Watt v State Bank of New South Wales

Watt, the appellant, brought proceedings against the State Bank of New South Wales, the respondent, alleging that the Bank had breached its duty of care to him as a customer. The dispute concerned the Bank's handling of a loan facility provided to a company in which Watt was a director and shareholder. Watt contended that the Bank's actions in managing the loan, particularly in relation to the company's financial difficulties, led to his personal financial loss. The matter was heard in the Court of Appeal of New South Wales.

The central legal issue before the Court of Appeal was whether the State Bank of New South Wales owed a duty of care to Watt in its dealings with the company, and if so, whether that duty had been breached. Specifically, the court had to determine the scope of the Bank's obligations to Watt, a director and shareholder, in the context of a commercial lending relationship with a company, and whether the Bank's conduct in managing the loan facility fell below the standard of care expected of a reasonable banker.

The Court of Appeal found that the Bank did not owe a duty of care to Watt in his personal capacity. The court reasoned that the Bank's relationship was with the company, not with its directors or shareholders personally, in the context of the loan facility. While a bank owes a duty of care to its customer, that duty is generally confined to the contractual relationship and does not extend to protecting the personal financial interests of directors or shareholders unless there are exceptional circumstances, such as where the bank assumes a specific responsibility towards them. The court held that no such exceptional circumstances were established in this case, and therefore, the Bank had not breached any duty owed to Watt.