Scotiabank moves to appeal ruling that it “negligently misdirected” $28M

The content originally appeared on: INews Guyana

With the justification that it was the victim of a “miscarriage of justice,” Scotiabank (Guyana) has filed a motion for special leave to appeal with the Court of Appeal to overturn the Full Court’s ruling from last month that it had “negligently misdirected” $28 million meant for an early mortgage repayment.

Core Investments Incorporated paid the sum to Scotiabank, intending to repay a mortgage early, but that payment was “negligently misdirected” by the financial institution, according to a judgement by the Full Court of Demerara, dated December 1, 2023.

The ruling, delivered by Justices Priya Sewnarine-Beharry and Navindra Singh, essentially reverses the February 15, 2023 ruling rendered by Justice Damone Younge.

“The applicant (Scotiabank) suffered a miscarriage of justice because the Full Court imposed liability on the applicant more than $30,000,000 including costs, by disposing of the appeal before it on a cause of action which was neither raised by the proposed respondent (Core Investments) in the High Court or Full Court, on which there was no evidence led by either party and on which there were no arguments led by either party,” said the bank in its motion.

The bank also argued that there had been an injustice since Justice Younge’s decision was overturned by the Full Court, citing no mistakes on her part regarding the parties’ privity of contract that placed obligations on the applicant.

Scotiabank further argued that the Full Court erred when it held the bank liable for negligence without holding a trial on the matter which cannot be supported by affidavit evidence and without Core Investments Incorporated ever bringing up the matter in either court.

The bank contended, among other things, that the appeal raises significant issues regarding the law of evidence regarding bankers’ practices and appellate practice and procedure, particularly regarding the appellate court’s authority to make decisions unilaterally on matters not brought up or contested by parties and for which they were not given a chance to reply.

At the centre of the court case is a property owned by Justin Teixeira, who – according to reports – died by suicide in April 2022, after ingesting a poisonous compound: sodium cyanide.

This publication has access to court documents that show that on March 28, 2022, Core Investments (the Appellant), located at Lot 241 Baramita Street, South Ruimveldt Gardens, Georgetown, agreed with Teixeira to purchase his property. That property, located along the East Bank of Demerara, was priced at $58M, and at the time of the signing of the agreement, $47M was to be paid upfront.

At the time of signing of the agreement, the Bank of Nova Scotia (the Respondent) held a mortgage over the property. As a result, the agreement stipulated that the $47M must be paid in the following ways: $28M to Scotiabank by way of a Republic Bank (Guyana) Limited manager’s cheque to liquidate the mortgage; and $19M to the vendor, Teixeira.

The court file states that Core Investments properly acquired the manager’s cheque for $28M from Republic Bank, made payable to the “Bank of Nova Scotia”, and delivered it to Teixeira at the time of the signing of the agreement.

The documents further state that, after the agreement was signed, Teixeira put the cheque into Scotiabank’s “Express Deposit Box” the very next day, but the bank later deposited the check into Teixeira’s account.

According to the judgement, on April 8, 2022, Teixeira purchased a manager’s cheque for the sum of $50M, payable to a relative, and made other withdrawals, leaving $169,133 in his account. The $28M contained in the cheque was never applied to the mortgage, and as a result, the property remained encumbered to the bank.

On November 28, 2022, Core Investments applied with the High Court, requesting, among other things, that Scotiabank return the $28M to it in restitution. The company contended that the bank could not have legitimately placed the $28M into Teixeira’s account, because the cheque was not payable to him.

However, Scotiabank claimed Teixeira had given orders to pay the manager’s cheque because of wording written on the reverse of the cheque, specifically “payee account number 312983.” Additionally, the bank argued that it was not privy to the agreement, and, as a result, was not bound by its provisions, because it was not a party to the deal.

In its ruling, the Full Court said it does not believe the words “payee account number 312983” that were allegedly on the back of the cheque were written by Teixeira.

The Judges said a detailed inspection of the cheque revealed that the words were precisely lined up with the bank’s twisted stamp that appears right below those words. They emphasised how unlikely it was that those words, which were allegedly penned before the stamp was positioned there, would have coincidentally aligned with the stamp, or that the words and the stamp would have been aligned.

The bank’s argument that the wording on the back of the cheque was Teixeira’s instructions was dismissed by the court as absurd.

The Judges went on to point out that, in addition to the language being in no way directive, it is a matter of fact and law that Teixeira was unable to give instructions regarding the manager’s cheque because he was not the payee listed on it. The court ruled that the bank, whether Bank of Nova Scotia or Scotiabank, should have known that the money was meant to be credited to them.

The Full Court held that “the only logical and judicious action” that the Respondent should have taken was to reject the cheque and return it to the drawer, Republic Bank, because it was extremely evident that it maintained no account in the name of the Bank of Nova Scotia.

“If this is indeed the manner in which this financial institution conducts its business, this is indeed worrying, and ought to be inquired into by the Bank of Guyana. The Respondent has failed to establish any legal or factual basis that justifies it depositing the manager’s cheque into (Teixeira’s) account,” said the Judges.

In the circumstances, it concluded that the bank “negligently misdirected the payment of the manager’s cheque, thereby causing loss to the Appellant.”

Consequently, the Full Court ordered that the monies due under the loan held by Scotiabank be calculated up to March 29, 2022, and that the sum of $28M be credited toward such sum.

Further, it was ordered that should this sum be more than the sum owing on the mortgage, then such excess monies shall be paid to the company.Should the sum owed under the mortgage be more than $28M, the Court has ordered, Core Investments would have to pay such excess to Scotiabank.

Additionally, the Full Court declared, “The mortgage is deemed to have been settled and repaid as per the forgoing orders. It is further ordered that when the mortgage is repaid as aforementioned, the Respondent shall forthwith cancel the said mortgage.”

The Appellant was awarded damages of $1M for negligence, and court costs in the sum of $1M against the financial institution. These sums had to be paid by the bank to Core Investment on or before January 3, 2024.