- •Commercial Law
- •Contents
- •Preface
- •Abbreviations
- •Table of Statutory Provisions
- •Table of Cases
- •1 Introduction
- •1 Introduction
- •2 What is agency?
- •3 Nature and characteristics of agency
- •4 The different types of agency
- •5 Conclusion
- •6 Recommended reading
- •1 Introduction
- •2 The authority of an agent
- •3 Agency by ratification
- •4 Agency of necessity
- •5 Conclusion
- •6 Recommended reading
- •1 Introduction
- •2 Duties of an agent
- •3 Rights of an agent
- •4 Commercial agents and principals
- •5 Disclosed agency
- •6 Undisclosed agency
- •7 Termination of agency
- •8 Recommended reading
- •Introduction
- •1 Introduction
- •2 Background
- •3 Development of the sale of goods
- •4 Equality of bargaining power: non-consumers and consumers
- •5 Impact of the European Union
- •6 Contract of sale
- •7 Contracts for non-monetary consideration
- •8 Contracts for the transfer of property or possession
- •9 Recommended reading
- •1 Introduction
- •2 Background
- •3 Sale of Goods Act 1979, section 12: the right to sell
- •4 Sale of Goods Act 1979, section 13: compliance with description
- •5 Sale of Goods Act 1979, section 14(2): satisfactory quality
- •6 Sale of Goods Act 1979, section 14(3): fitness for purpose
- •7 Sale of Goods Act 1979, section 15: sale by sample
- •8 Exclusion and limitation of liability
- •9 Acceptance
- •10 Remedies
- •11 Recommended reading
- •1 Introduction
- •2 Background to the passage of property and risk
- •3 Rules governing the passage of property
- •4 Passage of risk
- •5 The nemo dat exceptions
- •6 Delivery and payment
- •7 Remedies
- •8 Recommended reading
- •1 Introduction
- •2 Background
- •3 Provision of Services Regulations 2009
- •4 Supply of Goods and Services Act 1982
- •5 Recommended reading
- •1 Introduction
- •2 Background
- •3 Electronic Commerce (EC Directive) Regulations 2002
- •4 Distance selling
- •5 Recommended reading
- •Introduction
- •1 Introduction
- •2 CIF contracts
- •3 FOB contracts
- •4 Ex Works
- •5 FAS contracts
- •6 Conclusion
- •7 Recommended reading
- •1 Introduction and background
- •2 Structure and scope
- •3 UNIDROIT Principles of International Commercial Contracts
- •4 Conclusion
- •5 Recommended reading
- •1 Introduction and background
- •2 Open account
- •3 Bills of exchange
- •4 Documentary collections
- •5 Introduction to letters of credit
- •6 Factoring
- •7 Forfaiting
- •8 Conclusion
- •9 Recommended reading
- •1 Introduction
- •2 Hague and Hague-Visby Rules
- •3 Charterparties
- •4 Time charterparty
- •5 Common law obligations of the shipper
- •6 Common law obligations of the carrier
- •7 Bills of lading
- •8 Electronic bills of lading
- •9 Conclusion
- •10 Recommended reading
- •Introduction
- •1 Introduction
- •2 Background
- •3 Development of negligence
- •4 The move to strict liability
- •5 Types of defect
- •6 Developments in strict liability
- •7 Recommended reading
- •1 Introduction
- •2 Personnel
- •3 Meaning of ‘product’
- •4 Defectiveness
- •5 Defences
- •6 Contributory negligence
- •7 Recoverable damage
- •8 Limitations on liability
- •9 Recommended reading
- •Introduction
- •1 Introduction
- •2 Background
- •3 Enforcement strategy
- •4 Criminal law controls
- •5 Civil law enforcement
- •6 Recommended reading
- •1 Introduction
- •2 Scope of the 2008 Regulations
- •3 Prohibition against unfair commercial practices
- •4 Codes of practice
- •5 Misleading actions
- •6 Misleading omissions
- •7 Aggressive commercial practices
- •8 Commercial practices which are automatically unfair
- •9 Offences
- •10 Recommended reading
- •1 Introduction
- •2 Background
- •3 Controls over misleading advertising
- •4 Comparative advertising
- •5 Promotion of misleading or comparative advertising
- •6 Recommended reading
- •1 Introduction
- •1 Introduction
- •2 History of banking regulation: early policy initiatives
- •3 New Labour and a new policy
- •4 The Financial Services Authority
- •5 The Coalition government
- •6 Conclusion
- •7 Recommended reading
- •1 Introduction
- •2 What is a bank?
- •3 What is a customer?
- •4 Bank accounts
- •5 Cheques
- •6 Payment cards
- •7 Banker’s duty of confidentiality
- •8 Banking Conduct Regime
- •9 Payment Services Regulations 2009
- •10 Conclusion
- •11 Recommended reading
- •1 Introduction
- •2 European banking regulation
- •3 The Financial Services Authority
- •4 Financial Services Compensation Scheme
- •5 Financial Ombudsman Scheme
- •6 Financial Services and Markets Tribunal
- •7 The Bank of England
- •8 Bank insolvency
- •9 Illicit finance
- •10 Conclusion
- •11 Recommended reading
- •1 Introduction
- •1 Introduction
- •2 Evolution of the consumer credit market
- •3 Consumer debt, financial exclusion and over-indebtedness
- •4 Irresponsible lending
- •5 Regulation of irresponsible lending
- •6 Irresponsible borrowing
- •7 Ineffective legislative protection for consumers
- •8 A change of policy
- •9 Lessons from the United States
- •10 Conclusion
- •11 Recommended reading
- •1 Introduction
- •2 Crowther Committee on Consumer Credit
- •3 Consumer Credit Act 1974
- •4 Formalities
- •5 Cancellation of agreements
- •7 Documentation of credit and hire agreements
- •8 Matters arising during the currency of credit or hire agreements
- •9 Credit advertising
- •10 Credit licensing
- •11 Unfairness test
- •12 Other powers of the court
- •13 Financial Ombudsman Service
- •14 Enforcement
- •15 Consumer Credit Directive
- •16 Conclusion
- •17 Recommended reading
- •Bibliography
- •Index
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Banking and finance law |
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For security reasons, transfers are protected by cryptographic codes and can even be anonymous if the user so chooses.124
7â Banker’s duty of confidentiality
The banker’s duty of confidentiality is one of the most important aspects of their relationship with a customer. It has also been argued that this duty applies to non-customers ‘by giving an express undertaking to that effect, such as when a business plan is presented to the bank to secure finance’.125 The duty of confidentiality in the United Kingdom is based on judicial precedent, whilst in many other countries the duty is statute based.126 A bank’s duty of confidentiality is based on an implied term of the contract between itself and its customer. A bank’s duty of confidentiality was established in the famous case of Tournier v. National Provincial Union Bank of England.127 This case has been described as the ‘locus classicus’ of the bank’s duty of confidentiality towards its customers.128 It has also been referred to as ‘the leading case in respect of the bank’s duty of confidentiality’.129 The court imposed a duty of confidentiality in this case after the National Provincial Union Bank of England disclosed to Tournier’s employer his overdraft facility and that he had failed to meet the weekly repayments of £1. The Court of Appeal awarded damages to the customer.130 The extent of the duty of confidentiality was outlined by Atkin LJ, who stated:
It clearly goes beyond the state of the account, that is, whether there is a debit or credit balance, and the amount of the balance. It must at least extend to all transactions that go through the account, and to the securities, if any, given in respect of the account; and in respect of such matters it must, I think, extend beyond the period when the account is closed, or ceases to be an active account. I further think that the obligation extends to information obtained from other sources than the customer’s actual account, if the occasion upon which the information was obtained arose out of the banking relations of the bank and its customers– for example, with a view to assisting the bank in conducting the customer’s business, or in coming to decisions as to its treatment of its customers.131
It is important to note the dissenting judgment of Scrutton LJ, who ‘expressed the contrary view, holding that the bank’s duty to respect its customer’s
124S. Ramage, ‘Legislative comment: digital money, electronic fraud, new regulations and the old money laundering regulations’ (2011) 200 Criminal Lawyer 1, 2.
125Ellinger et al., above n. 10, at 176.â 126â Wadsley and Penn, above n. 1, at 89.
127[1924] 1 KB 461.
128R. Goode, ‘The banker’s duty of confidentiality’ (1989) Journal of Business Law (May) 269.
129S. Chew, ‘Disclosure of information by the bank: protection of the guarantor’s rights or a threat to the doctrine of confidentiality’ (2009) 24(6) Journal of International Banking Law and Regulation 313, 316. For a similar view see A. Olukonyinsola, ‘International securities regulation’ (1992) 7(5) Journal of International Banking Law 191, 192.
130Ellinger et al., above n. 10, at 176.
131Tournier v. National Provincial Union Bank of England [1924] 1 KB 461, 485, as cited in Goode, above n. 128, at 269.
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7â Banker’s duty of confidentiality |
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confidence did not apply “to knowledge derived from other sources during the continuance of the relation”’.132 However, the courts have sided with the approach of Atkin LJ. In Barclays Bank plc v. Taylor, Lord Donaldson MR stated ‘the banker-customer relationship imposes upon the bank a duty of confidentiality in relation to information concerning its customer and his affairs which it acquires in the character of his banker’.133 Wadsley and Penn noted that ‘the Court of Appeal held that it is an implied term of the banker-customer contract that bankers owe their customers a duty of secrecy or non-disclosure, and that in this case, the duty had been breached’.134 Arora noted that the Jack Committee ‘recommended the statutory codification of the rule in Tournier v.
National Provincial & Union Bank of England … where the court established a duty of confidentiality in respect of the customer’s affairs’.135 Stokes stated:
Thus the concept of banking confidentiality was born and quickly established itself at the heart of the banker-customer relationship. Consequently a traditional account of the banker’s duty of confidentiality would state that, generally, the duty of confidentiality is owed to the customer of the bank and begins upon the opening of the account.136
Therefore, a ‘bank may not disclose to any other person any document or other information it has obtained in the course of the relationship with a customer without the consent of the customer’.137
However, there are a number of exceptions to this rule, which were outlined by Banks LJ in Tournier. who famously stated:
On principle, I think the qualifications can be classed under four heads: (a) where disclosure is under compulsion by law: (b) where there is a duty to the public to disclose; (c) where the interests of the bank require disclosure: (d) where disclosure is made by express or implied consent of the customer.138
Banks LJ offered an interesting commentary on the longevity of the duty of confidentiality and stated that:
I certainly think that the duty does not cease the moment a customer closes his account. Information gained during the currency of the account remains confidential unless released under circumstances bringing the case within one of the classes of qualification I have already referred to.139
These qualifications have been described as being ‘almost universally regarded in the jurisprudence as exceptions to the duty and as if they have statutory
132 As cited in Ellinger et al., above n. 10, at 177.â 133â [1989] 1 WLR 1066, 1070, CA.
134Wadsley and Penn, above n. 1, at 105.
135A. Arora, ‘Code of Banking Practice: Part A’ (1992) 10(12) International Banking and Financial Law 177, 179.
136R. Stokes, ‘The banker’s duty of confidentiality, money laundering and the Human Rights Act’ (2007) Journal of Business Law (August) 502, 508.
137 Wadsley and Penn, above n. 1, at 89.â 138â [1924] 1 KB 461.â 139â Ibid.
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force’.140 Furthermore, they have also been referred to as the ‘central statement of the bank’s duty of confidentiality’.141
The first exemption, ‘compulsion by law’, applies to both civil and criminal proceedings,142 and is illustrated by the Bankers Books Evidence Act 1879, which provided:
On the application of any party to a legal proceeding a court or judge may order that such party be at liberty to inspect and take copies of any entries in a banker’s book for any of the purposes of such proceedings. An order under this section may be made either with or without summoning the bank or any other party, and shall be served on the bank three clear days before the same is to be obeyed, unless the court or judge otherwise directs.143
Other examples include orders for disclosure, witness summons, writs of sequestration, garnishee orders, cross-border disclosure and disclosure to investigators.144 Indeed, Ellinger et al., took the view that the amount of legislation permitting courts to order the inspection and disclosure of bank documents or otherwise requiring bank disclosure in specific circumstances has burgeoned, making major inroads into the bank’s duty of confidentiality.145 The FSMA 2000 empowers the Financial Services Authority to compel a bank to provide confidential information provided four conditions are met:
(1)he is the person under investigation or a member of that person’s group;146
(2)the person to whom the obligation of confidence is owed is the person under investigation or a member of that person’s group;147
(3)the person to whom the obligation of confidence is owed consents to the disclosure or production;148 or
(4)the imposing on him of a requirement with respect to such information or document has been specifically authorised by the investigating authority.149
It is important to note that this exception has been subject to criticism from several commentators.150
The importance of the second exception, a bank’s duty to the public, was illustrated following the infamous collapse of the Bank of Credit and Commerce International (BCCI).151 In Pharaon v. Bank of Credit and Commerce International SA, the court ruled that ‘having access to that institution’s accounts
140 Cranston, above n. 16, at 174.â 141â Hudson, above n. 35, at 824.
142A. Silvertown, ‘Bankers’ duty of confidentiality’ (1988) 7(5) International Banking Law 72.
143Bankers Books Evidence Act 1879, s.7.
144This exception also applies to requests by financial regulatory agencies and government departments. See Libyan Arab Foreign Bank v. Bankers Trust Co. [1989] 3 All ER 252.
145 |
Ellinger et al., above n. 10, at 178–9.â 146â FSMA 2000, s.175(5)(a). |
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147 |
Ibid., s.175(5)(b).â |
148â Ibid. s.175(5)(c). |
149 |
Ibid. s.175(5)(d).â |
150â See, e.g., Cranston, above n. 16, at 174. |
151See, e.g., Price Waterhouse v. BCCI Holdings (Luxembourg) [1992] BCLC 583, Ch. D, for a discussion of this rule. Other examples of this exception include trading with the enemy and suspected terrorist links.