Sagicor Bank Jamaica Ltd v YP Seaton and others (Jamaica)

A bank which makes unauthorised debits must reconstitute the customer’s account by disregarding those debits and crediting the contractual interest which would have accrued. The resulting claim is in debt.

Interest, including compound interest, may separately be recovered as damages for being deprived of money. The claimant must plead and prove an actual loss from which the court can infer borrowing costs, lost investment income or another financial consequence. Commercial claimants do not enjoy a general presumption of loss measured by a conventional borrowing rate.

A bank wrongfully froze five US-dollar accounts held by Mr Seaton and debited funds from accounts belonging to him and associated companies. The Supreme Court of Jamaica ordered repayment and compound interest at 27.3% annually. The Court of Appeal substituted repayment of JM$9.2 million with simple interest at that rate and directed that simple interest be applied to sums found due on an accounting.

The Seaton parties appealed. Mr Seaton sought reconstitution of his accounts with contractual compound interest and additional damages for the loss of use of the withdrawn and frozen funds. The central issues were the proper characterisation of the repayment claim and whether compound interest could be awarded as damages without proof of the particular financial loss sustained.

1. The appeal was allowed in part. The Bank’s unauthorised debits were ineffective. The proper remedy was to reconstitute the foreign currency accounts in US dollars, disregard unauthorised debits and credit contractual interest as if the money had remained in the accounts. The principal and contractual interest constituted a debt rather than damages.

2. Interest, including compound interest, may in principle be awarded as damages for breach of contract where money has been withheld. The claimant must plead and prove an actual financial loss. Relevant loss may comprise borrowing costs, the use of other interest-earning funds or a lost opportunity to invest. The evidence required to support an inference of loss depends upon the circumstances.

3. The Board rejected the proposition in Equitas Ltd v Walsham Bros & Co Ltd [2013] EWHC 3263 (Comm) that, ordinarily in a commercial case, a claimant kept out of money may recover compound interest at a conventional borrowing rate without evidence supporting an inference of loss. That proposition was inconsistent with Sempra Metals Ltd v Inland Revenue Commissioners [2007] UKHL 34. Although detailed investigation of the claimant’s finances is unnecessary, the common law does not presume such a loss.

4. Where a claimant proves that withheld money would have been used profitably but cannot establish the precise return, a commercial deposit or short-term lending rate may provide an appropriate approximation. The underlying opportunity and resulting loss must first be properly pleaded and proved.

5. Mr Seaton’s general evidence that he had needed the money for business did not establish borrowing, lost investment income or another particular financial loss. His claims for loss of use therefore failed. The accounting was to reconstitute the accounts in US dollars, convert intervening Jamaican-dollar payments at the exchange rate prevailing when paid, and compound contractual or agreed deemed interest monthly, or quarterly for the certificate of deposit.

Lord Hodge delivered the judgment, with which Lord Kitchin, Lord Burrows, Lord Stephens and Lady Rose agreed.

1. Privy Council: Allowed the appeal in part, set aside the payment-based remedy and directed reconstitution of the relevant foreign currency accounts and certificate of deposit by an accounting: [2022] UKPC 48 .

2. Court of Appeal of Jamaica: Allowed the Bank’s appeal, set aside the trial judge’s payment order and substituted repayment of JM$9.2 million with simple interest at 27.3%, together with simple interest on sums found due on the accounting: [2018] JMSC Civ 23.

3. Supreme Court of Jamaica: Sykes J dismissed the Bank’s claim, ordered repayment and an account of the foreign currency dealings: [2014] JMSC Civ 34. In a subsequent judgment, he directed compound interest at 27.3% annually from 1992 to 2014: [2014] JMSC Civ 139.