibility for bank employee’s bad advice

Published:Sunday | February 28, 2021 | 12:05 AMTanesha Mundle - Gleaner Writer

National Commercial Bank Jamaica Limited, NCB, has won an appeal against a former customer who had previously successfully sued the institution after unknowingly investing in an unregulated scheme on the advice of her personal banker, and suffering...

National Commercial Bank Jamaica Limited, NCB, has won an appeal against a former customer who had previously successfully sued the institution after unknowingly investing in an unregulated scheme on the advice of her personal banker, and suffering losses as a result.

The ex-customer, Sylvia Steens, claimed she lost $2 million, plus interest, after she borrowed $6 million from the bank, a portion of which was placed in the Higgins Warner investment scheme, a now-defunct Argentina-based foreign investment trading club, which at the time was not licensed or registered to offer investment products in Jamaica.

Steens said she was advised by her personal banker and childhood friend, Sandra Cunningham, that she could earn more on her savings of over €100,000 that was then invested with NCB Capital Markets, by putting it into an “investment programme”. She was not told the name of the programme then and was not aware that Cunningham was referring to the Higgins Warner scheme, and had not authorised the investment, she said.

Later, having tried unsuccessfully to recoup her funds in the scheme, which collapsed months after she learned of it, Steens sued NCB in the Supreme Court and was awarded damages for what she had lost, plus interest, in August 2013.

The funds and interest covering the period December 18, 2008, to August 5, 2013, at a rate of 7.5 per cent, plus $750,000 for court costs, were placed in escrow in an account at NCB, pending the appeal.

Steens’ argument was that the bank was liable for the negligent investment advice she received from its employee, now ex-employee.

However, NCB was successful in getting the three-judge panel at the Court of Appeal, consisting of Justices Hillary Phillips, Carol Edwards and Marva McDonald-Bishop, to set aside the lower court’s ruling. The panel also ordered that the funds held in escrow be turned over to the bank.

NCB, in its defence, argued that as a licensed commercial bank its services did not include the dispensation of investment advice, and that the personal banker was only authorised to convey information about its services and to conduct commercial banking transactions for the client.

The bank argued that Steens was aware that the personal banker had no authority to give investment advice, and that Cunningham had dispensed advice to Steens in her personal capacity.

NCB further noted that it was written in the loan application that the requested funds was for personal expenses and property purchase and that if Steens suffered any loss or damage, the bank was not responsible.

As part of its evidence, the bank submitted documents, including two signed in May and June of 2007 by Steens for US$4,000 and US$40,000, respectively, for investment in the scheme; as well as the loan agreement.

NCB also tendered an undated letter from the personal banker , signed by both parties, in which it was stated that Cunningham would return US$40,000 from the loan, which was invested in the scheme, to Steens.

But Steens countered that at the time when she took out the loan, she had not seen the document outlining the purpose of the loan; and that those were not the reasons for the loans; nor had she given the personal banker permission to utilise any of the loan funds.

She also stated that she had signed the documents without reading them; that she was never informed that Cunningham could not give investment advice to her clients, and trusted her to give advice about money matters.

Steens also maintained that she did not know about the investment scheme or that it was unregulated, and that the first time she heard about the company was in November 2007, when she was told by NCB that a fraud had been committed on her account and that she owed the bank $5 million. Steens was also informed by NCB that it was investigating Cunningham’s activities.

Prior to being informed by the bank about the fraud committed on her account, Steens said she was told by Cunningham that she was no longer employed to NCB and that she was being investigated by the bank.

She later collected $2.6 million from Cunningham for the sum that was borrowed, and subsequently cleared the NCB loan and closed her accounts.

The Court of Appeal, in overturning the lower court’s decision, ruled in the unanimous judgment handed down on February 19 that the trial judge was wrong to find that Cunningham had a fiduciary relationship with Steens, the respondent in the case.

“The trial judge also failed to properly assess the evidence in concluding that the advice given by the ex-employee to invest in the unregulated investment scheme was given in her capacity as personal banker to the respondent,” the appellate justices said.

The panel also held that the trial judge had failed to apply the correct test in assessing whether NCB should be held ‘vicariously liable’ – that is, held responsible for the civil wrong of another person – in the circumstances, and in so doing, failed to consider relevant factors which caused Steens to erroneously conclude that the conduct of the ex-bank employee was so closely connected to her employment that it was just to hold NCB to account.

The bank was represented by attorney Sandra Minott-Phillips, QC, and Steens by Lord Anthony Gifford, QC.

Steens has not indicated a desire to pursue the matter further, Lord Gifford said on Wednesday.