•
LAW OF FINANCIAL INSTITUTIONS AND SECURITIES
BLO3405
• Duties - Banker
• Introduction
• The banker customer relationship creates a number of contractual duties
• Most important duties of banker under the banker customer relationship are: duty to pay
cheques and the duty of secrecy.
• There are additional duties on the banker where additional services provided
• Duties - banker
• The Duty of Secrecy
The banker has a duty of secrecy wrt transactions that go through the account and any securities
taken by the banker:
Tournier v National provincial & Union Bank of England (1924)
• Duties banker
• Exceptions to the duty of secrecy:
• See Banks LJ in Tournier (p 204)
• The Privacy Act also applies to the duty of secrecy
• Note the duty of secrecy extends to banks as well as other financial institutions
• Duties - Banker
The duty of confidentiality can be overridden by other legal requirements.
where there is a court order to release information as part of a criminal prosecution the
bank must do so
There is also a duty to disclose to the public in some situations where it is in the public
interest:
• see Lord Denning in Initial Sevices v Putterill (1967) (p 207)
In the interest of the bank
If the customer gives the banker consent, either express or implied, to disclose the
confidential information, then obviously the duty of confidentiality does not apply
• Damages as a remedy
• Even in cases where the duty of secrecy is breached by the bank, the question is then has
the breach led to damage to the customer?
, • For example, a creditor may be given information on the account balance in order to pay a
cheque. While this is a breach of the duty of secrecy, there is no damage caused to the
customer
• Duties - Banker
Bankers’ References
• These are references provided from one bank to another detailing customer information.
This seems to be a breach of the duty of secrecy that a bank owes its customer. So what are
the legal grounds for providing such a reference?
• The argument is that by opening an account, in particular a business account, the customer
impliedly authorises the bank to provide an opinion when requested by another bank
• But this assumes that customers know that bankers provide customer references to other
banks.
• If there is implied consent to provide a customer reference, then the reference provided
must be accurate in terms of the account information
• If inaccurate customer information is provided then there would be a breach of the banker
customer contract
• Duties - Banker
• So what is the duty of the bank providing the reference to the customer of the other bank
(the ultimate inquirer)?
• There is no contractual relationship
• However, once the bank agrees to provide a reference, there is a duty to exercise
reasonable care in providing the requested information under the ordinary negligence
principles:
• Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964)
• If a disclaimer is provided by the bank wrt the customer reference then it will have no effect
for advice that is given recklessly or fraudulently:
• Compafina Bank v ANZ Banking Group (1984)
• Disclaimers may also have no effect if contrary to s 18 ACL
• Duties - Banker
• Duty of Care
• The duty of care does not always arise if gratuitous advice is provided
• A duty of care does arise however when the advisor either knows or ought to know that the
inquirer is relying on the answer.
• Duty of care in giving financial advice
• A bank owes a duty of care in giving financial advice to customers in the ordinary course of
business or where the bank advertises itself as giving the advice in question
LAW OF FINANCIAL INSTITUTIONS AND SECURITIES
BLO3405
• Duties - Banker
• Introduction
• The banker customer relationship creates a number of contractual duties
• Most important duties of banker under the banker customer relationship are: duty to pay
cheques and the duty of secrecy.
• There are additional duties on the banker where additional services provided
• Duties - banker
• The Duty of Secrecy
The banker has a duty of secrecy wrt transactions that go through the account and any securities
taken by the banker:
Tournier v National provincial & Union Bank of England (1924)
• Duties banker
• Exceptions to the duty of secrecy:
• See Banks LJ in Tournier (p 204)
• The Privacy Act also applies to the duty of secrecy
• Note the duty of secrecy extends to banks as well as other financial institutions
• Duties - Banker
The duty of confidentiality can be overridden by other legal requirements.
where there is a court order to release information as part of a criminal prosecution the
bank must do so
There is also a duty to disclose to the public in some situations where it is in the public
interest:
• see Lord Denning in Initial Sevices v Putterill (1967) (p 207)
In the interest of the bank
If the customer gives the banker consent, either express or implied, to disclose the
confidential information, then obviously the duty of confidentiality does not apply
• Damages as a remedy
• Even in cases where the duty of secrecy is breached by the bank, the question is then has
the breach led to damage to the customer?
, • For example, a creditor may be given information on the account balance in order to pay a
cheque. While this is a breach of the duty of secrecy, there is no damage caused to the
customer
• Duties - Banker
Bankers’ References
• These are references provided from one bank to another detailing customer information.
This seems to be a breach of the duty of secrecy that a bank owes its customer. So what are
the legal grounds for providing such a reference?
• The argument is that by opening an account, in particular a business account, the customer
impliedly authorises the bank to provide an opinion when requested by another bank
• But this assumes that customers know that bankers provide customer references to other
banks.
• If there is implied consent to provide a customer reference, then the reference provided
must be accurate in terms of the account information
• If inaccurate customer information is provided then there would be a breach of the banker
customer contract
• Duties - Banker
• So what is the duty of the bank providing the reference to the customer of the other bank
(the ultimate inquirer)?
• There is no contractual relationship
• However, once the bank agrees to provide a reference, there is a duty to exercise
reasonable care in providing the requested information under the ordinary negligence
principles:
• Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964)
• If a disclaimer is provided by the bank wrt the customer reference then it will have no effect
for advice that is given recklessly or fraudulently:
• Compafina Bank v ANZ Banking Group (1984)
• Disclaimers may also have no effect if contrary to s 18 ACL
• Duties - Banker
• Duty of Care
• The duty of care does not always arise if gratuitous advice is provided
• A duty of care does arise however when the advisor either knows or ought to know that the
inquirer is relying on the answer.
• Duty of care in giving financial advice
• A bank owes a duty of care in giving financial advice to customers in the ordinary course of
business or where the bank advertises itself as giving the advice in question
