Lloyd's Maritime and Commercial Law Quarterly
IMPLIED TERMS IN THE BANKER AND CUSTOMER RELATIONSHIP
The Maira (No. 3)
The facts of The Maira (No. 3)1
In July 1975, the defendants Pinios Shipping (“Pinios”) commissioned the building of the ship Maira. The National Bank of Greece S.A. (“the Bank”) agreed with Pinios to guarantee 14 promissory notes to pay for the Maira. The Bank’s guarantee was secured by a second preferred mortgage and by a personal guarantee given by Mr G. D. Tsitsilianis. The Bank was called upon to pay the amount of the first promissory note under its letter of guarantee. Instead of declaring Pinios in default under the mortgage, on 6 September 1977 the Bank entered a tripartite agreement with Pinios and Glafki Shipping Co. S.A. (“Glafki”) giving Glafki a sole and exclusive agency to manage the vessel under mortgage. Under the management agreement it was Glafki’s duty to place all insurances and, read together with the mortgage, this required that the vessel be insured for 130% of the total amount secured under the mortgage in favour of the Bank.
Until the date of the management agreement Pinios maintained the insurance of the vessel at 130% of the amount under the mortgage. However, when Glafki renewed the insurances on 9 February and 1 April 1988, the insurance became less than 130% of the mortgage amount. On 10 April 1978 the Maira became a total loss. The failure of Glafki to insure for 130% of the mortgage meant that Pinios could not repay the entire amount due to the Bank. Pinios successfully arbitrated a claim against Glafki for its failure properly to insure the Maira and, although this arbitral award was reversed in the Commercial Court, it was reinstated by the Court of Appeal and the House of Lords.2 However, Glafki refused to pay the amount of the award.
This action arose when the Bank sued Pinios for the margin between the sum insured and the amount owed under the promissory notes guaranteed and paid by the Bank and secured by the mortgage. The Bank obtained judgment against Pinios for $U.S. 2,118,213, including compound interest. In a counterclaim, Pinios alleged that the Bank was under a duty of care to ensure that Glafki did not underinsure the vessel. Pinios argued that this duty was an implied term of the management agreement or arose from the general law of torts. Pinios also challenged the Bank’s right to compound interest; it conceded compound interest until the date of the Bank’s demand for a repayment, but argued that only simple interest ran thereafter until the date of judgment.
The banker and customer relationship: creation and termination
When does a banker and customer relationship come into being? When does it end? The first of these questions is relevant because one way of imposing a duty of
1. National Bank of Greece S.A. v. Pinios Shipping Co. No. 1 (The Maira) (No. 3)
[1988] 2 Lloyd’s Rep. 126.
2. Glafki Shipping Co. S.A. v. Pinios Shipping Co. No. 1 (The Maira) (No. 2)
[1986] 2 Lloyd’s Rep. 12. See also Glafki Shipping Co. S.A v. Pinios Shipping Co. No. 1 (The Maira)
[1982] 1 Lloyd’s Rep. 257.
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