A partner in the plaintiff firm of solicitors stole money from them and spent it gambling in the defendant’s casino. The plaintiff cought to recover the money from the defendant, saying that as a gambling debt, no consideration had been given. They sought recovery also from their bankers, who had paid out on firm’s cheques drawn for Cash. At other times, cheques were made payable to a building society from whose account the partner withdrew the proceeds, and at other times, the cheques were made payable to the bank itself. The bank’s branch manager had knowledge of the partner’s gambling activities and was aware that the method used for the drawing of the cheques was unusual, but he had failed to inform the other partners in the solicitors’ firm.
Held: The court declined to extend the categories of quasi contract so as to enable the firm to recover the stolen money from the person to whom the thief has lost it gambling, but the contracts under which the club received the stolen money were void under section 18 of the Act of 1845 and the club was in no better position than a donee. On principle and on authority a donee is bound to reimburse the victim for stolen money received and retained by the donee and, in the circumstances, the club was unjustly enriched to the extent that the solicitors’ money was retained by the club.
Alliott J set out the principles underlying whether a bank can rely upon the authority of an authorised signatory: ‘(1) the bank is entitled to treat the customer’s mandate at its face value, save in extreme cases;
(2) the bank is not obliged to question any transaction which is in accordance with the mandate, unless a reasonable banker would have grounds for believing that the authorised signatories are misusing their authority for the purpose of defrauding their principals or otherwise defeating his true intention;
(3) it follows that, if a bank does not have reasonable grounds for believing that there is fraud, it must pay;
(4) mere suspicion or unease do not constitute reasonable grounds and are not enough to justify a bank in failing to act in accordance with a mandate; and
(5) a bank is not required to act as an amateur detective.’
The Bank, knowing that the partner, because of his gambling, was in financial difficulty, had reasonable grounds for believing that he was fraudulently withdrawing sums from the partnership account. Quite independently of contract, the Bank was also held in breach of duty to the other partners, in honouring cheques drawn by the gambling partner. The Bank was liable as constructive trustee for rendering knowing assistance to the gambling partner.
Judges:
Alliott J
Citations:
[1987] 1 WLR 987, [1992] 4 All ER 313
Jurisdiction:
England and Wales
Cited by:
At first instance – Lipkin Gorman (a Firm) v Karpnale Ltd HL 6-Jun-1991
The plaintiff firm of solicitors sought to recover money which had been stolen from them by a partner, and then gambled away with the defendant. He had purchased their gaming chips, and the plaintiff argued that these, being gambling debts, were . .
At first Instance – Lipkin Gorman v Karpnale Ltd CA 1989
A partner in a firm of solicitors stole money from them, and spent it gambling with the defendants. The firm sued also their banker, who had been held to be aware of the defaulting partner’s weaknesses and activities.
Held: The solicitors . .
Cited – Barclays Bank plc v Quincecare Ltd QBD 1992
The relationship of banker and customer is that of agent and principal: ‘Primarily, the relationship between a banker and customer is that of debtor and creditor. But quoad the drawing and payment of the customer’s cheques as against the money of . .
Lists of cited by and citing cases may be incomplete.
Contract, Equity, Banking
Updated: 01 May 2022; Ref: scu.259421