Playboy Club London Ltd & Ors v Banca Nazionale Del Lavoro SPA

A duty of care for a negligent bank reference turns on the relationship between the information provider and the person who will rely on the reference, including the purpose for which it is supplied. A bank told only the name of an intermediary, and not that an undisclosed end-user will rely on the reference for a concealed purpose, will ordinarily owe responsibility only to the named recipient. Deliberate concealment may defeat proximity and the requirement that imposing a duty be fair, just and reasonable. If a duty existed, loss caused by reliance on an inaccurate representation of financial means could fall within its scope even where counterfeit cheques were used. The appeal was allowed because no duty was owed.

The Bank appealed from the High Court Mercantile Court judgment and order dated 29 July 2014. The Club had claimed damages in negligence after relying on a bank reference when granting a customer a cheque cashing facility. The first-instance judge held that the Bank owed a duty of care to the Club, had breached that duty, and had caused the Club’s loss, subject to a 15% reduction for contributory negligence.

The appeal concerned whether the Bank owed a duty to the Club despite the reference being requested in Burlington’s name, whether the duty extended to the loss caused by counterfeit cheques, whether causation was established, and the extent of any contributory negligence.

Lord Justice Longmore delivered the leading judgment. Lords Justices David Richards and Laws agreed. The appeal was allowed, the order was set aside, and judgment was entered for the Bank.

1. Duty of care. A negligent misstatement duty depends on a special relationship and on identifying the person to whom responsibility was assumed and the purpose for which the information was to be used. Hedley Byrne and Co Ltd v Heller and Partners Ltd [1964] A.C. 465 did not require a different result: there the bank knew that the inquiry concerned an unnamed customer and advertising contracts. Here the reference named Burlington, while the Bank was unaware of the Club and of the gambling purpose. The Bank therefore assumed responsibility to Burlington, not to the Club.
2. The same conclusion followed from the wider duty-of-care inquiry. The Club deliberately concealed its identity to preserve customer confidentiality. There was consequently insufficient proximity, and it was not fair, just and reasonable to impose a duty on the Bank. The appeal was therefore allowed on the duty issue.
3. Scope and causation. The court nevertheless stated, obiter, that if a duty had existed, the Club’s loss would in principle have been attributable to the inaccurate representation of Mr Barakat’s financial means. The use of counterfeit cheques would not have placed the loss outside the scope of the duty or necessarily broken the chain of causation. The court distinguished the extraneous event considered in The Empire Jamaica [1955] P. 259 and applied the approach in Borealis AB v Geogas Trading SA [2011] 1 Lloyds Rep 482.
4. The court expressed no opinion on contributory negligence, since that issue arose only if a duty of care existed. The respondents were ordered to repay sums received under the first-instance order and to pay 80% of the Bank’s trial and appeal costs, including £110,000 on account.

• Court of Appeal (Civil Division): On appeal, the court allowed the appeal, set aside the order, and directed judgment for the Bank: [2016] EWCA Civ 457.
• High Court, Queen’s Bench Division, Mercantile Court: HHJ Mackie QC held that the Bank owed the Club a duty of care, was in breach, and caused the loss, subject to a 15% reduction for contributory negligence. The order dated 29 July 2014 awarded £802,940 subject to that reduction.