First Instance The trial at first instance lasted three weeks and came before Alliot J. The Court of Appeal noted that the trial judge had a particularly complex task, trying to reconcile a large number of different pleaded causes of action together with complex and sprawling allegations of fact. At first instance the claims were equally focussed upon the club and the firm's bankers (against whom the claimant solicitors pleaded both
negligence and liability as
constructive trustees). Unusually, at the end of the plaintiff's case, the bank's counsel (
Jonathan Sumption QC) made a submission of "
no case to answer" and offered no evidence. Alliot J gave judgment against the club, but only for conversion of a bank draft for a relatively small amount. The larger claim for
money had and received failed. Against the bank the judge made a stinging series of findings, including that "Mr Fox [manager of the bank] deliberately and systematically suppressed his knowledge of Cass' gambling from coming to his superior's notice", and that "Mr Fox deliberately lied to Mr Gorman."
Court of Appeal In the
Court of Appeal all three judges gave reasoned judgments. Both
May LJ and
Parker LJ dismissed the claims of the firm against the club for money had and received on the basis that the club had provided good
consideration. Although they accepted that gaming contracts were void, prior to the gambling the money was exchanged for chips, which were as good as cash inside the club for gambling or paying for drinks or other entertainment. Although the decision of the Court of Appeal is often overlooked because of the importance of the House of Lord's judgment, the judgments of the Court of Appeal on the issue of bank liability were not appealed, and remain the leading authority on the duty of care owed by a bank to its customer. Unfortunately, the discussion of the issue in the Court of Appeal was complicated because of the way the plaintiff law firm's claim was pleaded and the offering of no evidence by the bank. Nonetheless the comments of the Court of Appeal are important. There were two broad claims against the bank: one as constructive trustee and other for negligence. Each alleged that the bank knew or ought to have known that Cass was drawing on the firm's bank account for the purposes of satisfying his personal gambling problem, and yet they failed to take any action. The Court of Appeal accepted counsel's submission that the bank could not be liable as constructive trustee if it was not shown to be at least negligent. May LJ also asserted nothing less than actual knowledge should constitute a third party as constructive trustee. The Court further held that the bank had not been negligent, and thus could not be liable as constructive trustee. The Court noted the large number of cheques cleared daily, and that in this case only approximately one-seventh of the cheques drawn on the firm's account were fraudulent (and that the firm was one of over 2,800 customers of the bank branch). May LJ held "There is nothing ... express or implied, which could require a banker to consider the commercial wisdom or otherwise of the particular transaction. ... In my opinion any implied term requiring the banker to exercise care must be limited. To a substantial extent the banker's obligation under such a contract is largely automatic or mechanical. Presented with a cheque drawn in accordance with the terms of that contract, the bank must honour it save in what I would expect to be exceptional circumstances."
House of Lords The House of Lords held that £150,960 should be repaid as money had and received, and the club was also liable for damages of £3,735 to the solicitors for conversion of a banker’s draft that had been used once for gambling, rather than cash.
Lord Templeman said, the money could be recovered.
Lord Goff said that the change of position defence was debated but ==Significance==