Examples of disputes

Through a petition dated 8 July 2009, the petitioner sought an institution (building society) to transfer an amount saved within the scope of savings for building purposes or purchase of a house (hereinafter the “building savings”) in the amount of CZK 147,917.80 to her account. The petitioner justified her petition by stating that, on 19 March 2009, she and her husband had jointly terminated the building savings contract by giving notice in the registered office of the company; the contract had been made in favour of their son. The petitioner required the saved funds to be transferred. After the expiration of the time limit, the petitioner found out that her account had not been credited with the relevant funds and filed a complaint about this fact with the institution. However, there she learned that the institution had not received her notice  and was informed by the institution that the document had probably been lost somewhere. Together with giving the aforesaid notice, the petitioner required the institution to carry out an alteration with respect to another building savings contract, which was carried out as she was charged a fee according to the schedule of charges within 4 days after filing the requirement. The institution informed the petitioner that it was necessary for the contract to be terminated by giving a new notice, but this time directly by her son who had come of age in the meantime. However, for family reasons, the petitioner wanted to avoid such a situation (that is, the funds being made available directly to the son) by giving a timely notice. The petitioner had a copy of the proper notice that she had given with a commercial representative of the institution. Within the scope of complaint proceedings, the institution did not comply with the petitioner’s requirement and did not transfer the funds. The institution informed the Financial Arbitrator that the petitioner had made the building savings contract on behalf of her underage son under the effective General Commercial Terms & Conditions, the termination of the contract being governed by Article 7 thereof. In the aforementioned case, the contract was terminated in cooperation with a commercial representative; however, the notice was not delivered to the head office of the institution, which is why the contract could not have been terminated during the son’s minority. The petitioner sent a message with a copy of the proposal for termination of the contract; however, it was illegible and, at the time of the son’s majority, it was no longer possible for the petitioner to terminate the contract herself. The institution also argued that it happened very frequently that most parents did not realize that the saved amount on a building savings account maintained for a minor belonged to the minor’s property and that they had to respect Section 37 of Act No. 94/1963 Coll., the Family Act, as amended, which implied that they were obliged to surrender the administered property to the child after it had become of age. The state benefits, too, are provided from the state budget directly to a participant in building savings, and not to the participant’s parents. In the course of the substantiation phase, it was found out that the proposal had been duly signed by both statutory representatives of the participant in building savings and that the commercial representative had confirmed the correctness of the proposal for termination and its acceptance by appending her signature. In the course of the proceedings, the institution and the commercial representative were summoned to provide the Financial Arbitrator with an oral explanation. It followed from the hearing that commercial representatives would send processed documents to the head office of the institution collectively in an envelope, without making a list of the documents being submitted in this manner. A representative of the institution said that she had no idea where the document had been lost; however, if it had not reached the person in charge, it could not have been processed either. Further, the representative informed that the saved amount had not been paid out yet. During the hearing, the Financial Arbitrator stated that, regarding the completion of the proposal for termination of building savings, the petitioner had complied with all requirements and the proposal contained all prescribed particulars. In this respect, the Financial Arbitrator requested a legal opinion which showed that, based on the documents submitted, the contracting party was the son, whereas the petitioner represented him with respect to the institution as his statutory representative within the meaning of Section 26 or, as the case may be, of Section 27 of the Civil Code. On 19 March 2009, the son’s parents completed a proposal for termination of the contract as his statutory representatives. Had the funds under the contract been paid out, they would have belonged to the son and the parents would have been – pursuant to Section 37(a) of the Family Act – obliged to administer these funds with due care (that is, to administer the funds so as to prevent their son from suffering any detriment in terms of his property interests). Thus, when the petitioner stated in the petition for arbitration proceedings that she was not willing to make the money available to her son, her attitude did from the very beginning contradict the cited provisions of the Family Act. As regards the alleged erroneous conduct of the institution or, as the case may be, the institution’s liability for damage or, as the case may be, the institution’s failure to effect the transfer (as part of the proposal for termination of the building savings contract), no erroneous conduct of the institution was established either, since the provisions of Section 13(2) of the Terms & Conditions clearly stipulated that any filings of a subscriber shall become effective with respect to the building society as of the day of their delivery to the registered office of the building society. Thus, the Terms & Conditions defer the effectiveness of any filings up to the moment of their delivery to the registered office of the institution, irrespective of the fact whether such filings are delivered to the registered office of the savings bank in person or whether they are submitted for delivery to an operator of postal services or to a commercial representative. Regarding the commercial representative’s activities, the Financial Arbitrator hereby informs that the relationship between her and the institution is governed by a contract for commercial representation and by the provisions of Section 652 et seq. of the Commercial Code on the contract for commercial representation. Should the represented party incur any damage as a result of violation of the commercial representative’s obligations, the represented party would in such case have a right to seek damages. Should a client of the institution incur damage, the represented party shall be entitled to recover the damage from the commercial representative. The underlying documents do not imply, however, that the institution itself or through the commercial representative would have violated any obligation under the contract with respect to the petitioner’s son (the obligation of the commercial representative to deliver the clients’ written requirements to the institution without delay is not set out in the contract). In this particular case, another precondition for the institution’s liability for damage does not exist either, which is the very occurrence of any damage. The son, being the contracting party, does not claim (himself or through his statutory representatives) that he would have incurred any damage at all. It is apparent that the institution did not interfere with the property domain of the son. This implies that no liability for damage exists on the part of the institution under Section 373 or, as the case may be, Section 375 of the Commercial Code. It is possible that, even if the commercial representative did deliver the proposal for termination of the contract to the institution without delay, the institution would not have to accept this draft agreement, as neither the contract nor the Terms & Conditions imply any obligation of the institution to unconditionally accept a draft agreement on termination of the contract. It needs to be stated that no claim to the payment was created, since the contract was not terminated duly under the Terms & Conditions. The underlying documents submitted do not imply that the institution itself or through the commercial representative would have violated any contractual obligation or statutory duty with respect to the petitioner’s son and thus withhold the requested funds in an illegitimate manner. The petitioner’s petition, through which she sought the payment of the saved amount including late charges since the day of 15 June 2009, stating that the institution was withholding these funds in an illegitimate manner, appeared to be unjustified, since any potential claim to the payment of the saved funds would (in the event of compliance with all statutory and contractual requirements) have belonged solely to the contracting counterparty of the institution, which was no one else but the petitioner’s son, irrespective of whether he had been a major or not. The building savings under the contract made in favour of the son does not belong to the parents. The petitioner’s statement clearly showed that, in the process of termination of the contract or, as the case may be, in the proceedings conducted before the Arbitrator, she did not represent the interests of her son. On the one hand, the petitioner’s requirements contradicted the provisions of the Family Act and, on the other hand, there may in fact be doubts about the petitioner’s active legitimacy to conduct any litigation against the institution under the contract without the knowledge of the contracting party (that is, of her son). Based on the substantiation conducted, the Financial Arbitrator arrived at a conclusion that the petition was not justified, as it was not proved that the institution would have violated any legal obligation pursuant to the contract entered into with the petitioner, being a statutory representative of a participant in building savings and, simultaneously, that the institution had not violated the provisions of Act No. 124/2002 Coll. After having received a negative award, the petitioner submitted her challenges and, in the course of the challenge proceedings, a conciliatory settlement was effected between the petitioner and the institution, which the petitioner had been initially unwilling to accept during the proceedings. The institution contacted both the petitioner’s son and the petitioner to inform them about the proposed steps and they agreed. The petitioner confirmed this fact by a notification dated 29 December 2009 and withdrew her petition.

   Case No. 2 – domestic transfer – conciliatory resolution of the dispute

Through a petition dated 21 March 2009, the petitioner sought an institution to return funds that had been drawn from the petitioner’s account in an illegitimate manner (namely in the amount of CZK 180,000 and CZK 70,000) including a compensation for damage incurred as a result thereof.

The petitioner justified her petition by stating that, on 18 December 2007, she had personally arrived in a branch office of the institution and requested a right of disposal for Mrs. J.D. in relation to her account to be cancelled. However, on 4 a 5 January 2008, the petitioner found out (through the electronic banking service) that her account had been manipulated with in an illegitimate manner, namely that two transfers had been effected as a result of which funds in the total amount of CZK 250,000 had been drawn from the account. During her personal visit to the branch office of the institution on 10 January 2008, the petitioner discovered that the institution had failed to cancel the access of Mrs. J.D. to the electronic banking service in relation to her account. Therefore, the petitioner filed a complaint regarding the controversial withdrawals with the institution. The petitioner was informed that the institution had invited the owner of the account in favour of which the funds had been transferred to return the erroneously remitted payments; should they have not been returned within 12 September 2008, the petitioner would have had a right to send a written request directly to the institution for the provision of identification data of the recipient of the payment for the purposes of legal enforcement of the outstanding amount, informing her that the said service of provision of identification data was charged by the institution according to the schedule of charges with a fee of CZK 297.50, the payment of which the institution required in advance. Moreover, the form contained the following sentence: “On (date), as a result of my own erroneous instruction, I remitted the following payment by mistake:” However, this was not true. The petitioner declined to accept this notification and required the institution to rectify the situation immediately. Further, the petitioner stated in the petition that she had also incurred further damage.

In the course of the proceedings conducted before the Financial Arbitrator, the institution acknowledged its erroneous conduct and refunded the outstanding amount of CZK 250,000 to the petitioner. Further, the Financial Arbitrator also invited the institution to pay the late charges in the amount of CZK 33,489.11, which the institution subsequently settled to the petitioner. Further during the proceedings, no damage incurred in connection with the aforementioned unauthorized transfers was identified. Subsequently, the petitioner withdrew her petition and the Financial Arbitrator terminated the proceedings.

   Case No. 3 – use of a payment card in an ATM – petition rejected

Through a petition dated 2 June 2009, the petitioner sought the institution AA to return funds in the amount of CZK 30,000. In his petition, the petitioner stated that, on 9 January 2009, he had attempted to withdraw cash from an automated teller machine (hereinafter the “ATM”) of the company CC situated in the OC Globus shopping centre in Liberec. The withdrawal of CZK 10,000 failed, the ATM informed the petitioner that no receipt could have been issued – the ATM returned to stand-by mode, the card was released, but no money was paid out. The petitioner made another attempt (again for an amount of CZK 10,000 but without requesting a receipt) – the monitor showed a message that the requirement was complied with, the ATM released the card and returned to stand-by mode, but no cash was paid out again. Thus, the petitioner made a third attempt (again for the amount of CZK 10,000) but the withdrawal was not successful either – the card was released, the ATM returned to stand-by mode, but no cash was paid out. Subsequently, the petitioner went to another ATM to withdraw the required money – the ATM was in operation, but no cash was paid out to the petitioner due to having reached the limit. Therefore, on the very same day, the petitioner verified the withdrawals through the internet banking service and found out that his account had been debited with the funds of the three withdrawals in the total amount of CZK 30,000 that he had made using the ATM of the company CC. The institution informed the Financial Arbitrator that the claimed withdrawals had been effected properly and that the required cash had been paid out by the ATM. Through the VISA INTERNATIONAL system, the institution also requested the company XX to verify the transactions in dispute. It received a negative reply, since a journal of the claimed transactions was submitted to it, showing that the transactions had not followed immediately one after another, but that one more transaction had been made between the first and the second successful withdrawal, which fact the petitioner had failed to mention in his petition. The institution also submitted a statement of the company BB, a.s., being the provider of replenishing services in respect of the said ATM, according to which everything (that is, the replenishment of the ATM, the filling and emptying of the cartridges) had been carried out in compliance with the procedures laid down in the contract for security services and the number of banknotes had agreed with the numbers declared on the receipts printed out on the replenishment of the ATM. In the course of the relevant replenishment period, no maintenance action was carried out in relation to the aforementioned ATM. Within the scope of the substantiation proceedings, the Financial Arbitrator authorized an expert to carry out investigation and to prepare an expert opinion in respect of the functionality of the ATM of the company CC. The investigation showed that, on 9 January 2009 (in the period of time between 9:01 and 9:10 a.m.), the petitioner had made attempts to withdraw cash, specifically three attempts during which an erroneous PIN had been entered and three successful attempts. However, the attempts during which an erroneous PIN had been entered were not mentioned by the petitioner in his petition.

The evidence submitted by the company CC showed that, at the relevant time, the ATM had been in operation and no problems had been registered in relation to it. Potential manipulation with money by the company BB was also verified, but no discrepancies were identified either – crews rotate and, in addition to that, they just replace the cartridges and do not come in contact with the cash, which is processed only later by the cash processing centre. A review of the relevant records showed that there had been no differences registered by the ATM on its replenishment. If the ATM did not pay out the cash, it would have subsequently reported a higher balance during an automatic verification, namely by 30 banknotes, which would have represented a several-millimetre difference in the replenishing cartridge. The technical condition of the ATM was verified on the basis of maintenance journals submitted by the company CC. In the period between replenishments, there was no maintenance action carried out in relation to the ATM. This type of ATM meets the common standards, even though it is a low-end device, which is also reflected in its security. Compared to other ATM types, this ATM works rather slowly, banknotes are issued through a slot situated under the ATM’s service zone and the issuance of money is lengthy (banknotes are not issued in one package, but piece by piece), which may mislead some clients to think that the ATM has not issued the money to them and thus to leave the ATM. The fact that a transaction has been successfully completed is also confirmed by a receipt (on condition that the client has requested it) that the ATM issues only after the cash has been paid out. The dispenser type used in this ATM does not draw the banknotes back in if they are not collected by the client, which is one of the reasons why banks use different ATM types that comply with the security requirements to the full extent. Usually, ATMs of this type are used by independent organizations that distribute them particularly in shopping centres. As the camera recording was no longer available (that could have clarified the situation in respect of the cash withdrawal), we may in this case just present a hypothesis that the said ATM might have been subject to an attack. This means that the issue slot might have been covered and the ATM might have issued the banknotes into a special-purpose case or, after the petitioner has left the ATM, an unknown person might have seized the money issued by the ATM and not collected by the petitioner. Based on the documents submitted as evidence, no non-standard operation or failure was identified in respect of the ATM; in the said period, the ATM did not report any financial surplus or any other discrepancies, and the disputable transactions were confirmed by entering a valid PIN and were effected in a completely trouble-free manner. Thus, there has been no erroneous conduct on the part of the institution. As regards the behaviour of the petitioner during the transactions in dispute, certain discrepancies were discovered as against the facts stated in the petition for proceedings, namely the petitioner’s omission to mention the transactions during which he had entered an incorrect PIN. Moreover, even after the aforementioned experience, the client did not lose confidence in the said ATM and, on 27 February 2009 and on 14 May 2009, he carried out further transactions using the same ATM, which were effected without any problems. Based on the results of the substantiation proceedings, the Financial Arbitrator arrived at a conclusion that the petitioner had failed to prove his claims and, simultaneously, that the institution had not violated the provisions of Act No. 124/2002 Coll.

  Case No. 4 – use of a payment card in an ATM – petition rejected

The petitioner referred to the Financial Arbitrator stating that, on 21 November 2008, the ATM of an institution (situated in a department store) had not paid out the required funds to her.

Based on investigation and the evidence submitted upon request, the Financial Arbitrator found out that, on 21 November 2008, the petitioner had effected two consecutive cash withdrawals from an ATM using her payment card. Having investigated the ATM’s journal, which serves to record the ATM’s activities, the Financial Arbitrator found out that, in the first instance, a requirement for cash withdrawal in the amount of CZK 2,000 had been entered at 3:09 p.m. According to the record in the ATM’s journal, the aforementioned amount was paid out upon authorization. Subsequently, another requirement for cash withdrawal in the amount of CZK 200 was entered by the petitioner at 3:11 p.m. This amount, too, was authorized and the ATM paid out the cash. During both the said transactions, the PIN of the payment card was entered correctly, both the transactions were duly authorized and the required items were paid out according to the records submitted.

Further, the petitioner stated that the institution had made a mistake when it had given in its statement a different time of the cash withdrawal from the ATM, which did not agree with the time specified on the receipt issued by the ATM to the petitioner. In relation to this variance, the institution stated that the time on receipts was set by the authorization centre and that the time in the ATM’s journal was the system time of the ATM, which was set internally. There may be disagreement between the two times.

To verify the aforementioned, the Financial Arbitrator requested the institution to submit the ATM’s journal records on the transactions effected half an hour before and half an hour after the transactions carried out by the petitioner. No erroneous conduct on the part of the institution was proved.

Further, the Financial Arbitrator requested the institution to submit documents on the matters relating to the ATM’s journal, its registration and back-up. These matters are regulated in a contract for supply and administration of ATMs entered into by and between the institution and an external supplier. In the aforesaid document, no erroneous conduct on the part of the institution was discovered either.

Within the scope of the substantiation proceedings, the Financial Arbitrator found out that the records available did not reveal any violation of obligations by the institution, since – according to the underlying documents submitted by the institution – the said transaction had been verified and carried out in a trouble-free manner. Subsequently, the Financial Arbitrator made a negative award.

   Case No. 5 – remote use of an electronic payment instrument – conciliatory resolution of the dispute

Through a petition dated 5 October 2009, the petitioner sought an institution to return funds in the total amount of CZK 20,000 which had been drawn from his account in an illegitimate manner over the Internet using his stolen payment card.

The petitioner justified his petition by stating that, on 22 August 2009 (between 2:00 and 3:00 a.m.), his wallet had been stolen, also containing his payment card issued by the institution. The petitioner discovered the theft in the evening of the same day and went to report the fact to the police immediately. However, at 6:20 and 6:21 a.m. already, the thief managed to make two transactions over the Internet (thus, without using a PIN) with an internet betting shop, in the amount of CZK 10,000 each. As soon as the petitioner found out, he reported the fact to the police and went to the institution where he made a declaration of a card holder regarding a disputable transaction, in which he stated that he had neither made the two payments nor had given consent thereto. However, his complaint was not admitted, even though he referred to Section 18 of Act No. 124/2002 Coll., pursuant to which he was entitled to an immediate return of the funds.

In the course of the proceedings conducted before the Financial Arbitrator, the institution acknowledged that it should have resolved the dispute in accordance with the aforementioned provisions of Act No. 124/2002 Coll., under which – provided that an electronic payment instrument had been used without its physical submission or without the holder’s identification using the personal identification number (PIN) – the holder was entitled to an immediate return of the funds drawn in such a manner.