Court of Appeal confirms no tortious duty of care owed to customers in connection with the FCA past business review

A recent Court of Appeal decision has clarified that financial institutions do not owe duties of care in tort in connection with their conduct of the past business review of interest rate hedging product sales announced by the FCA (then FSA) in 2012: CGL Group Limited & Ors v Royal Bank of Scotland plc & Ors [2017] EWCA Civ 1073. This is a point on which there had been conflicting first instance decisions. The Court of Appeal's decision was based a number of factors, including that such a duty would undermine the relevant statutory and regulatory regime.

The decision is also of interest more generally in illustrating the courts' current approach to determining the existence (or otherwise) of a tortious duty of care to protect against economic loss in particular circumstances. Rather than applying a single test, the courts will tend to consider three approaches which, the court said, usually lead to the same answer and can be used as cross-checks on each other. These are: (1) whether the defendant assumed responsibility to the claimant; (2) the threefold test from Caparo Industries plc v Dickman [1990] 2 AC 605 (ie foreseeability, proximity and whether it is "fair, just and reasonable" to impose a duty); and (3) whether the addition to existing categories of duty would be incremental rather than indefinable.

For more information see our Banking litigation e-bulletin on the decision.