Negligent Misstatement: Supreme Court limits banks’ duty of care
by Emma Halton
Historically, the law has extended a bank’s liability for negligent statements made to its customers to unknown third parties who receive and subsequently rely on those statements. However, two recent rulings laid down by the Supreme Court place a renewed emphasis on voluntary assumption of responsibility; a bank will only owe a duty of care to third parties if it knowingly and voluntarily assumed responsibility.
The case of NRAM Ltd (formerly NRAM plc) v Steel  1 WLR 1190 marks the Supreme Court’s first step away from the traditional threefold test used to determine the existence of a duty of care. It found that “the concepts of proximity and fairness were so imprecise as to deprive them of utility as a practical test”. Instead, the court regarded voluntary assumption of responsibility as the foundation for a duty of care.
In the second case, Banca Nazionale del Lavoro SPA v Playboy Club London Limited  UKSC 43, the Supreme Court went a step further, adding that voluntary assumption requires a defendant to have knowledge of:
1. the person or group of persons likely to rely on the statement; and
2. the transaction to which it relates.
Absent that knowledge, a defendant will not have assumed responsibility for the transaction in question and no duty of care will arise.
Implication for banks
In summary, banks will not be liable to third parties in respect of loss resulting from reliance on statements made, and information produced by the bank, unless the bank voluntarily assumes responsibility for the accuracy of the information to those parties. The bank will voluntarily assume responsibility if it knows both the intended recipient of the statement and the business or transaction for which the intended recipient will use the statement.
In order to protect their position, banks should ensure that all material which may be passed on by the recipient, for example a credit reference, expressly states the identity of the intended recipient and the purpose for which it was given, so as to avoid any assumption of responsibility to a third party.
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