BANKING LAW

Banking Law



Banking Law

Introduction

This paper discusses and analyzes the statement provided by the Mr. Justice Salmon. The statement will be analyzed with reference to case law, judicial decisions and academic literature. The first part of the paper will briefly state the case in which this statement was used. The second part of the paper will be analyzing the statement thoroughly.

Summary of the Case

A case in which a bank was held to be under a duty of care to a customer was the 1959 case of Woods v. Martins Bank Ltd. In that case, the defendant bank negligently advised the customer to invest in the shares of a company on the basis that the company was financially sound and that the investment was a wise one to make. In fact the company was in a poor financial condition, and had a considerable overdraft with the bank which despite being continually pressed by the bank to repay, it did not repay during the time when the bank was advising the customer. The bank was held liable in damages for the negligent advice. In the course of giving judgment, Mr. Justice Salmon said:

"In my Judgment, the limit of a banker's business cannot be laid down as a matter of Law. The nature of such a business must in each case be a matter of fact and, accordingly cannot be treated as if it were a matter of pure law". In considering what is and what is not within the scope of the defendant bank's business I cannot do better than look at their publications”.

Mr. Justice Salmon then went on to consider various booklets and advertisements published by the defendants in whom there were various references to advice on financial matters being available to customers and concluded:

“I find that it was and is within the scope of the defendant bank's business to advise on all financial matters and that, as they did advise [the plaintiff], they owed a duty to the plaintiff to advise him with reasonable care and skill in each of the transactions to which I have referred” (Smailes, Woods v. Martins Bank ltd and another, [website]).

The Woods v. Martins Bank Ltd case demonstrated what has subsequently become clearer in the more recent cases referred to below; that in assessing the existence and extent of any duty of care, an English court will look first at the facts in relation to each case to ascertain whether there was any express or implied assumption of responsibility by a bank or other financial institution to advice, and second at whether that advice was reasonably relied on by the plaintiff (Reinhart & Carmen, 2008: 214).

Analysis of the Statement with Reference Cases

The case is mainly referring to the customer care services in context to the financial investment advice. The position of the Association of Brokers and Investment Advisers on changes in the provisions for disclosure obligations of issuers related to transactions in financial derivatives. Association of Brokers and Advisers agrees that the problem of ...