Tournier v. National Provincial and Union Bank of England (1924)

Every Indian discussion of the banker's duty of secrecy begins here, and for a good reason: there is no Indian statute that states the duty. The Banking Regulation Act 1949 says nothing about it. The Bankers' Books Evidence Act 1891 assumes it without defining it. What fills that gap is a contractual implication worked out in this case, together with a closed list of four occasions on which the duty yields.

The case is also the cleanest illustration of a point students slide past. The relationship between banker and customer is one of debtor and creditor. Between an ordinary debtor and creditor there is no duty of secrecy at all — a tailor who tells one customer about another's cloth breaks no contract. The duty of secrecy is therefore an added obligation, superimposed on the debtor-creditor relation because of what banking is. State that, and the rest of the answer follows.

Tournier banked at the Finsbury Pavement branch. His account was overdrawn, and arrangements had been made for reductions of one pound per week. When the agreed deductions were not made, the acting manager telephoned Tournier at the address of his employer.

Tournier was not available. The acting manager discussed the matter with the employer instead. In the course of the conversation he revealed the state of the account, and that cheques had been presented payable to bookmakers.

As a result of that disclosure Tournier was discharged by his employers. He sued the bank for damages.

1. Is the banker's duty to keep his customer's affairs secret a legal duty, or only a moral one?
2. Is the duty absolute, or qualified?
3. Does the duty survive the closing of the account?
4. Is the duty confined to information taken from the account itself?
5. On what occasions is disclosure justified?

The propositions drawn from the case are these.

The duty is legal, not merely moral. It arises out of contract. Breach therefore gives a claim for nominal damages, or for substantial damages if injury has resulted from the breach. Tournier, dismissed from his employment, had suffered exactly such injury.

The duty is not absolute but qualified. It is subject to exceptions, and the whole practical law lies in the exceptions.

The duty does not end when the account is closed. The obligation to secrecy continues even if the customer closes the account.

The duty is wider than the account. Atkin L.J. put it in terms that decide most modern disputes: the obligation extends to information obtained from sources other than the customer's actual account, if the occasion on which the information was obtained arose out of the banking relations of the bank and its customer — for example, with a view to assisting the bank in conducting the customer's business, or in coming to decisions as to its treatment of its customer.

The four exceptions. Disclosure is justified on four occasions, and on no others:

| | Occasion | What it covers | |---|---|---| | 1 | Compulsion of law | Evidence given by the bank in court; statutory powers of inspection; returns a statute requires | | 2 | A duty to the public to disclose | Rare; the standard example is a customer trading with the enemy in wartime | | 3 | Where the interests of the bank require disclosure | Explaining a dishonour, suing for an overdraft, answering an allegation of misconduct | | 4 | Express or implied consent of the customer | A written authority to the customer's accountant; a reference given at the customer's request |

The duty of secrecy is an implied term of the contract between banker and customer; it is qualified, not absolute; it survives the closing of the account; it extends to information whose occasion arose out of the banking relationship, whatever its source; and it yields on four occasions only — compulsion of law, duty to the public, the interests of the bank, and the customer's consent.

Compulsion of law is narrower than it sounds. It does not permit disclosure, without the customer's express permission, to a detective or police officer investigating a case, or to an income tax inspector. An order must be served on the bank before any party can demand to inspect the books. The Bankers' Books Evidence Act 1891 is the working form of this exception: it allows certified copies of entries to be produced in legal proceedings to which the bank is not a party, so that the bank need not attend court with its actual books.

Indian statutory examples of the same exception are easy to collect and make the answer concrete. The Reserve Bank may collect information from bankers and may furnish it to another banking company, though without disclosing the name of the bank that supplied it. The Banking Regulation Act 1949 requires every banking company to submit a return of unclaimed deposits within thirty days of the close of each calendar year, covering accounts in India not operated for ten years. The foreign exchange legislation empowers the Director of Enforcement or the Reserve Bank to inspect the books of an authorised dealer. Company legislation empowers inspectors appointed by the Central Government to investigate a company's affairs.

Shankarlal Agarwalla v. State Bank of India (AIR 1987 Cal 29) is the Indian case on the point. The customer tendered 261 notes of one thousand rupees for credit to his account, with the declaration form prescribed by the demonetisation legislation of 1978. The bank passed the information to the Income Tax Department, which issued a notice and attached the amount. Held: the disclosure fell within the exception, having been made under directions from the Reserve Bank and the Finance Ministry.

The duty to the public arises rarely. During the Second World War it was incumbent on a bank to make suitable disclosure if it had evidence of a customer trading with the enemy. A bank should be sure of its ground before venturing any revelation on this footing.

The interests of the bank exception is illustrated by Sutherland v. Barclays Bank. A customer's cheque to her dressmaker was dishonoured for want of funds; the bank knew of her bookmaking transactions and was unwilling to allow an overdraft. She protested to the bank by telephone, and her husband, a doctor, interrupted the conversation to add his own protest. The bank then told him that cheques had previously been drawn payable to bookmakers. She sued for breach of the duty. It was held that on the facts the bank succeeded, the disclosure being in its interests and within the qualifications recognised in Tournier.

Consent may be express or implied. The standard express case is a written authority letting the bank tell the customer's accountant the balance and give him copies of the monthly statements so that he may draw up the balance sheet; the letter is filed as evidence in case of need. Sutherland itself was also argued on implied consent, the bank contending that the conversation with the husband was a continuation of the conversation with the wife.