Can I Sue My Bank for Their Mistake UK

Have you lost money because of a mistake made by your bank?

Banks have a duty to manage your money and needs correctly. When they fail, it can lead to serious financial problems for you. Many people in this situation wonder if they can sue their bank for negligence or because you have been sold a financial product which does not suit your needs. In this article, our expert banking and finance lawyers at Go Legal explain your options for taking legal action against a bank.

If you have lost money because of a mistake or issue with your bank, please call us for a Free Consultation on 0207 459 4037 today.

Common Examples of Negligence Against Banks

When pursuing a case against a bank for negligence, it helps to understand the typical scenarios where a bank might be found at fault. In our experience, there are several common examples of negligence by banks in the UK including:

1. Incorrect Financial Advice: If a bank gives you wrong advice about an investment, mortgage, or other financial products, and you lose money as a result, this could be seen as negligence. For instance, advising a low-risk client to invest in high-risk stocks or financial hedging without proper explanation could be a breach of duty which could give rise to a banking compensation claim.
2. Errors in Account Handling: Mistakes in managing your account, like incorrect charges, duplicated transactions, or failing to carry out your instructions (like transferring money or paying bills), can lead to financial losses. These errors, if caused by the bank’s lack of care, could constitute negligence.
3. Unauthorised Transactions: If the bank fails to prevent unauthorised transactions from your account, especially if they had been notified or had reason to suspect fraudulent activity, this can be negligent.
4. Data Breaches: Banks are responsible for keeping your personal and financial information secure. If a bank’s failure to protect your data leads to financial loss (for example, through identity theft or fraud), this could be negligence.
5. Loan Mismanagement: If a bank mismanages loan processing, like failing to release funds on time or incorrect loan calculation, resulting in financial loss, this can be a sign of negligence.
6. Failure to Comply with Banking Regulations: Banks are subject to various regulations. If a bank’s failure to comply with these regulations directly results in a loss to the customer, this could be grounds for a negligence claim.

It is important to note that each case of alleged bank negligence is unique and must be assessed based on its specific facts and circumstances. Just because a bank makes a mistake does not automatically mean it is liable for negligence; it must be proven that the bank’s action or inaction directly caused your financial loss (see further below).

What You Need to Prove Negligence Against a Bank

If you are considering legal action against your bank for a mistake or negligence, it is important to understand what constitutes negligence and what you must prove. The burden of proof is on you as the claimant to prove:

1. Duty of Care: First, you must establish that the bank owed you a duty of care. This is generally a given, as banks are expected to handle your money and financial information responsibly.
2. Breach of Duty: Next, you need to show that the bank breached this duty. This means proving that the bank did not act with the care and skill expected of a reasonable banking service. For instance, if the bank provided incorrect financial advice or failed to carry out your instructions properly, this could be considered a breach of duty.
3. Causation: It is not enough to show that the bank made a mistake; you must also prove that this mistake caused you a financial loss. This link between the bank’s error and your loss is known as causation. For example, if the bank’s failure to execute a transaction in time led to a loss of investment opportunity, this would establish causation.
4. Damages: Finally, you must demonstrate that you suffered actual financial losses because of the bank’s negligence. This could include direct monetary losses, loss of opportunity, or additional costs incurred due to the bank’s error.

It is important to gather and preserve all relevant evidence, such as correspondence with the bank, transaction records, and any other documentation that can support your claim. In many cases, proving negligence requires a detailed examination of the discussions between you and the bank, and the specific circumstances of the negligence.

Case Examples of Claims against Banks

O’Brien v Barclays Bank plc [2008] EWHC 725 (QB) (undue influence and misrepresentation in mortgage agreement)

Summary

This case concerned a mortgage jointly held by Mr and Mrs O’Brien. When Mr O’Brien’s company faced financial difficulties, he arranged with Barclays Bank to increase the company’s overdraft, personally guaranteed by Mrs O’Brien and secured against their matrimonial home. The wife, who had no interest in the business, was influenced by her husband’s misrepresentation about the terms of the mortgage.
Despite instructions from the bank’s Woolwich branch to the Burnham branch to notify Mrs O’Brien of the implications of entering into a personal guarantee, she was not properly advised and signed the personal guarantee documents without fully understanding the consequences or receiving independent legal advice.

Judgment

At first instance, the judge ordered possession of the property in favour of the bank, stating that a misrepresentation by Mr O’Brien did not make the bank responsible. However, upon appeal, the Court of Appeal and subsequently the House of Lords found that the contract was voidable due to undue influence. They emphasised the need for banks to take adequate measures to ensure that parties offering security understand the implications of their actions, particularly in situations where there is a close personal relationship, like that between spouses.

Importantly, the case highlighted two classes of undue influence:

1. Actual Undue Influence (Class 1) – where the claimant needs to affirmatively prove that the wrongdoer exerted undue influence, and
2. Presumed Undue Influence (Class 2) – the complainant only needs to show a relationship of trust and confidence to presume that the wrongdoer abused that relationship in procuring the transaction. This shifts the burden to the wrongdoer to prove that the transaction was entered into freely, such as by demonstrating that the complainant had independent advice.

Titan Steel Wheels Ltd v The Royal Bank of Scotland plc [2010] EWHC 211 (Comm) (interest rate hedging mis-selling claim against bank)

Summary

The claimant, Titan Steel Wheels Ltd, a manufacturer predominantly earning in euros and spending in sterling, entered into two currency swap arrangements with RBS in 2007.

The claim concerned two derivative products provided by the bank. Titan claimed that the products were complex and that their financial controller lacked authority to enter into them. Titan also argued that the bank had advised them to take these unsuitable products, thus being liable for negligence, and violated the FSA rules by not dealing fairly with Titan or providing accurate product descriptions.

The bank argued that Titan had previously entered into similar products without complaint and that the financial controller had the authority to enter into these transactions. The bank also contended that it did not provide advisory services and was not obligated to do so under its contractual terms. Additionally, the bank claimed there was no breach of duty under the FSA rules that was actionable.

There were 3 main issues in this case that the Court had to determine namely (i) was the claimant a ‘private person’ under FSMA 2000 (ii) did the bank act as an advisor and owed a duty of care, and (iii) whether the contractual terms included exclusion clauses subject to the Unfair Contract Terms Act 1977.

It was important for the Court to assess whether the claimant was a ‘private person’ under FSMA 2000 because it would give them statutory rights to seek redress for losses suffered due to breaches of certain FSA rules. The classification as a ‘private person’ would have allowed Titan to pursue a claim for breach of statutory duty under the FSMA against the bank.

Decision

Issue 1 – Titan as a ‘Private Person’: The court ruled that Titan was not a ‘private person’ for the purposes of the FSMA. The transactions were considered part of Titan’s business and not sporadic or intermittent activities outside its business scope.

Issue 2 – Bank’s Role and Duty of Care: The bank was found not to have acted in the capacity of an advisor and did not owe a common law duty of care regarding the advice on the swaps. The bank’s role was more akin to that of a salesperson, with Titan independently assessing the products.

Issue 3 – Contractual Terms and Exclusion Clauses: The bank’s standard contractual terms were found to apply, indicating that the bank was not providing advisory services. The court also held that Clause 12.5 of the bank’s terms was a valid exclusion clause and satisfied the test of reasonableness under the Unfair Contract Terms Act. It explicitly stated that the bank would not provide advisory services and that any opinions expressed by the bank did not constitute investment advice. The clause further indicated that Titan was responsible for seeking independent advice as necessary.

Common Remedies in Claims against Banks

When it comes to addressing banking negligence, several remedies are available under UK law. These remedies aim to compensate the affected party for their losses or rectify the harm caused by the bank’s negligence. In our lawyers’ experience this can include:

• Compensation for Financial Losses: This includes direct losses (like money lost from an account due to a transaction error) and indirect losses (like lost investment opportunities).
• Restitution: This involves the bank returning any gains it unjustly received from its negligent actions.
• Rescission of Contract: The contract is treated as if it never existed, returning both parties to their pre-contractual positions.
• Rectification: This remedy involves correcting any errors in documentation or account details that led to the negligence.
• Specific Performance: In some cases, the court may order the bank to fulfil a specific duty it failed to perform, such as completing a transaction or unfreezing a bank account.
• Injunctions: These are court orders preventing the bank from continuing or repeating the negligent action.
• Interest on Losses: The court may also award interest on the amount of financial loss from the time the loss occurred to the time of compensation.
• Legal Costs: Our expert professional negligence lawyers, will also seek to recover your legal costs for pursuing a claim against the bank. Our professional negligence solicitors have extensive experience and success in being able to recover costs for clients.

Limitation period for bringing a claim against the Bank

The limitation period for bringing a claim against a bank is an important legal consideration. It defines the timeframe within which a claimant must initiate legal proceedings.

Under the Limitation Act 1980, the standard limitation period for most contractual and tort (negligence) claims is 6 years. This means you have 6 years from the date the cause of action occurred (i.e., when the negligence or breach of contract happened) to start legal proceedings. If the limitation period has expired, you may be barred from bringing a claim, regardless of its merits. Therefore, it is advisable to seek legal advice as soon as you become aware of a potential claim against your bank to ensure that your rights are protected.

However, for negligence claims where the damage was not apparent immediately (known as ‘latent damage’), the limitation period can be different. Under the Latent Damage Act 1986 and Section 14 of the Limitation Act, claimants may have 3 years from the date they became aware (or should reasonably have become aware) of the negligence, the identity of the defendant, and the damage, although there is an overall long-stop limit of 15 years from the negligent act. Similarly, if there is fraud or deliberate concealment then the 6-year limitation period may be extended.

Eligibility Criteria for Financial Redress Schemes in the UK

There are several redress schemes in the UK which may give complainant an alternative way of resolving disputes and complaints against bank without resorting to litigation or court proceedings including:

1. The Financial Ombudsman Service (FOS) Redress Scheme:

Consumer Status: You are eligible if you are a private individual, or a business, charity, or trust with an annual turnover of less than £6.5 million and fewer than 50 employees (micro-enterprise).

Time Limits: You must bring your complaint to the FOS within 6 years of the issue happening or within 3 years of when you realised (or should have realised) there was a problem. Additionally, you must contact the FOS within 6 months of receiving the final response from the financial firm.

Complaint to the Firm: You must first complain directly to the financial firm. If they do not resolve your complaint within 8 weeks or you are unsatisfied with their response, you can then approach the FOS.

2. Financial Conduct Authority (FCA) Redress Schemes:

Specific Issue Affected: You need to be directly affected by the specific issue that the redress scheme is addressing, such as mis-sold payment protection insurance (PPI) or interest rate hedging products.

Evidence of Loss: Demonstrate that you suffered a financial loss or detriment as a direct result of the issue covered by the scheme.

Customer of the Firm: You must have been a customer of the financial firm during the time the mis-selling or detrimental action occurred.

Flexible Funding Options

Navigating the complexities of banking disputes and understanding your rights can be challenging. Whether it is a case of professional negligence, a dispute over a financial product, or a need for redress through schemes like the FOS or FCA, knowing the right steps to take is crucial.

Our lawyers provide flexible funding options including fixed fees and “no win no fee” arrangements to pursue your professional negligence claim to success.

At Go Legal, our team of expert professional negligence lawyers specialise in complaints and banking disputes. Please do not hesitate to call us today on 0207 459 4037 for a Free Consultation with our lawyers.