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At the beginning of May, 1950, J., who was
manager of a branch of a bank, in reply to a request
by the plaintiff (who had no real business exper
ience) to be his financial adviser, said that the bank
would be only too pleased to take care of the
plaintiff's financial affairs. On 9th May, 1950, the
plaintiff was induced to invest £5,000 in preference
shares of B.R. Ltd., in consequence of advice prev
iously given by J., but implicitly repeated on that
day, that B.R. Ltd., who were customers of the
bank, were financially sound and that the investment
was a wise one to make. The plaintiff on that date,
in a letter dictated by J., authorised the proceeds of
certain investments to be paid to the bank so that
they might pay for the shares out of the proceeds
and retain the balance to his order. The balance,
after the bank had paid for the shares, was put by
them to the plaintiff's credit in a suspense account.
On ist June, 1950, the bank opened a current
account for the plaintiff. Relying on further advice
by J., the plaintiff subsequently invested a further
£6,800 in shares in B.R. Ltd., and made a loan of
£3,000 to the company in the form of an unregis
tered bill of sale.
In February, 1952, the plaintiff
signed a guarantee of the overdraft of F.A. Ltd.
with the bank, relying on advice by J. that F.A. Ltd.
were sound financially.
There were no grounds on which J. could reason
ably have advised that B.R. Ltd. was in a sound or
strong financial position, and still less could the
investment
in
the shares be reasonably recom
mended as a wise one. Unknown to the plaintiff,
B.R. Ltd. had with the bank a considerable overdraft,
of which at all material times the district head office
of the bank were pressing J. to procure a reduction.
Nor was there any reasonable ground for giving
the advice in relation to F-A. Ltd.
The plaintiff lost the sum of £14,800 invested in
B.R. Ltd., and was called upon to pay £990 35.
under his guarantee for F.A. Ltd., and claimed
these sums from the bank and J. A claim based
on fraud failed as it was found that J. honestly
believed in the advice which he gave, but as to a
claim in negligence :—
Held by Salmon J. (i) The limits of a banker's
business could not be laid down as a matter of law;
the nature of such a business must in each case be a
matter of fact, and on the facts it was within the
scope of the bank's business to advise on all financial
matters, and they owed a duty to the plaintiff to
advise him with reasonable care and skill in the
transactions referred to.
(2) That from 9th May, 1950, when the bank
accepted the plaintiff's instructions the relationship
of banker and customer existed between them.
(3) That even if the plaintiff did not become a
customer until later, the defendants would still
have been under a duty to exercise ordinary skill
and care in advising him in relation to the £5,000
transaction on 9th May.
(4) That J. ought never to have advised the plain
tiff without making a full disclosure to him of the
conflicting interests between the plaintiff and the
bank and the bank's other customers concerned.
(5) That as none of the advice was reasonably
careful or skiiful, and but for it the plaintiff would
never have made any of the investments or given
the guarantee, he had made out his case in negligence
against both defendants.
Certain material documents were not disclosed
in the defendant's affidavit of documents, and it
should at all times have been obvious to the defend
ants and their solicitors that such documents existed.
Held by Salmon J. that the solicitors' duty did
not stop at explaining to their clients that they must
disclose all relevant documents which were or
had been in their possession ;
solicitors owed a
duty to the court, as officers of the court, carefully
to go through the documents disclosed by their
clients to make sure, as far as possible, that no
relevant documents had been omitted from their
clients' affidavit.
(Woods
v.
Martins Bank Ltd. and Another.
(1958) i W.L.R. 1018).
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