Staggering Debts incurred due to bank breach of mandate?

[Karmanaut]

I opened a business bank account with 2 others, Partner A & Partner B, but then didn't go into business with them. However, due to various complications, I neglected to remove my name from the mandate (it's a long, dumb story I now thoroughly regret).

 

The account had no overdraft facility, so I wasn't initially concerned. I had moved out of the country and, eventually, I simply forgot my name was on the business account.

 

Years later, to my horror, I find that the bank are chasing me for a staggering amount of debt incurred by the business partnership I didn't join.

 

Partner A arranged a large overdraft with the bank, without my knowledge. Neither myself nor Partner B signed for this overdraft.

 

The business mandate states that two signatures are required on all withdrawals... however, the bank has been paying out large sums on cheques signed by Partner A alone, which has put the account into massive debt.

 

Am I liable for this debt?

 

Thanks for any advice.

[Ross-co]

If the bank are in breach of the agreement then you have at least a counter-claim against the bank.

 

I would advise you put this one in front of a solicitor though as it's going to get messy.

[Lula]

Also, how long ago was this? as i it was more than 6 years (5 in Scotland) I am presuming that the Statute of Limitations will kick in.

[dad]

Karmanaut,

 

It seems your case is very similar to this case:

 

Catlin v Cyprus Finance Corporation (London) Ltd [1983] 1 QB 759. There the judge held:

 

"It was pointed out on behalf of these defendants that the mandate was a single document, signed by each joint account holder and containing no hint of anything other than a joint obligation save where a joint and several responsibility for any overdraft was expressly provided for. But it is still necessary to consider whether a single obligation owed jointly exhausts what may be taken to be the undoubted contractual intention of the parties so far as the duty of the bank is concerned.

 

"The defendants agreed to honour instructions signed by both account holders. This no doubt imported a negative duty not to honour instructions not signed by both account holders. This duty also could, in theory, have been owed jointly, but it must (to make sense) have been owed to the account holders severally, because the only purpose of requiring two signatures was to obviate the possibility of independent action by one account holder to the detriment of the other. A duty on the defendants which could only be enforced jointly with the party against the possibility of whose misconduct a safeguard was sought, and where the occurrence of such misconduct through the negligent breach of mandate by the defendants would deprive the innocent party of any remedy, would in practical terms be worthless. Indeed, it would be worse than worthless, because a customer would reasonably rely on the two signature safeguard and refrain from active supervision of the account, only to find when loss (allegedly irreparable) has resulted that the reliance was misplaced."

[Karmanaut]

Also, how long ago was this? as i it was more than 6 years (5 in Scotland) I am presuming that the Statute of Limitations will kick in.

 

 

About 4-5 years ago, in England.