The duties of a bank to a customer where a fraud is perpetrated.
Caye International Bank (‘Caye’) is an international bank operating in Belize and offers banking services to international clients. One of its online banking clients, Rosemore International Corporation (‘Rosemore’) is a company registered in Panama. The corporate bank account had been opened in 2011 under the name “Rosemore International Corp- Jason Christopher Connor” and the two parties had a depository and indemnity agreement between them. The sole signatory for the account of Rosemore was Jason Christopher Connor (‘Connor’). Rosemore identified its email address as “[email protected]” and the beneficial owner of the account as “Jason Christopher Connor” whose email address was “[email protected]“. Connor used either one of these email addresses to communicate with Caye, both having the domain name ‘@rosemore.com’. Any emails sent to “[email protected]” were automatically forwarded to “[email protected]” for attention. The bank also had Connor’s telephone number on its records.
One of the services Caye offered to its customers was online fund transfers and Caye offered Rosemore the use of its secure online banking portal, as it did for all its customers, to conduct online transactions. To facilitate this Caye gave two sets of unique credentials to access the online portal known only to Rosemore.
Between 2011 and 2015 the account was used very little with two deposits of around US$230,000 being made and attracting interest as expected. Connor made one wire transfer for around US$2,000 using the email address “[email protected]“. He was not able to use the online system having been informed by Caye that the request had to be made by email or fax. This was done as instructed.
To know what you know and what you do not know, that is true knowledge.”
Confucius
In August 2015 Connor discovered that US$175,000 had been transferred without his authority from his account into an unknown account in Canada at the Carpathia Credit Union in the name of Walter. The transfer had taken place in April 2015 but, despite the fact that Connor had received a “low priority” email message from Caye at “[email protected]” to inform him that there was a new message on his online account, he was unable to log in to his account to see the message, even with several attempts. This was despite following the accompanying instructions to ‘Click here to log in to your user password account to view the message’. Connor reported this to Caye by email on 28 April 2015 but received no response. Connor continued to attempt to log in over the next few months, eventually disabling the account because of excessive attempts. Finally Connor received a response from Caye’s Systems Administrator which revealed that the last successful log in to his account was on 22 April, the day before the Connor had received the “low priority message” from Caye. After months of wrangling with Caye to get the money reimbursed, Rosemore brought a claim against Caye and Mr.Walter in March 2016 in the High Court of Belize. It claimed damages from Caye for breach of the express and implied terms of the depository agreement and, in the alternative, damages for negligence by Caye or its employees. Mr.Walter, who was accused under the doctrine of “unjust enrichment” made no attempt to attend court or defend himself and in his absence default judgement was entered against him. The case continued against Caye, a more accessible defendant.
Rosemore alleged that it had never instructed Caye to make a transfer and that they had acted without authority. Caye retaliated that they had received a message from Rosemore’s online bank account (this was later revealed to have been comprised). Confirmation of the transfer had then been sent by Caye to “[email protected]“, an email address unknown to Connor. On investigation this address was found not to be an address on Caye’s records for Rosemore, and did not even have Rosemore’s domain name within it. Evidence showed that Connor had been unable to log into his account. Caye further argued that it had been four months since the transfer and that it had taken Rosemore excessively long to bring the matter to Caye’s attention. Evidence showed that Connor had been unable to log into his account and that Caye had taken over three months to resolve this problem.
The High Court found in Rosemore’s favour, on the basis that there had been a breach of the depository agreement by Caye in that they “wrongfully…and without the claimant’s authorization or consent deducted US$175, 000 from its account.” In the alternative, the court also found Caye negligent by making the unauthorized transfer.
Caye appealed to the Court of Appeal which upheld the decision of the High Court. In February 2022, Caye appealed their decision to the Court of Caribbean Justice (‘CCJ’). The CCJ reviewed the verification clause of the depository agreement and, unlike the Court of Appeal, found no evidence that Caye had not properly followed the verification and identification process prescribed by the agreement. However they held that Caye had not satisfied the “Quince Care duty” which imposes implied terms : a negative duty on a company to refrain from executing a customer’s order if it is “put on enquiry” that there may be a fraud, and a positive duty to do something more than just fail to comply with an instruction. The CCJ again found in Rosemore’s favour.
Link to Final Judgement: Rosemore International Corp v Caye International Bank Ltd CCJ Appeal No BZCV2022/003 BZ Civil Appeal No 25 of 2018
Link to Court of Appeal Judgement: Caye International Bank Ltd v Rosemore International Corp Court Appeal of Belize AD 2021 Civil Appeal No 25 of 2018
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