The Duty of Confidentiality in Banking: is Tournier long gone?
Confidentiality has been a central notion in many relationships where high stakes are involved. For instance, patients reveal to doctors sensitive data regarding health, because the latter is entrusted with confidence. The same applies to solicitors; clients are willing to discuss all relevant facts in order to gain the best possible advice based on the circumstances without the fear of interference with the right of non-self-incrimination. Similarly, the concept of confidentiality is particularly underlined in the relationship among banks and customers.
In this article, the author examines whether the legal character of the duty of confidentiality between bank and customer is still valid, today, in the era of massive paperwork and over-regulation that coexists with the notorious “terms and conditions” imposed when opting-in for banking services, like the opening of an account. The importance of the legal character of the duty has been corroded due to the overwhelming number of exceptions imposed mainly through legislation. This is also reflected in the legal drafting of the bank-customer contract. Despite this, the basis of the duty still lies on the leading decision in Tournier v National Provincial and Union Bank of England as the starting point, taking into consideration the lack of codification.
The emergence of the legal duty in Tournier v National Provincial and Union Bank of England
Surprisingly, in spite of being of vital importance and deeply embedded in the relationship a bank maintains with its customers, the duty of confidentiality was thought to have the character of a rather moral than a legal obligation. The right opportunity to clarify the duty into one of a legal character arose undeniably late –considering that the banking sector has been developing since the 17th century- in 1924 when the Court of Appeal of England and Wales decided the case of Tournier v National Provincial and Union Bank of England.
The case concerned Mr Tournier, who overdrew his bank account by a sum of 10 pounds, and agreed to pay monthly instalments as repayment. After Mr Tournier’s initial commitment towards his liabilities, a remaining sum of 6 pounds was due. The bank’s officer noticed that a cheque issued from Mr Tournier’s employer towards Mr Tournier had not been deposited to the aforementioned individual's overdrawn account but to that of a third person. Investigating the issue further, the bank officer discovered that the third account belonged to a bookmaker. Frustrated with the discovery, the bank officer communicated the information to Mr Tournier’s employer, who was also a customer to the bank, to settle the overdraft. Mr Tournier’s employer, concerned with the fact that his employee might not be a trustworthy gentleman, but a gambler, decided not to renew the employment contract that was under provisional conditions with the view of a future permanent position. Based on this loss suffered, Mr Tournier sued the bank.
After an unsuccessful claim based on slander and breach of the confidentiality duty before the Court of First Instance, the Court of Appeal, in a remarkable passage of Lord Bankes, established that:
“the bank were absolutely pledged to secrecy in regard to the plaintiff’s account and business, and all matters incidental thereto, and that it was an implied term of the contract between the plaintiff and the bank that they would not disclose to any one any of the plaintiff’s business with the bank or matters arising therefrom (…)”.
The case now stands as one of the most cited banking law cases in the common law world and serves as an authority on confidentiality. The scope of the duty is indeed defined in broader terms, as it exists even after the termination of the relationship, even after the customer’s death. Despite the disagreement among the Lord Judges on the actual objective scope of the duty, the majority view prevailed and another argument was raised in favour of the broad character of the duty. According to Lord Bankes “the duty of non-disclosure is (…) extended to any information, regardless of its source, that was acquired in ‘the character of banker”. Lord Atkin’s decision was on the same page. The duty does not simply cover matters regarding transaction history, source of payments, subsequent account activity and personal data, but it is also expanding to negative information, such as the inactivity of an account. Admittedly, there are economic rationales behind the duty: a person is encouraged to enter into the contractual relationship because he is confident that his financial dealings will remain hidden. The bank’s provision of services is facilitated by the willingness of the customer to provide that detailed information.
The ever-increasing exceptions to the duty: can confidentiality remain immune?
Although the duty seems robust, it was diluted by the Tournier case itself. As Lord Bankes stated, the duty is not an absolute one, but there are qualifications that serve as exceptions based on compulsion by law, overarching public policy reasons, the bank’s own interests and the express or implied concern of the customer in disclosure.
In the context of globalised provision of banking services, one soon concludes that the current sectorial environment is much different than that of almost a century ago when Tournier was decided. The multi-functional operation of the banking system and its subsequent cross-border element made the banks covered by the “veil of secrecy” an attractive tool in the hands of criminals for committing illegal actions. The duty’s limits have been stretched aggravatedly by the introduction of legislation addressing terrorism, money laundering, tax evasion, drug trafficking and fraud committed in the corporate environment, to name a few. In fact, the Review Committee on Banking Services: Law and Practice traced about twenty such examples in 1989 and today, the list might be considerably expanded.
Outside the criminal law context, weakening is detected on legislation and soft-law concerned with the judicial co-operation and obtaining of evidence. Already in Barclays Bank Plc v Taylor it was clarified that the bank does not owe any pro-active duty towards customers. It is explicit from the aforementioned, that the already confined duty is considerably eroded as a symptom of this over-regulation phenomenon. Notwithstanding, the duty’s value is not completely overridden when information is disclosed for a particular purpose to a third party, per statutory exemptions, as such disclosure does make the confidential information automatically available to the public in general. Notwithstanding that, the duty is not completely overridden when information is disclosed to a third party where statutory exceptions designate so, as this information does not automatically leak to the public.
Current banking practice in acquiring consent shakes the duty’s foundations
Tournier’s surrounding circumstances were much different than the current practices deployed by the banking sector. The duty was implied to the contract between the bank and the customer due to the fact that not any established method was followed. The mere fact of opening of the account was tantamount to the beginning of the relationship and no further paperwork as part of the so-called “know your customer” or other modern initiatives was required.
The increased demands of the modern era result to the efficient addressing of contemporary threats through regulatory regimes which have prompted banks to adopt practices to cover the possibility of liability. The bank could have excluded potential liability from the outset; if a disclosure was made as per the existing legal regime, however, it might still have arisen as those legislative measures can be complicated or conflicting, and often depend heavily on judicial interpretation and implementation. Therefore, banks can shield, to an extent, their position by requiring express consent of the customer through the contract concluded between the parties when opening an account.
Requiring express consent is rather rational having in mind the decision in Turner v Royal Bank of Scotland where the practice of responding to enquiries of customer’s creditworthiness was not thought as problematic where the customer impliedly gave consent for the disclosure of this confidential information, especially since the disclosure lacked the necessary “notoriety” and was unknown to non-business customers. As Professor Hooley stated in a very cited commentary on the case, the Court’s conclusion undermines the commercial function of this and other similar practices if the consent of the client is required every time, as is provided by the Lending Code (as revised in 2015). To avoid the task of requiring case by case express consent, banks devised and apply widely the practice of requiring one-off consent in advance, with the opening of the personal account and the subsequent signing of the relevant contract. For instance, the Barclays’ personal banking terms regarding the acquisition of consent in disclosing confidential information are quite lengthy, covering a series of contingencies. As J. Wadsley has put it, today “customers who would prefer to be sure that their financial matters are kept confidential would be well advised to keep their money under their mattresses in the future”.
The fog of the implied character of the duty leaves intact the significance of Tournier
One must not ignore the fact, that the starting point of the bank-customer relationship has its roots in contract. The debtor-creditor relationship does not exclude its volitional character as the duty to repay is promise-based. This contract, in addition to its written terms can be enriched like any contract with implied terms arising out of the reasonable expectations of the parties in the light of all circumstances. It is explicit from the above mentioned that the importance of Tournier has declined. Yet no one disregards that in absence of codification –as opposed to what the Jack Committee has proposed- the duty is still based on common law shaped by Tournier, which continues to serve as the leading authority until today. The verbatim reflection on the Lending Code is evidence of this argument. In spite of all the heavy paperwork customers are required to go through and the relaxation of the duty’s boundaries, the massive injection of legislative exceptions maintains a desirable balance. Nevertheless, the decision in Tournier is still considered the starting point in every discussion on the duty of confidentiality of banks towards customers.
It is evident that the duty of confidentiality has been considerably eroded due to the heavy injections of exceptions where disclosure is available without any liability burdening the bank’s side, if each legal regime’s requirements introducing such exceptions are fulfilled thoroughly. This was inevitable as the imperatives of modern life demanded the decisive treatment of phenomena which excessively grew in the context of confidentiality, but also emerged rather naturally since Tournier itself has made clear from the beginning that the confidentiality duty is not absolute, but inherently contains qualifications based both on public policy and private law considerations. The heavy documentation that banks have undertaken as part of their general practice and policy in order to fully preserve their interests, but also to save time and money might have stretched the duty’s boundaries, but have not displaced Tournier. In the absence of the codification of the duty its roots are still found in common law, and common law as it currently stands is represented by the celebrated decision. Thus, the decision in Tournier remains significant to the customer-bank relationship to the degree that it provides the principle behind any start of discussion about confidentiality in the banking sector.
 Tournier v. National Provincial and Union Bank of England  1 KB 461 CA, 471.
 Ibid, 469.
 Ibid, 505.
Tournier v National Provincial and Union Bank of England  1 KB 461 CA, 471-472.
Turner v Royal Bank of Scotland  BPIR 683.
Barclays Bank Plc v Taylor  1 W.L.R. 1066 CA (Civ Div)
The Libyan Arab Bank v Banker’s Trust case  3 All ER 252
Barclays Plc, Terms and Conditions for personal customers, September 2017
Cranston R, Principles of Banking Law (2nd edn, Oxford University Press 2002)
Ellinger E P, Lomnicka E, Hare C V M, Ellinger’s Modern Banking Law (2nd edn, Oxford University Press, 2010)
R Hooley, ‘Bankers’ references and the bank’s duty of confidentiality: when practice does not make perfect’ (2000) CLJUK 21
J Houghton, ‘Bank’s duty of confidentiality – recent developments’ (1990) J.IB.L. 40
Jack RB, Review Committee on Banking Services: Law and Practice, Report by the Review Committee Vol. XLIX. (1989)
Symons E L Jr, ‘The Bank-Customer Relation: Part I- The Relevance of Contract Doctrine’ (1983) 100 Banking L.J. 220
The Lending Code Setting Standards for banks, building societies and credit card providers, 2011 (revised March 2015)
Wadsley J, ‘Banks’ confidentiality: a much reduced duty’ (1990) LQR 204