Global menu

Our global pages

Close

Banks owe no duty of care to an applicant of an injunction order

  • Hong Kong
  • Banking and finance
  • Litigation and dispute management

29-11-2017

The position of banks being served with a Mareva injunction order has been clarified in Hong Kong. In the recent case of Grasberg Capital Asia Limited v Bank of Communications Limited (HCA 2016/784)*, the Court considered the question of whether a bank notified of a Mareva injunction owes a duty of care to the party in whose favour the injunction was granted. It was confirmed thatf banks do not owe such duty and the Plaintiff’s claim was struck out.

* Eversheds Sutherland act for the Defendant bank in these proceedings.

Three things you should know

  1. This is the first written judgment by a Hong Kong Court on the issue of whether a bank owes a duty of care upon being served with a Mareva injunction order.
  2. The Hong Kong Court confirmed that no such duty of care exists by following the UK House of Lords decision of Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181. Therefore, no civil claim for negligence may arise against a bank for breach of a Mareva injunction order in such circumstances.
  3. However, any breach of an injunction order could still be subject to punishment for contempt of court.

Background facts

In April 2013, an individual shareholder obtained a Mareva injunction on behalf of the Plaintiff in a derivative action against a number of parties to restrict their disposal of assets in Hong Kong (the “Injunction Order”). The Injunction Order was served on the Defendant bank soon after it was obtained.

The Plaintiff alleged that the Defendant had failed to observe the Injunction Order by allowing transactions in three bank accounts which were operated by companies controlled or owned by one of the parties subject to the Injunction Order, although these companies were not named in the Injunction Order. It therefore commenced a claim against the Defendant.

In its claim, the Plaintiff alleges that:

  • The Defendant, upon acknowledging receipt of the Injunction Order, owed a duty to the Plaintiff to exercise reasonable care and skill when dealing with assets which were within the ambit of the Injunction Order; and
  • By allowing the transactions in the said bank accounts, the Defendant was said to have breached its duty and should be liable for the Plaintiff’s loss.

The Defendant applied for the claim to be struck out on the basis that no such duty exists .

No duty of care was owed

This main issue before the Court is whether a duty of care was owed by the Defendant to the Plaintiff upon receipt of the Injunction Order.

The Plaintiff argued that the considerations of fairness justice and reasonableness support the imposition of a duty of care. On the other hand, the Defendant submitted that the existence of such duty has been definitely rejected by the UK House of Lords in Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181.

In that case, the Customs and Excise Commissioners obtained a freezing injunction in respect of assets of two companies which included specified accounts at Barclays Bank. The injunction was notified to the bank which subsequently failed to prevent payments out of the accounts in breach of the injunction. The Commissioners claimed damages for negligence against the bank. The House of Lords rejected the claim and held that no duty of care was owed by the bank 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 freezing injunction was enforceable by contempt of court and the notified party’s duty is to the court only; and (iii) it would not be fair just and reasonable to recognize a duty of care in the circumstances.

The Hong Kong Court followed this decision and found in favour of the Defendant. The Plaintiff’s claim was struck out as no duty of care was owed to the Plaintiff.

Commentary

This is a favourable decision for financial institutions, particularly those increasingly receiving Mareva injunction orders in their day-to-day operations. It confirms the position that, in Hong Kong, the service of a Mareva injunction order is unlikely to give rise to a duty of care to the applicant of the order, and may deter any future civil negligence claims for alleged breaches of injunction orders.

Still, injunction orders should not be taken lightly. While civil liability in negligence is unlikely, it remains that third parties who knowingly assist in or permit breaches of injunction orders could be liable for contempt of court. Banks and financial institutions in receipt of such orders must carefully consider the scope of the order and have in place appropriate procedures/protocols to ensure compliance.

Read the full judgment here.

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings