UK: no Suremime-type duty of care owed directly to customer in connection with past business review

Six months after the High Court's surprising judgment in Suremime Limited v Barclays Bank plc [2015] EWHC 2277 (QB), the recent decision in CGL Group Limited v Royal Bank of Scotland [2016] EWHC 281 (QB) will be encouraging for financial institutions concerned about liabilities arising out of FCA past business reviews.  The Court held that the Claimant’s proposed amendment to the Particulars of Claim – namely, that the Defendant bank directly owed its customers a common law duty of care in connection with the past business review mandated by the FCA (as it now is) – was not arguable. 

The express exclusion of third party rights in the bank’s agreement with the FCA was one of the most significant factors considered by the Court. This decision underlines the importance of taking great care when considering and negotiating the terms of any agreements with the FCA, as we noted in our August 2015 e-bulletin on the Suremime decision.

The Court also emphasised that to impose such a duty of care would “drive a coach and horses through a clearly defined statutory scheme”. Although not expressly stated, this must be a reference to section 138D of the Financial Services and Markets Act 2000 (“FSMA”), which provides customers who qualify as “private persons” with a private right of action against a financial institution for certain breaches of the regulatory regime. The Court in the instant case agreed with the bank that the limited circumstances in which a customer may rely upon the obligations a bank owes to a regulator as a cause of action (i.e. under section 138D FSMA) did not arise in this case. Further, the fact that a bank owes a duty to the FCA does not mean that a similar duty is automatically owed by the bank to its customer at common law (Green & Rowley v Royal Bank of Scotland plc [2013] EWCA Civ 1197). In contrast to Suremime, it was held that the proposed common law duty would therefore circumvent the existence of the statutory scheme.

To read more on this case from Rupert Lewis, Benjamin Coleman and Ceri Morgan, click here.