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

The House allowed the appeal against the strike-out of claims in misfeasance in public office brought by depositors against the Bank of England. The court reaffirmed the elements of the tort of misfeasance in public office (unlawful exercise of power, subjective bad faith or subjective recklessness, standing and causation) and held that, applying the Civil Procedure Rules (in particular CPR r 24.2 and CPR r 3.4), the claim could not properly be disposed of summarily on the available material. The House emphasised that the Bingham inquiry report could be used as a source of factual material but that its findings and conclusions were inadmissible and unfair to use as conclusive evidence against claimants who had not participated in that inquiry. The Bank's application for summary judgment / strike-out failed because there was a realistic prospect that discovery, disclosure and oral evidence might materially assist the claimants and because the pleadings (the new draft particulars) sufficiently identified a misfeasance claim.

This was an appeal by depositors (including local authorities) against an order striking out their action against the Bank of England. The claimants alleged misfeasance in public office arising from the Bank's licensing and supervisory conduct in relation to BCCI SA. They sought leave to amend pleadings in terms of new draft particulars and to proceed to trial for damages.

Background and procedural history:

• The proceedings began by writ in 1993 and proceeded through a series of amendments and preliminary hearings. Clarke J at first instance struck out the claim in 1997 on the basis it was bound to fail; the Court of Appeal (majority) upheld that decision while Auld LJ dissented. The House previously determined the legal requirements of the tort in [2000] 2 WLR 1220 and directed a new draft pleading; on the further hearing the House reconsidered whether the pleadings and available material warranted summary disposal under the Civil Procedure Rules.

Nature of the claim and issues for decision:

• (i) Nature of claim: damages for misfeasance in public office (bad faith or subjective recklessness) arising from licensing and supervision of BCCI and failures to revoke or otherwise exercise regulatory powers.
• (ii) Primary issues: whether the new draft particulars disclosed a reasonable cause of action in misfeasance in public office; whether the claim had no real prospect of success such that it should be struck out or disposed by summary judgment (CPR r 24.2 / r 3.4); and whether use of the Bingham report as determinative evidence on state of mind was permissible at interlocutory stage.

Court's reasoning (concise):

• The House reiterated the tort's elements: unlawful act or omission in exercise of public power; required mental element (knowledge or subjective recklessness) and bad faith; standing; and causation.
• The new draft particulars were judged to set out the claim in sufficient detail to give fair notice; allegations of bad faith and recklessness were properly pleaded and not merely equivocal. Where particulars were capable of supporting either dishonesty or negligence, the evidential question should be resolved at trial rather than by strike-out.
• The court held that Clarke J and the Court of Appeal had placed impermissible weight on findings and conclusions in the privately-conducted Bingham inquiry: while its factual narrative could inform the assessment, its findings were not admissible and it was unfair to treat them as conclusive against claimants who had not been parties. That undermined the confidence to strike out.
• Applying CPR r 24.2, the House concluded there was a realistic prospect that disclosure and cross-examination could produce material of significance; the claim was not so hopeless or fanciful as to have no real prospect of success, and therefore should proceed to trial. The appeal was allowed and leave given to amend as per the new particulars; the Bank's cross-appeal was dismissed.

The appeal was allowed and the cross-appeal dismissed. The House held that the strike-out and summary dismissal of the claim was incorrect: the new draft particulars disclosed a viable cause of action in misfeasance in public office and, taking account of the limits on use of the Bingham inquiry report, the claim could not fairly be disposed of under CPR r 24.2 as having no real prospect of success. The matter should proceed to trial and the claimants were given leave to amend their particulars accordingly.

Writ issued 24 May 1993; Clarke J (High Court, Commercial Court) ordered strike-out in third judgment 30 July 1997 (unreported); Court of Appeal (majority Hirst and Robert Walker LJJ, dissent Auld LJ) upheld strike-out (reported at [2000] 2 WLR 15); House of Lords first hearing addressed legal ingredients of misfeasance in public office and directed new draft particulars ([2000] 2 WLR 1220); further hearing in House of Lords allowed the appeal and set aside the strike-out ([2001] UKHL 16).