Tournier v National Provincial & Union Bank of England (1924)

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As is well known, the great case of Tournier v National Provincial and Union Bank of England held that a bank owes a duty of confidentiality to its customers. The duty extends at least to information concerning account transactions and extends beyond the date of the termination of the banker customer contract. Information attained from other sources, like a credit agency, is also covered by the duty. The duty is not absolute for the bank may disclose information where the disclosure is under compulsion by law, where there is a duty to the public to disclose, where the interests of the bank require disclosure and where the disclosure is made by the express or implied consent of the customer.

Tournier had an overdraft with the defendant bank. He had made arrangements to make payments toward the reduction of the overdraft, but after only three installments ceased to make further payments. Tournier was the payee of a cheque drawn by Woldingham Traders Ld. Rather than deposit the cheque in his account with the defendant bank; he indorsed the cheque to a customer of the London City and Midland Bank. The defendant bank came to know about the cheque by virtue of the fact that Woldingham was a customer. Upon seeing the cheque presented for payment the manager rang the appropriate branch of the London City and Midland Bank to enquire as to the identity of their customer. It was learned that the endorsee was a bookmaker, a person who accepts and pays off bets.

The manager then rang the employers of Tournier and had conversations with two of the directors. The actual contents of that conversation are not clear, but it was alleged that the manager informed them that Tournier was having dealings with a bookmaker. As a consequence of that communication the employer refused to renew Tourniers contract of employment. Tournier sued both in defamation and for breach of contract. He lost at first instance and appealed with respect to both heads primarily on the grounds that the judge had instructed the jury erroneously. He succeeded in the Court of Appeal with respect to both claims, the Court ordering a new trial and Tournier eventually won the case.

This case established 4 major exceptions.

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a) With the customers consent.

Traditionally, a bank would make a status enquiry about a customers credit standing with another bank. The customer would usually have no knowledge of this enquiry. Today, the bank must seek the customers permission to release such information. However, Tourniers case laid out that an implied consent is created to disclose information if the customer gives his bank as a reference.

b) Under compulsion of law.

There are various situations where a bank may be legally compelled to disclose information about a customers affairs. One of these is compulsion by court order. This could be used to assist in the investigation of a criminal offence under

- Bankers Books Evidence Act 187

- Police & Criminal Evidence Act 184.

- Drug Trafficking Offences Act 186.

The Police, however, must have a reasonable suspicion of crime and cannot use it to search for evidence.

Another situation where a bank must disclose information legally is upon receiving a valid request from an authorized official. This could be under the following acts

Taxes Management Act 170 - Information required by the Inland Revenue.

Companies Act 185 - Company information required by DTI.

Criminal Justice Act 187 - Set up the Serious Fraud Office to investigate fraud.

Financial Services Act 186 - To investigate insider dealing.

Sometimes the bank is under no direct compulsion to disclose information, but statutory protection is given. This situation arises when a crime may be committed if the information is not disclosed.

- Drug Trafficking Act 14.

- Criminal Justice Act 1.

It is a criminal offence to assist a money launderer to obtain, hide, keep or invest funds if you know or suspect that the funds are a result of a crime. It is also a criminal offence to fail to disclose to the police knowledge or suspicion of money laundering activities related to terrorist or drug related activities. It is an offence to disclose information to a customer or third party information on money laundering that has been passed to the police. Whilst suspicion is not defined, any employee who reports any suspicions according to the banks procedures will have complied with the regulations.

c) Where disclosure is in the banks interest.

This exception applies where the bank has to reveal details of a customers account in court when taking legal action. It was successfully used in the Sunderland v Barclays Bank case in 18. The case tells that Mrs. Sunderland issued a cheque and it was dishonored because of insufficient funds in her account. She called the bank and argued with them, but when her husband picked up the phone to discuss the matter with the bank, he was told about his wifes gambling. Sunderland sued the bank for disclosing that information, but the bank succeeded as it was in the banks interest and the account balance would also be disclosed to the public in court.

Another situation where this exception applies is disclosure to credit rating agencies when the customer has failed to make payments on a loan. However, the customer must be notified of this prior to the disclosure but he cannot halt the disclosure unless he makes the payments.

d) Where disclosure is in the public interest.

This hardly ever arises in practice, banks preferring to rely on the customers consent or on compulsion of law. It has been suggested that it may apply to trading with the enemy in time of war. In 186, then President Ronald Reagan ordered the freezing of Libyan assets held in the US right after the US obtained information about Libyan government accounts with Bankers Trust [Libyan Arab Foreign Bank v Bankers Trust (18)]. The court, however, never made clear if the disclosure in public interest exception applied in this case. • Roberts, Graham. Law Relating to Financial Services. London Chartered Institute of Bankers, 00.

• Confidential Information, Microsoft® Encarta® Online Encyclopedia 00

• Alan L Tyree, Does Tournier apply to Building Societies? 17. http//www.law.usyd.edu.au/~alant/tournier.html.

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