Playboy Club wins damages claim against Italian bank for negligent customer reference

Playboy Club London Limited and Ors v Banca Nazionale del Lavoro Spa [2014] EWHC 2613 (QB)

The Mayfair casino, Playboy Club (Club), has won its High Court claim against Banca Nazionale del Lavoro Spa (BNL) for negligently providing a financial reference for a customer.

Facts

In October 2010, a Club customer requested a cheque cashing facility for £800,000. Through an intermediary company, the Club requested and obtained a financial reference from the customer’s Italian bank, BNL. The bank’s reference stated that its customer was “financially healthy” and able to meet his business commitments and was “trustworthy” up to the extent of £1.6 million “in any one week”. Relying on this reference, the Club granted the facility and accepted cheques from the customer to draw down on the facility in return for gaming plaques, which he used to gamble in the casino. The customer made gambling losses and BNL subsequently refused to honour payment of his cheques on the basis that they were counterfeit. It later transpired that the customer’s bank account had never contained any funds. Neither the customer nor his assets could be traced, and the Club brought a claim against BNL for negligently providing the reference on which it had relied to grant the facility.

BNL did not admit providing the reference and denied that it owed any duty of care to the Club, particularly as the reference was requested by and addressed to the Club’s sister company. It argued that the Club itself broke any chain of causation, or alternatively had contributed to its own losses, by accepting cheques that were clearly counterfeit or by failing to carry out sufficient other checks of the customer before granting the facility.

Decision

Despite this defence, the High Court found that it was clear that the bank had sent the reference and that the Club was entitled to recover its losses resulting from its reliance upon it. In particular, the bank employee who opened the account for the customer and was held out as his relationship manager was the same one who had apparently faxed back the reference, and the court noted that this member of staff had subsequently been dismissed “for irregularities unrelated to this case but similar in kind”. The Judge found that although this employee lacked actual authority to send the reference, she acted either within the scope of her apparent authority or within the course of her employment and so the bank was liable for her acts. BNL owed a duty of care to the Club, even though the reference was addressed to its sister company, as there was sufficient proximity between the Club and that intermediary. The court rejected BNL’s arguments that the fact that the cheques were counterfeit broke the chain of causation and that the losses fell outside the scope of its duty of care. The Judge did, however, find that there had been a minor degree of contributory negligence by the Club for failing to examine the cheques closely enough. The court therefore awarded the Club the sums paid away in reliance on the reference, amounting to over £800,000, with a modest reduction for contributory negligence, plus interest on those damages and its legal costs. The Judge refused permission to appeal.

Michael Simkins LLP represented the Club and instructed Fred Hobson of Brick Court Chambers. The full judgment is available here.

For further details please contact Paddy Gardiner, Partner and Head of the Disputes Group or Gillie Abbotts, Associate.