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06.06.2007 Business & Finance

Stanchart Wins Appeal

The Supreme Court has overruled the decisions of the High Court and the Court of Appeal and said the Standard Chartered Bank has no liability in the case in which Victoria Island Properties Ltd has sued for the recovery of $82,000.

The money belonged to the Nigerian company but was authorised through a 419 scam by a Nigerian in September 1997 and transferred from the Anz Grindlays Bank Ltd of Switzerland via New York to Ghana.

Victoria Island Properties earned judgement at both the High Court and the Appeal Court but the Supreme Court ruled by a unanimous decision that Standard Chartered Bank Ghana Limited was not liable for the fraudulent transfer of the money from the Swiss bank into an account at its Liberia Road Branch in Accra.

The Nigerian fraudster, E.O. Effiong, pretended to be the owner of the money, forged the signature of the chairman of Victoria Island Properties and fraudulently instructed the Swiss bank to transfer $12,000 and $70,000, respectively, into his account at the Liberia Road Branch of Standard Chartered, from where it was paid to him.

When Victoria Island Properties Ltd sued Stanchart at the Accra High Court for negligence and not complying with the Swiss bank's payment instructions, judgement was given in its favour in May 2001. This was confirmed by the Court of Appeal on November 12, 2004 that Stanchart was liable for the loss of the $82,000.

Victoria Island Properties argued, among others, that Stanchart, which had held itself as an international bank, negligently, and without complying with the originator bank's payment instructions, paid the money to Effiong through its Liberia Road Branch, even though Effiong did not have any foreign account with the bank.

It said Stanchart and Effiong conspired together for the common purpose of injuring the company financially to suffer loss and damage.

The company said it had not been aware of the fraud until January 1998 when it requested a statement of accounts from the Swiss bank and that the negligence occurred because Stanchart failed to make any proper preliminary enquiries about Effiong at the time he opened the account.

According to the company, Stanchart failed to check or validate the reference given by Effiong to reasonably ascertain his identity, integrity and reliability before agreeing to deal with him as an account holder.

Stanchart, however, denied any knowledge of the fraudulent nature of Effiong's instructions to the Swiss bank, saying that there was no way it could have known until it had been informed by the bank.

It denied that it had been negligent in complying with the Swiss bank's instructions and claimed that it carried them out, while there was no evidence that Effiong's account with the bank was fictitious.

The Supreme Court's decision, which was read by Dr Justice Seth Twum, said the conspiracy allegation was scandalous and vexatious and an abuse of the court process, since no iota of evidence was led in support of it.

It said the so-called forged instruction allegedly issued by Effiong was said to have been by two telex messages which were not tendered in evidence by the plaintiff so it was difficult to assess how the company's chairman's signature was forged in the telex messages.

“But whatever form the telex messages took, it is quite clear to me that there was nothing wrong with the mechanism for the actual transfer of the money from Switzerland to Ghana via New York,” he said, and added that what happened was no different from what would have happened if Effiong had not swindled the plaintiff's account with the co-plaintiff.

According to the court, communication between the ANZ Grindlays Bank and Stanchart for the payment of the money to Effiong was by SWIFT, an organisation maintained by banks and financial institutions throughout the world for money transfers.

The court held that by the legal nature of electronic transfer, the SWIFT system did not involve negotiable instruments and at any rate the recorded acknowledgements were not bills of exchange, as in the case of cheques which were drawn on a bank and payable on demand.

It said the plaintiff was the supposed originator, with ANZ Grindlays Bank, the co-plaintiff, as its bank but it was not clear which of the bank's officers sent the telex messages to Stanchart, since the co-plaintiff owed a duty of care and skill to the plaintiff.

“The overwhelming evidence is that the co-plaintiff dismally failed in its duty of care and skill to the plaintiff,” the court held, and stated that failing that, the plaintiff was entitled to sue the co-plaintiff for breach of contract and claim appropriate damages to the value of the $82,000 transferred.

It said in the ordinary course of business, the beneficiary bank credited the beneficiary's account in reliance on the instruction given to it by the originator bank and once that was done, the beneficiary bank held the funds to the customer's order.

On negligence, the Supreme Court held that what officials at the head office of Stanchart did by looking at Effiong's passport before paying the money to him across the counter was a legitimate practice for cashing travellers' cheques abroad.

The court was presided over by Mr Justice W.A. Atuguba, with Mr Justice S.A. Brobbey, Dr Justice Seth Twum, Mrs Justice S.O. Adinyira and Mr Justice S.K. Asiamah as the other members, while Mr Ace Anan Ankomah and Atta Akyea represented the plaintiff and Stanchart respectively.

Story by Stephen Sah