A Playboy Club (the Club) customer requested a cheque cashing facility. Before accepting the cheque, the Club requested a reference from the customer’s bank, Banca Nazionale del Lavoro (BNL).
BNL provided reference stating that the customer held an account with the bank and was “trustworthy up to the extent of £1.6 million in any one week”. The Club accepted the cheques and the customer drew down a total of £1.25 million with which to gamble.
The customer made significant gambling losses, his cheques bounced and neither he nor his assets could be traced. The cheques were later found to be forgeries.
The reference given by the bank employee was inaccurate. Since its opening, the customer’s account had always had a nil balance. Evidence showed that the employee has acted without the bank’s actual authority but had acted within the scope of her apparent authority. The court applied two tests and found that the bank was liable for the employee’s actions whichever test it applied: whether the negligent misstatement was made with the bank’s actual or apparent authority or whether it was done in the course of the employee’s employment.
The court rejected BNL’s argument that the chain of causation was broken by the fact that the cheques had been forged however it did find a certain degree of contributory negligence on the part of the Club in accept the forged cheques. The cheques would have been revealed as forgeries had they been more closely inspected.
In assessing damages the court looked at the element of the loss that flowed directly from the inaccurate reference. The fact that the customer went on to make gambling losses was a separate matter. As such the Club was entitled to recover the amount paid out under the facility minus 15% for contributory negligence.