Bamboo Springs Bottled Water Ltd v The Bank of Nova Scotia

• Jurisdiction: St Lucia
• Judge: Mde. Justice Cadie St Rose-Albertini
• Judgment Date: 04 November 2022
• Neutral Citation: LC 2022 HC 006
• Docket Number: CLAIM NO. SLUHCM2019/0063
• Court: High Court (Saint Lucia)

Between:

Bamboo Springs Bottled Water Ltd

Claimant

and

The Bank of Nova Scotia

Defendant

Before:

The Hon. Mde. Justice Cadie St Rose-Albertini High Court Judge

CLAIM NO. SLUHCM2019/0063

EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

COMMERCIAL DIVISION

Appearances:

Ms Natalie DaBreo, for the Claimant

Mr. Deale Lee, for the Defendant

1 ST ROSE-ALBERTINI, J. [Ag]: Bamboo Springs Bottled Water Ltd (“Bamboo Springs”) has filed this claim, seeking several orders against The Bank of Nova Scotia (“the Bank”), inclusive of declarations, special and general damages, and an injunction.

2 The causes of action as pleaded comprise (i) fraud (ii) breach of contract, (iii) negligence, (iv) undue influence and (v) breach of fiduciary duty, all arising from the Bank's Small Business Financial Services Agreement (“the SBFSA”) said to be executed between the parties and a Credit Card Facility to the value of $400,000.00, which Bamboo Springs says it received from the Bank, in questionable circumstances.

3 The Bank denies the claim in entirety, stating that its relationship with Bamboo Springs never went beyond that of banker and customer; a Credit Card Facility was never issued to the company, and only two services were granted, namely (i) a chequing account and (ii) merchant and cash management services. The Bank says Bamboo Springs has breached the terms of the merchant and cash management services agreement by attempting to manually process exorbitant unauthorized card transactions and filed a counterclaim for outstanding sums which it says are due to it, by reason of Bamboo Springs' overdrawn chequing account.

The Issues

4 The issues which the Court is required to resolve are as follows:

• 1. Was a Credit Card Facility or mortgage loan granted to, or on behalf of, Bamboo Springs?

• 2. Whether the SBFSA contained the full scope of the contractual obligations and relations between parties, and the relationship thereunder remained strictly within the realm of banker and customer, or did it constitute a partnership arrangement between them?

• 3. Was Bamboo Springs issued with Current Account Number 61526 (“the Chequing Account” or “the Account”) under SBFSA and if yes, did the Bank unlawfully reverse the sum of $1,500,000.00 from the Account thereby causing loss and damage to the company's business?.

• 4. Is Bamboo Springs entitled to a refund of the sum said to have been reversed from the Account?

• 5. Did the Bank unlawfully refuse to process and/or clear three debit card transactions processed through the merchant and cash management services provided to Bamboo Springs by the Bank?

• 6. Is the Bank entitled to the sum claimed as overdraft on the Chequing Account together with interest?

• 7. Did the Bank breach any fiduciary obligations to Bamboo Springs?

• 8. Was the Bank obligated to instruct Bamboo Springs of the need to have a financial expert present at meetings, and to seek independent legal advice in relation to its banking transactions?

5 It must be stated here that all references to sums of money in this judgment are to Eastern Caribbean Currency (XCD), except where it is expressly stated to be another currency.

Bamboo Springs Claim

6 Bamboo Springs is engaged in the business of harvesting and bottling spring water for wholesale and retail on the open market. It alleges that pursuant to the SBFSA which was executed between the parties, the company engaged in a business partnership with the Bank. The Bank as the principal partner, agreed to use its knowledge, skills, experience and expertise to provide flexible and customized financial services and knowledge of the business world to enable the company to achieve its business objectives with maximum efficiency and effectiveness. It is said that at the Bank's invitation, the directors of Bamboo Springs met with representatives of the Bank to discuss the nature and effect of entering into the SBFSA. The Bank gave assurances that the SBFSA was in Bamboo Springs' best interest and was designed to enable the company to obtain expert financial advice, and reasonable customer-friendly financial services. In that regard, at a meeting with Andrew Augustine, a loans officer at the Bank, Bamboo Springs relied on the following assurances given by the Bank:

• i. the Bank was not in a position at that time to offer a mortgage loan facility as requested by Bamboo Springs, but could make available a Credit Card Facility in the amount of $400,000.00 (“the CCF”) secured by immovable property valued at $1,500,000.00, belonging to a director;

• ii. the company could return after a period of two years, at which time the Bank would reconsider the effect of the CCF on its business and the possibility of converting it to a mortgage loan;

• iii. Bamboo Springs could return to the Bank in the event that it was having difficulty meeting payments on the CCF, and the Bank would arrange to make the payments more manageable; and

• iv. the Bank would do all in its power to ensure that Bamboo Springs' business remained a going concern by providing reasonable interest rates and payment arrangements.

7 It is alleged that upon signing the SBFSA, the CCF and the Chequing Account were issued with the assurance that the latter could be used to deposit any amount of money needed for the business operations, with no mention of any restrictions on the use of the Account. However, the interest rates soon became unbearable, and the company approached the Bank on numerous occasions for a more lenient facility, which the Bank refused. The result was that Bamboo Springs began to fall into significant indebtedness. It is said that the Bank's assurance that the SBFSA was a business partnership and its undertaking to provide sound financial arrangements were less than forthright.

8 Bamboo Springs asserts that it was coerced and unduly influenced to enter into the SBFSA because the Bank withheld the true meaning and implication of the CCF, thereby acting in breach of its fiduciary duty to inform the company of the right to seek independent legal advice. It is said that the Bank knew or ought to have known that Bamboo Springs' directors were ignorant of the business world, as such, granting them the CCF betrayed the spirit and intent of the SBFSA. It is pleaded that the Bank was in an advantageous position, having knowledge of small business operations and knowing that the CCF was not a strict loan facility, and exacted interest rates and monthly payments which were certain to bankrupt a small emerging business, Further, the CCF was not a feature of the SBFSA but was fraudulently, maliciously and clandestinely forced upon Bamboo Springs as part of it

9 Bamboo Springs pleaded that the Bank was the only party to the SBFSA that was represented at the discussions leading up to the signing of the SBFSA and issuing the CCF, therefore the Bank was under a duty of care to:

• i. inform Bamboo Springs that it was free to have a financial or business expert present to represent its interest;

• ii. inform Bamboo Springs it had the right to consult an Attorney-at-Law for independent legal advice;

• iii. invite the directors to read the SBFSA, or read and explain it to the directors, and inquire whether they understood the details and technical terminology used, and the nature and consequences of the SBFSA;

• iv. determine whether the company was sufficiently profitable and in a position to make the payments under the CCF having regard to market competition and the volume of sales required to sustain profitability;

• v. inform Bamboo Springs that the CCF was not part of the SBFSA, and to inquire into whether it was amenable to the use of this facility;

• vi. inform Bamboo Springs of details concerning use of the Chequing Account and any restrictions imposed thereon;

• vii. inform Bamboo Springs that there would be mercantile charges for services rendered, in the usual manner.

10 It is asserted that the SBFSA was obtained by economic manipulation, economic duress, undue influence, fraud and bad faith, and was intended to unjustly enrich the Bank. Having had the upper hand, the Bank made misrepresentations to Bamboo Springs, upon which it relied, to its detriment. When the company started to experience financial difficulty it relied on the advice of the Bank that it was free to seek other financial support, as a result of which it sought and obtained investments from four investors. The Bank subsequently froze the investment funds and reported to the Police that Bamboo Springs was misusing the facilities granted by the Bank.

11 Bamboo Springs says on 7 ^th December 2017, the sum of $1,500,000.00 was received from Nguyen Ton Van via its Chequing Account, as a transfer from Scotia Merchant Bank in Trinidad and Tobago. The sum was cleared by the Bank and the company was permitted to use those funds. The Bank honored cheques issued and thereby acquiesced to Bamboo Springs' use of the funds. Thereafter, without warning, without its knowledge or consent, and for undisclosed reasons, the Bank froze the Chequing Account, prohibited Bamboo Springs from using the funds and ordered persons to whom payments had been made to return the sums disbursed to them. Bamboo Springs further says that to date these funds have not been returned to Nguyen Ton Van, and he continues to hold the company liable for the said sum, under their Investors Agreement. Additionally, three other investments from Hunkar Aydin for €700,000.00, Imran Farooq Ur-Rehman Khan for €500,000.00, and Ben Edward White for US$1,000,000.00 were withheld in Trinidad and Tobago and never transferred to its Chequing Account. As the Bank has denied receiving these monies, Bamboo Springs has been placed in jeopardy of being liquidated by its investors.

12 Bamboo Springs claims that as a business partner, the Bank never once called in its directors to inform them that there was suspicion about the...