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Banking Error Did Not Cause Travel Agency’s Collapse

A beleaguered businessman came tantalisingly close to victory when he managed to convince the High Court that a high street bank was in breach of contract when it delayed processing a crucial payment. He will go uncompensated, however, after a judge ruled that the bank’s error did not cause the collapse of his travel agency business.

The ability of the man’s company to issue travel tickets in advance was critical to its business model and depended on its membership of the International Air Transport Association (IATA). Monthly payments due to IATA had put strain on the company’s cash flow and there had been one incident of default in the recent past.

The IATA had warned the company that, if it did not receive a payment of more than £160,000 by a particular date, it would invoke its default procedure. That came to pass when the money was transmitted one day after the deadline. The bank conceded that an error had been made and the Court accepted the businessman’s plea that it amounted to a breach of contract.

However, in dismissing his claim, the Court found that the delayed payment had not caused the demise of his company, which went into liquidation soon afterwards. The Court was ‘impressed’ by the bank’s argument that the company was already in severe difficulties and that its ‘days were numbered’ in any event.

Given its loss-making position, the Court valued both the company’s shares, and its loss as a result of the bank’s error, as nil. In the circumstances, the bank was also entitled to rely upon a £300,000 personal guarantee which had been signed by the businessman to underwrite the company’s overdraft.

Bathija v Lloyds TSB Bank Plc. Case Number: HC13B03493