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Playboy Club London Limited & Ors v Banca Nazionale Del Lavoro Spa [2016]

May 24, 2016

Playboy Club London Limited & Ors v Banca Nazionale Del Lavoro Spa [2016] EWCA Civ 457 (18 May 2016) was an appeal as to a judgement given by His Honour Judge Mackie [2014] EWHC 2613 (QB), were it was held that the Playboy Club had acted correctly, their bankers had sent the request to Ms Guidetti at the Defendant bank, addressed to the Manager.  It would have been reasonable for them to assume that she had obtained the necessary authority to be able to respond to them. The standard Request form used by the Club always addressed it to the Manager of the particular Bank.The Judge rejected the Defendant’s argument that no duty of care was owed to the Club since the reference referred to its sister company and not to it. The Judge felt that there was sufficient proximity on the facts of the case.He rejected the argument that the counterfeit nature of the cheques broke the chain of causation or that the losses fell outside the scope of duty owed by the bank.He ruled that the Claimants could claim for £802,920 subject to a deduction of 15% for contributory negligence.

In this matter, before The Right Honourable Lord Justice Laws, the Right Honourable Lord Justice Longmore and The Right Honourable Lord Justice David Richards in the Court of Appeal, the Defendant Bank submitted:

“i) its duty of care extended to Burlington but no further; if the Club wished to obtain its reference through a company and conceal its own interest in the matter that was a matter for it;

ii) the scope of the Bank’s duty extended only to the giving of the reference and not to the giving of cheques by its customer which were obviously bad on their face;

iii) the Club’s own negligence in relation to the cheques broke the chain of causation; and

iv) contributory negligence was in any event far greater than 15%”.

Lord Justice Longmore delivered the Judgment and, in respect of Duty of Care, he observed that the law of negligent misstatement had been fundamentally altered by the decision in the House of Lords in the case of Hedley Byrne & Co ltd v Heller & Partners Ltd (1964).  This case also concerned a bank reference and the House of Lords had found that the Defendant’s duty of care was not just to the bank who requested the reference but also to the customer of the bank and the advertising contractors because the enquiry had related to an advertising contract which the Defendants were aware of.

Lord Justice Longmore observed that this case was different.  In this matter the Club’s bank, when making the request for reference, had named its customer as Burlington and the Bank was unaware of the reason for the  reference and its gambling purpose.  He noted that Judge Mackie did not make any findings as to Ms Guidetti’s knowledge of the matter and posed the question, does “this factual difference constitute a relevant legal distinction?”

In Lord Justice Longmore’s judgment there was a legal distinction.  In Hedley & Byrne the bankers were requesting a reference not for their purposes but their Clients purposes as to advertising contracts. In this matter the Customer’s identity was given as Burlington and its true purpose for a gambling club was not made known.  He considered that this would not make the Bank responsible to the Club in place of Burlington or any responsibility as to trusting Mr Barakat, in respect of his gambling matters, of which the Bank had been unaware.

He observed that it would be impossible to suggest the Bank and Club had “a special relationship” when the Bank had no idea of the existence of the Club.  Its only knowledge was that the reference was requested by Burlington and the special relationship, Lord Justice Longmore considered, could only be with the customer identified to them.  Further, if the Bank requesting the reference clearly named the person, on whose behalf they were acting, there would be no reason why the Bank giving the reference would think it could be for anyone else.  In particular, where the reference is marked strictly confidential, would indicate it is not to be relied upon by other parties. He held that the Bank did not have any responsibility to the Club.

Following the case of Capro v Dickman (1990) it became usual practice to look at the points raised and address them to assess whether a duty has been established:

(1) whether the defendant assumed responsibility to the claimant

(2) whether (to adopt what has been called the threefold test)

(a) loss was a foreseeable consequence of the defendant’s actions or inactions,

(b) the relationship of the parties was sufficiently proximate and

(c) it is fair just and reasonable to impose a duty of care on the defendant towards the claimant and

(3) whether the addition to existing categories of duty is incremental rather than indefinable.

Lord Justice Longmore looked at (c) above in relation to this matter and observed that it was not fair and reasonable to impose liability on the Bank as the Club had requested the reference in the name of Burlington. It had hidden its existence to keep its customers confidentiality and it was not just and reasonable to claim a duty of care is owed in those circumstances.

With reference  to (b) above,  he did not consider there to be a proximate relationship for the reasons he had already given.

He respectfully disagreed with Judge Mackie’s conclusion that the Bank owed a duty of care to the Club and allowed the appeal.

Dealing with other matters, Lord Justice Longmore observed that the Bank had contended that any duty of care covered the reference as to Mr Barakat’s creditworthiness, not whether he was a person who would issue counterfeit cheques.

He agreed with Judge Mackie’s response that the Club would not have accepted the counterfeit cheque if what the Bank said in the reference was accurate as they may have possibly recovered the monies through the bounced cheques. The incorrect information had allowed Mr Barakat to buy valuable chips with worthless cheques. He observed the real problem was that Mr Barakat was without funds and the Bank had shown him to be wealthy. The Club had relied upon the Bank’s negligent representation of his  bank account.

Lord Justice Longmore considered that if he had found there to be a duty of care he would have held the Bank, in principle, to be liable for the Club’s loss. “Nor would I hold that any negligence on the Club’s part in accepting the “counterfeit” cheques broke the chain of causation in the sense of “obliterating” the Bank’s negligence”.

He allowed the appeal and directed that judgment be entered for the Bank with which Lord Justice David Richards and Lord Justice Laws agreed.

He ordered that:

The Order made by Judge Mackie be set aside.

The Club must pay to the Bank all monies that had been paid to them, by the Bank.

  1. The Club pays 80% of the Bank’s costs as to the trial and appeal on the standard basis and if not agreed,  to be subject to a detailed assessment.
  2. The Club pay £110,000 to the Bank on account of the Bank’s costs in accordance with 3. above.
  3. Payment of all sums be made on the 1st June 2016.
  4. Permission to appeal refused.