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 could not recover from the gambling house. The defendants gave valuable consideration in good faith for the cheques taken by the partner.
A bank will be liable for honouring a cheque drawn by one of the partners in fraud of the others if ‘a reasonable and honest banker [who] knew of the relevant facts would have considered that there was a serious or real possibility, albeit not amounting to a probability, that its customer might be being defrauded . . That at least the customer must establish.’
May LJ said: ‘The money which a customer deposits with a bank becomes the bank’s money, but the bank is prima facie bound to meet its debt when called upon to do so by the customer. The arrangement between some banks of giving references secretly could not displace the rule in Tournier. The bank was in breach of its contract.’
Nicholls LJ said: ‘the chips were not money or money’s-worth; they were mere counters or symbols used for the convenience of all concerned in the gaming. As tokens, the chips indicated that the holder had lodged cash with the club or, when a cheque had been used, had been given credit by the club, to the extent indicated by the tokens. It is as though the customer had been given a series of receipts in respect of the money handed over by him prior to beginning to play. The money was to go to the winners, or be returned to the customer if not spent on gaming. When the customer played at the table he was playing with the money he had brought with him to the casino, just as much as if he had used the banknotes themselves rather than the chips for which he had exchanged the banknotes preparatory to the start of play. I do not believe that this internal, preliminary, preparatory step, of issuing chips for cash, adopted for considerations of practical convenience, can have the effect in law that the club gave valuable consideration for the money it received, when the position in law under the statute is that if money rather than tokens had been used at the table, the club would not have given valuable consideration. I find such a conclusion repugnant to common sense.’
Parker LJ said that the defendants had given good consideration for two reasons. The club supplied chips in exchange for the money. The contract under which the chips were supplied was a separate contract, independent of the contracts under which bets were placed at the club; and the contract for the chips was not avoided as a contract by way of gaming and wagering under section 18 of the Gaming Act 1845. Secondly, although the actual gaming contracts were void under the Act, nevertheless Cass in fact obtained in exchange for the money the chance of winning and of then being paid and so received valuable consideration from the club.
Parker LJ, May LJ, Nicholls LJ
 1 WLR 1340
England and Wales
At first Instance – Lipkin Gorman (a Firm) v Karpnale Ltd 1987
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 . .
Cited – Tournier v National Provincial and Union Bank of England CA 1924
The court considered the duty of confidentiality owed by a banker to his client. Bankes LJ said: ‘At the present day I think it may be asserted with confidence that the duty is a legal one arising out of contract, and that the duty is not absolute . .
At CA – 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 . .
Cited – Sandra Estelle Fielding v The Royal Bank of Scotland Plc CA 11-Feb-2004
The husband and wife had signed a bank mandate allowing the bank to act upon the authorisation of either of them. The wife complained that the bank should not be able to recover from her any sums expended by the husband.
Held: The mandate . .
Cited – National Westminster Bank plc v Spectrum Plus Limited and others HL 30-Jun-2005
Former HL decision in Siebe Gorman overruled
The company had become insolvent. The bank had a debenture and claimed that its charge over the book debts had become a fixed charge. The preferential creditors said that the charge was a floating charge and that they took priority.
Held: The . .
Mentioned – Turner v Royal Bank of Scotland Plc CA 24-Mar-1998
The plaintiff complained as to the provision of references by his bank. The bank said he had given an implied permission through the bank which had made the request. Later changes in the bankers code of practice would have required explicit written . .
Lists of cited by and citing cases may be incomplete.
Banking, Equity, Contract
Updated: 12 April 2022; Ref: scu.194782