Hong Kong Court confirms third party banks do not owe a duty of care to holders of Mareva Injunctions

The Hong Kong court has for the first time held that a third party bank does not owe a duty of care to the holder of a Mareva injunction. Applying the reasoning of an English decision, the Court of First Instance in Grasberg Capital Asia Limited v Bank of Communications Limited concluded that it was not fair, just or reasonable to impose such a duty of care and that it was 'plain and obvious' that one did not exist.

Background

The plaintiff, Grasberg Capital Asia Limited, had obtained a Mareva injunction against Mr Chan Ying Lok Samson ("Samson") requiring him to not diminish the value of his assets in Hong Kong to less than HK$35,000,000. This injunction was served on the defendant, Bank of Communications Limited.

Samson was the beneficial owner and controller of two companies and a beneficial owner and controller of a third. Each had a bank account with the Defendant. Those bank accounts were not specifically named in the Mareva injunction.

Subsequent to the Mareva injunction being issued, a total of HK$6.5 million was withdrawn from those accounts. The plaintiff argued that the defendant ought to have known that the holders of the accounts were beneficially owned by Samson. As a result, the plaintiff alleged that the defendant failed to observe the Mareva injunction and therefore breached a duty of care it owed to the plaintiff, being specifically to ascertain all assets within the ambit of the injunction and to ensure that the terms of the injunction are fully observed.

Outcome

In the absence of any Hong Kong authority, the Court considered the 2007 decision of the House of Lords in Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181. Barclays involved very similar factual circumstances that were more favourable to imposing a duty (in that the relevant accounts were expressly named in the injunction). The House of Lords in Barclays also refused to find that a duty of care existed.

Specifically, the Court of First Instance agreed with the reasoning in Barclays that:

1. without further communication, the bank could not be said to have voluntarily assumed a duty of care by just having been served with a Mareva injunction;
2. a freezing injunction created a duty to the court only; and
3. it would not be fair, just and reasonable to impose a duty of care in such circumstances.

This led the Court of First Instance to conclude that it was plain and obvious that no duty existed.

Practical considerations

It is important to remember that a bank served with a Mareva injunction owes a duty to the court, enforceable by contempt proceedings in the event that the bank permits the defendant to breach the order. As such, they are still required to comply with the order strictly, but Grasberg (applying Barclays) confirms no duty of care is owed to the plaintiff which means that it will be very difficult for a plaintiff to have direct recourse against the bank in the event of a failure to comply. This is welcome news for the banking industry in circumstances where being served with a Mareva injunction will invariably create competing obligations towards the court and to a bank's client whose account or other assets falls within the ambit of the injunction.

With that said, Grasberg is not authority for the proposition that a bank will never owe a duty of care to the holder of a Mareva injunction. The reasoning of the court leaves it open in theory for conduct of the bank to create a duty such that they 'voluntarily assume' a duty. However, in practical terms and in light of the decision it seems unlikely that a duty would be lightly imposed.