Playboy Club London Ltd and Others v Banca Nazionale Del Lavoro SPA
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice David Richards,Lord Justice Laws |
| Judgment Date | 18 May 2016 |
| Neutral Citation | [2016] EWCA Civ 457 |
| Docket Number | Case No: A3/2014/2749 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 May 2016 |
[2016] EWCA Civ 457
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
MERCANTILE COURT
HIS HONOUR JUDGE MACKIE QC (Sitting as a High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
The Right Honourable Lord Justice Laws
The Right Honourable Lord Justice Longmore
and
The Right Honourable Lord Justice David Richards
Case No: A3/2014/2749
Mr Jeffrey Chapman QC & Mr Andrew de Mestre (instructed by Bird & Bird LLP) for the Appellant
Mr Simon Salzedo QC & Mr Fred Hobson (instructed by Michael Simkins LLP) for the Respondent
Hearing dates: 27 th April 2016
Introduction
This appeal relates to a financial reference given by a Ms Paola Guidetti of the defendant appellant bank ("the Bank") in respect of a customer, Mr Hassan Barakat. The reference was given to Burlington Street Services Ltd ("Burlington") which was acting on behalf of Playboy Club London Ltd ("the Club") which operated a casino in Mayfair, known at the time as "The Rendezvous". The Bank says Burlington was a front and the judge found that it was the Club's standard practice to use Burlington to ask for references so as "to preserve confidentiality for customers preferring to keep their gaming activities private". The casino was actually owned by the second claimant ("LCI"). The reference, addressed to Burlington, c/o NatWest, Berkeley Square, was in the following terms:-
"13 OCTOBER 2010
WE CONFIRM AND CERTIFY, THAT MR HASSAN BARAKAT, OF VIA TANARA 35, PARMA 43100, MAINTAINS AN ACCOUNT NUMBER, 301 WITH US TO OUR SATISFACTION AND HE IS FINANCIALLY HEALTHY, AND CAPABLE TO MEET HIS BUSINESS COMMITMENTS AND ALL HIS OBLIGATIONS.
MR BARAKAT IS TRUSTWORTHY UP TO THE EXTENT OF 1,600,000.00 ONE MILLION SIX HUNDRED THOUSAND STERLING POUNDS IN ANY ONE WEEK.
THIS INFORMATION IS GIVEN IN STRICT CONFIDENTIAL
KIND REGARDS
PAOLA GUIDETTI
FOR B.N.L. GRUPPO PARIBAS"
The true position was that, although Mr Barakat had, on 4 th October 2010, begun the process of opening an account with the Bank, there were never any funds in that account.
The cheques presented by Mr Barakat to the casino in exchange for gambling chips were, in the judge's word, "counterfeit". By this I take him to mean that they were not original documents taken out of a cheque book given to Mr Barakat but bad photocopies of cheques given to someone else without any obvious anti-fraud devices such as watermarks, although they were signed by Mr Barakat and stamped with the number of his account.
The four main issues debated on the appeal were:-
i) whether the Bank owed a duty of care to anyone other than Burlington and, if so, whether that duty was owed to the Club;
ii) whether the scope of the duty related to "counterfeit" cheques;
iii) whether the Club's loss in being unable to cash Mr Barakat's cheques was caused by breach of duty on the part of the Bank; and
iv) whether any claim should be reduced on account of contributory negligence on the part of the Club's employees.
Outline Facts
Mr Barakat became a member of the Club in September 2008. Until October 2010 he had played only once at the Club and for a modest amount. He had however played frequently at a casino in the Lebanon, the Casino du Liban, where he would typically gamble for stakes of around $100,000 per day funded in cash. Mr Barakat was said to have been recommended the Club as a place to gamble in London by one of the casino's employees (and former manager at the Club), Mr Shephard. Mr Shephard duly notified the Club of Mr Barakat's intention to gamble there, saying that he expected Mr Barakat to bring a substantial amount of cash with him to use in gambling.
Mr Barakat arrived at the Club on 11 th October 2010 and requested a cheque cashing facility ("CCF") in the amount of £800,000. A CCF allows a customer of the Club to present a cheque and, before the cheque is cashed, obtain high-value gaming chips up to an equivalent value. The Club required Mr Barakat to obtain a positive reference from his bank for twice the amount of the CCF i.e. £1.6million. Mr Barakat duly consented to the Club's obtaining a reference and completed an application for submission to the Bank, with whom he was in the process of opening an account as described above. He further provided the Club with a business card of Ms Guidetti, which described her as working in "Sviluppo business", and also an information sheet setting out his account details and Ms Guidetti's contact details. Any employee of the Club who spoke Italian would know that "Sviluppo" is Italian for development.
The reference request was, for the reasons stated above, made via Burlington through the Club's own bank, National Westminster Bank ("Natwest"). On 12 th October 2010 Natwest faxed the request to the Bank, addressed to the manager of the Bank's Reggio Emilia branch marked for the attention of Ms Guidetti. The reference sought the Bank's opinion as to the means and standing of Mr Barakat and his trustworthiness to meet a financial commitment to the extent of £1.6million at any one time.
On 13 th October, the Bank faxed the reference to Natwest which in turn passed it to the Club. The reference was signed by Ms Guidetti, was sent from the Bank's fax number and was in the above terms. At trial, the Bank pointed to a number of irregularities concerning the reference but the Judge ultimately concluded that it had come from the Reggio Emilia branch of the Bank. The same day as the reference was received, Michael Rothwell, the finance director of LCI, reviewed the reference and approved the CCF in the amount of £800,000.
Mr Barakat played roulette at the Club each day between 15 th and 18 th October 2010. His CCF was increased twice during that period, ultimately to £1.25million. At the end of this period, the Club was left with two cheques drawn on Mr Barakat's account with the Bank which it attempted to cash, one for €1,156,000 dated 17 th October 2010 and another for €291,075 dated 18 th October 2010. The cheques were subsequently returned to the Club unpaid. In early November, the Club was told that the cheques were counterfeit. Efforts were made to contact Mr Barakat without success. It later transpired that Mr Barakat's account with the Bank, which was closed in December 2010, had always maintained a nil balance.
The Club was consequently left out of pocket in the amount of £802,940. In May 2013 it filed a claim in negligence in the Mercantile Court against the Bank. The trial took place between 7 th and 10 th July 2014 before HHJ Mackie QC. The Bank did not call evidence from Ms Guidetti but it emerged at trial that the Bank had dismissed her for conduct unrelated to the instant case but "similar in kind".
The judgment
HHJ Mackie QC held first that the Bank was responsible for the reference (whether by virtue of the doctrine of apparent authority or vicarious liability) since it was issued through a conventional channel in circumstances which would not have put a third party on enquiry. Although there was originally an appeal from this finding, that appeal was not pursued in the light of the recent decisions of the Supreme Court in Bilta (UK) Ltd v Nazir (No. 2) [2016] A.C. 1 and Mohamud v Morrison Supermarkets [2016] 2 WLR 821.
He then held that the Bank owed a duty of care not just to Burlington but to the Club in giving the reference because there was no attempt to restrict liability to the enquirer; there was no suggestion in the evidence that the reference would not have been given or would have taken a different form if sought by the Club nor was there any basis for treating the financing of gambling as being of a different order from the financing of ordinary trade. He proceeded to hold further that the Bank was in breach of its duty of care and "but for" the reference the Club would not have accepted the cheques; the fact that the cheques were counterfeit did not, therefore, break the chain of causation; the Club was, however, contributorily negligent to the extent of 15% since the cheques looked odd on their face. He therefore awarded the Club £802,940 subject to a deduction of 15%.
The Submissions
The Bank now appeals and submits
i) its duty of care extended to Burlington but no further; if the Club wished to obtain its reference through a company and conceal its own interest in the matter that was a matter for it;
ii) the scope of the Bank's duty extended only to the giving of the reference and not to the giving of cheques by its customer which were obviously bad on their face;
iii) the Club's own negligence in relation to the cheques broke the chain of causation; and
iv) contributory negligence was in any event far greater than 15%.
The Club supports the judgment and submits
i) a duty of care in giving a reference extended not just to the person for whom it was expressly requested (in this case Burlington) but to any person for whom Burlington was acting whether or not the Bank knew that Burlington was acting for anyone else;
ii) the judge was correct to apply the "but for" test of causation so consideration of the scope of duty was irrelevant;
iii) there could be no question of any novus actus breaking the chain of causation; and
iv) there should be no interference with the judge's assessment of contributory negligence.
Duty of care
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