Following the recent ruling between Member of Parliament (MP) Fitz Jackson and the Bank of Nova Scotia Jamaica Limited (BNSJ) over cheque encashment fees, Justice Cresencia Brown Beckford has suggested that the legislative arm of the Jamaican Government make amendments to the Bills of Exchange Act (BEA) as a way to benefit banking customers in the modern digital age.

The suggestion occurs after MP Jackson against Scotiabank Jamaica on November 15 where his summary judgement application failed due to him being unable to prove his case on a balance of probabilities. This case stemmed from a May 2019 transaction at Scotiabank Jamaica’s Portmore branch where Jackson was charged a $385 cheque encashment fee for his $2,500 cheque which was drawn at Scotiabank’s Half-Way-Tree branch. This resulted in Jackson receiving $2,115 from this interaction, a situation which drew his ire as he believed that this breached the BEA since he did not receive the face value of the cheque due to the encashment fee.

“I am of the view, as was the Singaporean Court of Appeal, that the time is ripe for changes to be made to the law. I would recommend, in so far as I do not trespass on the purview of the legislature, that such a course be considered by the lawmakers,” stated Justice Brown Beckford in her written judgement.

This view by Justice Brown Beckford was expressed on the premise that the current version of the BEA attaches rights between the drawee, Scotiabank Half-Way-Tree, and the drawer or person who issued the cheque and not to the collecting bank Scotiabank Portmore and the payee Jackson.

The BEA contains several rules and conditions regarding the processing of cheques for payments. Certain persons defined in this Bill are the drawer – the person who issued the cheque; drawee – the bank named or indicated in the cheque as liable to pay it; payee – the person to whom the cheque is drawn/to be paid; holder – the payee or endorsee or bearer of the cheque; and holder in due course – the person, not being the payee, who is in possession of cheque. Under the presentment act of the BEA, there are certain obligations that must be meet by the person who presents the cheque, the payor, and the bank that it asked to honour the cheque. These obligations include timeliness, proper presentation, business hours, correct documentation and location.

The Jamaican BEA was passed in 1893, some 11 years after the United Kingdom passed its own version of the Bill, with the sole amendment to the Jamaican Act taking place in 1968. Under the current version of this act, a cheque must be presented at the branch where the account is maintained. This is in contrast to the UK, where they amended their BEA in 1996 to facilitate presentation of a cheque to any branch and not specifically to the branch on which the cheque was drawn. As a result, when Jackson brought the cheque to the Portmore branch, it was not properly presented for payment since the cheque was originally drawn from the Half-Way-Tree branch. Thus, the Portmore branch had no obligation to pay Jackson as this obligation only existed with the Half-Way-Tree branch.

“Counsel [Maurice Manning, KC] also argued that the provisions of the Bills of Exchange Act do not reflect the current economic realities where there is a proliferation of an interconnected banking system, where a customer may transact business at any branch of the bank. The Bills of Exchange Act still reflects the position of Woodland v Fear (supra), where a cheque had to be presented at the branch where the account was maintained. To accommodate the current realities, BNS has had to implement systems for the convenience of customers,” stated the written judgement.

Scotiabank Jamaica also argued that their encashment fee was per their policy, practice and custom. This argument was put forward on the basis that the fee was used to reimburse its costs to conduct diligence checks, verify the authenticity of requests and the instruments tendered. However, this is not precluded by law as the Banking Services Act and Code of Conduct do not authorise the imposition cheque encashment fees, but the Banking Services Act only requires banking institutions to notify customers on fees and when those fees may change. Even the attorney general, which was invited to make submissions, did not agree with Scotiabank’s argument which was supported by the court as it agreed that the bank did not present any evidence on the establishment of the custom for the court’s consideration.

If there were certain amendments to different laws which affect the general conduct of banks in the technology era, there could be lower operational costs by banks which could translate to lower fees for banking customers.

Due to the novel nature of the case, past decisions from India, South Africa, Singapore, Canada and the UK had to be presented to establish a standing and precedence from previously decided cases. Some of these cases as seen in the Singapore case of Damayanti Tantilal Doshi versus Indian Bank have used their latitude to engage in a correction of statute where the laws have not advanced with technology. However, Brown Beckford did not believe the Jamaican Supreme Court should go that far in its latitude and observed the same reticence as seen by the British and Indian courts.

“Again, in so far as this court does not offend the separation of powers, the Court suggests that the Legislature gives consideration to the extent that it should interfere, as a matter of public policy, in the law of contract and the principle of pacta sunt servanda [Latin: agreements must be kept] for the protection of the banks’ customers,” she added in her ruling.

Jackson has since indicated that he would be appealing this decision to the Court of Appeal as he seeks to further engender his push to protect banking customers. The St. Catherine Southern MP has been the most outspoken voice in parliament on the impact of banking fees on the ordinary person. Jackson’s highlight of the cheque encashment fee led to Scotiabank Jamaica, the country’s second largest commercial bank, discontinuing the practice of charging that fee and attempt to refund that fee to the MP who is also its customer.

The Bank of Jamaica (BOJ), which also made submissions in this case, does not regulate banking fees but seeks to use moral suasion to convince deposit-taking institutions or banks to improve their practices with the general public. Jackson piloted a Bill to regulate banking fees in 2018, but it was struck down in Parliament as the incumbent Government didn’t agree with his stance.

The BOJ recently published standards regarding automated banking machines (ABMs) which has been a pain point for many consumers. It is also seeking international help to develop market conduct standards as Jamaica prepares for its transition to the twin peaks regulatory model over the next two years. However, that process can be hampered by the timeline it takes to be processed by both the upper and lower houses of parliament. BOJ Governor Richard Byles noted last Monday at the BOJ’s monetary policy quarterly conference that a version of twin peaks Bill is ready, but that the actual progress of the Bill will take some time due to the time it takes for legislation to go through the relevant process. This comes at a time when the BOJ also seeks to make amendments to the law for the implementation of Basel III and new protocols for directors of financial holding companies and their subsidiaries. The BOJ also awaits the next step by the Senate on the Financial Institutions (Resolution and Winding Up) Act, 2024 or special resolution regime.