A sole shareholder and director who had dominant influence over the affairs of the plaintiff company acted fraudulently and paid out the company’s money from its bank accounts for his own personal benefit.
The bank was held liable because on the facts it was found that any reasonable banker would have realised that there were many obvious, even glaring, signs that the shareholder was perpetrating a fraud on the company when he instructed the money to be paid to other parts of his business operations.
The UK court said the law must guard against the facilitation of fraud and exact a reasonable standard of care in order to combat fraud and protect bank customers and innocent third parties. The banker’s duty only arises where, abnormally, the bank is put on enquiry by the particular circumstances but this was an abnormal situation. The apportionment of damages of bank to customer of 75%/25% was upheld on appeal.
[The case is Singularis Holdings Limited v Daiwa Capital Markets Europe Limited]