Summary

The courts continued to express a marked reluctance to find a contractual or tortious duty of care upon bankers as advisers. In appropriate circumstances, injunctive relief was available to prevent related proceedings outside the jurisdiction.

Facts

Appeal by the defendant merchant bank ('F') against dismissal of its two summonses: (i) to strike out the statement of claim of the plaintiff/respondent ('C'); and (ii) for an injunction to restrain C from taking further proceedings without leave of the court. C had initiated legal actions in several jurisdictions (the action of the second plaintiff had been struck out), but the key facts were that in 1987 F had advanced very substantial business loans to a company of which C was a director, and following various negotiated amendments personal security had been provided by C to supplement other security. A demand in 1989 for repayment had never been met, and C had not accepted an offer to settle. He alleged that at a meeting before the demand for repayment, F had been made aware of a conspiracy to oust C from his position in the company, but had not informed him of the plot. In the present proceedings C relied on breach of contract or tort, contending that the bank should have disclosed that information to him. The grounds of F's appeal asserted that: (a) there was no legal duty upon which C would be able to rely in claiming breach by F; (b) even if there were such a duty, the loss claimed did not flow from breach of it; and (c) the issues could and should have been litigated elsewhere so that C should not be allowed to litigate them here, following the rule in Henderson v Henderson (1843) 3 Hare 100.

Held

(1) The duty claimed by C did not arise out of the ordinary relationship of banker and customer, but out of an alleged implied contract (or alternatively a tortious duty of care) founded on examples of the bank undertaking to advise C, and C's reliance on such advice. However, no contract other than that of banker and customer had been pleaded, and although following Hedley Byrne & Co Ltd v Heller & Partners (1964) 3 WLR 101, a banker could in certain circumstances be said to have undertaken to exercise reasonable care in advising, that did not mean that if reasonable care had been exercised when the advice was given the bank official who gave it or his employer had assumed a further continuing duty to keep the advice he had given under review and if necessary to correct it in the light of supervening events. (2) C relied on a duty to disclose details of the plot against him, but no such duty could be said to lie upon the bank to disclose what it had heard. An implied contract not pleaded could be cured by amendment, but in this case the circumstances were not capable of giving rise to any duty to disclose. Nor did such a duty arise when C had written to request disclosure. (3) Authority supported the conclusion that the duty claimed could not have arisen out of the ordinary relationship of banker and customer, particularly Shamji v Johnson Matthey Bankers (1986) BCLC 278. Although C did not rely on the ordinary relationship because he accepted that fact, his assertion relying on a separate legal duty arising between advisor and advisee was also unsustainable and the courts had shown a marked reluctance to imply obligations of the kind claimed. (4) The duty on which C sought to rely did not even arguably exist, and as C had conceded that, if that were the conclusion, he would present his case in no other way, the appeal was allowed and the action dismissed as disclosing no reasonable cause of action.

(5) It was not necessary to investigate the other two attacks on the pleading, but (obiter) if there had been a breach of duty it would have been arguable that loss and damage of the kind claimed did flow from the breach. However, that did not assist C where it had been held that there could be no duty. Similarly (obiter), the rule in Henderson v Henderson (supra) applied on the facts concerning the foreign proceedings. That rule was founded on abuse of process, and if the pleading had not been found to disclose no reasonable cause of action, it would have been struck out as vexatious or an abuse of process on the basis of that rule. (6) Proceedings had been instituted by C in Scotland, in which he sought to undermine an American judgment as obtained by fraud, and he contended that a Court of Appeal decision of 1996 on that issue was not binding in Scotland, so that he should be entitled to proceed. However, a stay of the present English proceedings pending an outcome in Scotland was not appropriate: there was no reason why F should not now have relief in this jurisdiction. The injunctions sought by F in the second summons would therefore be granted.

Appeal allowed. Action struck out. Injunctive relief preventing action in Scotland.