Barbara Gayle, Staff Reporter

Sandra Minott-Phillips (right) of Myers, Fletchers and Gordon was assisted by Dave Garcia (left) in representing the Workers Savings and Loan Bank against the Morrell's. - Contributed

A St. Elizabeth businessman, his last hope of reprieve dashed by the United Kingdom Privy Council, is now faced with a huge debt of $462 million to October 17, with interest accruing at a daily rate of $40,000, arising from loan transactions with a bank between 1992 to 1994.

Gifford Morrell's debt is now eight fold the $57 million he owed at the start of the case in 1998.

But it is not the size of liabilities but the precedent set by the ruling that will spark interest in banking, financial and business circles, based on the conclusion drawn by law lords that notwithstanding specific mandate in writing, a bank can act on oral instructions from its clients.

Essentially, the Privy Council has endorsed arguments that verbal directives from a bank client can override earlier written instructions.

overdraft facility

Morrell, who had an overdraft facility with the failed Workers Savings and Loan Bank, which was taken over by Finsac in the 1990s and is in the process of being wound up, had sued the bank - his daughter was also party to the suit - claiming that Workers wrongly debited their accounts and was unable to supply documentary proof or authorisation for such debits.

The bank counter-claimed for an overdraft, which in September 1994 amounted to $56.8 million, on the basis that it acted on verbal instructions.

Justice Howard Cooke who heard the Morrell's suit in the Supreme Court, dismissed it in October 1998 and ruled that there should be judgement in the sum of $243 million for the bank on its counter-claim.

Morrell appealed the ruling. After a 44-day hearing that began October 1999, the local Court of Appeal comprising Justices Henderson Downer, Donald Bingham and Clarence Walker, handed down a majority decision in January 2003 applauding Cooke's ruling. Justice Downer dissented.

The Morrells, for the first time, had raised the issue of illegality in the Court of Appeal and contended that the bank aided and abetted Morrell in an illegal activity, namely the selling of foreign exchange for which Morrell had no licence at the time. The Morrells said that because of the illegal transaction, the bank had no power to sell his 60-acre property in Lacovia, which was earmarked for eco-tourism development.

But the Court of Appeal dismissed the claim. Justices Downer and Walker held that the defence of illegality should not be allowed because it involved issues of fact which would have required trial to determine.

The Privy Council upheld the ruling, saying it was "not satisfied that it has all the relevant surrounding circumstances before it which would have been investigated if illegality had been an issue at trial."

The ruling followed arguments before it by Jamaican lawyers Sandra Minott-Phillips and Dave Garcia, representing the bank, that the local courts' decision should not be disturbed.

more reliable evidence

Hilary Phillips, Q.C. and Dr. Lloyd Barnett, who represented the Morrells, argued that the court should have accepted Morrell's diary entries as more reliable evidence than that given on behalf of the bank.

One of the important issues raised on appeal was the weight of a customer's oral instructions to a bank.

Bank executives had claimed that Morrell had given them oral instructions at times in relation to his accounts at the Savanna-la-Mar branch in Westmoreland in response to Morrell's claim that no debit could properly be made to his account without documented approval.

He argued that if the accounts had not been wrongly debited, his Jamaican dollar accounts would never have been overdrawn.

The Privy Council disagreed, noting in its ruling that "a customer's irrevocable authority to a bank to accept a document signed by a particular undersigned, attorney or agent, without any further signature or consent does not preclude the actual customer from giving or the bank from accepting and acting upon oral instructions from that customer."

"Similarly, the fact that a customer implied promises to repay any amount due against the written order from the customer addressed to the bank at the branch does not exclude either the possibility of an oral order or a bank's right to be indemnified in respect of an oral order, if it can show that such was given by the customer or with his authority."

The law lords commented that it was prudent for banks to behave in such a manner, but said nothing in law precluded it.

"A bank may not be bound, or prudent to accept purely oral instructions. But there is no basis in the contractual documentation used in this case or at common law for saying that a bank which can show that it received and chose to act on oral instructions is disentitled from obtaining an indemnity from its customer. That would be both strange and unfair."

barbara.gayle@gleanerjm.com