Three Rivers District Council and Others v. Governor and Company of The Bank of England

The tort of misfeasance in public office requires a public officer to act in bad faith. Bad faith may be established by targeted malice or by knowledge that the act was unlawful combined with subjective recklessness as to the likely injurious consequences.

Reckless indifference in a subjective sense suffices for liability; objective foreseeability alone does not. Mere breach of supervisory duties under the First Banking Directive 1977 does not, by itself, confer a private right to damages on depositors.

The appeal arose from claims by thousands of B.C.C.I. depositors against the Bank of England for losses following that bank's collapse. The pleaded causes were (1) misfeasance in public office by senior Bank supervisors and (2) breach of the First Council Banking Co-ordination Directive 77/780/E.E.C. and of domestic implementing legislation. Clarke J. struck out the claim after preliminary questions. The Court of Appeal (majority) affirmed. The House was asked to state the ingredients of the tort and to decide whether the Directive confers private rights to damages on depositors.

1. Disposition: The House dismissed the Community-law claim and declined to refer the Directive issues to the ECJ as acte clair. The House stated, for guidance, the ingredients of the tort of misfeasance in public office and adjourned further consideration of whether the pleaded facts met those ingredients for later hearing (per Lord Steyn; per Lord Hope; per Lord Hutton; per Lord Hobhouse; per Lord Millett).
2. Misfeasance in public office — essential elements (per Lord Steyn; Lord Hutton; Lord Hobhouse; Lord Millett):
   1. The defendant must be a public officer acting in the exercise of public power.
   2. There are two alternative mental-state routes: (a) targeted malice — intent to injure a particular person or class; or (b) knowledge that the act was beyond power plus either actual foresight that it would probably injure the plaintiff (or class) or subjective recklessness (wilful or conscious disregard) as to that consequence. Recklessness in a subjective sense suffices.
   3. Dishonesty or bad faith (absence of an honest belief in the lawfulness of the act) is a necessary ingredient; mere illegality or negligence does not suffice.
   4. The plaintiff must prove causation and special damage; questions of causation and whether the pleaded facts satisfy the tort are for further factual inquiry.
3. Remoteness: A test of simple objective foreseeability is insufficient. The plaintiff must show the defendant knew the act would probably injure the plaintiff or was subjectively reckless as to that injury (per Lord Steyn; Lord Hutton).
4. Community law — Directive 77/780/E.E.C. (per Lord Hope; agreed by the House): Examination of the recitals and articles shows the Directive was the first step in harmonisation of authorisation and supervisory regimes. It: (a) set minimum conditions for authorisation of institutions seeking to commence activities (Article 3); (b) imposed duties of cooperation and formulation of ratios for supervisory authorities (Articles 6–7); and (c) prescribed limited grounds for withdrawal (Article 8) read with Article 10. The Directive did not, on its terms, create unconditional, sufficiently precise individual rights in depositors to recover damages. Accordingly depositors cannot rely on the Directive as a direct source of a private action for damages in this case. The House considered the question acte clair and refused a preliminary reference to the ECJ.
5. Practical outcome: The Community-law head of claim is dismissed. The House provided an authoritative statement of the tort's ingredients and remitted the question whether the pleaded facts meet that tort to a further hearing of the Appellate Committee.

• Court of Appeal (Civil Division): Appeal dismissed by majority (Hirst and Robert Walker L.JJ.), Auld L.J. dissenting; reported at [2000] 2 W.L.R. 15.
• High Court (Queen's Bench, Clarke J.): Preliminary issues and strike-out at first instance; principal judgments reported at [1996] 3 All E.R. 558 and [1996] 3 All E.R. 634; strike-out and dismissal on 2 October 1997 (unreported judgment on further amendments).