Kumar & Anor v United Bank Ltd

An ordinary relationship between a bank and the acceptor of bills of exchange, or an ordinary banker-and-customer relationship, does not ordinarily create a duty to warn individuals that signing in a company trading name may make them personally liable. A claimant must establish a special relationship in which the bank assumed responsibility to advise. Accounting or administrative assistance is insufficient where it does not involve banking expertise or an assumption of advisory responsibility. The evidence must also support imposing a duty that is just and reasonable, including evidence that a reasonable banker should have appreciated the relevant statutory effect.

Mr and Mrs Kumar sought permission to appeal from the judgment of Mr Justice Andrew Smith dated 22 June 2001. They claimed in tort against United Bank Limited, which presented bills of exchange for acceptance on behalf of Novaknit’s bank. The bills were signed in the company’s trading name rather than its full corporate name, and the Kumars had consequently been held personally liable under section 349 of the Companies Act 1985.

The claim alleged that the bank owed a duty to warn them about the risk created by the manner of signature. The central issues were whether the bank’s dealings with the company and the conduct of its employee created a special relationship, and whether a duty of care was just and reasonable in the circumstances.

1. Permission to appeal refused. Time for the renewed application was extended, but the application disclosed no real prospect of success.
2. The ordinary relationship between a collecting bank and the acceptor of bills does not ordinarily give rise to a duty of care to advise the acceptor. The same applies to the ordinary banker-and-customer relationship. Treating the claimants as customers because they were directors or officers of the company would not alter that conclusion.
3. A duty could arise only if the claimants established a special relationship in which the bank assumed responsibility to advise them. The evidence accepted below did not show that the bank employee had assumed the role of adviser to the company, still less that he had assumed responsibility to the claimants. Checking and reconciling documents concerning goods and invoices was materially different from undertaking advisory responsibility.
4. The alleged warning would have involved legal advice about the effect of section 349 of the Companies Act 1985. There was no sufficient factual or expert evidence that a person in the employee’s position, or a reasonable banker, should have known of that statutory effect. It was therefore not just and reasonable to impose the alleged duty.
5. Since there was no duty, there was no breach. The judge’s factual findings disclosed no arguable basis for intervention, and no basic principle of law requiring determination on an appeal was identified.

• Court of Appeal (Civil Division): On 26 October 2001, Lord Justice Rix extended time but refused the renewed application for permission to appeal from the judgment of Mr Justice Andrew Smith dated 22 June 2001.