The Gazette 1958-61

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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