Customs and Excise v. Barclays Bank plc

Factual and Procedural Background

The Plaintiff is the United Kingdom tax authority. In January 2001 the Plaintiff obtained two freezing (Mareva) injunctions—one on 26 January against Company A and one on 30 January against Company B—to restrain dissipation of VAT debts totalling more than £6 million. Each order specifically identified the relevant current account held by the companies with the Defendant bank.

The orders were fax-served on the Defendant at 12:33 pm (Company A) and 11:38 am (Company B). Approximately two hours after each service, internal “operator error” within the Defendant allowed unauthorised payments of £1,240,570 (Company A) and £1,064,289 (Company B). Subsequent judgments against the companies remain unsatisfied. The Plaintiff sued the Defendant in negligence for the sums paid away. The trial judge ruled for the Defendant; the Court of Appeal reversed; the House of Lords heard the Defendant’s appeal on an agreed preliminary issue assuming negligence but testing the existence of any duty of care.

Legal Issues Presented

1. Does a bank, once notified of a freezing injunction obtained by a third party against one of its customers, owe that third-party claimant a tortious duty of care to take reasonable steps to comply with the injunction?

Arguments of the Parties

Defendant’s Arguments

• No duty arises absent a voluntary “assumption of responsibility”; the bank’s obligation is imposed by court order, not undertaken voluntarily.
• Even applying the Caparo three-fold test (foreseeability, proximity, and fairness), policy considerations make the imposition of a duty unfair and unreasonable.
• The contempt jurisdiction already supplies adequate sanctions; imposing negligence liability would create disproportionate, indeterminate exposure.
• Recognising a duty would be inconsistent with established principles that adverse parties (or their advisors) owe no duty of care to one another during litigation.

Plaintiff’s Arguments

• The loss was plainly foreseeable and the notice of the order created sufficient proximity.
• The bank’s confirmation letters and its routine compliance infrastructure evidence an objective assumption of responsibility.
• No conflict exists between a negligence duty and the bank’s duty to the court; recognising the duty simply enforces the court’s command.
• Without civil liability the Plaintiff is left remediless because contempt requires proof of intentional flouting, not negligence.

Table of Precedents Cited

Court's Reasoning and Analysis

The House observed that three analytical tools guide economic-loss negligence: (1) assumption of responsibility, (2) the Caparo three-fold test, and (3) incremental development. It accepted that the loss was foreseeable but rejected the existence of proximity or policy grounds sufficient to create a duty.

Key points:

• No assumption of responsibility. The Defendant’s obligations were imposed involuntarily by court order; nothing was “said or done” by the bank that could amount to a voluntary undertaking toward the Plaintiff.
• Policy limb of Caparo. Imposing liability would unfairly expose an uninvolved third party to “very large” claims for mere negligence, despite already facing contempt sanctions for deliberate breaches.
• Alternative remedies. The contempt jurisdiction and the Plaintiff’s undertaking to reimburse compliance costs form a coherent remedial structure; grafting tort liability onto it would upset that balance.
• Comparative analysis. No Commonwealth jurisprudence recognises such a duty; analogous English authorities—where duties were recognised—rested on genuinely voluntary services (e.g., solicitors in White v. Jones, reference writers in Spring).
• Litigation posture. While the bank is not strictly an “adverse party,” its compelled role is sufficiently adverse that, by analogy with authorities denying duties between litigants, no negligence duty should arise.
• Incremental caution. Extending liability here would be a “radical innovation” lacking close precedent and potentially imposing duties on any person, even private individuals, notified of a freezing order.

Holding and Implications

Appeal allowed; Plaintiff’s negligence claim dismissed.

Consequences:

• The Defendant is not liable in damages for negligently permitting payments in breach of the injunctions.
• The ruling confirms that third parties notified of freezing orders owe duties only to the court (enforceable through contempt), not to the claimant, unless they voluntarily undertake such responsibility.
• The decision preserves the existing contempt-based enforcement framework and avoids imposing open-ended negligence exposure on banks and other notified parties. No new cause of action was created.