Customs & Excise v Barclays Bank Plc

In a claim for pure economic loss, the existence of a duty of care depends on the factual relationship. Where the defendant has provided information or services in circumstances akin to contract, assumption of responsibility and reliance may provide the appropriate analysis. In more oblique relationships, the court should apply the threefold approach of foreseeability, proximity, and whether it is fair, just and reasonable to impose a duty, supplemented where appropriate by analogy with established categories.

A bank’s notice of a freezing injunction does not, by itself, create sufficient proximity with the claimant. A duty may arise where the bank, before releasing the funds, objectively assumes responsibility to the claimant by words or conduct which cross the line and are relied upon. A subsequent acknowledgment cannot found liability for an earlier release.

The Commissioners obtained freezing injunctions against Brightstar Systems Ltd and Doveblue Ltd in respect of unpaid VAT. Both companies held credit balances with Barclays Bank. The orders prohibited disposal of funds in specified accounts and were served on the Bank.

After service, Barclays permitted substantial transfers from both accounts. The transfers resulted from operator error in one case and the operation of the Bank’s Faxpay system in the other. The Commissioners later obtained judgments and garnishee orders, but the remaining balances were insufficient to satisfy the debts.

The preliminary issue was whether Barclays owed the Commissioners a duty of care in negligence to prevent the transfers.

The claim failed on the assumed facts. Mr Justice Colman held that Barclays owed no relevant duty of care in respect of the funds released from either account.

1. Nature of the loss. The Commissioners claimed pure economic loss: the transfers reduced the assets available to satisfy judgments obtained later. A freezing injunction created no proprietary interest. Its purpose was to preserve assets for possible execution.
2. Applicable methodology. The assumption-of-responsibility analysis is appropriate where the relationship is objectively akin to contract and the defendant has provided information or services to the claimant. In more indirect relationships, the threefold approach of foreseeability, proximity, and fair, just and reasonable imposition of liability provides the appropriate guideline. Established categories may also be used as analogies.
3. Effect of the injunction. Service of the order placed the Bank under a duty to the court not knowingly to facilitate its customer’s breach. That duty did not itself create sufficient proximity with the Commissioners. A parallel statutory or procedural duty does not necessarily exclude a duty of care, but the court must consider whether the civil duty would conflict with or discourage performance of the other duty.
4. Adverse litigation relationship. An opposing party generally owes no duty of care to its adversary in civil proceedings without an additional assumption of responsibility. The Bank’s position was not materially closer merely because it held the customer’s funds and had notice of the injunction.
5. Assumption of responsibility and timing. Any relevant assumption had to occur before the release and had to be objectively communicated to, and relied upon by, the Commissioners. Barclays’ letters confirming compliance could have constituted an assumption of responsibility if received before the transfers. On the pleaded facts they were received too late. They could therefore create no duty concerning the earlier releases.

First-instance preliminary issue decision. The judgment does not state any prior appellate decision.