Morrell (Gifford), Morell (Fiona) v Workers Savings and Loan Bank

Judge DOWNER. J.A. (dissenting) , BINGHAM, J.A: , WALKER. J.A.:
Judgment Date04 November 2004
Neutral CitationJM 2004 CA 36
Judgment citation (vLex)[2004] 11 JJC 0401
CourtCourt of Appeal (Jamaica)
Date04 November 2004
Hilary Phillips, Q.C. Dr. Lloyd Barnett, and Harold Brady instructed by Grant Stewart and Phillips for Appellants.
Dennis Goffe, Q.C. Sandra Minott-Phillips and Odia Reid instructed by Myers, Fletcher and Gordon.

CONTRACT - Mortgage contract - Enforcement of mortgage to recover debt to bank - Whether contract between parties valid and enforceable - Whether appellant's debt to bank justified by evidence - Issue of illegality

DOWNER. J.A. (dissenting)





The problem to be resolved in this unusual appeal is whether Cooke J. ruled correctly concerning the operation of four current accounts which the appellants Gifford Morrell and his daughter Fiona Morrell operated with the respondent bank, Workers Savings and Loan Bank constituted under the Workers Savings and Loan Bank Act. The dominant account was in Jamaican currency while the other three accounts were in U.K. sterling, American dollars and Canadian dollars,. The cardinal principle of law advanced by the appellants was that the four contracts to operate the accounts provided for written mandates by way of cheques on the Jamaican dollar account and withdrawal slips for the foreign currency accounts were the only methods to debit these accounts. There were two minor exceptions to this invariable rule. The accounts could be debited for bank, as well as interest charges. Closely connected with these accounts, on the Bank's case, was that a mortgage was held over Mr. Morrell's property. The learned judge ruled that the Bank was entitled to enforce the mortgage as the current account in Jamaican dollars was in overdraft. He also imposed a rate of interest on the amount he found the appellants owed the Bank. On the issue of the mortgage the appellants claimed that it was for a specific loan which was never disbursed. They therefore contended that the Bank could not exercise a power of sale for this reason and also from the fact that all the accounts were in credit.


This was a complicated case. Some of the records could not be traced. Some of the principal Bank employees gave no evidence, and in any event they were no longer employed by the Bank. In these circumstances both parties jointly retained accountants to carry out an audit of the accounts with such records as they both submitted. The evidence of the accountants which was relied on by the appellants will be crucial in this appeal. Equally important, will be the conclusive evidence clause in the contract for the Jamaican current account on which the Bank relies.


The other principal issue between the parties was raised by the appellants for the first time on appeal. The learned judge acknowledged at the very outset of his reasons for judgment, that Morrell was trading in foreign exchange, in contravention of the Exchange Control Act. Counsel for the Bank cross-examined Mr. Morrell on this issue. The issue of law which was raised for the first time on appeal was whether the Bank can rely on these illegal transactions to enforce its debt and retain its powers of sale pursuant to the mortgage. On this issue the Bank's principal defence was that the matter ought to have been pleaded in the Court below. The other line of defence was that even if it was obligatory to plead the illegality, the breaches were for the criminal Courts. It would not affect the validity of the mortgage. It is against this background that all the issues must be examined.




How the issues were pleaded in the Court below


The appellant's Amended Statement of Claim is to be found at pages 192-202 of Volume I of the Record.


The accounts in issue were the Jamaican Dollar Account opened on 16 th April, 1992, the U.S Dollar Account 8200038, Canadian Dollar Account 0820041 and the U.K. sterling account 08239941. The foreign currency accounts were deposit accounts, but there were no passbooks and in substance they were operated as current accounts although there were no cheque books. These Accounts were also called savings accounts. It is noteworthy, that no bank statements concerning these foreign currency accounts were ever sent to the appellants.


The appellants' averments concerning the operation of his accounts - his daughter's name; was added later- are set out in the following paragraphs of the Amended Statement of Claim:

  • "3. During 1992 the Plaintiff opened a Jamaican Dollar account #8001100 referred to in this Statement of Claim as 'the current account'.

  • 4. The Plaintiff also opened a United States of America Dollar Savings Account #8200381; a Canadian Dollar Savings Account #8200046 and a Pound Sterling Savings Account #08200041.

  • 6. Pursuant to the said agreement the Defendant undertook to receive lodgments into the Plaintiffs' current account in Jamaican Dollars from the Plaintiff's customers and clients and to make payments from Plaintiff's foreign exchange savings accounts in various foreign currencies to the said customers and clients. The said transactions were conducted on the basis of the rates of exchange that the First Plaintiff negotiated with his customers and clients and which he communicated to the Defendant and the written authorizations given by the First Plaintiff to the Defendant to deduct sums from the Savings Accounts."


A point to note is that there is a specific reference to the four accounts in these paragraphs. With respect to the Jamaican dollar account clause 4 of the agreement was captioned "Verification of Account. " Paragraph 6 and any other averment in the Amended Statement of Claim which adverts to this account brings the Verification clause in issue. With respect to all four accounts to ere are provisions in the agreement to open the accounts which stipulate that the withdrawals from the accounts were to be by written mandates by the appellants.


The Amended Statement of Claim continues:

  • "7. The Defendant undertook that in those instances where the First Plaintiff agreed to sell foreign exchange to purchasers who were not in Savanna-la-Mar that payments in Jamaican Dollars would be made to another of the Defendant's branches and that the Defendant would arrange for the transfer of the Jamaican Dollar funds by telephone after the Defendant received the Jamaican Dollar funds from the purchasers and lodge those sums in the Plaintiffs' current account before it made payments in foreign exchange to the purchasers from the Plaintiffs' Foreign Exchange Savings accounts.

  • 8. In addition to transactions that involved the Plaintiffs' customers and clients, the Defendant,, acting on behalf of Its own customers periodically made requests to the First Plaintiff for him to sell foreign exchange to the Defendant's customers. These requests were the basis of contracts between the Fir^ Plaintiff and the Defendant for the First plaintiff to sell foreign exchange to the Defendant's customers in which the Defendant undertook to collect the Jamaican currency from its customers and lodge the same into the Plaintiffs' current account. In those instances where the First Plaintiff agreed to sell foreign exchange to the Defendant's customers who were not at the Savanna-la-mar branch the Defendant's customers would make payment of the Jamaican Dollar funds to the account of the Plaintiffs at another of the Defendant's branches and the Defendant would arrange, after the Defendant received the Jamaican Dollar funds from the purchasers, for the transfer of the Jamaican Dollar funds by telephone to the Plaintiffs' current account before payments were made from the Plaintiffs' Foreign Exchange Savings Accounts to the Defendant's customer,

  • 9. In any event whether the First Plaintiff was selling foreign exchange to his customers or facilitating the Defendant to sell foreign exchange to the Defendant's customers it was agreed between the First Plaintiff and the Defendant that no deductions would be made from the Plaintiffs' foreign exchange savings account without his written authority."


On the basis of paragraphs 6,7,8 and 9 the appellants alleged Breach of Contract and Negligence. The particulars of the Breach of Contract are as follows at page 199 of Volume I of the Record:

11. The Defendant in breach of contract and or negligently operated the said accounts so that the Plaintiffs' current account went into overdraft in early 1993, at a time when the sole business being transacted through that account related to trading in foreign exchange.

  • (a) Failing to ensure that the purchasers of foreign exchange made lodgments to the Plaintiffs' current account before deductions were made from the Plaintiffs' Foreign Exchange Savings Accounts.

  • (b) Failing to ensure that the payments in Jamaican Dollars made by the purchasers of Foreign Exchange were credited to the Plaintiffs' current account

  • (c) Making deductions from the Plaintiffs' current account and Foreign Exchange Savings Accounts without any written authority to do so."


As 11(c) is at the heart of the appellants' claim, it is appropriate to state that cheques or withdrawal slips were the instructions the appellants were relying on to substantiate their claims. Then paragraph 12 reads:

"12. As a consequence of the breach of contract by the Defendant the Defendant charged the Plaintiffs interest on the said overdraft, in consequence whereof the Plaintiffs have suffered loss and damage."


If the unauthorized debits resulted in an overdraft, then the appellants can rightly claim that the corresponding interest charges were unwarranted. The appellants made further allegations on the issue...

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