Bankers’ Duties and Responsibilities

On 26 February 2020, the Supreme Court of Mauritius delivered a landmark judgment in the case of Up To Ten v Barclays Bank Plc (2020 SCJ 57), critically analysing the scope of a bank’s duties, boundaries and responsibilities to its customers when acting in accordance with account mandates.

Barclays Bank Plc (the Bank) was sued by Up to Ten (the Company), a company incorporated in Mauritius on 6 January 2000 and holding a category 1 global business licence, for having acted outside the scope of its mandate and in breach of contract. The Bank had acted on the instructions of a sole signatory and allowed a series of SWIFT payments from a certain bank account held by the Company with the Bank when the account mandate provided by the Company clearly required two named signatories.

The Supreme Court of Mauritius found in favour of the Company awarding actual and moral damages to the latter.

Findings:

• Relationship Between a Bank and Its Customers
• With regard to the relationship between the Company and the Bank, the judgment establishes clearly that it is a contractual one.
• Duties, Boundaries and Responsibilities of Banks under Mandate
• On the duties, boundaries and responsibilities of banks when executing account mandates, the Honourable D.Chan Kan Cheong J. upheld the findings of the Supreme Court in the case of Chetty v The State Bank of Mauritius Ltd (2018 SCJ 144) that “it is an implied term of the contract between the bank and a customer that the bank will observe reasonable care and skill in executing the customer’s orders.”
   

The Court further found as follows:

The exercise of banking activities involves significant risks. Banking operations may give rise to fraud to the detriment of a customer, the bank and even third parties. Accordingly, a banker must, at all times, exercise prudence and control when conducting banking operations on behalf of his clients.

The risks associated to the exercise of his profession warrants that the banker be invested with a duty of vigilance and supervision when banking conducting operations on behalf of his clients.

Under its supervisory duty, the banker is responsible for ensuring that transactions he is asked to process do not show any irregularity.

The duty of vigilance, on the other hand, requires the banker to detect, among the banking operations that he is asked to perform, those which present any ostensible irregularity and, in the presence of such irregularity, to do everything in his power to avoid any injury or harm to a client or a third party arising from the completion of this operation.

Appropriate behaviour may consist of refusing to perform a banking operation. Sometimes simple information or advice given to the person whose interests are threatened may suffice. In the absence of such an initiative, the bank may be liable of negligence.
 

CONCLUSION

The above stated principles and analysis are very important and shed much needed light on the duties, boundaries and responsibilities of banks in executing account mandates on behalf of its customers but also, regarding the Bank’s duties vis-à-vis third parties. Liability to perform a contract is generally strict. Therefore, a bank is under a strict contractual duty to act in accordance with the account mandate provided by its customers.

Moreover, Banks are fully entitled to and should question instructions emanating from their customers, in particular, if such instructions are contradictory and irregular and may potentially cause injury or harm to a customer or a third party.