Malik v BCCI SA; Mahmud v BCCI SA
| DOI | https://doi.org/10.1108/eb024959 |
| Pages | 77-80 |
| Published date | 01 January 1998 |
| Date | 01 January 1998 |
| Author | Goff, Mackay, Mustill, Nicholls, Steyn,Joanna Gray |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 6 Number 1
Compensation for the stigma of having
worked for a fraudulent employer
Malik v BCCI SA; Mahmud v BCCI SA
House of Lords: Lord Goff, Lord Mackay, Lord Mustill, Lord Nicholls and
Lord Steyn
Date of Judgment: 12th June, 1997
Reported at: Times Law Reports, 13th June, 1997
FACTS
These two appeals arose out of the 1991
collapse of BCCI and were brought by
two former employees of BCCI in London
who had both lost their jobs as a result of
the collapse. Mr Malik had worked for
BCCI for 12 years, his last position being
head of deposit accounts and customer ser-
vices at BCCI's Leadenhall branch. Mr
Mahmud had 16 years service with the
bank and was manager of the Brompton
Road branch at the time he lost his job.
They claimed that as well as losing their
jobs they had suffered damage to their
reputations, and thus future employability,
as a result of their association with BCCI.
In all the courts through which the claims
passed the liquidators agreed that the
actions should proceed upon the basis of a
set of agreed facts (although the liquidators
made no admission of the veracity of those
facts) namely
— BCCI operated in a corrupt and
dishonest manner
— Messrs Mahmud and Malik were inno-
cent of any involvement therein
— once BCCI had collapsed its corruption
and dishonesty became widely known
and as a consequence Messrs Mahmud
and Malik were at a handicap on the
labour market because they were stig-
matised by reason of their previous
employment by BCCI, and that they
suffered loss in consequence.
ACTION
Both the court at first instance and the
Court of Appeal had dismissed the Appel-
lants'
claim for compensation for the
damage suffered to their reputations, and
hence subsequent employability, by
BCCI's breach of the obligation of trust
and confidence it owed them pursuant to
the contract of employment. It was the
Appellants' case that damages were reco-
verable at law for injury to their reputation
and the lower courts had been wrong to
draw a distinction between financial loss
and damage to reputation in the context of
this particular case.
DECISION
Both the Appellants and BCCI agreed that
it was well established in law that the
employment relationship carried with it a
two-way obligation of trust and confi-
dence. That obligation, when viewed
from the perspective of the employee,
translated into an implied term that his
employer would conduct an honest busi-
ness.
Lord Nicholls pointed out in his judg-
Journal of Financial Regulation
and Compliance, Vol. 6, No. 1,
1998,
pp. 77-80
© Henry Stewart Publications,
1358-1988
Page 77
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