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(1958) JELR 87055 (HC)

High Court  •  23 Jul 1958  •  United Kingdom



SALMON J. read the following judgement: The plaintiff's father died in August, 1948. Approximately one year before he died he gave the plaintiff about £26,000 in cash, the bulk of which was invested by the plaintiff, under his father's guidance, in building societies. At about the same time the father established a fund of between £20,000 and £30,000 to provide an income for the plaintiff's step-mother for her life. When the plaintiff's father died death duties became payable on both sums to which I have referred. The plaintiff voluntarily contributed a large sum of money to his step-mother's fund so that she would not suffer any serious diminution in income by reason of the payment of death duties. Thereafter, the plaintiff had about £17,000 of free money and, subject to his step-mother's life interest, he was entitled to a further sum of more than £20,000. The plaintiff had not long since left the services, and after a short time as a salesman in a retail store he had entered under his father's auspices a small motor business near the parental home. This was Connaught Motors Ltd. One Darling, in whom the plaintiff's father had had confidence, was the principal director. The plaintiff’s investment in this company was £200. The name of this company was subsequently altered to True Shapes Ltd. when it changed its business to sheet metal working, and it will be necessary for me to refer to it again presently. At this time the plaintiff was a young man about 30 years old with no real business experience or knowledge of affairs. In my judgement, the plaintiff is a pleasant and honest young man but rather stupid and extremely gullible. These attributes can have been no less pronounced or obvious eight years ago than they are today. He was, in fact, the very prototype of the lamb waiting to be shorn. And he did not have long to wait.

In about the month of April, 1950, he met one Brock who was the moving spirit in a company called Brocks Refrigeration Ltd. This was a company which had then been in existence only a few months and whose business was to sell, install and service refrigerators manufactured by J. and E. Hall Ltd. Between May 1950, and October, 1951, the plaintiff sank £14,800 in this company, every penny of which he has lost. The plaintiff claims that he invested this money as a result of the advice given to him by the defendant bank through the defendant Johnson who was the manager of the defendant bank's Quayside branch at Newcastle-upon-Tyne. The plaintiff claims that this advice was given negligently or fraudulently.

The writ in this action was not issued until April, 1956. It is therefore apparent that the claim is a stale claim. The plaintiff gives as his principal reason for the delay in issuing the writ that he and his company True Shapes Ltd. became heavily involved with the bank and that he postponed bringing this claim until he was no longer in the hands of the bank. However this may be, it is obvious that such a stale claim must be scrutinised very closely. It would be easy for a young man who had improvidently lost a large amount of money, many years later to persuade himself that he had received bad advice from his bank manager, and that it was as a result of this advice that his money had been lost. If the defendant Johnson had been able categorically to deny the plaintiff's story, if he had said that the plaintiff never came to him for advice, and that he never did and never could have advised the plaintiff that Brooks Refrigeration Ltd. was in a sound financial position, or that it was wise for the plaintiff to make the investments in that company that he in fact made, then, in spite of the fact that the plaintiff impressed me as a most candid witness I might have found it difficult to accept his evidence. It seems to me strange that anyone with the slightest knowledge of financial matters could have considered the finances of Brocks Refrigeration Ltd. as sound in 1950 or 1951, or that the investments which the plaintiff made in that company were other than ludicrously imprudent. But the defendant Johnson admits in effect that the plaintiff did come to him for advice, and does not strongly challenge the fact that he may well have advised the plaintiff that the investments the plaintiff proposed making were wise and prudent investments. At any rate, the defendant Johnson admits that he certainly told the plaintiff that if he the defendant Johnson, had been able to make the same investments with his own moneys he would have done so. I am quite satisfied that the plaintiff received the advice from the defendant Johnson that the plaintiff says he received. I am bound to say that until he saw the defendant Johnson in the witness-box it seemed to me incredible that any bank manager could be sufficiently ingenuous or ignorant honestly to have believed in such advice. Having seen the defendant Johnson in the witness-box, however, I think that he did, in his muddle-headed way, honestly believe in the advice which he gave the plaintiff.

During the course of this judgement I shall have to refer to the memoranda passing between the defendant Johnson and the defendant bank's district head office. Most regrettably, these documents were not disclosed in the defendants' affidavit of documents although they are of the greatest materiality. It should at all times have been obvious to the defendants and their solicitors that such memoranda existed. Indeed, they are expressly referred to in some of the documents which were disclosed. I am certain that these documents were not purposely suppressed. Nevertheless, the defendants were grossly negligent in omitting these documents from their affidavit of documents. It was not until the trial was well advanced that these documents were produced on my direction. They were then found within a very short space of time, and it was conceded that there was no excuse for their non-disclosure. No doubt the defendants' solicitors explained to their clients that they must disclose all relevant documents which were or had been in their possession. The solicitors' duty, however, does not stop there. It cannot be too clearly understood that solicitors owe a duty to the court, as officers of the court, carefully to go through the documents disclosed by their clients to make sure, as far as possible, that no relevant documents have been omitted from their clients' affidavit. In this case I am regretfully driven to the conclusion that this duty was not performed by the defendants' solicitors.

I find the following facts: In April, 1950, True Shapes Ltd. were interested in the project of manufacturing a product known as the Bolden Steriliser. The plaintiff and Darling were directors of this company. Its accountant and secretary was one Gordon Barr. At Barr's suggestion a meeting took place in the office between, amongst others, the plaintiff, Darling, Brock and the defendant Johnson in order to consider the proposal of Brock's Refrigeration Ltd. becoming the distributors of the Bolden Steriliser. It appears that this proposal was carried at the meeting. In point of fact Brock's Refrigeration Ltd. Has never sold a single Bolden Steriliser, for no commercial Bolden Steriliser has ever been produced by True Shapes Ltd. At the meeting to which I have referred the defendant Johnson was introduced to the plaintiff as Brock's bank manager and financial adviser. Between the date of that meeting and May 9, 1950, the plaintiff met the defendant Johnson on three or four occasions. At this time the defendant Johnson had learned from Darling that the plaintiff was a man of considerable means. The defendant Johnson then set out to acquire and succeeded in acquiring for the defendant bank the custom of the plaintiff, True Shapes Ltd., and an associated company named Bolden Sterilisers Ltd. The defendant Johnson, as manager of the Quayside branch of the defendant bank, perfectly properly considered it part of his duty to attract such customers as he could for his employers. The defendant Johnson impressed upon the plaintiff that the Quayside branch, of the defendant bank was a commercial branch and that he, as the manager of that branch, was at the very hub of financial business in the city of Newcastle-upon-Tyne and in a position to offer the plaintiff much better service than the manager of the suburban branch of the rival bank at which the plaintiff and True Shapes Ltd. were then customers.

By the beginning of May, 1950, the plaintiff was convinced of the defendant Johnson's financial experience and acumen and had complete confidence in the defendant Johnson's supposed knowledge and skill in financial affairs. The plaintiff asked the defendant Johnson if he would be his financial adviser, to which the defendant Johnson replied that the defendant bank would be only too pleased to take care of the plaintiff's financial affairs. Thereafter the defendant Johnson told the plaintiff that he might be able to get some preference shares for the plaintiff in Brocks Refrigeration Ltd. At this time, and indeed at all times, Brock was urgently in need of money for his company. Brock, who had then known the plaintiff only for a few weeks or months, was quite cunning enough to realise that the Proposition to invest money in his company was more likely to the plaintiff if it came to him from a bank manager in whom he had confidence rather than from Brock, who would necessarily be an interested party. I have no doubt that the asked the defendant Johnson whether Brock's Refrigeration Ltd. was financially sound and whether it would be wise for him, the plaintiff, to invest £5,000 in that company's preference shares. Brock and his company were, to the plaintiff's knowledge, customers of the defendants' Quayside branch. Accordingly the plaintiff rightly supposed that the defendant Johnson, in whose ability he reposed great confidence, had special knowledge of Brock's Refrigeration Ltd.’s financial affairs. It is to be observed that the defendant Johnson, as bank manager to the company, would be doing them a service by helping to introduce further capital, and he would also thereby be helping to reduce the company's overdraft, which, even as early as May 9, 1950, the district head office was suggesting, in the memoranda to which I have referred, ought to be reduced. He was in an invidious position in suggesting the investment to the plaintiff and in a still more invidious position when he was asked by the plaintiff for his advice. The defendant Johnson did, however, advise the plaintiff that Brock's Refrigeration Ltd. was financially sound and, if he were able to do so with his own money or if he were in the plaintiff's place, he would invest £5,000 in the company's 6 per cent. cumulative preference shares. This advice meant that the proposed investment was a wise and sound one for the plaintiff to make.

The plaintiff then had a conversation with one Sowerby, the manager of the Gosforth branch of Barclays Bank Ltd., with whom the plaintiff had banked for some time and from whom he had then almost been weaned by the defendant Johnson. As a result Sowerby accompanied the plaintiff to another interview with the defendant Johnson, and the defendant Johnson repeated before Sowerby the advice which he had previously given to the plaintiff. Sowerby has not been called as a witness by either side. I draw no inference from his absence from the witness-box except that it would have been difficult for him to give evidence against a former customer and equally difficult for him to give evidence against a rival bank. It seems to me that there were no grounds upon which the defendant Johnson could reasonably have advised that Brock's Refrigeration Ltd. was in a sound or strong financial position. No audited accounts existed. Such figures as the defendant Johnson had did not support the view that the company's finances were sound or strong. Their liquid assets were not sufficient to meet their current liabilities, even leaving out of account their not inconsiderable overdraft. Still less, in my view, could the investment by the plaintiff of £5,000 in preference shares in that company be reasonably recommended as a wise investment. The daunting risks of investing in a company of mushroom growth such as this, and, moreover, a company which was so clearly over-trading, should have been palpable even to the veriest tyro in financial affairs. The plaintiff had never in his life before this occasion bought a share. His inexperience and ignorance and dire need of advice should have been obvious, as I believe they were, to the defendant Johnson. I have no doubt that, but for the defendant Johnson's advice, the plaintiff would not have made the investment in Brock's Refrigeration Ltd. which he in fact made in May of 1950.

On May 9, 1950, the defendant Johnson dictated a letter for the plaintiff to sign. It is addressed to the defendant bank and it is in these terms: "I hand you herewith Alliance Building Society passbook registered No. A.18370 showing investments for £5,000 together with my letter of authority to that society requesting them to pay to you the proceeds of that investment against your discharge. On receipt of such proceeds please pay the sum of £5,000 to the above mentioned company against their acknowledgement and undertaking to issue to me 5,000 6 per cent preference shares of £1 each and retain to my order the balance of the proceeds." The balance referred to in this letter amounted to between £40 and £50 and this sum was put to the plaintiff's credit in a suspense account opened for him by the defendant bank. In my view the defendant bank accepted the instructions contained in this letter as the plaintiffs bankers, and at any rate from that date the relationship of banker and customer existed between them. It is true that the express advice was in the first place given before the 9th May, but it was implicitly repeated on that day. On June 1, 1950, the defendant bank opened a current account for the plaintiff, and it is conceded that from this date the relationship of banker and customer existed between them.

At the beginning of October, 1950, the defendant Johnson told the plaintiff that he could acquire a further 2,500 preference shares in Brock's Refrigeration Ltd. He then told the plaintiff that this company was very strong financially and advised the plaintiff that it would be wise for him to subscribe for the shares. At this stage he knew that the plaintiff's disposable capital was about £17,000, £5,000 of which was already invested in the company's preference shares. The defendant Johnson had then no more reason than he had had in May for advising that the company was strong financially or that the investment was a wise one for the plaintiff to make. The plaintiff, relying on the defendant Johnson's advice, decided to make the investment and the defendant Johnson made out the cheque for £2,500 for the plaintiff to sign. The plaintiff signed it. The communications between the defendant Johnson and the district head office make it plain that prior to this transaction the company's overdraft had been allowed by the defendant Johnson considerably to exceed the permitted limit, and the district head office had been pressing the defendant Johnson to procure a reduction of the overdraft. The defendant Johnson in effect assured the district head office that the overdraft position would be eased by the additional capital, which he stated was £2,750. These facts were not disclosed by the defendant Johnson to the plaintiff.

In November, 1950, as appears from the defendants' internal memoranda, the defendant bank's district head office was again urging the defendant Johnson to procure a reduction of the company's overdraft. The defendant Johnson assured the district head office that this would be accomplished by the company unloading unwanted stock to the value of £3,000 upon factors. To the defendant Johnson's knowledge, as he admitted, the company tried unsuccessfully during November to unload £3,000 worth of stock upon factors and upon J. and E. Hall Ltd.

At the beginning of December, 1950, a meeting took place between the plaintiff, Brock and the defendant Johnson. The defendant Johnson told the plaintiff that the company had a quantity of stock valued at £5,000 to unload and that, in order to obtain liquid cash for expansion, the company was prepared to sell this stock to the plaintiff for £3,000 provided that the plaintiff would leave the stock with the company on the terms that the company would repurchase it from the plaintiff in nine months' time for £3,300. The plaintiff asked, the defendant Johnson for his advice about this proposal, and, indeed, the defendant Johnson admits that he knew the plaintiff was looking to him for advice. The defendant Johnson recommended [sic] the plaintiff that it would be quite safe and wise for him to enter into this transaction. I think he did tell the plaintiff that the stock should be segregated. He did not tell the plaintiff that the real reason for the company requiring the £3,000 was to reduce the overdraft, nor did he tell him that the company had been trying unsuccessfully to sell the stock to factors and to J. and E. Hall Ltd. Relying on the defendant Johnson's advice, the plaintiff did enter into this transaction and certain documents came into existence which I must read. On December 16, 1950, the plaintiff wrote to the Rock Building Society in the following terms: "I shall be grateful to you if you will pay to Messrs Martins Bank Ltd., Quayside Branch, Newcastle-upon-Tyne, for credit of my account with them the sum of £3,000 out of my above-mentioned funds with you and I hereby authorise you to accept the bank's receipt as your full and sufficient discharge. Please return the passbook to the bank with your remittance. If you can expedite this I shall be obliged." On December 16, he wrote to the bank: "I hand you herewith my Rock Building Society preference share passbook together with an authority addressed to that society to pay the sum of £3,000 to you for the credit of my account with you. Kindly expedite the matter and retain the passbook when returned to you." Then there was a letter from Brocks Refrigeration Ltd. to the plaintiff in these terms: "We hereby acknowledge your cheque for £3,000 in payment of miscellaneous stock as per attached schedule. In accordance with the arrangement with you we agree to hold this said stock to your order in a separate part of our stores and we hereby further agree that there will be no storage charge and undertake to keep such stock fully insured without cost to you. It is a condition of the arrangement that you on your part will not dispose of any or all of such stock for a period of nine calendar months from the date hereof except to this company, Brocks Refrigeration Ltd., and it is agreed between us that all such sales will be on the basis of 10 per cent added to the price at which we have sold the stock to you as per the attached schedule. We Brocks Refrigeration Ltd. hereby undertake to repurchase from you piecemeal or in bulk on the terms stated herein the whole of the stock within the said period of nine calendar months from the date hereof. We enclose a duplicate of this letter which please sign over the sixpenny stamp at the foot thereof and return it to us." This was done. A list of the stock was drawn up and the summary at the end of the list is in the defendant Johnson's own handwriting. Although the transaction was in form a sale by the plaintiff to the company, in reality it was clearly a loan by the plaintiff on the security of the stock. The documents constitute an unregistered bill of sale and accordingly afforded the plaintiff no security at all. It would be difficult to imagine a more imprudent transaction from the point of view of the plaintiff, though from the point of view of the company, who were also the defendant bank's customers, and from the point of view of the defendant bank itself the transaction had certain attractions. The defendant Johnson had no reasonable grounds for advising the plaintiff, as he did, that it was safe or wise for the plaintiff to enter into this transaction.

The plaintiff had now, as a result of the defendant Johnson's advice, sunk £10,500 of his disposable capital of about £17,000 in Brock's Refrigeration Ltd. If the company foundered (and there was a grave risk of its doing so, as should have been obvious to the defendant Johnson) the plaintiff would lose his money. If the company made a huge success, as the defendant Johnson no doubt hoped that it would, the equity shareholders would reap the benefit, but it would profit the plaintiff nothing. Any investment in Brock's Refrigeration Ltd. would have been unwise. An investment which gave the investor a share in the equity commensurate with the capital he was investing, though unwise, would at any rate have been a gamble, if an extremely hazardous one. The investment of £7,500 in preference shares and £3,000 in a loan had nothing to commend it. There is nothing to show that 6 per cent was an unusually high yield in 1950 on preference shares in sound private companies. There is some evidence that at this time 33⁄4 to 4 per cent was the average yield on preference shares in "blue chip" companies. One would expect such a difference of yield between a first class public company where the investor can at any time realise his investment and a private company where he cannot. There are two requirements for any preference share: (i) that the money invested shall be safe; and (ii) that the stipulated interest shall be paid. Any ordinarily prudent and competent bank manager, especially the bank manager of a commercial branch, should know that before advising the investment of money in the preference shares of any company, let alone a private company, he should be able to see from the balance-sheet figures that the financial position of the company is strong enough to ensure that the investor's capital is safe and from the trading history of the company that the interest would be paid. I cannot imagine that any ordinarily prudent and competent bank manager, on the facts and figures which the defendant Johnson had before him, could have advised the plaintiff to make any investments in preference shares of this company, whatever the supposed yield had been, still less that he would have advised a customer to enter into the £3,000 loan transaction. In April, 1951, the company issued a debenture charging all its assets to the defendant bank. A little while before October 17, 1951, the plaintiff went to see the defendant Johnson to seek his advice, as the defendant Johnson admits, about a proposal that had been made to him by Brock. He told the defendant Johnson that Brock had suggested that the plaintiff should invest a further £4,000 in the company's preference shares and should also acquire 300 ordinary shares of a nominal value of £1 each at par, with a seat on the board. The plaintiff explained that he had been told by Brock that the company needed additional capital for further development in the Yorkshire area. The defendant Johnson appeared to know all about the proposal. He confirmed that the company needed the extra capital of £4,000 for further development, and said that J. and E. Hall Ltd. had asked the company to extend their business in the Yorkshire area. He advised the plaintiff that it would be a very wise move on his part to take up the shares. Relying on this advice, the plaintiff decided to take up the shares, and made out cheques for £4,000 and £300, which he left with the defendant Johnson. At this time the permitted limit of the company's overdraft was £18,000 on the strength of the debenture, the company's assets having been assessed by the defendant bank at £25,000. The company had been allowed by the defendant Johnson to exceed this limit, and in fact had an overdraft of about £20,500. The district head office had been pressing the defendant Johnson, with some acerbity, to secure a reduction of the overdraft to within the permitted limit. The internal memorandum of October 17, 1951, shows that the defendant Johnson told the district head office that the company intended to consolidate and that "their present intense efforts will result in a considerable reduction in the level of their requirements which after the receipt of the £4,000"-from the plaintiff-"will be well within the limit of £18,000 arranged with the bank." No mention of the company's overdraft was made by the defendant Johnson to the plaintiff. The defendant Johnson's statement to the plaintiff that the £4,000 was required for further development in the Yorkshire area was clearly untrue. Nevertheless, having seen the defendant Johnson, I am not satisfied that he realised that it was untrue. In his muddle-headed way he may well have thought that, as the permitted limit of the overdraft had been exceeded to finance development, the £4,000 subscribed to help reduce the overdraft could properly be described as required for further development. The defendant Johnson did not disclose to the plaintiff that a debenture had been issued to the bank, nor did he say a word to the plaintiff about the Company's alarming trading position for the year ending October 31, 1951. It is true that the balance sheet and the trading and profit and loss account for the year 1951 were not then in the defendant Johnson's possession but he had been supplied with quarterly figures. During that year the company lost, according to its accounts, over £21,000. In October, 1951, the defendant Johnson had at any rate the balance sheet and trading and profit and loss account of the company for the year ending October 31, 1950. These showed that the liquid assets were not sufficient to meet current liabilities and that the average monthly expenditure exceeded the average monthly revenue. Indeed, it should have been apparent to any bank manager in the defendant Johnson's position in October, 1951, that the company was precariously balanced on the very knife-edge of insolvency and that disaster appeared to be only round the corner. Yet the defendant Johnson, with no conceivable justification, advised the plaintiff that it would be wise for him to invest a further £4,000 in the company's preference shares thus subscribing, with the £3,000 loan, more than half the total money invested in this company in order to obtain £300 worth of ordinary shares, that is to say about one-sixteenth of the equity, and a seat on the board, for all the good that that might then do him.

Shortly before this transaction, as the defendant Johnson well knew, the plaintiff's disposable capital had become exhausted. He had sunk £10,500 in Brock's Refrigeration Ltd. and a considerable sum in True Shapes Ltd., and the balance he had spent on himself. The defendant Johnson advised the plaintiff that he might get his hands on the fund set up by his father to provide his stepmother with an income by buying his step-mother a life annuity equal to her then income. This could apparently be done for about £5,000, leaving the plaintiff with the balance of the fund for his own enjoyment or to be invested in accordance with the defendant Johnson's advice. It was out of the moneys received from this fund that the £4,000 for preference shares was found in October, 1951. So urgent was the necessity on October 17, 1951, to reduce the company's overdraft or to obtain some further security against it that, until such time as the plaintiff was able to realise £4,000 worth of securities from his step-mother's fund, he was asked by the defendant Johnson to give, and he did give, a guarantee to the defendant bank of £4,000 in favour of Brock's Refrigeration Ltd. The plaintiff had only the haziest notion of what was happening in relation to this guarantee and relied entirely upon the defendant Johnson.

One day towards the end of October, 1951, the plaintiff, whose company, True Shapes Ltd., was then considerably in debt to the defendant bank, remarked to the defendant Johnson in relation to Brocks Refrigeration Ltd. that it was nice to be associated with a company whose account with the bank was in credit. The defendant Johnson told him that this company, far from being in credit, had an overdraft of £22,000. The plaintiff says that he was stunned. I believe him.

In February, 1952, there was an interview between the plaintiff and the defendant Johnson and Brock. A small private company called F. Adamson Ltd., in which Brock was interested and which was a customer of the defendant bank, required a guarantee of £1,000 on its bank overdraft. Brock, who, I am told and can well believe, had a magnetic personality and considerable powers of persuasion, in effect assured the plaintiff that the signing of the guarantee would be a mere formality and that there was no risk of the plaintiff being called upon to pay. The defendant Johnson confirmed this and advised the plaintiff that F. Adamson Ltd. was sound financially, and that its overdraft would undoubtedly be discharged by moneys outstanding that would be coming in during the next 12 months. The defendant Johnson advised the plaintiff that there was no real risk of his being called upon to pay under the guarantee. The defendant Johnson had no reasonable ground for giving this advice. I am satisfied that the plaintiff signed this guarantee relying upon the advice he received from the defendant Johnson. Ultimately the plaintiff was called upon to pay and did pay £990 3s. under this guarantee. The plaintiff claims in this action the sum of £14,800 which he lost in Brooks Refrigeration Ltd., and the sum of £990 3s. which he was called upon to pay under his guarantee for F. Adamson Ltd. as damages for negligence, alternatively as damages for fraud, against the defendant bank and the defendant Johnson. I have already indicated that the claim in fraud fails, since I am not persuaded that the defendant did not honestly believe in the advice which he gave to the plaintiff. As to the claim in negligence, the defendants take the point that the defendant Johnson did not advise the plaintiff as he alleges. I am against the defendants on this point. It is clear from what I have already said at, in my judgement, the plaintiff did receive the advice from the defendant Johnson that the plaintiff says that he received.

The defendants' next point is that it was no part of their business as bankers to advise upon such financial transactions as plaintiff entered into with Brooks Refrigeration Ltd. or in relation to F. Adamson Ltd., and that, accordingly, they were under no duty to advise the plaintiff carefully or competently in these matters. They say that, however careless or incompetent the advice the defendant Johnson gave the plaintiff may have been, since the defendants were under no duty to the plaintiff they are not responsible for any loss that may have been caused by that advice. They rely on the well-known cases of Le Lievre v. Low v. Bouverie12 and, in particular, on Banbury v. Bank of Montreal.13 This latter case seems to me to turn on its own special facts, and particularly on the fact that the plaintiff there admitted that the bank manager "had no general authority to advise-in other words, that it was not within the scope of the bank's business to advise on investments at large," per Lord Parker of Waddington. In my judgment, the limits of a banker's business cannot be laid down as a matter of law. The nature of such a business must in each case be a matter of fact and, accordingly, cannot be treated as if it were a matter of pure law. What may have been true of the Bank of Montreal in 1918 is not necessarily true of Martins Bank in 1958. In considering what is and what is not within the scope of the defendant bank's business I cannot do better than look at their own publications. I look first at their advertisement. That is in these terms: "Although Martins is a bank with over 600 branches and world-wide connexions, our system of decentralization keeps us in touch with the customer's closest problems. We have six district head offices with boards of directors and general managers, so that the very best advice is available through our managers virtually on your doorstep"; and the advertisement is headed "We share your problems." Then I consider their booklet. The material parts read as follows: "If you want help or advice about investments our managers will gladly obtain for you advice from the best available sources in such matters." I observe that the "best available source" in this case was the bank itself, who were the bankers for Brock's Refrigeration Ltd. and thus knew everything that there was to know, or were in a position to know all that there was to know, about that company's financial standing. The next passage I read is as follows: "In all these matters strict secrecy is observed and your affairs will not be divulged to any other person, relative or otherwise, without your knowledge or permission. You may consult your bank manager freely and seek his advice on all matters affecting your financial welfare. All these advantages are yours as the possessor of a bank account, current or deposit, and in these difficult days, when financial problems of one kind or another always seem to be cropping up, it is a great comfort to know that you have an impartial friend whose help you may seek without obligation." I hardly think that it would be reasonable to construe those words as meaning "without obligation to the bank." The words "you may consult your bank manager freely and seek his advice on all matters affecting your financial welfare," seem to me to be in the widest possible terms. Then at the end of the booklet there is this paragraph: "We have not gone into great detail, but if there is anything about which you would like more information please call in at the branch most convenient to you. We shall be delighted to make your acquaintance and to help you with your finances in every possible way, and we very much hope that you will have been sufficiently attracted by tile impressions you have formed after reading this booklet to have made up your mind to join the great band of satisfied customers who bank at Martins."

It is true that these publications saw the light of day only recently, but the defendant Johnson, who has a lifelong experience with the defendant bank and who was the only witness called on their behalf, said in evidence that the matters they speak to were as true in 1950 as they are today. I find that it was and is within the scope of the defendant bank's business to advise on all financial matters and that, as they did advise him, they owed a duty to the plaintiff to advise him with reasonable care and skill in each of the transactions to which I have referred. It is at any rate remarkable that the defendant bank, who seem to be keen competitors with other banks to obtain custom and who, in order to do so, apparently spend large sums of money in advertising that one of the advantages that they offer is expert advice in all financial matters without obligation, are taking the point in this court that they are under no duty to use any care or skill in giving such advice."

The defendant bank relies upon a book of secret instructions circulated to their branch managers. So secret is this book of instructions that the bank objected to producing it and produced a photostat copy of the page containing instructions relating stock exchange transactions. They read as follows: "As the giving of advice to customers about stocks and shares other than concerning procedure is fraught with danger, managers must not directly advise the purchase or sale of any investment"; and a little lower down it says: "The order should be recorded in the stocks and shares bought and sold register and passed in writing to the broker." Then later it says: "Each branch should transact stock exchange business through the broker or brokers allotted to it by head office or district office, unless in any particular case a broker is specifically named by the customer." These instructions, which are headed Stock Exchange Transactions," appear to relate only to stock exchange transactions and do not affect the kind of transactions with which this case is concerned. In any event these instructions do not, in my judgment, alter the true scope of the bank's business any more than any secret instructions issued by a firm of solicitors to their managing clerks forbidding them to advise on any particular legal topic save through counsel would cut down the scope of the firm's business vis-à-vis its clients.

The next point taken by the defendants is that the plaintiff was not a customer of the defendant bank at the date of the first transaction in May, 1950, in that no current account had then been opened by the plaintiff and that, therefore, they owed the plaintiff no duty of any kind, at any rate in respect of this transaction of May, 1950. I have already stated that, in my judgment, the plaintiff was a customer of the defendant bank on May 9, 1950. Nevertheless, even if he did not become a customer until later, the defendants would still, in my judgment, have been under a duty to exercise ordinary care and skill in advising him in relation to the £5,000 transaction. I have found that it is part of the defendants' business to advise customers and potential customers on financial matters of all kinds. In May of 1950 the plaintiff paid business not social calls on the defendant Johnson in his office. The plaintiff made it plain that he was consulting the defendant Johnson as manager of the defendant bank's Quayside branch. The plaintiff was a potential customer and one whose custom the defendant Johnson was anxious to acquire and soon did acquire. The plaintiff had asked the defendant Johnson if he would become his financial adviser, to which the defendant Johnson had replied that the defendant bank would be glad to take charge of his financial affairs. In my judgment, a fiduciary relationship existed between the plaintiff and the defendants. No doubt the defendant Johnson could have refused to advise the plaintiff, but, as he chose to advise him, the law in these circumstances imposes an obligation on him to advise with reasonable care and skill. This seems to me to be an even stronger case from the point of view of the plaintiff than cases of gratuitous deposit, such as Giblin v. McMullen,5 or gratuitous services, such as Whitehead v. Greetham,6 where it has been held that an obligation to use due care and skill may arise.

The defendants then take the point that the defendant Johnson was not negligent in the advice which he gave the plaintiff. Clearly the defendant Johnson was not negligent merely because his advice turned out to be wrong. Nor could he be negligent because he failed to exercise some extraordinary skill or care. His only obligation was to advise with the ordinary care and skill which the ordinary bank manager in his position might reasonably be expected to possess. It seems to me to be plain that in the circumstances of this case he ought never to have advised the plaintiff at all-certainly not without making a full disclosure to the plaintiff of the conflicting interests between the plaintiff and the defendant bank and the plaintiff and the defendant bank's other customers concerned. No one but an extremely foolish man or a knave could have given the plaintiff the advice given him by the defendant Johnson. As I have already indicated, I do not think that he is a knave. On the other hand, for the reasons stated earlier in this judgment, it is quite plain that none of the advice which. he gave the plaintiff comes within measurable distance of being reasonably careful or skilful.

The last point taken by the defendants is that the plaintiff's loss was not occasioned by any negligence on the part of the defendants. It is argued that, even had the defendant Johnson advised the plaintiff against making any investment in Brocks Refrigeration Ltd. and against giving the guarantee, the plaintiff would still have acted as he did. The plaintiff did not strike me as being an over-confident young man or one who would not take advice. I think he had just enough sense to realize that he was no match for Mr. Brock, and I am certain that he relied entirely on the defendant Johnson's advice to protect him in his financial dealings with Mr. Brock. I hold that, but for the defendant Johnson's advice, the plaintiff would never have made any of the investments which he did make in Brock's Refrigeration Ltd., nor have given the guarantee in favour of F. Adamson Ltd. The fact at the plaintiff was the kind of young man who might have lost his money in other unwise transactions or soon spent it, perhaps more enjoyably, on extravagant living is beside the point. He has made out his case in negligence against both defendants and has established that he has lost £15,790 by reason of that negligence. There must, accordingly, be judgment for the plaintiff against both defendants for that sum, with costs.

Judgment for the plaintiff against both defendants.

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