The claimant club used an agent (for customer confidentiality reasons) in order to seek a reference from the defendant bank in relation to an individual who wished to gamble in the club’s casino. Having received the reference, the club agreed to exchange the customer’s cheques for gambling chips. These cheques proved to be false and the club incurred a loss. This case was an appeal by the bank against the judge’s decision that the bank owed a duty of care to the club which it was found to have breached.
In the circumstances, the bank could not be said to have assumed a duty of care to the club, only to the agent (Caparo v Dickman (1990) followed). Distinguishing Hedley Byrne v Heller (1964), the court held that the bank owed no duty as the bank was not aware that the reference was ultimately for the club or for the purposes of gambling. The special relationship was between the bank and agent and as the club frequently concealed its identity and requested references in the name of its agent, it was not fair, just, or reasonable to impose liability on the bank.
As regards the counterfeit cheques, the court stated that had it found a duty of care to have existed, it would have held that the bank was in principle liable for the club’s loss on the basis that the customer was in fact impecunious when the bank had represented that he was a man of wealth. The club relied on this representation in exchanging the counterfeit cheques for chips. The appeal was allowed.