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

The judgment was delivered by Mr Justice Lino Farrugia Sacco in the First Hall of the Civil Court following a writ of summons filed by ATG Company Limited against the bank. The company told the court that it had received an order to export merchandise overseas. It had insisted upon payment in advance and had then received a bank draft drawn on Saudi British Bank in the sum of US$18,000. This draft was deposited with HSBC until such time as it was cleared.

In December 2002 the company was informed by the bank that the draft had been cleared and the company consequently proceeded to export the merchandise. However, in the following January the bank informed the company 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 that had been 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, said the bank, 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 informed it that this was not 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.