‘Playboy Club’: No Tortious Duty to Undisclosed Principal
Yesterday the Supreme Court handed down its decision in Banca Nazionale del Lavoro v Playboy Club London ( UKSC 43). The claim related to a reference provided by the Defendant bank in relation to a high net worth individual for a line of credit to gamble at the Claimant’s club. The reference was obtained by the club via a third party, B, and in giving it the bank was unaware of the club’s interest in it or existence. The reference turned out to be incorrect and the club suffered losses as a result. At trial a question arose as to whether, in the circumstances, a duty of care could be owed by the bank to the club.
The Court of Appeal ( EWCA Civ 457) applied the reasoning in Customs and Excise Commissioners v Barclays Bank plc ( 1 AC 181) and concluded that no duty was owed because the bank could not have assumed responsibility to the club if it did not know of its existence; put another way the parties’ relationship was insufficiently proximate.
Before the Supreme Court, the club argued for the imposition of the duty on the basis that it was the third party’s undisclosed principal. Lord Sumption, giving the lead speech, rejected that analysis for three reasons (at  to ). First, the club’s analysis wrongly conflated contractual and tortious duties – merely because something is ‘analogous to contract’ does not mean that it imports all the same legal incidents. Secondly, dealing with another’s undisclosed principal is not sufficient to give rise to proximity to import a duty of care. In fact, the law related to undisclosed principals relies upon a legal construct to effectively get around a lack of proximity. Thirdly, the club’s argument sought to impose a single aspect of the law relating to undisclosed principals (i.e. a duty to the principal) whereas the law in fact imported a bundle of interconnected rights and duties in such circumstances.
This decision provides an orthodox confirmation of the general rules relating to the imposition of tortious duties and undisclosed principals. Proximity of the parties’ relationship and assumption of responsibility are of central importance and Hedley Byrne remains the starting point in most cases.
A copy of the full decision is available here: banca nazionale del lavoro v playboy.