National Commercial Bank Jamaica Ltd v Olint Corporation Ltd

JurisdictionUK Non-devolved
CourtPrivy Council
JudgeLord Hoffmann
Judgment Date28 Apr 2009
Neutral Citation[2009] UKPC 16
Docket NumberAppeal No 61 of 2008

[2009] UKPC 16

Privy Council

Present at the hearing:-

Lord Hoffmann

Lord Rodger of Earlsferry

Lord Carswell

Lord Brown of Eaton-under-Heywood

Lord Mance

Appeal No 61 of 2008
National Commercial Bank Jamaica Limited
Appellant
and
Olint Corp. Limited
Respondent

[Delivered by Lord Hoffmann]

1

The chief issue in this appeal, as formulated by Panton P in the Court of Appeal, is whether a bank, "by merely giving reasonable notice", can lawfully close an account that is not in debit, where there is no evidence of that account being operated unlawfully: see paragraph 12. Their Lordships have no doubt that in the absence of express contrary agreement or statutory impediment, a contract by a bank to provide banking services to a customer is terminable upon reasonable notice: Paget's Law of Banking 13 th ed (2007) p. 153.

2

Olint Corp Ltd ("the company") carries on the business of providing administrative and other services to an investment club which appears to have offered its members very high returns, allegedly derived from profits made in foreign exchange trading. In 2005 it opened two accounts with the National Commercial Bank Jamaica Ltd ("the bank") and a third account in 2007. Towards the end of 2006 the company attracted a good deal of unfavourable publicity in the press. There were allegations that it was, not to put too fine a point upon it, a pyramid or Ponzi scheme in which the returns to investors were paid out of the money subscribed by new investors attracted by the prospect of high returns. In August 2007 the bank asked to see the company's audited accounts (as it is required to do under guidance issued by the Bank of Jamaica for the purpose of countering money-laundering and terrorist financing) but they were not forthcoming.

3

On 14 November 2007 the bank, no doubt apprehensive that if the rumours turned out to be true, it might at best suffer some damage to its reputation and at worst find itself on the receiving end of a claim for negligence or dishonest assistance in paying away money derived from club members, decided that it did not want to continue to be the company's banker. It wrote saying that it intended to close the company's accounts on 17 December and, in the absence of other instructions, would send the company a draft for its net credit balance. That was 32 days notice.

4

On 21 November 2007 the company asked that the period of notice be extended to 14 March 2008. The bank said that this was too long but agreed to an extension until 14 January 2008. It said that the company had given no information which could justify a longer period.

5

On 11 January 2008 the company, without any notice formal or informal to the bank, successfully applied ex parte for an injunction restraining the bank from closing its accounts until 25 January or further order. The application came before Jones J inter partes on 17 and 18 March. On 18 April he dismissed it. The company appealed and on 18 July 2008 the Court of Appeal granted the injunction until trial.

6

There is no allegation in the particulars of claim served on behalf of the company that the extended period of notice was unreasonably short. Instead, it is alleged that the bank was acting maliciously, contrary to its statutory obligations under the Banking Act and the Fair Competition Act and with the intention of inducing breaches of contract between the company and members of the investment club whose monies had been deposited. Their Lordships will consider each of these causes of action.

7

First, it was argued that the bank's contractual right to terminate the banking relationship by reasonable notice has been modified by section 4(3)(c) of the Banking Act. That paragraph is part of a general requirement, contained in section 4, that a licence to carry on a banking business should be granted only to companies which the Bank of Jamaica recommends as having fit and proper persons as their directors, managers and major shareholders. Section 4(3)(c) says what is meant by a fit and proper person: he must be of sound probity, competent, diligent and so on. Their Lordships are unable to see what these provisions have to do with the terms of the contract between the bank and its customers. In the Court of Appeal, Morrison JA criticised the judge for deciding this matter by way of a "mini-trial" and held that it gave rise to a serious issue which ought to be tried. But he did not explain what that issue would be and their Lordships consider that one has only to read section 4(3)(c) to see that it is irrelevant to any issue in this case.

8

The claims under the Fair Competition Act appear to their Lordships to be equally unpromising. First, it is said that by closing the account, the bank was abusing a dominant position in the market. There appears to have been no evidence to suggest that the bank occupied a dominant position – defined in section 19 as "such a position of economic strength as will enable it to operate in the market without effective constraints from its competitors" – in the market for banking services in Jamaica. The bank is the second-largest in Jamaica, with 34-37% of total loans and 30-35% of total deposits, but the Bank of Nova Scotia is larger and there are four other commercial banks in Jamaica, to say nothing of foreign banks. They are all in competition with each other. It is not easy to acquire a dominant position in the banking market. However, even if the bank did occupy a dominant position, their Lordships cannot see how a refusal to be the company's banker can be an abuse of that position. Abuse of a dominant position is normally with a view to securing some advantage in the market. Section 20 defines such abuse as impeding the "maintenance or development of effective competition". It does not appear to their Lordships that the bank's action could have any effect on competition between banks. On the contrary, it enabled competitors to pick up another customer if they felt inclined to do so.

9

Secondly, under the Fair Competition Act, it was argued that the bank was in breach of section 34(1)(b), by refusing to supply services to the company. Read literally, this subsection could mean that a refusal to supply goods or services to anyone, for whatever reason, was an offence under the Act. Section 34 has the side-note "Price Fixing" and their Lordships suspect that paragraph (b) of subsection (1) is the result of a slip in the legislative process, because it covers exactly the same ground in exactly the same words as paragraph (c), without the qualifying...

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