Man fails to show bank should have informed him of fellow customer’s financial difficulties

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Mr Joseph Delaney argued in the Court of Appeal against the High Court order, which struck out his claims against Allied Irish Banks PLC and two statutory receivers.

Mr Delaney had been duped out of almost €350,000 by a man named Ger Killaly in 2008, after Mr Killaly assisted him with some tax affairs.

Mr Killaly had told Mr Delaney that he was in financial difficulty, and asked for some assistance.

Mr Delaney had agreed, and had instructed his wife, who operated their bank account, to make the necessary withdrawals.

This she did, and although during the last withdrawal a member of staff at the bank asked if she was being threatened or forced to make them, she made clear that she was not.

However, she informed Mr Delaney that she had been asked this question, and Mr Delaney sought assurances from Mr Killaly, as he was concerned that the bank staff were aware of who the money was for, and were uneasy about it.

Mr Killaly reassured Mr Delaney, but said that if he had concerns, he would give him a 24 year and 9 month lease of premises at 82 JKL Street, Edenderry at a rent of €12,000 plus VAT per annum which would not be collected.

Mr Delaney accepted this offer, but was unaware that the premises had been mortgaged to AIB, on the understanding that AIB’s consent was necessary before any lease of the premises was made. This consent had not been obtained.

Some time after, the manager of the Edenderry branch of AIB called at the property, to express the bank’s displeasure at the lease being made without its consent.

Mr Delaney explained the situation, at which time he averred that Mr Gillen told him that he would ‘resolve matters to his satisfaction.’

However, although there was a meeting between Mr Gillen, Mr Delaney and Mr Killaly, nothing emerged to ameliorate Mr Delaney’s position.

In 2009 Mr Killaly and his wife were declared bankrupt, leaving Mr Delaney without the option of seeking damages for the money, which was never repaid. The premises were given up to National Asset Management Act receivers.

The heart of Mr Delaney’s claims in the case before the High Court was that he believed AIB should have told him of Mr Killaly’s precarious financial position, as they knew that Mr Delaney was lending him money.

The High Court judge first considered Mr Delaney’s claim of negligence, in which he argued that AIB owed him a duty of care, and breached this duty by failing to notify him of the financial difficulties of a fellow customer, leading to Mr Delaney’s loss.

The High Court judge found this completely unstateable. To impose such a duty if care upon banks would be to go well beyond the current state of the law, and would undermine the confidentiality requirements placed on banks.

On appeal, Mr Delaney urged that simply because no case had supported his proposition thus far, did not mean it was unstateable, citing Packer v. Packer 2 All ER 127.

However, the judge pointed out that while the law of negligence may develop and extend its scope, it does so incrementally, so as to avoid what Cardozo J. described in Ultramares Corporation v. Touche 174. N.E.441 as “ to a liability in an indeterminate amount for an indeterminate time to an indeterminate class”.

Further, as Mr Delaney was aware of Mr Killaly’s embarrassed financial circumstances, the duty of care he would seek to impose upon the bank would be the task of inquiring as to the purpose behind a customer’s withdrawal of his own money from his account, in order to ensure that he is not lending it to somebody who may not be in a position to give it back, or is not otherwise acting improvidently and to his detriment.

On appeal, Mr Delaney sought to rely on a fraud exception, citing Tournier v. National Provincial and Union Bank of England 1 K.B. 461, and a Canadian case, namely Canadian Imperial Bank of Commerce v. Sayani 83 BCLR (2d) 167 (BCCA).

He argued that there were exceptions to the confidentiality requirement.

However, the Judge remarked that: “I do not believe that the duty of confidentiality is relevant to the question whether the bank owed a duty of care to Mr Delaney. The bank does not need to avail itself of arguments based on the undoubted existence of a duty of confidentiality. It is unnecessary for me to comment on the extent of that duty and any exceptions that may be considered to exist under Irish law. I have concluded that the duty of care contended for by Mr Delaney in the circumstances of this case by the bank is not one which is recognised in the law of negligence, and the losses suffered by him are not recoverable under the law of negligence.”

Mr Delaney also argued that the assurance given to him by Mr Gillen amounted to a constructive trust, which would allow him to remain in place on the property.

However, the Judge noted that a simple comment by a bank manager could not possibly act as a commitment by the bank.

Mr Delaney also made an argument based on unjust enrichment by the bank on the basis that they knew Mr Killaly’s financial position within the branch and knew also that Mr Delaney was providing his own money to alleviate that position, and therefore easing the bank’s overall position.

However, the trial Judge, citing Companie Commerciale Andresa v. Artibelle Shipping Co. Ltd SC 653, found this to be unstateable, which was upheld on appeal.

The appeal judgment also upheld the trial judgment’s dismissal of Mr Delaney’s claims that an AIB official had been deceitful, and that AIB had breached the NAMA Act 2009.

Concluding, the appeal Judge stated that: “For all these reasons I would dismiss this appeal with all the regret that I can muster for Mr Delaney because of the parlous position in which finds himself because he was duped by Mr Killaly into a misplacement of his trust which has had such dire and irretrievable consequences for him.”