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What is banking business, and when may a banker speak?

Two questions from a 1993 Finance Law and Tax assignment: how the common law and the Banking Act define carrying on banking business, and the four circumstances in which a banker may disclose a customer’s affairs.

This is an assignment I wrote for Finance Law and Tax, ECFS 835, one of the ten subjects in Macquarie University’s Master of Applied Finance. Its own title page gives the due date as the 5th of May 1993, which is the date this carries.

The paper answers two of the set questions, numbered 2 and 4 as they were numbered on the sheet, and there is no question 1 or 3 here because those were not the ones I took. The title above is mine; the manuscript has none beyond the question text.

Set from the Word 2.0 manuscript, with its references kept as they stood. The course was taught by Greg Hammond and Nuncio D’Angelo of Mallesons Stephen Jaques, whose own course outline is in the same archive and is not reproduced here, being theirs rather than mine.

Download the original assignment (DOC, 45 KB)

Master of Applied Finance Assignment Finance Law and Tax ECFS 835

Macquarie University

Master of Applied Finance

Finance Law and Tax ECFS 835

Assignment (Due 5 May 1993)

Chris Tham (SID 30957109)

2. Explain what is meant by the phrase “banking business” as that term is used in the Banking Act 1959 (Cth) and contrast that meaning with the position in the United Kingdom.

Introduction

Banks are the largest and oldest financial intermediaries in Australia and have played a major role in the Australian financial system. The theory and practice of banking and lending have varied from age to age and nation to nation, but the business of banking in Australia generally resembles that of the United Kingdom. Australian banking law also conforms closely to that inherited from the English legal tradition. However, the terms “bank” and “banking business”, whilst appearing frequently in statutes, have to date eluded prescriptive definition, resulting in some discrepancies in common law definitions between the two legal systems.

In practical terms, the business of banking is a service industry which can involve a variety of services and products. An explanation of “banking business” cannot be laid down as a matter of law because the facts of each case will vary, and the nature of the business will be a mixture of fact and law.1

The difficulties of satisfactorily defining “banking business” due to the changing nature of banking across time and place are best described by Lord Morton of Henryton in Bank of Chettinad, Ltd of Colombo v Commissioner of Income Tax, Colombo [1948] AC 378 at 383 and echoed by Lord Justice Lawton over thirty years later in Re Roe’s Legal Charge: Park Street Securities Ltd v Albert William Roe [1982] 2 Lloyd’s Rep. 370 at 382.

Dixon J in Commonwealth v Bank of NSW2 viewed banking business in the context of its place as part of the trade, commerce and intercourse of a modern society and defined it thus: “the creation and transfer of credit, the making of loans, the purchase and disposal of investments and other kindred activities”.

Common Law Definitions

The first major Australian case that attempted to define the business of banking was Commissioners of the State Savings Bank of Victoria v Permewan, Wright & Co Ltd (1914) 19 CLR 457 at 470-1. The majority of the High Court supported a definition of “banking business” based on economic usefulness rather than the maintenance of a current account and the collection and payment of cheques. Accordingly, the Commissioners were bankers within the meaning of the Bills of Exchange Act 1909 (Cth) and the Instruments Act 1890 (Vic) despite the fact that repayments of deposits were only permitted on production of the depositor’s passbook with his or her order for payment.

Isaac J cited with approval the judgement of Fitzgibbon LJ in Re Shields Estate [1901] IR 172 at 199 that “… those who take money ‘on deposit account’ are just as much bankers as those who hold it ‘on current account’.” and set out the essential characteristics as:

  1. The collection of money by receiving deposits upon loan.

  2. The repayment of money when and as expressly or impliedly agreed upon.

  3. The utilisation of money so collected by lending it again in such terms as are required.

This definition was quoted with approval in subsequent decisions of the High Court in a number of cases.3

Banking Act 1959

Section 5(1) of the Banking Act 1959 (Cth) (“the Banking Act”) defines a bank as “a body corporate authorised … to carry on banking business …”. Sections 7 and 8 prohibit a person other than a body corporate from carrying on a banking business in Australia. In addition, a body corporate cannot carry on any banking business unless it has been granted the appropriate authority. These two sections embody the chief purpose of the Banking Act in “… regulating the carrying on of banking business in Australia …”.4

The Act does not define the term “banking business”.5 In considering whether any body corporate has contravened the provisions of the Act, by carrying on a banking business without authority, the courts have applied the definition in the Commissioners of the State Savings Bank of Victoria.6

A different approach was taken by the High Court in Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 420, where the court looked at the purpose of the legislation (in this case, s 8 of the Banking Act) to arrive at its decision. As explained by Mason J, the Act “does contain a series of provisions which, when considered as a whole, give some clue to the purpose which is sought to be achieved by the prohibition contained in s 8.”

The position in the United Kingdom

There is no United Kingdom Act of Parliament which sets out to define banking. An “authorised institution” may be recognised by the Bank of England as a bank or carrying on “banking business” for the purposes of the Banking Act 1987 (see s 67(1)). However, it is possible for an institution to be conducting banking business but not recognised as a bank for the purposes of the Banking Act 1987. Hence, the common law definition of “banking business” is still of some importance, especially when a party seeks to assert that it is carrying on “banking business” in order to take advantage of or to indicate compliance with an enactment.7

The opinions expressed by judges concerning “banking business” have changed over the years. The traditional view is that no one may be considered a banker unless he pays cheques drawn on himself.8 From time to time, however, this view has been rejected.9

In United Dominions Trust Ltd v Kirkwood [1966] 2 QB 431 at 447, the court reviewed earlier cases and comment in text books10 and re-affirmed the traditional view. In this case the plaintiff bore the onus of proving that it was “a person bona fide carrying on the business of banking” and for this reason exempt from the provisions of the United Kingdom Money Lenders Acts. Lord Denning concluded that the usual characteristics are as stated in the 6th edition of Paget’s Law of Banking and thus defined by example the functions or purpose of a bank, i.e.:

  1. The conduct of current accounts.

  2. The payment of cheques drawn on bankers.

  3. The collection of cheques for customers.

This was followed in Re Roe’s Legal Charge [1982] 2 Lloyds Law Reports 370 and London and Harrogate Securities Ltd v Pitts [1976] 2 All ER 184 which observed that the main issue was whether a financial institution was carrying on a genuine bona fide banking business.

Conclusion

In summary, the English courts have held that the definition of banking adopted in In Re Shields Estate and Commissioners of the State Savings Bank of Victoria are ‘too wide for the present day’ and that the collection of cheques is an additional requirement.11

Lord Denning in the United Dominions Trust case (QB 431 at 446) observed that “Money is now paid and received by cheque to such an extent that no person can be considered a banker unless he handles cheques as freely as cash”. This apparent divergence between the earlier Australian and later English decisions is reinforced by the Australian High Court specifically adopting its earlier “economic usefulness” decision in Australian Independent Distributors Ltd v Winter (1965) 112 CLR 443 at 455.

Since the High Court is no longer bound by Privy Council decisions, the following quotation (made in 1947) must be taken as a correct statement of the law:

“it may be accepted as settled law in Australia that the honouring of cheques is not an essential part of the business of banking.”12

[1008 words]

References

  1. Mark Hapgood, Paget’s Law of Banking, 10th ed, Butterworths 1989

  2. J Milnes Holden, The Law & Practice of Banking, Volume 1: Banker and Customer, 4th ed, Pitman 1986

  3. Andrew D Smith & Leonie M Muldoon, Commonwealth and State Legislative Controls over the Functions and Administration of Banks, The Australian Law Journal, Volume 64 Jan-Feb 1990 pg. 13-15.

  4. G A Weaver & C R Craigie, The Law Relating to Banker and Customer in Australia, 2nd ed, Law Book Company 1990

  5. P M Weaver, Banking and Lending Practice, Studies in Australian Banking and Finance, 2nd ed, Serendip Publications 1990

  6. W S Weerasooria, Banking Law and the Financial System in Australia, 2nd ed, Butterworths 1988

4. When does the banker’s duty of secrecy or confidentiality arise and what are the exceptions to that duty? Give examples of each exception.

Introduction

The position of trust which bankers hold has certain legal incidents, including the responsibility to maintain confidential the affairs of a customer of the banker. This is a duty which is owed to and belongs to the customer and therefore, only the customer or persons having rights which are traceable through the customer may waive that duty.

Historical Development

In Foley v Hill (1848) 2 HLC 28; 9 ER 1002, the House of Lords held that the relationship existing between the customer and the banker was an ordinary relationship of debtor and creditor, but the principle was further developed in subsequent cases to incorporate the duties of good faith and confidentiality which had their origins in the duties of trustee and agents,13 although such duties would not be absolute but qualified.14

The banker’s duty of confidentiality has been described as a contractual duty in the English Court of Appeal’s decision in Tournier v National Provincial and Union Bank of England [1924] 1 KB 461; 29 Com Cas 129, CA (Tournier’s case).15 However, it would appear that the duty of confidentiality arises in equity quite apart from any implied term in the contract of banker and customer, as private information may be disclosed by a prospective customer prior to entering into a contractual relationship with a bank.16 Although it is doubtful whether equity would intervene in all cases, it has been suggested that both the common law and equitable duties of confidentiality have important roles to play in the law of banking.

Atkin LJ held that the nature of information that a banker must not disclose extends to all aspects of the account and transactions through it, to any securities and to information obtained from other sources arising out of the relationship between the bank and its customer. He held that the obligation continues after the closure, and extends to information obtained about a former customer who no longer had an account and had ceased to be a customer of the bank.17

Bankes LJ also enunciated in Tournier’s case that: “… the duty is a legal one arising out of contract and that the duty is not absolute but qualified”.18 The qualifications can be classified under four heads:

“(a) where disclosure is under compulsion by law;

(b) where there is a duty to the public to disclose;

(c) where the interests of the bank require disclosure;

(d) where the disclosure is made by the express or implied consent of the customer.”19

Disclosure Under Compulsion at Law

This exception of disclosure has grown in importance with the growth of organised crime and tax fraud, and many governmental and regulatory bodies now have legislative powers20 to call for disclosure of banking records and documents.

As stated in the Introduction, the right of confidence is the customer’s and therefore if the courts or Parliament consider that the customer should be compelled to disclose information, then the bank will also be compelled.21 The courts in Australia have the power to subpoena confidential information in litigation involving a customer of the bank where they think it is appropriate, as spelled out by Diplock LJ in Parry-Jones v Law Society [1969] 1 Ch 1 at 9: “… the duty of confidence is subject to the overriding duty of the banker at common law to disclose and answer questions as to his customer’s affairs when he is asked to give evidence on them in the witness box in a court of law.”

Each of the Australian jurisdictions has legislation controlling the production of bankers’ books in legal proceedings, based on the Bankers’ Books Evidence Act 1879 (UK).22 The statutes provide that copies of the entries in the ‘business records’ of a bank shall be received as prima facie evidence and detail the matters which must be proved in order for a copy to qualify for this privileged status.23 The banker need not be a party to the proceedings24, nor do the accounts need to be held by the parties to the litigation.25 The term “bankers’ books” would cover all the usual records used in the ordinary business of banking, including microfilm records26 and managers’ diaries27. The statutory provisions apply to criminal proceedings as well.28

In Bankers Trust Company v Shapira [1980] 1 WLR 1274, Lord Denning in the English Court of Appeal was hesitant to apply the above principle in full force, recognising how important the duty of confidentiality is to the integrity and standing of banking institutions.29 This theme of privacy and of the individual’s rights against unnecessary disclosure was filtered through Australian law as evidenced in the decision of the Federal Court of Australia in Citibank Ltd v Commissioner of Taxation (Cth)30 in which a question concerning the scope of s 263 of the Income Tax Assessment Act 1936 (Cth) arose.31 In the later case of Allen Allen and Helmsley v Deputy Federal Commissioner of Taxation32, the Full Bench of the Federal Court held on appeal that the Tax Office was validly authorised to access documents, subject to due observance of the doctrine of legal professional privilege.

The Financial Transaction Reports Act 1988 (Cth) has overridden much of the fundamental principle of privacy referred to by the above cases by placing the onus of reporting certain financial transactions on “cash dealers.”33 S 16 in particular seems to be forcing the banker to make a value judgement on “suspicious behaviour” based on “reasonable grounds”.34 However, relief is given by s 16(5) and s 16(5A)35 to protect the banker against suits or proceedings by an aggrieved customer.36

Duty to the Public

Bankes LJ in Tournier’s case37 quoted Viscount Finlay’s dictum in Weld Blundell v Stephens [1920] AC 956 at 965 that “danger to the State or public duty may supersede the duty of the agent to his principal.” However, various authorities have been at loathe to concede the circumstances by which a disclosure by reason of “public interest” can be justified.38

It has been suggested that disclosure under a duty to the public would be permissible when funds were being accumulated for some very extreme political purpose or propaganda subversive of social order39 or where, in wartime, there are indications that the customer is in breach of the laws forbidding trading with the enemy40, but there are no decided cases to support either of these propositions.41 However, there are suggestions that the “public interest” exception to the duty of confidentiality may, if tested, be given a broader interpretation under modern conditions.42

Disclosure Required by Interests of the Bank

A bank must necessarily disclose the state of its customer’s indebtedness when it is taking legal proceedings to recover the amount of an overdraft or other loan accommodation. Equally, in any proceedings relating to the enforcement or protection of a security which it holds, the bank is entitled to make any disclosure which is necessary to enable to merits of its case and the basis of its claim to be considered by the court.

In Sunderland v Barclays Bank Ltd43, the bank disclosed the reason for dishonouring a wife’s cheques to her husband. Du Parcq LJ held that the wife had implicitly consented to the disclosure44, and, furthermore, that the disclosure was required in the interest of the bank. Professor E P Ellinger in Modern Banking Law (1987) p 104 has questioned this decision and suggested that the bank had disclosed more information than was necessary for protecting its own interest.

This would imply that the duty to disclose under the bank’s interest should be interpreted narrowly, which was confirmed by the English Court of Appeal in Bank of Tokyo Ltd v Karoon [1987] 1 AC 45.

When the customer gives an express consent to the release of information, there can be no complaint provided that the banker discloses only information which is correct and within the confines of the customer’s consent. Implied consent may only be inferred when the customer knows that the information is likely to be disclosed and submits to it. Two areas which are relevant to the matter of disclosure with the express of implied consent of the customer are guarantees and banker’s opinions.

It is not clear in what instances a bank can disclose information to a guarantor or intending guarantor, or whether there is an implied authority allowing disclosure of information.45 Harvey CJ in Eq said in Ross v Bank of New South Wales (1928) SR (NSW) 539 that a guarantor of a customer’s account with a bank is not entitled to demand from the bank a copy of the account but is entitled to demand certain information.46 Barwick CJ stated in Goodwin v The National Bank of Australasia Ltd (1968) 42 ALJR 110 at 111 that the bank “… is only bound to disclose to the intending surety anything … ‘which was not naturally to be expected’” but this comment is probably too wide.47

The best policy for a banker to adopt is probably to answer any questions from an existing or intending guarantor carefully and honestly, but not to volunteer information.48

There are conflicting opinions on whether the well-established practice of banks giving opinions concerning their customer’s creditworthiness and the reliability and standing of those who bank with them has the implied consent of their customers.49 The matter has never been tested in the courts and therefore, as the situation stands today, it is unsatisfactory. A related issue is the duty of care when giving a bankers’ opinion, or the lack thereof by relying on disclaimers.50

Conclusion

The extent of the capacity or power of the bank to supply information to others is limited by the obligation to observe the duty of secrecy, but this is increasingly being eroded both by the courts and by the legislatures. The balancing required of ensuring that law enforcement agencies have access to the “necessary” information and at the same time guarding and protecting an individual’s right to privacy is a delicate process. Amendments which have been made to the Privacy Act 1988 (Cth) by the Privacy Amendment Act 1990 and the Law and Justice Legislation Amendment Act 1991 seem to place limitations upon the disclosure of personal information by credit reporting agencies and credit providers.51 The Martin Committee in its report Pocket Full of Change (AGPS 1991) made a number of recommendations in relation to the matter of bankers’ confidentiality, which have so far drawn a mixed response from the Commonwealth Government.

[1541 words]

References

  1. Alan L Tyree, Banking Law in Australia, Butterworths 1990.

  2. John Walter & Nathan Erlich, Confidences — Bankers and Customers: Powers of Banks to Maintain Secrecy and Confidentiality, The Australian Law Journal Volume 63 June 1989 pgs. 404-420.

  3. G A Weaver & C R Craigie, The Law Relating to Banker and Customer in Australia, 2nd ed, Law Book Company 1990

  4. P M Weaver, Banking and Lending Practice, Studies in Australian Banking and Finance, 2nd ed, Serendip Publications 1990.

  5. W S Weerasooria, Banking Law and the Financial System in Australia, 2nd ed, Butterworths 1988

Chris Tham SID 30957109 Page 18

Notes

  1. Banbury v Bank of Montreal [1918] AC 626; Woods v Martins Bank Ltd [1959] 1 QB 55 at 62; [1958] 3 All ER 166; Royal Bank of Canada v Inland Revenue Commissioners [1972] 1 Ch at 679; [1972] 1 All ER 225
  2. [1950] AC 235 at 303; [1949] 2 All ER 755; 79 CLR 497; discussed in (1950) 23 ALJ 213.
  3. Melbourne Corporation v Commonwealth (1947) 74 CLR 31 at 63-65, 69; Bank of NSW v Commonwealth (1948) 76 CLR 1 at 194, 285; Australian Independent Distributors Ltd v Winter (1964) 38 ALJR 330 at 334-5; Savings Bank of South Australia v Wallman (1935) 52 CLR 688; Commissioners of Stamps v City & Suburban Building Society (1914) QSR 1 and in Butterworth v Commonwealth Bank of Australia (1916) 22 CLR 206. In Re Adelaide Cooperative Society Ltd (1964) 5 SASR 266 the South Australian Supreme Court applied the test of banking business in Commissioners of the State Savings Bank of Victoria case and observed that the essential requisite of the business of banking is the lending of customer’s money to other persons.
  4. Mason J in High Court in Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 422.
  5. And neither do Corporations Law, the Bills of Exchange Act 1909 (Cth), the Cheques and Payment Orders Act 1986 (Cth) nor the Consumer Credit Act 1972 (SA). The Credit Acts of the various other mainland states and territories define “bank” in terms of the meaning for the purposes of the Banking Act 1959 (Cth) or as otherwise constituted under another law of the Commonwealth or of a State, but again give no further assistance as to the meaning of “bank” or “banking business”.
  6. See, for example, Australian Independent Distributors Ltd v Winter (1964) 38 ALJR 330 and Re Adelaide Cooperative Society Ltd [1964] SASR 266.
  7. The Banking Act 1987, and its precursor the Banking Act 1979, amended several statutes to define ‘bank’ by reference to the Banking Act. This includes the Bankers’ Books Evidence Act 1879, the Agricultural Credits Act 1928 and the Solicitors Act 1974. An important group of post 1979 statutes conspicuously avoid usage of the expression ‘bank’ and refer instead to authorised institutions under the Banking Act 1987, including the Companies Act 1985, the Insolvency Act 1986, the Building Societies Act 1986 and the Financial Services Act 1986. However, several statues enacted both before and after 1979 uses the expression ‘bank’ or ‘banker’ or a similar expression without proper definition. It is in relation to these statutes that the common law definition of banking remains of paramount importance. They include the Bills of Exchange Act 1882, the Cheques Act 1957, the Post Office Act 1969, the Insurance Companies Act 1982, and the Income and Corporation Taxes Act 1988.
  8. See, for example, Re District Savings Bank Ltd, Ex parte Coe (1861) 31 LJ Bank 8; Halifax Union v Wheelwright (1875) LR 10 Ex 183 at 193; Re Birkberk Permanent Benefit Building Society [1912] 2 Ch 183; affirmed sub nom Sinclair v Brougham [1914] AC 398.
  9. For example, Lord Goddard in R v Industrial Disputes Tribunal, ex parte East Anglican Trustee Savings Bank [1954] 1 WLR 1093. See also the opinion of the Judicial Committee of the Privy Council in Bank of Chettinad v Commissioners of Income Tax [1948] AC 378 at 470.
  10. Lord Denning quoted from the summary of the salient aspects of the banker-customer relationship made by Atkin LJ in Joachimson v Swiss Bank Corp [1921] 3 KB 110 at 127, then dealt with Bank of Chettinad Ltd v Income Tax Commissioner [1948] AC 378 which referred to s 330 of the Companies Ordinance 1938. From these authorities and the definition of “bank” in the Shorter Oxford Dictionary, Lord Denning found support for the view expressed in Paget’s sixth edition.
  11. United Dominions Trust Ltd v Kirkwood supra at 446, 451-8, 464; Bank of Chettinad Ltd v Commissioners of Income Tax, Colombo, supra at 382.
  12. Manning and Farquharson, The Law of Banker and Customer in Australia, pp 55-56.
  13. The principle in Foley v Hill was further developed in Joachimson v Swiss Bank Corporation [1921] 3 KB 110, especially at 127 per Atkin LJ.
  14. The duty of confidentiality found its roots in the decision of Foster v Bank of London (1862) 3 F & F 214; 176 ER 96, but the judgement in Hardy v Veasey (1868) LR 3 Exch 107, upheld on appeal, developed the law an extra step by recognising that the duty of confidentiality was not a strict duty in all circumstances.
  15. Mr Tournier, employed on a three month contract, had overdrawn his account without prior arrangement, and then failed to make the agreed repayments. His banker telephoned Mr Tournier’s workplace and, when he was unable to speak to Mr Tournier, spoke instead to his employer, telling him of Mr Tournier’s gambling and the state of his account. Mr Tournier’s contract was not renewed, he lost his job and successfully sued the bank for slander and breach of conduct.
  16. See Lord Chieveley’s comments in Attorney-General v Guardian Newspapers Ltd and Ors (No 2) [1988] 3 WLR 776 at 806 and Megarry J’s link to the Statute of Uses 1535 in Coco v A N Clark (Engineers) Ltd [1969] RPC 41 at 46. In the latter case, Megarry J enunciated a useful test to decide when the obligation of confidence shall arise in equity: “[If] … any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence, then this should suffice to impose upon him an equitable obligation of confidence.” Although this case involved information of a commercial and industrial nature, the Law Commission of England in Working Paper No 58 (Breach of Confidence) (1974) at p 15 suggested that the ‘reasonable man’ test should be equally applicable to cases involving information of a personal nature. Walter & Erlich (see Reference No. 2) then expressed the opinion that the equity of confidence is also applicable to the banker-customer relationship, otherwise the customer would be accepting a “narrower duty of confidentiality” and that the contractual and equitable duties of confidentiality are “not mutually exclusive but complement each other and co-exist”, following Lord Wilberforce’s judgement that there is no difficulty in recognising the co-existence of legal and equitable rights and remedies in the one transaction in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 580-1, confirmed by the New South Wales Court of Appeal in Stephens Travel Service International Pty Ltd (Receivers and Managers Appointed) v Qantas Airways Ltd (1988) 13 NSWLR 331.
  17. See also Megarry J’s comments in Royal Bank of Canada v Inland Revenue Commissioners [1972] 1 Ch at 680; [1972] 1 All ER 225: “… a banker’s duty of secrecy to its customers is not confined to ordinary banking transactions but would extend to any banking transaction which is effected for a customer, ordinary or extraordinary.” Interestingly, the contractual duty of confidence discussed in Tournier’s case has been accepted at English law to be a duty that applies to all professional persons, see for example Diplock LJ’s comments in Parry-Jones v Law Society [1969] 1 Ch 1 at 7. This would seem to imply that the duty would be imposed on a ‘financier’ that may not be a bank in the traditional sense.
  18. Tournier v National Provincial and Union Bank of England [1924] 1 KB 461 at 471-2.
  19. Ibid, at 471.
  20. See, for example, the Business Franchise Licences (Tobacco) Act 1987 (NSW); the Business Franchise Licences (Petroleum Products) Act 1987 (NSW); the Revenue Laws (reciprocal Powers) Acts of the Commonwealth and certain of the States; the Fair Trading Acts of NSW, Victoria and Queensland; the Proceeds of Crime Act 1987 (Cth); the Financial Transactions Reports Act 1988 (Cth); the Corporations Law; the Trade Practices Act 1974 (Cth); the Royal Commissions Act 1923 (NSW); the National Crime Authority Act 1984 (Cth); and the Crimes (Confiscation of Profits) Act 1986 (Vic).
  21. There must be a lawful compulsion, and not every demand which comes from a government department falls into the exception, a fact that is sometimes not appreciated by zealous bureaucrats.
  22. For example, Evidence Act 1898 (NSW). It is doubtful whether the Australian statutory provisions confer jurisdiction on a court of one State to order inspection of copies of books of a bank situated in another state: Bank of Australasia v Pollard (1882) 8 VLR (L) 66, although this doubt has been resolved in some of the States, e.g. the Victorian Parliament amended the Evidence (Bankers’ Books) Act 1969 (Vic) following the decision in R v Mitchell (1971) VR 46.
  23. The requirements are that the book was at the time of making the entry one of the ordinary books of the bank; that the entry was made in the ordinary course of business; and that the book from which the copy is taken is in the custody and control of the bank. Proof may be by either oral testimony or by affidavit.
  24. in which case the person seeking the production of the records must obtain an order of the court (see, for example, s 49 of the Evidence Act 1898 (NSW)). See also Woods v Martins Bank [1959] 1 QB at 60; [1958] 3 All ER 166 and Haughton v Haughton [1965] 1 Ont Rep 481. The court also has the power to order one of the parties to a litigation to inspect and take copies of certain banking records (see s 50). See also Gordon v Kerr (1916) 33 WN (NSW) 55 but the order must be limited to relevant entries: Emmott v Star Newspapers Co (1892) 62 LJQB 77
  25. James v Mabin (No 3) [1929] NZLR 899; Pollock v Garle [1898] 1 Ch 1; Waterhouse v Barker [1924] 2 KB 759.
  26. Barker v Wilson [1980] 1 WLR 884.
  27. R v William Bacon & Co [1969] NZLR 228; also R v Smart [1983] VR 265.
  28. See Williams v Summerfield [1972] 2 QB 513; [1972] 2 All ER 1334.
  29. Lord Denning stated at 1282 that “… it is a strong thing to order a bank to disclose the state of its customer’s account and the documents and correspondence relating to it.” In this case, two rogues obtained a substantial amount of money by presenting to the plaintiff bank in New York cheques purportedly drawn on it by a bank in Saudi Arabia and made payable to one of the men. When the cheques turned out to be forgeries, the plaintiff bank in New York reimbursed the amount debited to the account of the Saudi Arabian bank and sought to recover its losses from the two rogues. In an attempt to locate them, the plaintiff bank applied for an order instructing the defendant bank to permit the plaintiff bank to inspect and take copies of all correspondence between the rogues and the defendant bank. The Court of Appeal granted the order against the defendant bank, but made it subject to an undertaking by the plaintiff that the information disclosed would be utilised solely for the purpose of the action to trace the funds.
  30. (1988) 88 ATC 4714, (1988) 83 ALR 144; (on appeal) 89 ATC 4268, (1989) 85 ALR 588.
  31. Under s 263 and 264 of the Income Tax Assessment Act 1936 (Cth), any properly authorised officer (cf O’Reilly v State Bank of Victoria Commissioners (1982-1983) 153 CLR 1) may require access or information to be produced, but the only documents which the Commissioner can require to be produced must relate to the income or the assessment of income tax of an identified person (cf Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499). In this case, thirty seven tax officers entered the bank’s premises and seized documents allegedly relating to its customers’ involvement in offshore tax arrangements. Lockhart J formed the opinion that the authorities relied upon by the tax officers pursuant to s 263(2) were not specific or particular to the extent required. The authorities were expressed in terms which were too general and no reference had been made to specific documents.
  32. (1988) 88 ATC 4734, (1989) 81 ALR 617; (on appeal) 89 ATC 4294; (1989) 86 ALR 597.
  33. The term “cash dealer” is defined in s 3(1) and includes financial institutions. S 7 and s 15 requires cash dealers to prepare and lodge reports on domestic currency transactions and currency transfers to and from Australia in excess of specified amounts.
  34. Some assistance in relation to the meaning of the terms may be obtained from Hussein v Chong Fook Cam [1970] AC 942 at 948; Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266 at 303 per Kitto J; and Parker v Churchill (1985) 63 ALR 326 at 334.
  35. Effected by the Crimes Legislation Amendment Act (No 2) 1991.
  36. The precedent created by s 16 and 17 of Financial Transaction Reports Act 1988 (Cth) has been followed in ss 51 and 52 of the Drug Trafficking (Civil Proceedings) Act 1990 (NSW). Indeed, Weaver and Craigie (see Reference No. 3) notes that “What appears to be emerging is either a statutory expansion of … [exception where the interests of the bank require disclosure] … or a new, fifth exception to the banker’s duty of confidentiality which may become known as disclosure under statutory licence.” A new Division (Division 3) was inserted in the Financial Transaction Reports Act 1988 (Cth) by s 9 of the Cash Transaction Reports Amendment Act 1991 relating to the provision of reports concerning certain international transfers of funds but appears to leave many questions unanswered.
  37. [1924] 1 KB 461 at 473.
  38. Campbell CJ in R v Bedfordshire (1855) 24 LJQB 81 at 84 said that the term ‘interested’ does not refer to curiosity “… but that in which a class of the community have a pecuniary interest, by which their legal rights or liabilities are affected.” The view in Paget’s Law of Banking (9th ed 1982) that “… the licence to disclose by reason of … [a duty to the public] … should not be too lightly assumed” is approved by Lord Keith of Kinkel in Attorney-General v Guardian Newspapers Ltd (No 2) [1988] 3 WLR 776 at 782.
  39. Sir John Paget;3 LDAB 312.
  40. R S T Chorley, Law of Banking (6th ed Maxwell 1974) p 23.
  41. Professor Ellinger argues that it is unlikely that there will ever be a reported case, for if the bank discloses information to the authorities which is acted upon, then an action for breach of contract by the customer is hardly a possibility, whereas if the bank turns a blind eye to information in its possession, it is unlikely that there will be a prosecution to sheet home its guilt. He suggests that any supposed duty, whether imposed by case law or by statute, is purely cosmetic, see E P Ellinger, Modern Banking Law, Clarendon Press 1987 p 103.
  42. See Lord Denning MR’s comments in Chic Fashions (West Wales) Ltd v Jones [1968] 2 QB 299 at 313, and also in Initial Services Ltd v Putterhill [1967] 3 All ER 145 at 148. See also Lion Laboratories Ltd v Evans [1985] QB 526, or, for a case closer to home, Allied Mills Industries Pty Ltd v Trade Practices Commission (No 1) (1980) 55 FLR 125.
  43. (1938) 5 Legal Decisions Affecting Bankers 163; London Times, 25 November 1938. A wife complained to her husband that her bank had dishonoured several cheques. The wife telephoned the bank at the husband’s encouragement. When she subsequently handed the handset to the husband, he was told that although there were in fact insufficient funds in the account to meet the cheques, the real reason for disallowance was that most of the cheques were in favour of bookmakers
  44. by handing the handset to the husband.
  45. Lord Chorley, Law of Banking (6th ed 1974) p 335; cf Paget’s Law of Banking (9th ed 1982) p 502.
  46. as to the balance then owing, the rate of interest charged and the amount, if any, realised by the bank in respect of the collateral securities. However, there is no indication whether this was a complete statement of the information that might be disclosed, or the categories or types of information that might not be disclosed, or address different types of guarantees provided in different circumstances. It does not seem fair to allow the duty of confidentiality to be inoperative where the bank without the consent of the customer arranges for a third party to act as guarantor of the customer’s account.
  47. However, see also Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; Behan v Obelon Pty Ltd [1984] 2 NSWLR 627.
  48. Hamilton v Watson (1845) 12 C & F 109; 8 ER 1339; National Provincial Bank of England Ltd v Glasnuck [1913] 3 KB 335; Royal Bank of Scotland v Greenshields [1914] SC 259; MacKenzie v Royal Bank of Canada [1934] AC 468; Westminster Bank Ltd v Cond (1940) 46 Com Cas 60; Cooper v National Provincial Bank Ltd [1946] KB 1
  49. E P Ellinger, Modern Banking Law (1987) p 104 and Paget’s Law of Banking (9th ed 1982) p 158. Bankes LJ in Tournier’s case at 473 made a reference to the banker’s opinion but only, it seems, as an example of a disclosure made by the express consent of the customer. Atkin LJ at 486 referred to bankers’ opinions in the context of an implied consent but did not seem to wholeheartedly endorse it. If the customer has given the name of his or her bank in the course of business dealings, then it is relatively easy to find an implied consent. The common opinion among bankers is that they are entitled to give a bankers’ opinion without the express authorisation of the customer on the grounds that a customer authorises the bank to provide this kind of information when an account is opened. Although the practice is widespread, there are doubts whether it is notorious, i.e. known to all customers, although it would probably be known at least to commercial customers.
  50. See, for example, the landmark case Hedley Bryne and Co. Ltd v Heller and Partners Ltd [1964] AC 465; MLC Assurance Co. Ltd v Evatt (1968-1969) 42 ALJR 316, on appeal [1971] AC 793; Commercial Banking Co of Sydney Ltd v R H Brown and Co (1972) 126 CLR 337; and Compafina Bank v Australia and New Zealand Banking Group Limited (1984) ASC 56-685.
  51. The expression “credit provider” includes a “bank”. In particular, refer to the limits on disclosure of an individual’s personal information by credit reporting agencies in s 18K(1), limits on the use which credit providers may make of personal information contained in credit reports in s 18L, and the circumstances in which a credit provider may disclose a “report” or personal information contained in a “report” in s 18N.