Does bank owe duty of care to applicant of injunction order?

November 2017

Banks often receive injunction orders from others against their own customers in daily operation. Does a bank owe any duty of care to the applicant of injunction orders? If a bank has accidentally acted in breach of an injunction order, will it be liable to the applicant?

The short answer to the above question is “no”, according to Master KC Chan in Grasberg Capital Asia Ltd v Bank of Communications Ltd (HCA 784/2016, 13 November 2017), although banks are not entirely carefree.

Where the accountholder is a limited company beneficially owned by an individual, who is the person restrained by a Mareva injunction order, the bank allowing the accountholder to withdraw funds from the account does not owe any duty of care to the applicant of the injunction.

The Mareva injunction in this case restrained an individual from removing his assets out of Hong Kong, whether in his own name or whether solely or jointly owned. He beneficially owned three companies. Each company maintained an account with a bank, but none of the companies was named in the injunction order. Apparently, the bank was not aware that the companies were beneficially owned by the individual and therefore allowed the companies to withdraw a few million dollars from the accounts after it received the injunction order.

The Mareva Injunction order was in standard form.

The applicant sued the bank, claiming that the bank “ought to have known” that the three companies were beneficially owned and controlled by the individual. It tried to argue that the bank owed a duty of care to exercise reasonable care and skill when dealing with the companies’ accounts, even though the companies were not named in the injunction order. As the bank had breached the duty, it should be liable for the applicant’s loss.

The court held that the applicant failed to show any reasonable cause of action against the bank because the bank did not owe any duty of care to the applicant. The court followed the English case Customs and Excise Commissioners v Barclays Bank plc, in which the House of Lords held that the bank in that case could not be understood as having voluntarily assumed responsibility so as to give rise to a duty of care. An injunction was enforceable by contempt of court and the notified party’s duty is to the court only. It would not be fair just and reasonable to recognize a duty of care in the circumstances.

Banks will no doubt welcome the decision, as it is time-consuming to handle injunction orders in which the relevant corporate accountholders are not named.

However, banks are not carefree. They still owe a duty to the court, which is enforceable by contempt proceedings. In this case, the court did not dismiss the whole action against the bank. Instead, it allowed the applicant of the Mareva Injunction to apply for leave to amend its claim to sue the bank for “dishonestly assisting” the parties to breach the Injunction. Perhaps the story has not yet ended.