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Dispute Resolution Law Alert - December 2017
Submitted by // K Bowers, Partner / Solicitor Advocate
22 December 2017


Banks owe no duty of care to holders of Mareva injunction

Introduction 

In the recent case of Grasberg Capital Asia Ltd v Bank of Communications Ltd HCA 2016 / 784, the Hong Kong Court had the opportunity to consider for the first time the issue of whether banks, upon receiving a Mareva injunction, owe a duty of care to the holder of the injunction. Applying the UK position as held in the House of Lords case of Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181, the Court of First Instance ("CFI") found that banks in Hong Kong do not owe a duty of care to Mareva injunction holders.

Facts

The Plaintiff is a BVI company and one of its shareholders obtained a Mareva injunction which was subsequently continued ("Injunctions") against a number of parties, to restrain them from disposing of their assets and requiring them to maintain their assets at an aggregate value of no less than HK$35m. The Injunctions were served on the Defendant bank, and it was the Plaintiff's case that upon receipt of the Injunctions by the Defendant bank, it owed a duty of care to the Plaintiff to exercise reasonable care and skill when dealing with assets (funds) which fell within the scope of the Injunctions, and that the duty of care includes ascertaining the assets (funds) which fell within the scope of the Injunctions and ensuring that the terms of the Injunctions are fully observed. The Plaintiff argued that it was fair, just and reasonable for a duty of care to be imposed on the Defendant bank.

The Plaintiff highlighted three companies (which were either fully or partially owned and controlled by one of the individuals who was subject to the Injunctions) which held accounts with the Defendant bank. It was argued that the Defendant bank should have known this, and by allowing various transactions in these three bank accounts, it failed to observe the orders under the Injunctions which amounted to a breach of the duties that it owed to the Plaintiff. It is noteworthy that these accounts were not specifically identified in the Injunctions.

Bank owes a duty to the Court, not to the holder of the Injunctions

Applying Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181, the CFI held that the Defendant bank did not owe a duty of care to the Plaintiff. The facts in this UK case are very similar in that the Customs and Excise Commissioners argued that the bank was negligent by authorising transactions involving accounts referred to in the injunction order. It was held in this House of Lords decision that no duty was owed to the plaintiff for the following reasons:-

i) the bank could not be understood as having voluntarily assumed responsibility so as to give rise to a duty of care;

ii) the injunction was enforceable by contempt of court only and the notified party's duty (the bank) is to the court only; and

iii) it would not be fair, just or reasonable to recognise a duty of care in such circumstances.

The CFI also commented that the facts of the UK case were more favourable to the plaintiffs than the facts in this Hong Kong case, as although the accounts were specifically identified in the injunctions in that UK case, no duty of care was found or imposed on the defendant bank.

Comment

This case is a welcome decision for Hong Kong banking institutions as it confirms (that in respect of injunctions) their duty is owed to the Court and there are no conflicting duties owed to the holder of the injunction or to their customers (i.e. those who maintain banking relationships with them). Had there been a duty of care imposed on the Defendant bank in this recent Hong Kong case, this would have given rise to an enquiry as to whether the duty of care should be extended to other third parties who may be holding assets that are subject to a Mareva injunction.

The judgment in this case also confirms that a holder of a Mareva injunction is unable to make a direct claim against a bank in Hong Kong for failure to ensure that the injunction order is observed. However, this does not mean that banks are free to act in a manner that may cause any injunction not to be observed. As banks owe a duty to the Court when they receive an injunction, they are reminded to carefully review its terms and implement systems and controls to effect the order where necessary, including promptly notifying the relevant payment processing units within the bank to place restrictions on the bank accounts concerned. Any failure to ensure that the order is observed may expose the bank to contempt proceedings, which may result in the bank being fined, assets seized, or even the imprisonment of its responsible employees in extreme cases.


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