A Lender’s Duties Defined

The recent case of Mirpuri v. Bank of India [2010] JRC 129 is one of the very few cases to come before Jersey's Royal Court which touches on the Security Interests (Jersey) Law 1983 ("the 1983 Law"). The court considered the requirements for a variation of a contract, the nature of a bank's duty to its customers and whether there is a duty on a creditor in an action for debt to mitigate his loss.

The Bank of India ("the Bank") made three loans to Mr. Mirpuri ("the Borrower"), between 2000 and 2003, totaling some US$ 3.5 million. The Borrower provided security for these loans by the creation of a security interest over a deposit account which he held with the Bank. The deposit account was a multi-currency account which had the option of being designated in either sterling or US dollars. The Bank took control of the deposit account pursuant to Article 2(5) of the 1983 Law. Security interest agreements were entered into in respect of the loans, a term of which was that