Playboy Club London sued an Italian bank for losses it suffered after it extended a credit facility to one of the bank’s customers on the basis of a favourable credit reference provided by the bank.
A ‘well-known figure at a casino in Lebanon’ applied to Playboy Club for a cheque-cashing facility up to £800 000 to enable him to gamble in the casino. The Club sought a credit reference from the individual’s bankers for twice the amount sought. The Club asked for the credit reference via a third party agent in order to avoid disclosing to the bank the purpose of the credit facility.
The bank confirmed the account and said the customer was ‘trustworthy up to £1.6 million’ in any one week. The Club extended credit of £1.25 million.
The individual was paid out for £400 000 in winnings but the cheques totalling £1.25 million were returned unpaid leaving a total net loss of more than £800 000. The account was only opened two days after the credit reference was sent and had a nil balance before being closed two months later.
The UK Supreme Court ruled that the bank owed a duty of care to the third party agent which made the enquiry but not to the Club.
The bank therefore did not voluntarily assume any responsibility to the Club. The agent had not expressly or impliedly said that the reference was requested for the benefit of an unnamed client.
[The case is Banca Nazionale del Lavoro (SPA) v Playboy Club London Limited]