In October, Christina received an invoice from the builder for $13,000, which she forwarded to the bank, asking that it process it that week. Bank staff put a reminder in the calendar to pay the invoice. Later the same day, she met the builder on site, and he told her the property was not, in fact, repairable and would have to be demolished. Christina cancelled her contract with the builder and called the bank immediately with the news. She told the bank over the phone and then in an email to hold off paying the invoice until it heard back from her. Bank staff did not remove the calendar reminder and paid the invoice before hearing back from her. The builder subsequently returned Christina’s $40,000 deposit, but when the bank asked the builder’s bank to refund the $13,000 payment, it declined to do so, saying that the builder did not consent to it doing so.  

The bank offered Christina $3,000. It said she could use the money to pursue her dispute with the builder and quantify her direct loss, which it said was less than the amount claimed in the invoice. Once she had established the precise loss, she could bring a claim to the bank to consider. Christina was unhappy with this offer and complained to us.

Our investigation

We found the bank paid the invoice despite Christina’s instructions – both written and verbal – to hold off doing so. The bank did not dispute receiving the instructions and acknowledged it had overlooked them and made the payment.

We were left to work out an appropriate remedy for the bank’s error. To recommend compensation for direct loss, we had to be satisfied Christina had suffered a quantifiable financial loss as a result of the error. We were not satisfied the entire $13,000 amounted to a direct loss. There were three reasons for this: one, the invoice was vague about exactly what work and materials it related to – and Christina’s understanding was also limited on this score; two, Christina had been able to offset her loss by selling building materials used on the site, recouping$4,000; and three, there were uncertainties about what would have happened if the bank had followed Christina’s instructions – the builder might have pursued Christina for the unpaid amount or deducted $13,000 from the deposit he refunded. We were satisfied Christina had suffered a direct loss, but we lacked sufficient evidence to quantify that loss.

We did, however, consider Christina had suffered substantial stress and inconvenience as a result of the bank’s error, which came at a time when she was already dealing with stressful events, including difficulties obtaining her insurance pay-out, ill health and changing advice from the builder. Christina was also upset about the way the bank had treated her after the error was discovered. And finally, she was left with the burden of a dispute with the builder over the invoice.

Outcome

The bank apologised to Christina and offered her $7,000 for the stress and inconvenience she had suffered. She accepted the offer.