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Banca Nazionale del Lavoro SPA v Playboy Club London Ltd & Ors
Factual and Procedural Background
A gambling establishment (“Plaintiff”) wished to extend a cheque-cashing facility to a customer (“Individual A”). Its internal policy required a bank reference for twice the amount of the proposed facility. To conceal the purpose of the enquiry, an associated company (“Company A”) asked the customer’s bank (“Defendant”) for a reference stating the customer’s trustworthiness up to £1.6 million. The bank, knowing nothing of the gambling context, provided a favourable reference.
Relying on that reference, the Plaintiff granted a facility, later raising it to £1.25 million. Individual A drew two cheques for that sum, won £427,400, took the winnings, and left the jurisdiction. Both cheques were returned unpaid, causing the Plaintiff a net loss of £802,940. It was later common ground that the Defendant had no reasonable basis for its reference, having opened an empty account for Individual A only after the reference was sent.
At first instance, Judge [Last Name] held that the Defendant owed a duty of care to the Plaintiff. The Court of Appeal reversed, finding any duty was owed solely to Company A, the addressee of the reference. The present judgment, delivered by Judge [Last Name] for the Supreme Court, addresses the Plaintiff’s further appeal.
Legal Issues Presented
- Whether a bank that negligently supplies a credit reference owes a duty of care to an undisclosed principal who relies on that reference.
- Whether the doctrine allowing an undisclosed principal to sue on a contract can be transposed to create a “relationship equivalent to contract” sufficient for tortious liability in negligent misstatement.
Arguments of the Parties
Appellant’s (Plaintiff’s) Arguments
- Conceded the Defendant did not know the reference would reach the Plaintiff, but contended that, as Company A’s undisclosed principal, the Plaintiff stood in a relationship “equivalent to contract,” thereby creating sufficient proximity.
- Submitted that, had consideration been given, contractual principles would have allowed the Plaintiff to intervene and enforce the representation; tort law should therefore recognise the same proximity.
Respondent’s (Defendant’s) Arguments
- The bank assumed responsibility only to Company A, the sole addressee of the reference.
- No duty arises to a party whose existence and purpose were completely unknown to the representor, consistent with Hedley Byrne, Caparo and subsequent authority limiting liability to an identifiable class.
- The anomalous contractual doctrine of undisclosed principals has no counterpart in tort and cannot create proximity where none exists.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 | Duty of care for negligent misstatements based on voluntary assumption of responsibility and reasonable reliance. | Contrasted with the present case; in Hedley Byrne the representor appreciated the statement would reach the claimant, unlike here. |
| Caparo Industries plc v Dickman [1990] 2 AC 605 | Proximity requires the defendant to know the identity or class of persons and the transaction for which reliance is contemplated. | Used to show that the Plaintiff, as an undisclosed principal, fell outside the identifiable class contemplated by the Defendant. |
| NRAM Ltd v Steel [2018] 1 WLR 1190 | Reaffirmed assumption of responsibility as foundation of liability for economic loss. | Cited to stress that the defendant must assume responsibility to an identifiable person or group, not the world at large. |
| Nocton v Lord Ashburton [1914] AC 932 | Origins of the phrase “relationship equivalent to contract.” | Explained that such equivalence is allegorical; it does not import all contractual incidents into tort. |
| Candler v Crane, Christmas & Co [1951] 2 KB 164 (Denning LJ dissent) | Duty extends only to persons the accountant knows will receive and rely on the statement. | Adopted in Caparo; supports limiting duty to known recipients such as Company A only. |
| Ultramares Corp v Touche (1931) 174 N.E. 441 | Warning against “liability in an indeterminate amount for an indeterminate time to an indeterminate class.” | Quoted in Caparo; illustrates policy against expansive liability. |
| Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 | Sets out principles governing undisclosed principals in contract. | Cited to demonstrate that the doctrine is an anomaly of contract and does not determine tortious proximity. |
| Smith v Bush [1990] 1 AC 831; Henderson v Merrett Syndicates Ltd [1995] 2 AC 145; Spring v Guardian Assurance plc [1995] 2 AC 296 | Examples where “relationship equivalent to contract” created tortious duties. | Used to show that equivalence depends on factual proximity, not merely on legal constructs. |
| Vesta v Butcher [1989] AC 852 | Interaction between contractual and tortious liability for contributory negligence. | Mentioned in the concurring opinion to illustrate consequences if contractual principles were imported into tort. |
Court’s Reasoning and Analysis
Judge [Last Name] emphasised that liability for negligent misstatement rests on a voluntary assumption of responsibility toward an identifiable person or class. Unlike Hedley Byrne, the Defendant had no knowledge that anyone other than Company A would receive or rely on the reference. Mere foreseeability that another might rely is insufficient; proximity requires actual or inferential knowledge of that person or class and of the transaction in contemplation.
The Plaintiff’s reliance on the doctrine of undisclosed principals was rejected for three reasons: (1) equating “relationship equivalent to contract” with all contractual incidents is a non-sequitur; (2) contractual liability to an undisclosed principal is a legal construct that bypasses factual proximity, whereas tort liability demands factual closeness and voluntary assumption of responsibility; and (3) importing only one aspect of the doctrine would disturb the mutuality of rights and obligations inherent in contract, producing asymmetric tort duties.
Judge [Last Name] acknowledged the Defendant’s apparent negligence but concluded that indifference to the identity of the recipient does not constitute an assumption of responsibility to unknown parties. The concurring opinion agreed, adding that while the purpose for which the reference was sought need not be specific, the claimant must still fall within the class to whom the representation is directed—here confined to Company A.
Holding and Implications
APPEAL DISMISSED.
The Supreme Court affirmed that the Defendant owed no duty of care to the Plaintiff, an undisclosed principal entirely unknown to the bank when the reference was given. The immediate consequence is that the Plaintiff cannot recover its £802,940 loss from the Defendant. The decision applies well-established principles without creating new precedent; it reinforces the requirement that defendants must knowingly assume responsibility to an identifiable person or class before tortious liability for negligent misstatement can arise.
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