Earles v Barclays Bank Plc

A judge determining disputed oral instructions should assess credibility by reference to the whole evidential picture. Contemporary documents, objective facts, consistency, motive and overall probabilities are generally more reliable than recollection alone. Electronic records are documents for disclosure purposes, and parties—particularly institutional litigants—must identify, preserve and disclose relevant electronic information. Deliberate destruction or withholding may justify adverse inferences, but mere non-disclosure caused by poor judgment does not establish spoliation. Contractual limits on consequential loss may be reasonable in commercial banking arrangements where the parties have comparable bargaining strength. A party may also ratify an unauthorised transaction by later entering into an agreement that expressly recognises the resulting indebtedness.

The claimant, a long-standing bank customer and property developer, alleged that Barclays had made five unauthorised transfers from his personal business account to an associated company’s account. He claimed consequential losses of approximately £2.4 million. Barclays contended that the transfers were authorised by telephone instructions and relied alternatively on contractual exclusion clauses and ratification.

The trial was split. The court had to determine whether the claimant authorised the transfers, whether the contractual terms excluded liability for consequential loss, and whether the claimant had ratified the transfers through a later loan agreement. The court also considered the parties’ failures to disclose relevant telephone, email and transfer records.

1. Primary issue. The court found that all five transfers were orally authorised. In assessing conflicting evidence about historic telephone conversations, the judge applied the guidance derived from Onassis v Vergottis, [1968] 2 Lloyds Rep 403, and Grace Shipping v Sharp & Co, [1987] 1 Lloyd’s Law Rep 207. The relevant considerations included consistency with admitted or objective facts, internal consistency, consistency with earlier accounts, credibility on collateral matters, demeanour, contemporary documents, motive and overall probabilities.
2. Electronic disclosure. Electronic information, including telephone records, emails, bank records and transfer sheets, was within the meaning of documents under CPR 31.4 and CPR 31PD.2A. The parties should have addressed its preservation and disclosure before the case management conference. Barclays’ failure was seriously inadequate, but the judge found no deliberate spoliation and therefore drew no adverse inference against either party.
3. Adverse inferences. Before proceedings, a clear evidential basis of deliberate spoliation would be required before adverse inferences could properly be drawn. After proceedings commenced, parties and their solicitors owed the court a duty to make reasonable efforts to identify and disclose relevant documents. The omission of documents could support adverse inferences where deliberate withholding or destruction was established.
4. Alternative issues. Although unnecessary to the result, the judge held that the contractual exclusion of consequential and indirect loss was reasonable under the Unfair Contract Terms Act. The claimant was a commercial customer with equal bargaining strength, and the bank had assumed no additional duty exposing it to the claimed speculative losses. The judge further held, alternatively, that the claimant ratified the transfers by entering into a loan agreement recognising a debt that included them, applying London Intercontinental Trust Ltd v Barclays Bank Ltd, [1980] 1 Lloyd’s Rep 241.
5. Disposition and costs. The claim failed on the primary issue. Barclays was entitled to costs, but the bank’s disclosure failures and disproportionate London-based costs justified a substantial reduction. The claimant was ordered to pay 25 per cent of the defendant’s schedule of costs, amounting to £38,517.81 including VAT.

First-instance judgment. No earlier decision or appeal is stated in the judgment.