The duty that the bank owes to the customer or the duty of secrecy.

There are situations when the banks could be in their right to disclose.

A banker is under an obligation of secrecy under the Banking Contract regarding his customers’ affairs.  This obligation is a legal obligation arising out of the contract.  A breach of that duty on the part of the banker will expose the banker to liability.  In other words a banker is not generally permitted to disclose the affairs of his customers to 3rd parties.  The duty is not an absolute duty because there are exceptions when a bank is at liberty to disclose the affairs of the customer.

The leading authority on this subject is the case of

Tournier v. National Provincial and Union Bank of England. (1924) 1 KB 461

It was held in that case that it is an implied term of the contract between a banker and its customer that the banker will not divulge to 3rd persons without the consent of the customer express or implied either the state of the customer’s account or any of his transactions with the bank or any information relating to the customer, acquired through the keeping of the customer’s account unless the banker is compelled to do so by order of a court, or the circumstances give rise to a public duty of disclosure or the protection of the banker’s own interests require disclosure.

The facts briefly

The Plaintiff was a customer of the Defendant bank.  A cheque was drawn by another customer of the Defendant’s in favour of the Plaintiff who instead of paying it into his own account endorsed it in favour of another person who had an account at another bank.  On return of the cheque to the Defendant the manager enquired from the other bank to whom this cheque had been paid and the information given was that it was paid to a bookmaker.  That information was disclosed by the Defendant to 3rd persons and the Plaintiff brought an action against the bank and the holding was that the disclosure constituted a breach of the Defendant’s duty to the Plaintiff and that although the information was acquired not through the Plaintiff’s account but through the drawer of the cheque, the information was none the less acquired by the defendants during the currency of the Plaintiff’s account and in their character as bankers.

The classic statement is by Bankes L.J at page 472

            “In my opinion it is necessary in a case like the present to direct the jury what are the limits and what the qualifications of the contractual duty of secrecy implied in the relation of banker and customer.  There appears to be no authority on the point.  On principle I think that the qualifications can be classified under four heads:
(a)       Where disclosure is under compulsion by law;
(a)          Where there is a duty to the public to disclose;
(b)          Where the interests of the Bank require disclosure;
(c)          Where the disclosure is made by the express or implied consent of the customer.

He goes on to say “the duty of secrecy does not cease the moment a customer closes his account.  Information gained during the currency of the account remains confidential unless released under circumstances bringing the case within one of the classes of qualifications I have already referred to.  Again the confidence is not confined to the actual state of the customer’s account it extends to information derived from the account itself.”

Tournier v. National Provincial and Union Bank of England (1924) 1 KB 461

Judgment of Scrutton J.

I have no doubt that it is an implied term of bankers contract with this customer that the bank shall not disclose his account or the transaction relating thereto except in  certain circumstances.  The circumstances in which disclosure is allowed are sometimes difficult to state. I think it is clear that the bank may disclose the customer’s account and affairs to an extent reasonable and proper for its own protection (as when a bank is collecting or suing for an overdraft. Or to the extent reasonable and proper for carrying on the business of the account as in giving a reason for declining to honour cheques when there are insufficient assets or when ordered to answer questions in the law courts or to prevent frauds or crimes. 

I think also that the implied legal duty towards the customer to keep secret his affairs does not apply to knowledge which the bank acquires before the relation of banker and customer was in contemplation or after it ceased or to knowledge derived from other sources during the continuance of the relation.  The banks can by express agreement provide for circumstances when the bank may be at liberty to disclose.

Judgment of Lord Atkins

Intercom Services Limited & Other v. Standard Chartered Bank Limited Civil Case No. 761 of 1988  E.A. L. R 2002 Vol. 2 391

Judgment of Visram J.

The facts in this case are that a Mr. James Kanyita Nderitu was a director of 4 companies Intercom Services Ltd, Inter State, Swiftair, and Kenya Continental Ltd.  In 1985 Mr. Nderitu received a cheque for 17 Million shillings drawn by Customs & Excise in favour of his company Intercom Services Ltd.  And he banked it on the persuasion of the Branch Manager of Standard Bank Westlands and it was common ground or it was conceded that, that cheque represented a substantial amount of money in those days.  One Saturday Mr. Nderitu went to Westlands Branch of Standard Chartered Bank and deposited that cheque there.  The account was relatively new having been opened some 8 days prior to the depositing of the cheque.  The bank accepted the cheque without raising any questions as it appeared to be proper on the face of it.  The cheque was specially cleared and on the following Monday the Bank manager telephoned Mr. Nderitu and informed him that his superiors thought the deposit was somewhat unusual and he was requested to provide some documentary proof of payment.


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