The recent decision of the Court of Appeal in Playboy Club London Ltd & Ors v Banca Nazionale Del Lavoro SPA [2016] EWCA Civ 457 is an interesting clarification of the legal principles that apply to bankers' references.

The commercial effect of the judgment is that, if a request for a bank reference:

  1. deliberately chooses not to reveal the existence of an underlying customer (naming an intermediary instead); and
  2. does not specify the purpose for which the reference is required;

then the underlying customer may not be able to rely upon the reference if the subject of the reference defaults.

Financial institutions drafting requests for references should therefore ensure that the above information is included in any request. Any customer who wishes to remain anonymous should be warned that there is a risk they may not be able to rely upon the reference. On the other hand, any financial institutions who are giving references may be able to rely upon this development in order to avoid liability under the reference in an appropriate case. The decision is discussed in further detail below.


Playboy Club London Ltd (the "Club") operated a casino in Mayfair called 'The Rendezvous'. Customers of the casino were able to obtain gambling credit via a cheque cashing facility, which allowed customers to present a cheque and - before that cheque was cashed - obtain gambling credit of an equivalent value. Before extending credit under such a facility, the Club, through its agent Burlington Street Services Ltd ("Burlington"), would obtain a reference attesting to the customer’s means and trustworthiness to repay the funds. It was the Club's standard practice to use Burlington to ask for references so as "to preserve confidentiality for customers preferring to keep their gaming activities private."

In October 2010, Burlington sought and obtained a reference from Banca Nazionale Del Lavoro (the "Bank") regarding a customer of the Club, Mr Barakat. The reference provided by the Bank was addressed to Burlington c/o its bank, NatWest. The reference stated that Mr Barakat maintained an account with the Bank, was in sound financial health and was able to meet obligations of up to £1.6 million in any one week. The reference indicated that the information provided was strictly confidential.

In fact, Mr Barakat had only begun the process of opening an account with the Bank a little more than a week earlier and his account did not have any funds on deposit. In reliance on the reference, the Club extended £1.25 million of gambling credit to Mr Barakat in exchange for cheques drawn on Mr Barakat’s account with the Bank. After Mr Barakat incurred substantial gambling losses, the Club sought to cash the cheques only to find that the cheques were counterfeit.

Efforts to recover the funds from Mr Barakat were unsuccessful and the Club commenced a negligence claim against the Bank. Burlington was not a claimant to the proceedings, presumably because it had suffered no loss.

At first instance, the Court held that the Bank was responsible for the reference and that in giving the reference, the Bank owed a duty of care not just to Burlington, but also to the Club. The Bank appealed.

Court of Appeal decision

Overturning the decision of the High Court, the Court of Appeal held that the Bank did not owe a duty of care to the Club and that its obligations were limited to Burlington.

(1) Hedley Byrne distinguished

The Court of Appeal recapped the key principles from Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] A.C. 465, the seminal authority on negligent misstatement which also happens to be a case about a banking reference.

Hedley Byrne was an advertising agency which, before taking on a liability in respect of an advertising contract for a customer (Easipower) had its bank (National Provincial) obtain a reference from Easipower’s bank (Heller & Partners). The reference was to confirm Easipower’s ability to cover the liability. National Provincial’s request to Heller & Partners identified that the reference sought related to an advertising contract but did not identify whether the reference was for National Provincial’s own use or that of a customer.

Similar to the instant appeal, Heller & Partners argued that it only owed a duty to National Provincial and not to its unnamed and unidentified customer, Hedley Byrne. This was rejected by the House of Lords, which held that it was immaterial that the name of the customer (Hedley Byrne) was not mentioned by the inquiring bank (National Provincial). The House of Lords commented that the bank "must have known that the inquiry was being made by someone contemplating doing business with Easipower Ltd and that their answer or the substance of it would in fact be passed on to such person."

Distinguishing the facts of Hedley Byrne, the Court of Appeal noted that the Bank’s reference expressly named Burlington as the party to whom the reference was being provided. Further, the Bank knew nothing of the purpose for which the reference was sought and received no notice that the reference would be passed on to Burlington’s principal or any other party. The Court of Appeal considered whether these factual differences afforded a relevant legal distinction between the instant case and Hedley Byrne. To answer this question, the Court reviewed the principles for establishing liability for negligent misstatement.

(2) Test to establish a duty of care

The Court noted that there was no single test for determining when a duty of care will arise and set out the general principles established in Caparo v Dickman [1990] 2 AC 605 as applied in Customs and Excise Commissioner v Barclays Bank plc [2006] UKHL 28:

  1. Whether the defendant has assumed responsibility to the claimant.
  2. Whether:
    1. loss was a foreseeable consequence of the defendant’s actions or inactions (the threshold test);
    2. the relationship of the parties was sufficiently proximate; and
    3. it is fair just and reasonable to impose a duty of care on the defendant towards the claimant.
  3. Whether the addition to existing categories of duty is incremental rather than indefinable.

Applying these principles, the Court of Appeal held that the factual differences with Hedley Byrne did indeed afford a relevant legal distinction.

The Court of Appeal focused on whether there had been an assumption of responsibility and whether it would be fair, just and reasonable to impose a duty. It held that there could be no assumption of responsibility or “special relationship” between the Bank and the Club, given that the true purpose of the reference was not revealed to the Bank and the Bank did not know of the existence of the Club.

Assumption of responsibility is a sufficient but not a necessary condition for finding a duty of care. The Court of Appeal therefore went on to consider whether it would be fair, just and reasonable to impose liability on the Bank in this case, concluding that it was not. The Club had chosen not to reveal its own interest in the reference to preserve the confidentiality of its customers. The Court held that it was not just and reasonable for the Club to assert a duty of care when it deliberately concealed its existence.

The Court also rejected the Club's submission that it should be able to sue the Bank as Burlington's undisclosed principal, on the basis that the Bank had again assumed no responsibility to the Club on the facts. The Court focused in particular on the fact that the requesting bank had named Burlington and so there was no reason for the Bank to think that the reference would be relied on by anyone else (particularly where the reference was given in strict confidence, indicating it would not be passed on).


This decision is an interesting clarification of the Hedley Byrne rule. It suggests that if a party chooses not to reveal its existence to the bank providing a reference, then it will not be able to establish that it is owed a duty of care. Guidance for making requests for references is set out in the introduction to this e-bulletin.