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Professional negligence claims are claims whereby a person who has suffered some damage or loss, and who then alleges that that damage or loss was suffered as a result of a professional doing something or not doing something that he should have done or not done. Professional negligence is a special subset of negligence in that it is measured in light of the specific obligations and duties that the professional may be expected to have in a given industry.

Banks can be accused of professional negligence in any number of situations. Under the principles of agency or vicarious liability, the actions of an employee or agent of a bank will be the liability of the bank itself. If that person has breached some duty, the bank will likely have to answer for it, and then either institute internal disciplinary proceedings against that individual or cross-claim in breach of contract (for example). The same can be said for people acting in a representative capacity, where their actions or representations may be taken to be the responsibility of the bank on whose behalf they are acting.

The Australian Bankers’ Association has a Code of Banking Practice which outlines the industry standards according to which the professional duty of care owed to the public can be measured. According to the Association’s website:

The Code of Banking Practice is the banking industry's customer charter on best banking practice standards. The Code sets out the banking industry's key commitments and obligations to customers on standards of practice, disclosure and principles of conduct for their banking services. The Code applies to personal and small business bank customers.” [1]

According to the Australia Securities and Investments Commission, the Code of Banking Practice “is the banking industry's customer charter on good banking service. Virtually all banks providing services to retail customers subscribe to the Code.” [2] The Code deals with the following matters:

  • Disclosure of Fees and Charges;
  • Disclosure of Terms and Conditions;
  • Changes to Fees and Charges;
  • Changes to Terms and Conditions;
  • Disclosure of general information about the provision of banking services;
  • Privacy and Confidentiality issues;
  • Statements of Account;
  • Copies of Documents;
  • Direct Debits;
  • Chargebacks on credit cards;
  • Financial Hardship provisions;
  • Debt Collection; and
  • Complaints Handling.

The Association has a Code Compliance Mentoring Committee which has investigative powers and can make inquiries in relation to alleged breaches of the Code. If a person is not satisfied with the internal investigations pursued by the bank, the person who has suffered some loss can approach the Financial Ombudsman Service, which:

provides specialised services in dispute resolution, systemic issues management and code monitoring. FOS [Financial Ombudsman Service] is a not-for-profit external dispute resolution [...] scheme that provides free, fair and accessible services to consumers (including some small businesses) who are unable to resolve disputes with financial services providers that are members of FOS.” [2]

It is not unusual that an individual may not be satisfied with the outcome of any proceeding before the FOS. Approaching the court system with a claim in professional negligence may be another avenue through which justice may be sought. In these cases, detailed advice should be first obtained from an experienced legal practitioner as to the merits of the case. Litigation, particularly against banks, can be extremely complex and therefore costly.

At Navado, we always try to seek a negotiated resolution to disputes, especially if they are complex and the claims, although bona fide, may not be convoluted. This is because there is always a risk that an ultimate finding may not be a positive one. In any event, should a dispute against a bank be pursued before the courts, the laws relating to professional negligence will be no less relevant in establishing liability. It may be the case that expert evidence may need to be adduced, and a very large volume of material may also need to be subpoenaed and investigated before the matter is listed for a Hearing.

The process of litigation can be long and drawn out. The FOS was established largely to provide a specialist forum where disputes in the banking industry could be heard and resolved in a more efficient, timely and economical manner. Litigation in Court, although always available as a matter of right, should be considered as a last resort. If and when a decision has been made to sue a bank for professional negligence, it is essential to have a strategy worked out with a banking lawyer first.

If you need legal advice with a bank negligence matter you may wish to contact our firm by telephone on (02) 9233 4048 or email us at info@navado.com.au and make an appointment to see one of our solicitors. 

[1] “Code of Banking Practice” Australian Bankers’ Association (undated) <www.bankers.asn.au> (accessed 15 October 2013).

[2] “Code of Banking Practice” Australia Securities and Investments Commission (updated 2 June 2013) <www.asic.gov.au> (accessed 15 October 2013).

[3] “About Us” Financial Ombudsman Service (undated) <www.fos.org.au> (accessed 15 October 2

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