Dindial v Rbtt Bank Ltd

• Jurisdiction: Trinidad & Tobago
• Court: Court of Appeal (Trinidad and Tobago)
• Judge: Mendonça, J.A.
• Judgment Date: 31 January 2014
• Neutral Citation: TT 2014 CA 2
• Docket Number: Civil Appeal No. 244 of 2009
• Date: 31 January 2014

Court of Appeal

Mendonça, J.A.; Bereaux, J.A.; Rajnauth-Lee, J.A.

Civil Appeal No. 244 of 2009

Dindial

and

Rbtt Bank Limited

Appearances:

Mr. Dolsingh appeared on behalf of the appellant.

Mr. Gilkes, appeared on behalf of the respondent.

Negligence - Loan — Duty to avoid causing damage — Whether the Bank owed a duty of care to the appellant where the Bank had paid out sums to a third party who defrauded both the Bank and the appellant — Foreseeability — Proximity — Fairness — Loan — Whether the duty of care arose out of the course of the loan transaction as the Bank dealt directly with the third party where the actions were done at the behest of the appellant — Disbursement of loan — Debit authorisation — Whether the Bank was negligent because it had represented by letter it would pay the third party by way of bank draft but had not done so by debit authorisation and the letter had not excluded other payment methods — Security for loan not yet perfected — Whether section 20 (b) of the Sale of Goods Act Chap 82:30 could apply to the objection that the trucks which were the security for the loan had not been delivered — Mortgage of sale of bills — Whether the failure to search the register of mortgage of sale of bills could be a breach of duty where the Bank owed no duty to ensure that the security was perfected — Legal advice — Whether the Bank acted negligently in obtaining a mortgage where the appellant opted not to obtain independent legal advice — Appeal dismissed.

I agree with the judgment of Mendonça J.A. and have nothing to add.

N.Bereaux, J.A.

I too agree.

M.Rajnauth-Lee, J.A.

Mendonça, J.A.

1 The appellant at all material times was an operator of trucks. In 2005 he decided to acquire two dump trucks from a Mr. Rattan (Rattan) at the total cost of $900,000. In or about February 2006, he approached the respondent Bank (the Bank) for a loan of $600,000 to assist in the purchase of the trucks. His application for the loan was approved on March 21st, 2006. As security for the loan the appellant was required to provide a mortgage over the trucks by way of mortgage bills of sale.

2 On April 12th, 2006 the appellant executed a mortgage bill of sale in respect of each of the trucks. The Bank on that date disbursed the loan proceeds and credited Rattan's account with them. Shortly thereafter it was discovered that the trucks did not exist. A fraud was perpetrated by Rattan and as the Judge (Jones, J) noted “not unsurprisingly he has since disappeared”. On May 12th 2006 the appellant subsequently executed a deed of mortgage in favour of the Bank over his property at Malabar, Arima, in essence, to replace the mortgage bills of sale as security for the loan.

3 In 2008 the appellant commenced these proceedings against the Bank claiming a declaration that the mortgage bills of sale and the Deed of Mortgage were null and void and should be set aside, damages for negligence and breach of contract. There were other consequential relief claimed that I need not set out.

4 The appellant alleged that the Bank was negligent in its dealings with him and pleaded several particulars of negligence and breach of contract. In summary the particulars related to the alleged failure of the Bank: a) to obtain the originals of certain documents which the Bank required for processing the loan; b) to verify the existence of the trucks; c) to transfer the loan proceeds without obtaining the authorization of the appellant and without following standard Bank procedures which required the money to be paid by a crossed cheque. It was pleaded as particulars of negligence and breach of contract that the mortgage over the appellant's property was obtained without his receiving independent legal advice.

5 The Judge in her judgment stated that the case of the appellant may be divided into 3 distinct areas namely: 1) the action of the Bank prior to the approval of the loan and the disbursement of the loan proceeds; 2) the unauthorized payment by the Bank of the loan proceeds to Rattan in payment for the trucks; and 3) the execution of the deed of mortgage by the appellant without his having obtained independent legal advice.

6 With respect to the actions of the Bank prior to the approval of the loan and the disbursement of the loan proceeds, the Judge was of the opinion that there was no duty of care owed by the Bank to the appellant “to ensure that the trucks existed or the appellant got what he paid for”. The arrangement between the appellant and Rattan was of no importance to the Bank, except insofar as it was concerned with the Bank's security. The Judge opined that:

“Insofar as the existence or the value of the trucks were relevant to the transaction between the Bank and the Claimant it was relevant only with respect to the ability of the Bank to recover its money in the event of default by the Claimant.”

7 With respect to the authorization of the payment of the loan proceeds to Rattan, the Judge found as a fact that the appellant had authorized the payment to Rattan and consequently could not complain that the Bank disbursed the loan proceeds to Rattan.

8 On the question of independent legal advice, the Judge was of the view that this issue was of no relevance to the appellant's case. She stated:

“The difficulty that the Claimant faces is that his case is based on the Bank's negligence and/or breach of duty of care towards him and not undue influence. While independent legal advice was one of the ways by which [an] allegation of undue influence is rebutted it is not an element in negligence, neither is it a cause of action on its own. I have not been referred to any authorities which show that there is a duty of care on the Bank to ensure that independent legal advice be given. What the authorities provided do show is that it may be prudent in certain circumstances for the Bank to require a party to obtain independent legal advice in order that it could avoid claims of undue influence. That is as far as the cases go. In my view they fall short of declaring that there is a duty on a Bank to provide or insist on independent legal advice to customers entering into a mortgage or other arrangements for the provision of security for a loan with them.”

9 The Judge therefore dismissed the appellant's claim and the appellant now appeals contending that the Judge erred in dismissing his claim against the Bank.

10 Before this Court Mr. Dolsingh, counsel for the appellant, attempted to argue that the Bank owed duties of a fiduciary nature to the appellant arising out of the trust and confidence reposed by the appellant in the Bank and that the mortgage bills of sale and/or the deed of mortgage were obtained by undue influence. The Court did not think that it was open to the appellant to make those submissions. Nothing of the kind was pleaded by the appellant. Of course an issue may have been a live one before the trial judge even though it does not arise on the pleadings. In that event the parties would have had an opportunity to fully investigate the factual circumstances. That is not the position here. Those were not live issues in the Court below and it would be unfair and prejudicial to the Bank to permit those issues to be raised before this Court. In any event what evidence there was in this case cannot support a claim of undue influence or go to show that the relationship between the Bank and the appellant acquired a fiduciary character and could give rise to claims of a fiduciary nature.

11 The appellant's case as noted previously is pleaded both in contract and in tort. Before this Court however, Mr. Dolsingh rested his case on the tort of negligence. He submitted that the Bank owed a common law duty of care to the appellant to ensure that the documents it received prior to the disbursement of the loan were genuine and that the trucks existed.

12 It is not disputed that when the Bank approved the loan to the appellant it required valuation reports in respect of the trucks and a slip issued by the Licensing Authority as evidence of registration of the vehicles in the name of the appellant. It is also not disputed that the Bank received copies of documents purporting to be valuation reports and certified copies of the certificate of registration of the trucks with the Licensing Authority purporting to be issued by the Licensing Authority. These documents were not genuine and were in fact copies of forged documents. They were apparently sent to the Bank by Rattan. Having received these documents the Bank proceeded to process and subsequently disbursed the loan. It is also not in dispute that the Bank did not take any steps to verify that the trucks existed prior to the disbursement of the loan. It is Mr. Dolsingh's contention that the Bank owed a duty of care prior to the disbursement of the loan proceeds to the appellant to ensure that the documents it received were genuine and that the trucks existed.

13 Mr. Dolsingh contended that there was an express representation by the Bank of the assumption of such a duty by it or alternatively that such a duty was owed on general principles pertaining to the tort of negligence.

14 With respect to the submission that the Bank assumed such a duty by express representation, it is sufficient to say that that is simply not borne out by the evidence. Mr. Dolsingh was unable to refer to any evidence that supported such a conclusion and following a careful examination of the evidence there is none that remotely suggests an express assumption of such a duty by the Bank. We must therefore have regard to general principles to determine whether the Bank owed the appellant the duty of care contended for by him.

15 It is now settled that for any situation to give rise to a duty of care three ingredients must exist and these are; 1) the foreseeability of damage; 2) there should exist between the party said to owe...