In England, bank owes duty of confidentiality to payee under letter of credit

The House of Lords found in this case1 that a bank owed a duty of confidentiality to the payee under a letter of credit.

Mr Jackson imported goods from a company in Thailand for a customer in England. The customer would place orders with Jackson and, in order to effect payment, the customer's bank would issue letters of credit in favour of Jackson . The letters of credit provided for payment of the agreed sum upon production of various documents. This arrangement continued for two and a half years until, by mistake when handling a demand made under a letter of credit, the bank sent to the customer documents which should have been sent to Jackson. One of those documents was the Thai supplier's original invoice which revealed to the customer Jackson's substantial mark-up on the value of the goods. As a result, the customer placed no further orders with Jackson and thereafter bought the goods directly from the Thai supplier.

Jackson commenced proceedings against the bank for breach of its duty of confidentiality claiming damages for the lost opportunity to make further profits from the trading relationship with the customer.

The letter of credit did not contain an undertaking that the bank would treat the documents provided to it as confidential. However, the Court found that the information was confidential to Jackson and that it was the duty of the bank to protect that confidentiality.

1 Jackson and Anor v Royal Bank of Scotland Plc [2005] UKHL3

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