Moffett v Bank of Nova Scotia

• Jurisdiction: Barbados
• Court: High Court (Barbados)
• Judge: Douglas, C.J.
• Judgment Date: 30 May 1969
• Neutral Citation: BB 1969 HC 9
• Docket Number: No. 261 of 1966
• Date: 30 May 1969

High Court

Douglas, C.J.

No. 261 of 1966

Moffett

and

Bank of Nova Scotia

Appearances:

Mr. J.S.B. Dear, Q.C. and Mr: H. St. John, Q.C. instructed by Messrs. Carrington and Sealy for the plaintiff.

Mr. W. Hanschell, Q.C. and Mr. H. deB. Forde instructed by Messrs. Yearwood and Boyce for the defendant.

Bank - Account — Statement of account — Agreement by customer to check entries and notify bank of errors or omissions therein — Whether agreement estopped customer from claiming that amount improperly debited

Douglas, C.J.

1 In these proceedings, Helen Bilsi Moffett seeks against the Bank of Nova Scotia (hereinafter referred to as “the Bank”) the return of the title deeds of “Dumbarton,” Kent, Christ Church, jointly owned by her and her husband, Henry Moffett. She also seeks a declaration that certain amounts debited to her account by the Bank were wrongly debited and she asks for ancillary relief.

2 The Bank by its defence claims to be entitled to retain the title deeds, denies that the debits were improperly charged to Mrs. Moffett, and counterclaims for moneys owing to the Bank under various heads.

3 On August 3, 1962, Mr. and Mrs. Moffett borrowed the sum of $72,000 from the Bank and deposited the title deeds, of their home, “Dumbarton,” Kent, Christ Church, as security. Under the memorandum of deposit Mr. and Mrs. Moffett agreed with the Bank that “the Bank may hold the documents until all obligations, present or future, direct or indirect, of the undersigned to the Bank, have been fulfilled, and whether the same arise from agreement or dealings between the Bank and the undersigned or from any agreement or dealings with any third person by which the Bank may be or may become in any manner whatsoever a creditor of the undersigned, and whether such obligations were or were to be incurred alone or with another or others, and whether as principal or surety, and whether matured or not, and whether absolute or contingent.”

4 On September 16, 1962, Mrs. Moffett entered into an agreement with the Bank to open a personal current account. Among the terms of the agreement was the following:

“Upon receipt from the Bank from time to time of a statement of account of the customer together with cheques and other debit vouchers for amounts charged to the said account appearing therein, the customer will examine the said cheques and vouchers and check the credit and debit entries in the said statement, and within thirty days of the delivery thereof to the customer or, if the customer has instructed the Bank to mail the said statement and cheques and vouchers, within thirty days of the mailing thereof to the customer, will notify the Bank in writing of any errors or omissions therein or therefrom; and at the expiration of the said thirty days, except as to any errors or omissions of which the Bank has been so notified, it shall be conclusively settled as between the Bank and the customer that the said cheques and vouchers are genuine and properly charged against the customer and that the customer was not entitled to be credited with any amount not shown on the said statement.”

5 At the time of these transactions Mr. Moffett was the Managing Director of Moffett Industries Limited, (hereinafter referred to as “the Company”) which carried on the business of processing logs imported from abroad into lumber. He was at the same time the principal shareholders in the company, holding sixty per cent of the Company's shares. The $72,000 borrowed from the Bank by Mr. and Mrs. Moffett represented the balance of Mr. Moffett's commitment to the Company in respect of his 60% share holding.

6 In April, 1963 Mr. and Mrs. Moffett and Mr. John Showalter, a director and shareholder who held 30% of the Company's shares, executed a continuing guarantee to the Bank, guaranteeing payment to the Bank of the liabilities whether direct, contingent or otherwise which the company had already incurred or might thereafter incur to the bank, whether arising from dealings or proceedings by which the Bank might in any manner become a creditor of the Company. And all of this was in addition to a debenture given by the Company to the Bank on the Company's assets to the extent of $102,000.

7 On the 31 ^st of May, 1963, the memorandum of deposit of the title deeds of “Dumberton” was upstamped from $72,000 to $125,000.

8 At the beginning of 1964 Mr. Moffett wrote to Mr. Wells, the Manager of the Bank, setting out the position of the Company at the time. In his letter of the 2 ^nd January, 1964, Mr. Moffett draws attention to the Company's overdraft at the 31 ^st December, 1963 standing at $165,429 and the Company's operating loss of $59,736 for the year. He continues –

“While we are not particularly please with this loss, it should be noted that this first year can hardly be considered a normal year. Actually two specific problems contributed almost wholly to this loss. First, sales were considerably below expectations. This was not due to lack of orders, actually at year end there is over $175,000 in back orders for the local market, but rather a slow start in production.

Considering that our burden and staff costs are for twelve months yet sales for the first six months were only $32,000 as against $301,000 for the last half, it is obvious that a significant loss was incurred the first six months. Secondly, our shipping costs were completely out of line ……..”

9 Mr. Moffett gave evidence that the Company was chronically under-capitalised. In his letter of the 2 ^nd January, 1964 he wrote –

“The other basis problem confronting this Company is lack of working capital. Considering that the two principal owners, J.T. Showalter and the writer have out-of-pocket investments of nearly $300,000 in this Company plus two years services without any remuneration, the subject of providing more working capital was deferred until the end of the first year of operation. At the beginning of the year we confidently expected to generate sufficient working capital from profits ……..”

10 It was in these circumstances that Mr. Moffett paid a visit to the Bank's head office in Toronto. The object of his mission was to provide the Company with additional working capital. The upshot of the discussions in Canada seem to be recorded in a letter dated the 29 ^th January, 1964 signed by Mr. Moffett and Mr. Showalter and addressed to Mr. Wells in these terms –

“With regard to our current overdraft we have determined that we have sufficient production and inventory to realise sales of at least $110,000 this month. We have further discussed with the dealers and established that they would cover all receivables by month end.

On this basis we are in a position to guarantee that our overdraft will not exceed $190,000 at that time.”

11 In the meantime the firm of Harrisons and Crosfields (hereinafter referred to as “Crosfields) had evinced an interest in the Company's operations and negotiations were commenced with a view to a merger between the Company and Crosfields. Crosfields is a large firm, internationally known in the trade and headed by Sir James Mitchell.

12 From the 8 ^th April until the 15 ^th of July, 1964 Mr. Williams acted as Manager of the Bridgetown branch of the Bank. On the 3 ^rd of June, he spoke to Mrs. Moffett about the overdraft on her personal account which at that time was in the order of $1,300. Mr. Williams requested that Mrs. Moffett execute a promissory note for $1,400 to “regularise” (as he put it) the overdraft. This she did and the note bears the date 3 ^rd June, 1964 and in it Mrs. Moffett promises to pay to the Bank on demand the sum of $1,400 with interest at 7 per centum. It is not disputed that this note remains unpaid.

13 In June, 1964 Mr. Moffett went to England for talks with Crosfields and returned with a letter of intent setting, out the conditions on which a merger could be affected between the Company and Crosfields. Mr. Moffett claims that this letter was shown to Mr. Wells and certain agreements come to between the Bank and the Company. In paragraph 2 of the Amended Reply and Defence to Counterclaim, it is pleaded that Mr. and Mrs. Moffett informed the Bank that Crosfields had offered to purchase shares of Mr. and Mrs. Moffett in the Company for the sum of $70,000 thereby acquiring a majority shareholding in the Company and that the Bank agreed that if the Moffett sold their shares ad paid in the money to the Bank, the Bank would release the memorandum of deposit and the guarantee mentioned above. In answer to the Bank's request for particulars, the following particulars were supplied in respect of the above pleadings –

“It was in or about the month June 1964 (the exact date whereof cannot be specified) that the plaintiff and Henry O. Moffett informed Mr. Roy Wells, the Manager of the defendant Bank, at the Bank's Headquarters, Broad Street, Bridgetown, of the matters set out in paragraph 2 of the Reply. This took place in the afternoon — no more exact time can be given …… The agreement was oral to the general intent set out in paragraph 2 of the Reply and more particularly Mr. Wells said “as soon as the money is paid, your documents will be returned without question.” This was addressed to Mr. Henry O. Moffett.”

14 I am satisfied on the evidence that there was no such conversation or agreement because the simply fact is that Mr. Wells was not in Barbados in June, 1964.

15 On the 14 ^th September, 1964, Mr. Moffett was in the Republic of Honduras expediting timber on behalf of the Company. On that date Mrs. Moffett signed a requisition for a bank draft for $2,500 United States currency in favour of Santiago Babuen. This transaction cost $4,322.54 and was debited to Mrs. Moffett's account in accordance with the terms of the requisition form in which the following words are set out –

“You are authorised to charge the total cost of the above to my account.”

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