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employer’s liability for providing negligent references

7 August 2014

In Playboy Club London Ltd and others v Banca Nazionale Del Lavoro SPA, the High Court held that a bank was liable for negligently providing a casino with a reference for one of the bank’s customers, stating that he was financially healthy. Relying on that, the casino allowed the customer to become a member and accepted his cheques, which later turned out to be counterfeit. Acceptance of these cheques led to the casino suffering losses of £1.25 million.

It transpired that the customer’s account with the bank had a balance of nil. The bank denied any responsibility as the reference had been provided by an employee who did not have actual authority to do so and had since been dismissed. Despite this, the court found that the bank still was responsible for providing the reference, regardless of the wrongful conduct of the employee. There was nothing informal about the request for or giving of the reference and the court found that there was no reason for the casino to be cautious about receiving a reference from an employee apparently responsible for the customer’s account.

This case demonstrates the caution businesses should take when their employees give out references and that even if wrongly provided, such references can be held to give rise to legal duties on the part of the employer.

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