Confidentiality
Inland Revenue would like access to companies' bank accounts to assess how much tax they owe: e.g. Starbucks and Google. Where police suspect and are investigating crime, they would like to look at accounts. In family disputes, one member may wish to know how much the other earns e.g. from shared assets. Employers, e.g. in the betting trade, would like access to employees' accounts.
It has been established since 1924, prior to which there was case law, that there is implied confidentiality owed by the banks to the customer. This is not absolute. The scope of the duty, how long it lasts for (a bank/customer relationship is not infinite) and the exceptions are not set out in any statute. Thus, the courts can widely interpret this implied law.
The leading case is Tournier. A customer's account was overdrawn. The bank were pressing him to pay it off, and he agreed to pay £1 per week. He paid three instalments then stopped. He gained new employment, and shortly afterwords received a cheque from a third party. Instead of paying the cheque into the bank, he endorsed it to another party. The other party was involved in the betting trade. The bank found out that it had gone to the betting trade and carried on writing to him. They rang his employer to find out his address. In the course of that conversation it was revealed that they knew he was involved with the gambling trade and that he was overdrawn, and that they had suspected he owed money to the gambling trade. His contract with the employer was not renewed. The customer sued the bank for slander and breach of confidentiality. It was held that the bank did owe a duty of confidentiality and it had been breached. The bank argued that it was a moral rather than legal point of law. The court held that it was a legal duty but that it was not absolute, and set out four exceptions: (i) where disclosure is under compulsion by law; (ii) where there is a duty to the public to disclose; (iii) where the interests of the bank require disclosure; (iv) where the disclosure is made by the express or implied consent of the customer.
Compulsion of law: This applies when C goes to court and seeks a court order compelling the bank to provide evidence to start proceedings. The court would look very carefully at the application for a court order. The court looks at whether there is any evidence that money in the account has been criminally attained; whether there is a real prospect that assets will be preserved or located - is there something in the account?; and requires undertakings as the the use of information by C. There are various statutory provisions which allow the court to order disclosure of bank books, e.g. Bankers' Book Evidence Act 1979. The Inland Revenue have some powers to access accounts, as do the government and police. The bank owes no duty to its customer to oppose the application to court for disclosure after Barclays Bank v Taylor 1989.
Duty to the public: There is uncertainty about this duty. Arab Foreign Bank v Bankers Trust Co 1989: President Reagan made a blocking order, stating that no money could go through bank accounts from the USA to Libya. Money should have been transferred from New York to London but this was stopped. The duty to the public was fulfilled by breaching the duty of confidentiality: the funding of terrorism was possible.
Interests of the bank: This applies where the bank has to take legal action against a customer for repayment of an outstanding debt. There are two issues here: (i) can the bank disclose to other companies in the same group (e.g. Lloyds' insurance and other services companies) - every company must be regarded as a separate legal entity. There is no rule saying that one member is allowed to give information to another member. Credit reference agencies keep information about how credit-worthy we are. They collect information from freely available sources. This is permitted.
Customer consent: There may be express consent in clauses, which a customer signs when opening an account or agreeing to loans etc. There is now no implied term that banks can pass credit information to credit reference agencies, but this has been solved by making express terms.
Data Protection Act 1998: This applies to any data relating to any individual. Anyone who holds data must be registered as a data controller. They must comply with 8 principles. One of these is that it must only be used for purposes for which it was obtained. Another is that it must be accurate.
It has been established since 1924, prior to which there was case law, that there is implied confidentiality owed by the banks to the customer. This is not absolute. The scope of the duty, how long it lasts for (a bank/customer relationship is not infinite) and the exceptions are not set out in any statute. Thus, the courts can widely interpret this implied law.
The leading case is Tournier. A customer's account was overdrawn. The bank were pressing him to pay it off, and he agreed to pay £1 per week. He paid three instalments then stopped. He gained new employment, and shortly afterwords received a cheque from a third party. Instead of paying the cheque into the bank, he endorsed it to another party. The other party was involved in the betting trade. The bank found out that it had gone to the betting trade and carried on writing to him. They rang his employer to find out his address. In the course of that conversation it was revealed that they knew he was involved with the gambling trade and that he was overdrawn, and that they had suspected he owed money to the gambling trade. His contract with the employer was not renewed. The customer sued the bank for slander and breach of confidentiality. It was held that the bank did owe a duty of confidentiality and it had been breached. The bank argued that it was a moral rather than legal point of law. The court held that it was a legal duty but that it was not absolute, and set out four exceptions: (i) where disclosure is under compulsion by law; (ii) where there is a duty to the public to disclose; (iii) where the interests of the bank require disclosure; (iv) where the disclosure is made by the express or implied consent of the customer.
Compulsion of law: This applies when C goes to court and seeks a court order compelling the bank to provide evidence to start proceedings. The court would look very carefully at the application for a court order. The court looks at whether there is any evidence that money in the account has been criminally attained; whether there is a real prospect that assets will be preserved or located - is there something in the account?; and requires undertakings as the the use of information by C. There are various statutory provisions which allow the court to order disclosure of bank books, e.g. Bankers' Book Evidence Act 1979. The Inland Revenue have some powers to access accounts, as do the government and police. The bank owes no duty to its customer to oppose the application to court for disclosure after Barclays Bank v Taylor 1989.
Duty to the public: There is uncertainty about this duty. Arab Foreign Bank v Bankers Trust Co 1989: President Reagan made a blocking order, stating that no money could go through bank accounts from the USA to Libya. Money should have been transferred from New York to London but this was stopped. The duty to the public was fulfilled by breaching the duty of confidentiality: the funding of terrorism was possible.
Interests of the bank: This applies where the bank has to take legal action against a customer for repayment of an outstanding debt. There are two issues here: (i) can the bank disclose to other companies in the same group (e.g. Lloyds' insurance and other services companies) - every company must be regarded as a separate legal entity. There is no rule saying that one member is allowed to give information to another member. Credit reference agencies keep information about how credit-worthy we are. They collect information from freely available sources. This is permitted.
Customer consent: There may be express consent in clauses, which a customer signs when opening an account or agreeing to loans etc. There is now no implied term that banks can pass credit information to credit reference agencies, but this has been solved by making express terms.
Data Protection Act 1998: This applies to any data relating to any individual. Anyone who holds data must be registered as a data controller. They must comply with 8 principles. One of these is that it must only be used for purposes for which it was obtained. Another is that it must be accurate.