Banks, financial institutions and all providers of financial advice to the public will have carefully noted the decision of Mr Justice Taylor given on 4th September 1995 in the case of Verity -v- Lloyds Bank. The Plaintiffs, finding themselves short of cash, decided to purchase and renovate a property for profit. One of the Plaintiffs, Mrs Verity sought the advice of Mr Hunt, who was a manager of a local branch of Lloyds Bank, on the prudence of this financial transaction. Mr Hunt duly advised her that the transaction was financially viable and encouraged the Plaintiffs to proceed with it. The Plaintiffs established at trial that they had seen and relied upon a pamphlet published by Lloyds bank entitled "Starting your Business" which contained a number of references to how helpful their local bank manager would be in providing advice on any business venture.

The Court drew a sharp distinction between two different types of relationship between a customer and a bank. First, the ordinary relationship which does not place any duty on the bank to advise the customer on the wisdom of a commercial project for which the bank is asked to lend money. Different considerations, however, apply if a customer actually asks the bank for financial advice or if the bank holds itself out as a provider of such advice.

In view of the approach by Mrs Verity for advice and also taking into account the contents of Lloyds Bank's pamphlet, the actions of the bank fell squarely into this second category. Mr Justice Taylor then had no difficulty in finding that Mr Hunt had been negligent in the advice which he had given to the Plaintiff as no reasonably careful adviser in Mr Hunt's position could "conceivably have taken the view that the project was viable or sensible for the Plaintiffs' to undertake".

This case represents a further instance where a borrower who has suffered severe financial difficulties following the collapse of the property market in the United Kingdom has sought compensation through the courts. Hitherto the litigation buck had stopped expensively with surveyors and valuers. Time alone will tell whether any other of the tens of thousands of hard-up borrowers will now seek to bring themselves within the ambit of this case.

The case also highlights another problem area. One of the reasons Lloyds Bank came unstuck was the leaflet they produced advertising their services. Most service industries nowadays, including banks, accountants and lawyers, produce brochures making a variety of claims over what they offer their customers or clients. A cynic may suspect that sometimes the contents of these brochures owes a considerable debt to the fertile imagination of a public relations consultant. This decision confirms that the provider of services in these circumstances will be judged against the promises which are made in their publicity material rather than a lesser legal standard which would be applied in its absence.


Keywords: Banks/Financial Advisers - Advertising materials - Duty to advise over financial transactions - Professional Indemity

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