Dextra Bank & Trust Company Ltd v Bank of Jamaica
| Jurisdiction | UK Non-devolved |
| Judge | Lord Bingham of Cornhill,Lord Goff of Chieveley |
| Judgment Date | 26 November 2001 |
| Neutral Citation | [2001] UKPC 50 |
| Court | Privy Council |
| Docket Number | Appeal No. 26 of 2000 |
| Date | 26 November 2001 |
[2001] UKPC 50
Present at the hearing:-
Lord Bingham of Cornhill
Lord Goff of Chieveley
Lord Hobhouse of Woodborough
Sir Martin Nourse
Sir Patrick Russell
Privy Council
[Delivered by Lord Bingham of Cornhill and Lord Goff of Chieveley]
On 19 January 1993 Dextra Bank & Trust Co Ltd ("Dextra") drew a cheque dated 20 January 1993 on its bankers Royal Bank of Canada (New York) in favour of the Bank of Jamaica ("the BOJ") for US$2,999,000. The BOJ received that cheque on 20 January 1993. On 25 January 1993 the BOJ negotiated the cheque by indorsement and delivery to Citibank International Ltd which duly collected payment from the Royal Bank of Canada. Dextra drew its cheque intending to lend the sum specified to the BOJ against the security of a promissory note executed by the BOJ. The BOJ for its part intended to buy the specified sum of United States dollars in exchange for the equivalent in Jamaican dollars, which it paid to individuals understood to be nominated on behalf of Dextra. Each party was deceived as to the intention of the other and the Jamaican dollar sums paid by the BOJ were received not by Dextra but by others who included those responsible for the deception.
Dextra sued the BOJ to recover the sum paid under its cheque, contending that the BOJ had converted the cheque or alternatively that it (Dextra) was entitled to recover the proceeds of the cheque as money paid under a mistake of fact. Its claim failed in the Supreme Court of Judicature of Jamaica (Harrison J) and in the Court of Appeal (Forte, Patterson and Bingham JJA). It now appeals against the dismissal of its claims by leave of the Court of Appeal.
Since resolution of the issues in this appeal depends on a correct understanding of the facts it is necessary to recite the relevant history, much of it uncontroversial, in some detail.
Dextra is a bank registered in the Cayman Islands and licensed under Cayman law to carry on banking business. Its chairman was Mr Jack Ashenheim, a chartered accountant. He was also employed as a financial consultant and accountant by Myers & Alberga, a firm of Cayman attorneys, one of whose partners, Mr Darryl Myers, was a director of Dextra and acted as its attorney–at-law.
The BOJ is the central bank of Jamaica, established by statute. It has the ordinary functions of a central bank and is authorised to buy, sell and borrow foreign currency.
Until September 1991 exchange controls restricted the buying and selling of foreign currency in Jamaica. The foreign exchange system was then liberalised and it became possible for anyone to buy, sell, borrow or lend foreign currency from or to authorised dealers, although only those authorised could carry on the business of dealing in foreign currency. After September 1991 the BOJ became active in the market, employing a team of authorised agents to identify vendors of foreign currency and to make purchases on behalf of the BOJ. Among its agents authorised for this purpose were Messrs Richard Jones and Wycliffe Mitchell. The BOJ provided overdraft facilities on which agents could draw to make payment for their purchases up to a limit of Jamaican $5 million, later reduced to Jamaican $4 million, but the evidence is clear that these limits were very greatly exceeded. Within the BOJ a special unit responsible to Mr Rupert Straw, a Deputy Governor, supervised the purchase of foreign exchange in the open market.
Mr Orville Beckford was employed as Director of the Economic Co-operation Department of the BOJ from May to December 1992, when he was made redundant. He was however kept on to perform some services relating to his old department and occupied an office in the BOJ until his engagement was finally terminated on 8 February 1993, after the events giving rise to these proceedings had come to light. His duties did not at any time involve the purchase of foreign currency or helping the authorised agents of the BOJ to do so. But it seems that Beckford would identify vendors of foreign currency and sell or arrange sales to certain of the BOJ's authorised agents. Such agents included Jones and Mitchell. There is no finding that Beckford was authorised by the BOJ to do this. But Jones' evidence was that he made arrangements with Beckford in August 1992 to assist in obtaining foreign currency. Thereafter Beckford supplied him with US$200,000 on a daily basis. Jones would pay for the sums supplied by Beckford with cheques drawn in favour of payees named by Beckford. Sometimes Jones would draw cheques and give them to Beckford before receiving the foreign currency he was buying.
Among those who sold foreign currency to the BOJ's authorised agents, either directly or indirectly through Beckford, were Messrs Michael Phillips and John Wildish. They sold such currency to Jones from 1991 until April 1992. After that date Jones did not buy directly from them but, as the trial judge put it, "Beckford subsequently provided the said currency, up to the time of purchase of [Dextra's] cheque". It was Beckford, Phillips and Wildish who perpetrated the fraud at the heart of this case.
On about 11 January 1993 Wildish approached Myers & Alberga asking for a short-term loan of US$3 million for three months on behalf, he said, of the BOJ. He did not represent himself to be an agent or employee of the BOJ, and in truth was neither. He had no authority of any kind from the BOJ. Myers spoke to the secretary of Dextra and then wrote to Dextra confirming the request for a loan. On about 12 January Phillips and Wildish personally represented to Dextra that they had been asked by Beckford, an officer of the BOJ, to try and obtain a loan. Again, they did not represent themselves to be servants or agents of the BOJ. On 13 January the board of Dextra passed a resolution agreeing to make a loan and authorising the chairman to negotiate and approve the terms of the loan and of a promissory note in consultation with Dextra's attorney. The secretary of Dextra told Myers of the resolution. Myers drafted a promissory note which he passed to Wildish for approval. Some amendments were made, it seems at the instance of Beckford. On 15 January Myers sent Wildish a draft of the promissory note and added:
"I suggest you show this letter to the Bank of Jamaica and if they have any further problems with the document let them call us direct to discuss them as going through you as intermediary is a waste of time."
He then gave Wildish instructions as to the signing of the promissory note:
"A resolution of the board will be required … you must therefore get from the bank a certified copy of the resolution unless Mr Beckford, who I assume has the authority, tells you it is not necessary … if not this is going to cause delay … we must be sure that the note is properly authorised and signed."
The BOJ knew nothing of any proposed loan or promissory note. No contact had been made with anyone acting on its behalf or with its authority.
At 1.30 pm on 19 January 1993 Ashenheim, as chairman of Dextra, met Myers and Phillips in Grand Cayman. Dextra's cheque for US$2,999,000 (representing US$3 million less a deduction of US$1,000 for legal costs), post-dated 20 January, drawn on Royal Bank of Canada, Dextra's bankers in New York, and payable to the BOJ, was handed to Phillips by Myers. Myers told him to take the cheque and two copies of the promissory note to the BOJ, to see personally that the note was signed by the Governor or the Deputy Governor and another authorised officer, to hand Dextra's cheque to the BOJ upon receipt of the signed note, to take the note to the Stamp Commissioner for stamping as exempt from stamp duty and to return the signed note to him by courier. Phillips did not follow these instructions.
According to Jones, whose evidence was accepted, Beckford told him, sometime before 20 January, that he was expecting to get US$3 million, payable to the BOJ, from a group of Caymanian investors. He would be asking Jones to buy US$2 million and Mitchell US$1 million. He would ask that payment be made "by way of a number of cheques to payees which he would provide". It appears that he later made this request. On 19 January Jones drew 7 cheques payable to a number of individuals. On the next day he drew another cheque, to make up the total of US$2 million. Mitchell drew four cheques, three on 18 January and one on 19 January, amounting in total to US$999,000. These cheques were given to Beckford, and all of them (with the exception of that dated 20 January) were presented and cleared on or before close of business on 19 January. None of these cheques was drawn in favour of Dextra. The Court of Appeal recorded:
"… the undisputed fact is that certain of those cheques made payable to fictitious persons were lodged to the credit of Le Par Ltd in the account at the New Kingston branch of the Eagle Commercial Bank. Phillips and Wildish were the signatories to and operators of that account. Certain other cheques used in purchasing the Dextra cheque were lodged to the Troy McGill account. The lodgment slips were signed by Phillips or Wildish in each case".
In drawing cheques in favour of payees (or fictitious payees) nominated by Beckford in anticipation of receiving the foreign currency they were buying Jones and Mitchell failed to comply with a term of their respective agency agreements with the BOJ which provided:
"All payments for purchases by the Agent must be by way of cheques drawn in the name of the Vendor. Payment may only be made to the Vendor against immediate delivery of the cash items or effects to the Agent."
Late on 19 January, or possibly on the following day, Beckford handed Dextra's cheque to Jones in Jamaica. It was an...
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