Gatt v Barclays Bank Plc & Anor [2013]
Gatt v Barclays Bank Plc & Anor [2013] EWHC 2 (QB)
In April 2008, Michael Gatt (M) and Carol Gatt (C) applied to the Bank of Scotland to re-mortgage their home. The finance was needed to fund the Gatts’ property development business. The Bank of Scotland refused to make a loan advance to the Gatts because of M’s poor credit rating. At the time of the application credit reference agencies stated on M’s credit reports that his current account with Barclays Bank PLC was “delinquent” because he had a credit limit of just £1,500, yet he had an overdraft of some £250,000.
The account was a joint account in both M and C’s names although the credit reports did not say so. The Gatts argued that the borrowing was well known to, and authorised by, Barclays, and it was therefore untrue for Barclays to imply to the agencies (and anyone to whom those CRAs supplied information, i.e. the Bank of Scotland) that the Gatts had substantial unauthorised borrowings. The Gatts case was that Barclays’ ‘false statement’ had the foreseeable consequence of the Gatts being unable to raise the finance required to fund their property business, which in turn led to its collapse, the loss of their home (and other assets) and to M’s bankruptcy.
C claimed damages from the bank for breach of contract, negligent misstatement and defamation, and the bank counterclaimed for the amount outstanding on the overdraft and a joint loan account.
Barclays purchased M’s claim in this action from his Trustee and then dropped it. C continued as the sole Claimant.
Breach of contract
The statement that the authorised overdraft limit was only £1,500 was true. The bank had authorised the limit of £250,000 for four months and then it went back to £1,500. The overdraft was not authorised but it was not in default since M was in discussions with B about it. The description of “delinquent”, though not in “default” was correct. M could not succeed in a claim for breach of contract since it was true information falling within the permitted categories for disclosure.
As to C it was obliged not to disclose any confidential financial information about her to the credit reference agencies, true or false, as she had not consented. However, it did not preclude the bank from disclosing information about M who had contractually consented to that disclosure.
Negligence
The court recognised a duty would be owed by a bank to its customer to whom the reference related. However the bank would not normally owe a duty of care to the spouse of a person in respect of whom the bank provided a credit reference to a credit reference agency. The bank owed a duty to C in negligence, since it knew that she was a joint holder of the account and a co-director of the business which largely depended on M’s credit. However, the information was true and not misleading, was disclosed with M’s consent and was disclosed pursuant to Barclays’ data sharing. C’s claim in negligence also failed.
Defamation
The court found the Bank published the words complained of to third parties, to the Credit reference agencies and indirectly to the bank which took up the reference from the CRAs.
The words referred to or identified M, who was named.
And the Court accepted that it would be defamatory to say that a person has a delinquent or unauthorised overdraft, especially one of £250,000 on a £1,500 limit. The defamatory meaning would be that that person had shown serious irresponsibility in financial matters by overdrawing money from his bank in “grave excess of the limits it had allowed.”
However it would be more difficult for C to establish that the reference complained of identified her and that it was defamatory in meaning
- ‘Even such a reader, who knew CG was MG’s wife and business colleague, could not reasonably read the credit report as meaning: “that woman has an unauthorised overdraft” or even: “that woman shares her husband’s blame and irresponsibility for having an unauthorised overdraft”. At worst, they would think it meant: “that woman is married to a financially irresponsible man with an unauthorised overdraft”. Although that might be a misfortune, it is not an allegation which reflects on her personal reputation.’
It was in the public interest that credit information could be obtained and relied on by banks and other institutions.
Only if malice could be shown could qualified privilege be defeated.
C would have to show dominant and improper motive, and would be proved by showing that the Bank knew that the words were untrue, or at least did not believe them to be true
- “Negligence is not enough, unless it rises to the point of reckless indifference to truth. Where the Defendant is a corporation, it must also be shown that a particular employee or agent both participated in the publication and had the required malicious state of mind”
The contractual agreements between a bank and a customer are likely to imply that any confidential information required to be disclosed by a bank to a CRA must be completely true. If false and result in damage they may give rise to a claim.
Banks will owe a duty of care in negligence to the spouse when providing a credit reference. Qualified privilege will provide a defence for banks in libel claims as to information provided to credit agencies.