Her Majesty's Commissioners of Customs and Excise v Barclays Bank plc

The House of Lords held that a bank which has been notified of a non‑proprietary freezing injunction (a Mareva injunction) does not, by virtue of that notification alone, owe a tortious duty of care to the applicant to take reasonable care to ensure no payments are made out of the frozen account. The court applied and discussed the competing tests for liability for pure economic loss — assumption of responsibility, the threefold test (foreseeability, proximity and whether it is fair, just and reasonable to impose a duty) and incremental development — and concluded that assumption of responsibility was not made out and that, although the loss was foreseeable, policy considerations and proximity did not justify imposing a tortious duty to the applicant.

Key legal points: (i) freezing injunctions are orders of the court and the principal civil remedy for non‑compliance by a notified third party is contempt proceedings; (ii) the notification of an injunction does not of itself create a voluntary assumption of responsibility to the applicant; (iii) the foreseeability of loss in cases of freezing orders is not decisive — the court must consider proximity and policy; (iv) imposing a duty of care on notified third parties would be a significant extension of tort law and was declined for reasons of principle and policy.

The Commissioners of Customs and Excise obtained two standard freezing injunctions in January 2001 against two corporate debtors, Brightstar Systems Limited and Doveblue Limited, which specified accounts held with Barclays Bank. The injunctions were served on Barclays; shortly after notice was given the bank (by error) authorised substantial payments out of each account. The Commissioners recovered judgments against the companies but could not recover the full sums. They sued Barclays for damages on the assumed facts, alleging negligent release of funds after notification of the orders.

The preliminary issue, tried on assumed facts, was whether the notified bank owed a duty of care to the claimant in tort for pure economic loss. The issue had been decided for the bank by Colman J at first instance ([2004] EWHC 122 (Comm)), but the Court of Appeal ([2004] EWCA Civ 1555) reversed and held a duty existed. The House of Lords allowed the bank's appeal.

Issues framed: (i) whether a notified third party bank owes a duty of care to the applicant of a freezing injunction to take reasonable care to comply with the injunction; (ii) which test for economical loss applies (assumption of responsibility, the threefold Caparo test, or incrementalism); (iii) the role of contempt as the court's enforcement mechanism and whether tort should supplement it.

Reasoning: the House examined leading authorities (including Hedley Byrne, Caparo, Henderson v Merrett, Z Ltd v A‑Z, White v Jones, Ministry of Housing v Sharp and others). The Lords agreed that foreseeability was satisfied but held that the bank had not assumed responsibility to the Commissioners and that proximity and policy considerations did not support imposing a tortious duty. The proper legal protection for the applicant is provided by the court's contempt jurisdiction and related procedural measures; to recognise a tortious duty would be a substantial and unwarranted extension of the law, with risks of indeterminate or disproportionate liability and practical problems for non‑bank third parties. The bank's standard confirmation letters were held to be legally insignificant for establishing reliance or assumption of responsibility.

Appeal allowed. The House of Lords held that a bank notified of a freezing injunction does not owe a tortious duty of care to the applicant to take reasonable care to comply with the injunction. The bank's obligation was to the court and the appropriate remedy for deliberate or knowing interference is contempt; in principle and on policy grounds it was inappropriate to create a new tortious duty to the applicant based solely on notification of the order.

First instance: Colman J held for the bank ([2004] EWHC 122 (Comm)). Court of Appeal: reversed and held a duty of care existed ([2004] EWCA Civ 1555). House of Lords: appeal allowed ([2006] UKHL 28).