Scottish Court of Session Decisions

These actions which were debated on procedure roll concern the effect of a power of attorney and its operation in relation to joint bank accounts permitted by the first defenders, The Governor and Company of the Bank of Scotland ("the Bank").

Chronologically the first event was the granting of a power of attorney on 2 January 1990 in Mozambique, expressed in Portuguese, or the Portuguese in use in Mozambique. That document was translated by the Language Unit of the University of Dundee and it was that translation upon which the Bank operated. The power of attorney bore to be granted by Manhomed Ekabel Francisco Esmail, described as a single man, and it bore to appoint as his agent with limited power of attorney, Mr Bachir Latif Karim. Confirmation of the authenticity of the document was obtained, presumably by the bank, on 30 November 1992 from the Mozambique Embassy in London. The next event, so far as these actions are concerned, was the opening of an account with the Bank (No. 01924564). That account, a Premier Investment Account with a pass-book, was opened in the names of Manhomed (the first pursuer is Mahomed in the instance) Ikabel Francisco Esmail and Fatima Latif Karim on 23 October 1991 with the sum of £200,000. In connection with that account the form of application for the account was produced. That production was not signed by both account holders, nor, indeed, by either of them. The pursuers aver, however, that at all material times the authorised signatories of the account were both the first and second pursuers. On about 8 January 1993 Bachir Karim began operations upon that account in the course of which substantial sums of money were transferred out. There remains, according to the pursuers, after certain recoveries from Bachir Karim, a balance of £122,190.31 unaccounted for. On 11 May 1993 the pursuers took steps to close that account. At that time they did not expressly challenge the Bank about the operations which had taken place.

The next event, which was the concomitant of that closure, was the opening of three other accounts, each in the sum of £474,000 on 4 May 1993. These were the account in action No.1 (No. 01929322) in the name of Mr Esmail and his mother Mrs Zubeda Esmail. That Premier Investment Account from its application form bore to be in the names of Mrs Zubeda Esmail as the first applicant and Mahomed Ikbal Esmail as the second applicant. The application form bore to authorise the Bank to "accept the signature of either of us or the survivor as acknowledgement of withdrawals" and was signed by both of the account holders. The Bank accepted the power of attorney granted to Bachir Karim as validly conferring upon him power to operate that account on his own and permitted him to operate the account. As a result the pursuers aver that after Bachir Karim's intromissions there was a shortfall on the account of £157,740.90.

The second account (No. 01929306) was opened in the names of Mrs Fatima Latif Karim and Tasmin Iqbal, the wife and child of Mahomed Esmail. The authority in the application form was for an acceptance of a signature of "either of us or the survivor as acknowledgement of withdraws" and it was signed by Mr Esmail and his wife. Mr Esmail signed as guardian of the child Tasmin, whose date of birth was given as 9.2.91. In that account the operations of Bachir Karim left a shortfall of £176,011.50.

A fourth account (No. 01929314) was opened in the name of Adila Esmail, the schoolgirl daughter of Mahomed Ikbal Esmail, the second account holder. The child's date of birth was given as 21.11.84. On the application form the authority was to the Bank to "accept the signature of any one of us or the survivor as acknowledgement of withdrawals". It was signed by Adila and also by Mr Esmail. The alleged shortfall on that account as a result of the operations of Bachir Karim was £225,718.72.

Although the actions came before the court on the plea of the Bank seeking dismissal, it was, in the course of the debate, conceded by the Bank that if the power of attorney was held not to be sufficient to authorise the operation of the said accounts by Bachir Karim, the appropriate course would be for proof on quantum. If it were sufficient, however, each of the actions would require to be considered separately but each and all of them were irrelevant, according to the Bank, insofar as they sought to impose upon the Bank any duty other than to pay over the money to the attorney on his request.

Since, accordingly, the validity of the power granted in the deed and its subsequent use by the Bank is critical to each of the actions, that matter is considered first. As already noted it was granted by a person using a different name from that on the accounts in question. It was agreed that this was in fact the same person, but it was granted a considerable time before the accounts forming the subject matters of the action were opened, not by the attorney, but by Mr Esmail and others.

The essential features of the document are those in the following quotation.

(It is noted that the copy of the translation produced omits a comma between "establishments" and "and" and that the Portuguese word "consequentemente" is translated as "subsequently", perhaps not the obvious translation to a reader of the Portuguese word which gives the impression of "consequently" or "resultant" or "following", particularly in the context of the business document.)

The document continues,

I hope I do not do any injustice to the contention for the pursuers if I express it as being simply that this power of attorney which was directed towards business enterprises neither expressly nor by implication granted any power to the agent with limited power of attorney to operate joint accounts. In response the Bank contended that the powers conferred were extremely wide and the operation of bank accounts was clearly provided for.

The issue is a short, sharp one. The deed in my judgment does not expressly provide nor does it provide by implication any authority on the agent with limited power to operate joint bank accounts. In the first place it is plainly concerned with commercial and business activities. It is so introduced as being for that purpose. All the accounts in issue are joint accounts in the names of separate individuals in Premier Investment Savings Accounts of the Bank. Such accounts do not easily fall within the definition of activities relevant to conducting business. In particular, whether the activities relevant to conducting business were subsequent to or consequent upon the purchase of commercial establishments, the operation of joint savings accounts cannot fall within the general preamble. The question remains, however, whether the remainder of the document giving much detail of various activities, again, in my view, plainly directed to the conducting of a business, are sufficiently wide as to entitle the attorney to operate upon joint savings accounts and sufficient for the Bank to regard the operation as legitimately authorised. The only sub-clauses which related to bank accounts provide power to open bank accounts and, secondly, "to deposit and withdraw money moving his (my emphasis) accounts to any bank or other credit institutions". In my view the deed plainly envisages the attorney opening accounts and operating those accounts but not his operating joint accounts in which the name of the grantor appears. In any event, the provision for depositing and withdrawing money and moving his accounts to any bank would, in my opinion, be plainly referable only to any account of the grantor if it were not a reference to an account held by the attorney. I am unable to regard joint accounts as being "his accounts". A joint account is not the property of one of the account holders, however it may be operated from the point of view of administration. It is not appropriate in my opinion to describe a joint account as "his". It is an account containing funds to which he may have entitlement, but in a question with the Bank these were in none of the instances Mr Esmail's accounts.

Accordingly, for all those reasons, I shall sustain the pursuers' first plea-in-law to the extent of restricting enquiry to quantum. It follows that the first defenders' pleas-in-law apart from the last require to be repelled in each action.

If I were wrong in my construction of the deed then I would have allowed a proof before answer in each case. Action No. 3 is only saved from dismissal because in it there are contained averments in relation to a further power of attorney, said to be forged, bearing to be granted by Mrs Esmail, the joint bank account holder. On no view, in my opinion, could the third action otherwise proceed to proof except on quantum since it was never, so far as Mr Esmail is concerned, "his account", it was an account in the name of his child which he operated as guardian.

The argument advanced for dismissal by the Bank was that the Bank was acting in accordance with written instructions and actual authority and that there were insufficient averments to establish any special duty in relation to the paying-out of funds from a customer's account. Reference was made to Lipkin Gorman v Karpnale Ltd 1989 1 W.L.R. 1340 and Barclays Bank Plc v Quincecare Ltd 1992 4 A.E.R. 363, said by counsel to contain correct statements of the law of Scotland, that is, that the circumstances of the transfers in issue require to be such that they would have raised questions in the mind of a reasonable banker as to whether the transaction was in fact truly authorised by the customer and for the customer's benefit, thereby putting the banker under a duty of enquiry. Although the circumstances in each of the cases are different, the factors in each are sufficiently similar to allow them to be regarded in conjunction save that, in actions Nos. 3 and 4 involving, as they do, funds expressed plainly and on their face to be the equal property of children not of full age, it could well be argued that questions should more easily come to the mind of the banker with regard to transactions by an attorney than would in the case of adult account holders.

In actions 1, 3 and 4, apart from the general question about the terms of the power of attorney itself raising doubts about joint accounts being accounts of the grantor, there were the additional factors that funds were being withdrawn by the attorney and used to gamble upon the stock exchange, often within the same stock exchange account. This was scarcely a commercial operation. The very size of the transactions would itself raise questions. In addition, although the actions are separate, the conduct of the attorney in relation to these three accounts was similar and in total involved very substantial sums. Averments have been made on the responsibility of counsel that the magnitude of these transactions, the terms of the power of attorney and the identities of the account holders were matters such that no banker exercising ordinary skill and care would fail to have been put upon his enquiry. I think it is impossible to say as a matter of relevancy that the extent of the amounts involved and the frequency of the transactions could not as a matter of law be sufficient to put a reasonable banker exercising ordinary skill and care under a duty of enquiry as to whether the transaction was in fact truly authorised by their customer.

I should only add that the Records contained averments that the pursuers knew of the transactions which, although preceded by the words "believed and averred", I would not have felt able to exclude from probation.

On the whole matter, however, in each of the actions proof, before answer, will be restricted to quantification of loss.