AN 85-YEAR-OLD retired businessman, Stephen Hew, won $18 million following a Court of Appeal ruling yesterday that the National Commercial Bank was in breach of its fiduciary duty .The Court of Appeal upheld a Supreme Court ruling in July last year which was in Mr. Hew's favour and dismissed the bank's appeal.
The dispute between Mr. Hew and the bank arose from a loan transaction in 1989. Mr. Hew's 45-acre property in Ironshore, St. James was mortgaged to the bank on September 13, 1989 for $1,750,000. On December 27, 1989 Mr. Hew's 95 acres of land at Ironshore was mortgaged for $5 million. The loans were to build houses at Barrett Town, St. James.
In 1991 the overdraft exceeded $3 million and the bank requested the money. The bank withdrew the overdraft facilities, but with interest rates and penalty rates reaching over 80 per cent at times, the overdraft grew rapidly, despite Mr. Hew's repayment of over $12 million. In 1996, Mr. Hew received a letter of demand from the bank for the payment of $32,945,108.20.
After he received the letter, he sued the bank on May 22, 1996 claiming damages for negligence and breach of fiduciary duty. The bank, in turn, filed a suit against Mr. Hew to recover the $32 million.
Justice Basil Reid heard the suits and on July 31 last year, ruled in Mr. Hew's favour.
The bank appealed and the Court of Appeal comprising the Hon. Ian Forte, President of the Court of Appeal, Justice Paul Harrison and Justice Ransford Langrin dismissed the appeal.
In dismissing the appeal, the court referred to advice which Mr. Hew got from the bank and said "the effect of the advice was that Stephen Hew, in his known vulnerable state, was ushered by Geoffrey Cobham (the then manager) into a transaction to spend money on a project with several foreseeable weakening features of obstacles, delays, and escalating costs."
The court also issued a stern warning for bank managers to stick to banking. "The manager of a bank must remain a banker simpliciter advising on banking and related financial matters. He must exhibit a professional detachment from investment transactions with his customers and not be tempted into the realms of investment advice and thereby be seen to have crossed the line," the court said.
It was the court's finding that because there was manifest disadvantage suffered by Mr. Hew in the transaction with the bank, the presumption arose that the bank exercised undue influence over him.
