Court orders bank to pay damages

HSBC Bank Malta has been ordered to pay damages of over €3,000 to a company after it incorrectly informed it that a foreign cheque had been cleared.

ATG Company Ltd said it had received an order to export merchandise and had insisted upon payment in advance. It had received a bank draft for $18,000 drawn on Saudi British Bank.

The draft was deposited with HSBC until such time as it was cleared.

In December 2002, the bank informed the company that the draft had been cleared and the company proceeded to export the merchandise. However, the following January the bank advised that the draft had not been cleared and that the company had to make good for the funds it had utilised.

On its part, HSBC pleaded that it had acted in accordance with normal banking practice and that the bank draft deposited was false. Furthermore, the bank pointed out that the deposit slip signed by the company's representative clearly stated that the bank reserved the right to debit the client's account in the event that the draft was not honoured. This condition, the bank argued, was not a small print condition but was clear and concise.

In its judgment, the court noted that a bank representative had told the company that the bank draft in issue had been cleared but had subsequently said it had not been the case. When funds were cleared, the client was entitled, in normal circumstances, to assume that it could proceed with its business. On the other hand, the clause on the deposit slip ought to have alerted the company as to the risk it was taking.

The court found that both parties were equally to blame for the damages suffered by the company. HSBC was ordered to pay €3,267.65 in damages.