Larry A. Ferguson v RBC Royal Bank (Bahamas) Ltd

JurisdictionBahamas
JudgeMadam Justice Charles, JA
Judgment Date25 September 2023
Neutral CitationBS 2023 CA 132
CourtCourt of Appeal (Bahamas)
Year2023
Docket NumberSCCivApp No. 79 of 2023
BETWEEN
Larry A. Ferguson
Appellant
and
RBC Royal Bank (Bahamas) Limited
Respondent
BEFORE:

The Honourable Sir Michael Barnett, P

The Honourable Mr. Justice Isaacs, JA

The Honourable Madam Justice Charles, JA

SCCivApp No. 79 of 2023

COMMONWEALTH OF THE BAHAMAS

IN THE COURT OF APPEAL

Civil appeal — Breach of contract — Defamation — Interpleader procedure — Appellant not specific on what factual findings he seeks to appeal — Whether Merchant Agreement governed the relationship between the parties — Whether the funds which were transmitted were initial advances or deposited moneys which the bank could not reverse if card issuer did not settle transactions — Whether Judge made finding of fraud — Whether appellant was defamed — Whether appellant could bring action personally for company in which he is a shareholder — Whether the judge reversed the burden of proof — Whether Judge relied on evidence not pleaded

The appellant was a customer of the respondent bank since 2010 where he held a business account in his name, trading as Coastal Winds, and a separate account in the name of Store Away Ltd., a company in which he was a shareholder. The appellant entered into a Merchant Agreement with the respondent which allowed him to process debit and credit card transactions. The Merchant Agreement outlined the duties, obligations, rights and responsibilities of the parties to the Agreement.

On 20 October 2016 $20,958,000.00 was credited to the Coastal Winds account and $990,000.00 was credited to the Store Away account. Both amounts arose from twenty-three force posted transactions against the Visa card of one BP. A force-posted transaction occurs where a merchant processes a credit card or a debit card offline by use of a code obtained from the merchant's bank. This enables the merchant to bypass the normal authorization process.

The transactions were flagged by the respondent as suspicious activity and a hold placed on the accounts. When the appellant tried to access the funds he was advised of the hold. The transactions in question were found to be fraudulent and the respondent declined to settle the transactions on the basis that the transactions exceeded Visa's $249,999.99 daily limit.

The appellant asserts that the funds having been posted to the accounts were deemed to be legitimate and the respondent had an obligation to pay those funds to him. The respondent asserts it never received the funds from Visa that were advanced to settle the transactions and the funds advanced were, therefore, reversed.

The appellant brought an action against the respondent claiming damages for breach of contract and defamation. The judge dismissed the appellant's action against the respondent and the appellant now appeals that decision.

Held: Appeal dismissed. Costs to the respondent, to be taxed if not agreed.

In order for an interpleader procedure to be relevant, the party bringing the proceedings must actually have the disputed property (funds) in its possession. In the present case, the respondent was never in receipt of the funds to which this action relates.

The Court found that the appellant did not have an automatic right to the funds credited to the accounts as the funds were only initially advanced to his accounts to be later settled by Visa. The funds were not settled by Visa. In the circumstances the respondent was entitled to reverse the advance.

No evidence was adduced that publication was made to a third party and therefore the claim of defamation was not established.

In the court below the appellant sought to formally amend his claim to join Store Away as a party. However, he decided there was no need to proceed with that application to amend. He then made the application orally. The application was opposed, and the judge declined to allow the amendment. The Court is of the view that the joinder issue was adequately considered and disallowed by the trial judge. The appellant had effectively conceded that Store Away needed to be a party to the action of its own accord. The judge cannot be faulted for finding that no claim had been brought by Store Away, a separate legal entity from the appellant, and there was no evidence of any consent by Store Away to allow the appellant to maintain its claim.

The judge did not shift the burden of proof by stating that BP was not called to support the appellant's contention that the funds were legitimately received. The judge accepted that the scenario could objectively have been viewed as suspicious and that calling BP to speak to the transfers would have been a reasonable method of addressing these suspicions.

FirstRand Bank Limited v The Spar Group Limited [2021] ZASCA 20 considered

Foley v Hill and others [1843-60] All ER Rep 16 considered

Foss v Harbottle (1843) 67 E.R. 189 mentioned

Glendon E. Rolle v Scotiabank (Bahamas) Limited [2022] 1 BHS J. No. 30 considered

Hall and others v. Hillside Investment Company Limited [2002] BHS J. No. 166 considered

Mills v First Caribbean International (Bahamas) Bank Limited and others [2010] 3 BHS J No 24 mentioned

Saloman v. Saloman & Co. [1897] A.C. 22 mentioned

Surf “N” Turf Ltd v. Deltec Bank & Trust Limited and others [2018] 1 BHS J. No. 203 considered

APPEARANCES:

Mr. Keod Smith and Mr. Carlton Martin, Counsel for the Appellant

Mrs. Tara Archer-Glasgow and Mr. Audley Hanna Jr., Counsel for the Respondent

Madam Justice Charles, JA

Judgment delivered by the Honourable

1

. Pursuant to a Notice of Appeal Motion filed on 12 April 2023, Larry Ferguson (“the appellant”) appealed the entirety of the Judgment of the Honourable Madam Justice G. Diane Stewart (“the Judge”) which was delivered on 24 March 2023 wherein she dismissed the appellant's claim for damages for breach of contract and defamatory publication of electronic bank statements and awarded costs to RBC Royal Bank (Bahamas) Limited (“the respondent”) to be taxed if not agreed.

2

. For reasons which are set out in the written Judgment, we dismiss the appeal and award costs to the respondent to be taxed if not agreed.

Background
3

. Since about 27 October 2010, the appellant had been a customer of the respondent bank where he maintained and operated a business account in his name trading as Coastal Winds and a separate account in the name of Store Away Limited, a company in which he was a shareholder.

4

. As a part of the relationship, the respondent agreed to service a point-of-sale (“POS”) facility in order to allow the appellant to process debit and credit card transactions connected with his business. The provision of the POS terminal and the respondent's handling of the associated transactions were at all material times governed by RBC Royal Bank of Canada Visa Merchant Agreement/Mastercard Merchant Agreement/Discover Card Agreement/Debit Card and Terminal Agreement (“the Merchant Agreement”) which was executed on 27 October 2010 between the appellant and the respondent.

5

. The Merchant Agreement expressly states that a Prohibited Transaction means a transaction carried out by a prohibited merchant or in furtherance of a prohibited or illegal activity. By the Agreement, the respondent agreed to inform the merchant “from time to time” which transactions were prohibited or which transactions were not authorized to process.

6

. By clause 1.3(a) of the Merchant Agreement, the merchant agreed to pay to the respondent any charges applicable for the services provided inclusive of transaction fees, taxes, certification fees and chargeback fees all of which would constitute a debt payable to the respondent.

7

. Clause 1.21 expressly provides that the appellant agreed that where he defaulted on the Merchant Agreement or was reasonably suspected by the respondent to have defaulted, the respondent was entitled to, among other things, immediately and without prior notice, suspend the appellant's rights under the Merchant Agreement or end it, freeze any of his bank accounts from any financial institution, wherever located and take possession of any funds contained in such frozen bank accounts and/or take other steps the respondent consider necessary. An occurrence of default is defined in clause 1.21(b) as:

1.21(b) Default occurs when:

  • ▪ You make a representation in this Agreement that is incorrect in any way;

  • ▪ You participate in the processing of Transactions that you know or ought to have known to be fraudulent; Prohibited Transactions or otherwise unauthorized transactions.

  • ▪ You do not observe or act according to the terms and conditions of the Agreement…”

8

. By virtue of the Visa Merchant Agreement and Mastercard Merchant Agreement Terms and Conditions, the appellant also agreed to the following:

1.1 B. You agree that, in addition to the terms and conditions set out herein, you are bound by and will comply with our policies and procedures regarding Credit Card processing services including any user manual or quick reference guide or other communication that we provide to you from time to time.

You acknowledge that any payment made or credit given to you as settlement for a Transaction is an advance of funds, unless and until the Transaction is not capable of being the subject in whole or in part to a Chargeback or other adjustment.

2.1 (b) Processing Remote Transactions

(v) If a Credit Card used for a Remote Transaction or other pre-authorized Transaction is rejected or if the Card issuer cancels a pre-authorization, you are not permitted to accept the Credit Card as a form of payment and agree not to deliver the goods or services, unless you negotiate a different form of payment for the goods or services. All Remote Transactions are subject to a Chargeback if the Cardholder disputes the charge.

2.2 Getting Transaction Authorizations

(a) If you do not use a Terminal to process your Transactions, you must obtain an Authorization Number for all Transactions that are...

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