Description
Failure to service an overdraft facility – bank’s diligence in lending and recovering an unrepaid loan – duty of a bank in overdraft facilities – duty of a bank to mitigate escalation of interest – contractual safeguards – manipulation by the bank – liability of a guarantor.
- A bank has a duty to exercise reasonable care and skill towards its customer. This duty extends to overdraft facilities.
- A bank has a duty to mitigate escalation of interest – where escalation of interest could have been mitigated or stopped by the bank and the bank fails to do so for no apparent reason, the court will be entitled to hold that interest so accrued is not due to the bank or be forfeited.
- The bank cannot be entitled to interest which appears to result from its own manipulation.
- Where a bank does not take prompt steps to realise securities such a delay amounts to manipulation by the bank.
- Terms of the guarantee shows that the liability of a guarantor is on the principal amount of the facility alone.
