Word Count: 997 Essay Example

Tutorial day and Time:

In this question I am asked to advise Amelia as to whether or not NRT Bank is obliged to grant him a loan of 200,000 dollars; as to whether the Big bank has contravened is confidentially rights; and to explain to Amelia what is a current account. In addition, I am asked to advise NRT bank as to whether Amelia has become a customer of the bank. In the second part of the question I am asked to advise Fred, the managing director of Lucky Ltd as to whether or not Wealthy Bank is entitled to debit the fraudulently withdraws for the $1million stolen by Mary and the $3,000 stolen by Fred.

The answer to these questions depends on the interpretation of the action of the bank’s manager in line to duties now imposed upon managers in Section 181 of the Corporations Act, Common Law, the Banking Act 1959 (Cth) and the Privacy
Act 1988. These provisions have been derived from a number of decided law cases which have remained relevant to their application to the facts of the present case.

Analysis:

    1. WhetherNRT Bank is obliged to provide Amelia with a loan of $200,000?

Section 181 of the Corporations Act 2010 requires manager to act “in good faith, for proper purposes and in the interests of the company (here NRT Bank)”. it appear that the manager may have done that when he agreed to grant Amelia the loan. A duty of care is owned to the client when the customer-banker relationship begins.1 In special circumstances, this relationship can arise even if the customer has no bank account with the bank. For example, in Woods v Martins Bank Ltd case, although the plaintiff did not have an account with the bank. The plaintiff was already a customer because the bank manager of the back acted in his capacity as a manager when he advised the plaintiff.2 The manager could have refused to give Amelia the loan, but he chose to grant the loan after discussing the issue with the bank’s lending team. The fact that Amelia did not have an account with NRT Bank is immaterial.3 What is material is that the bank’s manager has acted in his capacity as manager of the bank when agreed to give Amelia the loan. In this case, there is a duty of care on the part of the manager to give loan to Amelia.

1.2 Whether Amelia has a right against Big Bank

The Privacy Act 1988 protects the right of a person from invasion and the flow of their personal information. Under the Common Law there exists a duty of confidentiality in dealing with a customer’s financial matters. For example, the duty of confidentiality between a banker and a customer arose in Tournier v National Provincial and Union Bank of England. The bank is required to maintain customer confidentiality.4 then the financial institution will act wrongly and should be held liable for the foreseeable consequences of its action. In this case, Amelia can sue Big Bank for breach of confidentiality and awarded damage on the same.

    1. Whether Amelia has become a customer of the bank

As seen in the Woods v Martins Bank Ltd case, although Mr. Wood did not have a bank account, Mr. Wood became a customer because the bank manager acted in his capacity as a manager when he advised the plaintiff.5 In the case Amelia became a customer of NRT Bank at that moment when the bank manager, Mr. Madison accepted to give a loan of 200,000 dollars and also open a current account to Amelia.

    1. Explaining to Amelia what is a current account.

A current account is a non-interest bearing account that is operated to run a business.6

2.0 Whether or not Wealthy Bank is entitled to refund fraudulently withdrawn money

According to Banking Act 1959 (Cth).7 A financial institution contractual duty is to exercise reasonable skill and cares, in particular situations or circumstances, include duty or obligation to question or to make inquiries an otherwise valid mandate, for example, a cheque that has been written and signed by an authorized person. Although a bank staff is not expected to be a detective and is required to proceed on the prima facie assumption that the staff is serving an honest person-unless the indications are to the contrary.8 Therefore, a bank officer is not required to turn a blind eye to known activities that indicate there is possibility that a client is being defrauded or that money are being misappropriated.9 For example, in Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 1 WLR 1555 case, In this case, cheques were being signed by authorized persons but as part of fraudulently withdrawals, the money was being paid to an individual who used the money to buy shares in the company. The company’s bank knew the company’s money was being used to purchase the company’s shares. Thus if a banks have reasonable suspicion that a customer’s is being defrauded or money is being misappropriated or money is being used not for company purposes then some questioning should be undertaken.10

Conclusion-my advice:

As a consequence, my advice with respect to question 1 and 2 in this problem would be:

1.1 Amelia should be granted the loan because there is a duty of care on the part of the manager to give loan to Amelia.

1.2 Amelia can sue Big Bank for breach of confidentiality and awarded damage on the same because Big Bank manager has contravened Privacy
Act 1988. The bank manager may be liable to pay compensation.

1.3 Amelia was already a customer because the manager accepted to open for Amelia a current account and grant loan to Amelia.

2.0 As per the rules set in Banking Act 1959 (Cth), Wealthy bank should be refund all the money fraudulently drawn because as part of the contractual relationship.

1
Tyree, Alan
The Australian Law of Banking, Sydney, 2006, p.25

2Woods v Martins Bank Ltd case

, Sydney, 2003, p.2201The Law Relating to Banker and Customer in AustraliaToby Weaver and Jim Craigie,
3

4Tournier v National Provincial and Union Bank of England

5Woods v Martins Bank Ltd case

, Oxford, 2000, p92Modern Banking Law
BurridgeEllinger,
6

7
Tyree, Alan
The Australian Law of Banking, Sydney, 2006, p.25

8Tyree, Alan
The Australian Law of Banking, Sydney, 2006, p.26

9Maurice Megrah and F R Ryder, Law of Banking, 9th ed, London, 2006, p. 28

10
Tyree, Alan
The Australian Law of Banking, Sydney, 2006, p.27