Playboy Club London Ltd (Club) used Burlington Services Limited (Burlington) as a front for checking the Club's patrons' financials before inviting them to gamble at its premises. The purpose of Burlington was to keep the Club's patrons' gambling predilections private.
Burlington had requested a reference from a prospective patron's (Mr Barakat) bank ahead of him gambling at the Club. The bank mistakenly provided a positive reference to Burlington "in strict confidential" for the amount of £1.6 million even though Mr Barakat's account had a nil balance. Barakat played roulette at the Club using counterfeit cheques and the Club consequently lost £802,940 and lodged a claim in negligence against the bank after Barakat could not be found. The Mercantile Court found in favour of the Club, stating that the reference failed to put a third party on enquiry and but for the reference, the Club would not have accepted the cheques. However, the Court did find the Club contributorily negligent for 15% of the claim, having not spotted the counterfeit cheques.
The determinative issue on appeal was whether the bank owed a duty of care to anyone besides Burlington, and if so, whether that duty was owed to the Club.
Drawing on the development of the three-fold test of Hedley Byrne, the Court of Appeal considered that the bank had no special relationship with, and assumed no responsibility, to the Club as it was giving the reference to Burlington "in strict confidential" which meant that the reference could not be passed on to (and relied on by) third parties.
The Court also considered it unfair to impose liability on the bank: "the Club wishes to remain anonymous, it is hardly just and reasonable for it to assert that a duty of care is owed to it when it deliberately conceals its existence".
The Club was ordered to repay to the bank the award granted to it by the Mercantile Court, along with £110,000 in legal costs.
See Court decision here.