United Kingdom House of Lords Decisions

HOUSE OF LORDS

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

Her Majesty's Commissioners of Customs and Excise (Respondents) v. Barclays Bank plc (Appellants)

[2006] UKHL 28

LORD BINGHAM OF CORNHILL

My Lords,

1.   The important question raised by this appeal is whether a bank, notified by a third party of a freezing injunction granted to the third party against one of the bank's customers, affecting an account held by the customer with the bank, owes a duty to the third party to take reasonable care to comply with the terms of the injunction. The question arises in these proceedings brought by the Commissioners of Customs and Excise against Barclays Bank, and has been resolved as a preliminary issue on facts assumed to be true but not proved. Colman J at first instance resolved the issue in favour of the Bank: [2004] EWHC 122 (Comm) [2004] 1 WLR 2027. The Court of Appeal (Peter Gibson and Longmore LJJ and Lindsay J) reversed his decision and ruled in favour of the Commissioners: [2004] EWCA Civ 1555, [2005] 1 WLR 2082. The Bank challenges that ruling.
2.   In January 2001 Brightstar Systems Limited and Doveblue Limited held current accounts with the Bank. Both accounts were substantially in credit, but both companies owed the Commissioners large sums of unpaid VAT. The Commissioners believed that both companies would dissipate their assets in order to defeat judgments which the Commissioners were likely to obtain. They accordingly applied for freezing injunctions against each of the companies, which were granted on 26 and 30 January 2001 respectively. The value of the assets restrained was £1,800,000 in the first case and £3,928,130 in the second. In each order a numbered account held by the company at the Bank was specified, and in the second order the branch also. The first order was served on the Bank by fax at about 12.33 p.m. on 29 January, the second (also by fax) at about 11.38 a.m. on 30 January 2001. At about 2.30 p.m. on 29 January 2001 the Bank authorised payments totalling £1,240,570 to be made out of the Brightstar account, and at about 2.0 p.m. on 30 January it permitted payments totalling £1,064,289 out of the Doveblue account. In due course the Commissioners entered judgment against Brightstar for £2,285,788.98 and against Doveblue for £3,944,095.85. Neither company paid any part of the judgment, although the Commissioners obtained and enforced garnishee orders absolute against residual sums remaining in the accounts of the companies. In these proceedings the Commissioners claim damages against the Bank in the sums paid out in breach of the respective injunctions plus interest for the appropriate periods. It is alleged (and for present purposes assumed) that the Bank was negligent to permit the payments to be made.
3.   On being notified of each injunction the Bank sent to the Commissioners a standard letter confirming that the Bank would abide by the terms of the order and notifying the Commissioners of their duty to reimburse the Bank for its costs incurred in complying with the order. Neither letter reached the Commissioners before the respective payments were made, and neither influenced the conduct of the Commissioners in any way. Had the letters reached the Commissioners before release of the funds, the judge would have attached significance to them (paras 76-81 of his judgment). But in my respectful opinion they were of no significance. The Bank was bound to comply with the order of the court irrespective of any confirmation on its part. The letters did not affect the factual or the legal position. Their purpose was to pave the way to reimbursement of the costs of compliance incurred by the Bank.

The test of tortious liability in negligence for pure financial loss

4.   The parties were agreed that the authorities disclose three tests which have been used in deciding whether a defendant sued as causing pure economic loss to a claimant owed him a duty of care in tort. The first is whether the defendant assumed responsibility for what he said and did vis-à-vis the claimant, or is to be treated by the law as having done so. The second is commonly known as the threefold test: whether loss to the claimant was a reasonably foreseeable consequence of what the defendant did or failed to do; whether the relationship between the parties was one of sufficient proximity; and whether in all the circumstances it is fair, just and reasonable to impose a duty of care on the defendant towards the claimant (what Kirby J in Perre v Apand Pty Ltd [1999] HCA 36, (1999) 198 CLR 180, para 259, succinctly labelled "policy"). Third is the incremental test, based on the observation of Brennan J in Sutherland Shire Council v Heyman (1985) 157 CLR 424, 481, approved by Lord Bridge of Harwich in Caparo Industries Plc v Dickman [1990] 2 AC 605, 618, that
"It is preferable, in my view, that the law should develop novel categories of negligence incrementally and by analogy with established categories, rather than by a massive extension of a prima facie duty of care restrained only by indefinable 'considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed'."

Mr Brindle QC for the Bank contended that the assumption of responsibility test was most appropriately applied to this case, and that if applied it showed that the Bank owed no duty of care to the Commissioners on the present facts. But if it was appropriate to apply either of the other tests the same result was achieved. Mr Sales for the Commissioners submitted that the threefold test was appropriate here, and that if applied it showed that a duty of care was owed. But if it was appropriate to apply either of the other tests they showed the same thing. In support of their competing submissions counsel made detailed reference to the leading authorities including Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465; Ministry of Housing and Local Government v Sharp [1970] 2 QB 223; Smith v Eric S Bush [1990] 1 AC 831; Caparo Industries Plc v Dickman [1990] 2 AC 605; Henderson v Merrett Syndicates Ltd [1995] 2 AC 145; White v Jones [1995] 2 AC 207; Spring v Guardian Assurance Plc [1995] 2 AC 296; Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830; and Phelps v Hillingdon London Borough Council [2001] 2 AC 619. These authorities yield many valuable insights, but they contain statements which cannot readily be reconciled. I intend no discourtesy to counsel in declining to embark on yet another exegesis of these well-known texts. I content myself at this stage with five general observations. First, there are cases in which one party can accurately be said to have assumed responsibility for what is said or done to another, the paradigm situation being a relationship having all the indicia of contract save consideration. Hedley Byrne would, but for the express disclaimer, have been such a case. White v Jones and Henderson v Merrett, although the relationship was more remote, can be seen as analogous. Thus, like Colman J (whose methodology was commended by Paul Mitchell and Charles Mitchell, "Negligence Liability for Pure Economic Loss (2005) 121 LQR 194, 199), I think it is correct to regard an assumption of responsibility as a sufficient but not a necessary condition of liability, a first test which, if answered positively, may obviate the need for further enquiry. If answered negatively, further consideration is called for.

5.   Secondly, however, it is clear that the assumption of responsibility test is to be applied objectively (Henderson v Merrett, p 181) and is not answered by consideration of what the defendant thought or intended. Thus Lord Griffiths said in Smith v Bush, p 862, that
"The phrase 'assumption of responsibility' can only have any real meaning if it is understood as referring to the circumstances in which the law will deem the maker of the statement to have assumed responsibility to the person who acts upon the advice."

Lord Oliver of Aylmerton, in Caparo v Dickman, p 637, thought "voluntary assumption of responsibility"

"a convenient phrase but it is clear that it was not intended to be a test for the existence of the duty for, on analysis, it means no more than that the act of the defendant in making the statement or tendering the advice was voluntary and that the law attributes to it an assumption of responsibility if the statement or advice is inaccurate and is acted upon. It tells us nothing about the circumstances from which such attribution arises."

In similar vein, Lord Slynn of Hadley in Phelps v Hillingdon, p 654, observed:

"It is sometimes said that there has to be an assumption of responsibility by the person concerned. That phrase can be misleading in that it can suggest that the professional person must knowingly and deliberately accept responsibility. It is, however, clear that the test is an objective one: Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 181. The phrase means simply that the law recognises that there is a duty of care. It is not so much that responsibility is assumed as that it is recognised or imposed by law."

The problem here is, as I see it, that the further this test is removed from the actions and intentions of the actual defendant, and the more notional the assumption of responsibility becomes, the less difference there is between this test and the threefold test.

6.   Thirdly, the threefold test itself provides no straightforward answer to the vexed question whether or not, in a novel situation, a party owes a duty of care. In Caparo v Dickman, p 618, Lord Bridge, having set out the ingredients of the threefold test, acknowledged as much:
"But it is implicit in the passages referred to that the concepts of proximity and fairness embodied in these additional ingredients are not susceptible of any such precise definition as would be necessary to give them utility as practical tests, but amount in effect to little more than convenient labels to attach to the features of different specific situations which, on a detailed examination of all the circumstances, the law recognises pragmatically as giving rise to a duty of care of a given scope. Whilst recognising, of course, the importance of the underlying general principles common to the whole field of negligence, I think the law has now moved in the direction of attaching greater significance to the more traditional categorisation of distinct and recognisable situations as guides to the existence, the scope and the limits of the varied duties of care which the law imposes."

Lord Roskill made the same point in the same case at p 628:

"I agree with your Lordships that it has now to be accepted that there is no simple formula or touchstone to which recourse can be had in order to provide in every case a ready answer to the questions whether, given certain facts, the law will or will not impose liability for negligence or in cases where such liability can be shown to exist, determine the extent of that liability. Phrases such as 'foreseeability', 'proximity', 'neighbourhood', 'just and reasonable', 'fairness', 'voluntary acceptance of risk', or 'voluntary assumption of responsibility' will be found used from time to time in the different cases. But, as your Lordships have said, such phrases are not precise definitions. At best they are but labels or phrases descriptive of the very different factual situations which can exist in particular cases and which must be carefully examined in each case before it can be pragmatically determined whether a duty of care exists and, if so, what is the scope and extent of that duty. If this conclusion involves a return to the traditional categorisation of cases as pointing to the existence and scope of any duty of care, as my noble and learned friend Lord Bridge of Harwich suggests, I think this is infinitely preferable to recourse to somewhat wide generalisations which leave their practical application matters of difficulty and uncertainty."

7.   Fourthly, I incline to agree with the view expressed by the Messrs Mitchell in their article cited above, p 199, that the incremental test is of little value as a test in itself, and is only helpful when used in combination with a test or principle which identifies the legally significant features of a situation. The closer the facts of the case in issue to those of a case in which a duty of care has been held to exist, the readier a court will be, on the approach of Brennan J adopted in Caparo v Dickman, to find that there has been an assumption of responsibility or that the proximity and policy conditions of the threefold test are satisfied. The converse is also true.
8.   Fifthly, it seems to me that the outcomes (or majority outcomes) of the leading cases cited above are in every or almost every instance sensible and just, irrespective of the test applied to achieve that outcome. This is not to disparage the value of and need for a test of liability in tortious negligence, which any law of tort must propound if it is not to become a morass of single instances. But it does in my opinion concentrate attention on the detailed circumstances of the particular case and the particular relationship between the parties in the context of their legal and factual situation as a whole.

Freezing injunctions

9.   The jurisdiction to grant Mareva injunctions, to give freezing injunctions their original and better known name, was developed by judicial decision from the late 1970s onwards. It was recognised in section 37(3) of the Supreme Court Act 1981, and is now governed by CPR Part 25.1(f) as an order which may be made
"(i)  restraining a party from removing from the jurisdiction assets located there; or

(ii)  restraining a party from dealing with any assets whether located within the jurisdiction or not."

A standard form of injunction (which may be modified to meet the needs of the particular case) is annexed to the Practice Direction on Interim Injunctions (25PD.10). The prescribed standard form contains a penal notice:

"IF YOU [ ] DISOBEY THIS ORDER YOU MAY BE HELD TO BE IN CONTEMPT OF COURT AND MAY BE IMPRISONED, FINED OR HAVE YOUR ASSETS SEIZED

ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS THE RESPONDENT TO BREACH THE TERMS OF THIS ORDER MAY ALSO BE HELD TO BE IN CONTEMPT OF COURT AND MAY BE IMPRISONED, FINED OR HAVE THEIR ASSETS SEIZED"

The first of these warnings is addressed to the subject of the order, the second to any party (such as a bank) who knows of it. The form provides that anyone served with or notified of the order may apply to the court to vary or discharge it on notice to the applicant's solicitor. The effect of the order as it affects parties other than the applicant and the subject of the order is again stated:

"It is a contempt of court for any person notified of this order knowingly to assist in or permit a breach of this order. Any person doing so may be imprisoned, fined or have their assets seized."

The form records an undertaking by the applicant to pay the reasonable costs of any person other than the subject of the order

"which have been incurred as a result of this order including the costs of finding out whether that person holds any of the Respondent's assets and if the court finds that this order has caused such person loss, and decides that such person should be compensated for that loss, the Applicant will comply with any order the court may make."

In the present case, the second sentence of the penal notice (addressed to notified parties) was not included, but the effect of the notice was stated as in the standard form (subject to an immaterial change of wording) and both the notice concerning variation or discharge and the Commissioners' undertaking as to costs of notified parties followed the text quoted.

10.   It is very well-established that the purpose of a freezing injunction is to restrain a defendant or prospective defendant from disposing of or dealing with assets so as to defeat, wholly or in part, a likely judgment against it. The purpose is not to give a claimant security for his claim or give him any proprietary interest in the assets restrained: Gangway Ltd v Caledonian Park Investments (Jersey) Ltd [2001] 2 Lloyd's Rep 715, para 14, per Colman J. The ownership of the assets does not change. All that changes is the right to deal with them.
11.   The court will punish a party who breaches one of its orders if the breach is sufficiently serious and the required standard of knowledge and intention is sufficiently proved. This rule applies to freezing injunctions, as the prescribed form and the notices given to the Bank in this case make clear. The leading authority on Mareva injunctions leaves no room for doubt. In Z Ltd v A-Z and AA-LL [1982] QB 558, 572, Lord Denning MR said:
"Every person who has knowledge of [the order] must do what he reasonably can to preserve the asset. He must not assist in any way in the disposal of it. Otherwise he is guilty of a contempt of court."

He repeated this point at pp 573-574 and 575. Eveleigh LJ devoted his judgment in the case wholly to the requirements of contempt in this context. That the power to punish for contempt is not a mere paper tiger is well illustrated by the judgment of Colman J in Z Bank v D1 and Others [1994] 1 Lloyd's Rep 656.

12.   There was discussion in argument whether the relationship of the Commissioners and the Bank as a notified party, was adverse or antagonistic, like that of opposing parties to litigation. The Commissioners contended that it was not. The Bank carried on banking business, and it is now a routine feature of such business that freezing injunctions are notified to it and are given effect. The substantial relief the Commissioners were seeking was against the Bank's customers, not it. The Bank answered that this analysis did not fully reflect the reality of the situation.
13.   In 1981 Robert Goff J observed that "the banks in this country have received numerous notices of [Mareva] injunctions which have been granted" (Searose Ltd v Seatrain UK Ltd [1981] 1 WLR 894, 895), and there is no reason to think that the pace has slackened since. Thus receiving notice of such injunctions is, literally, an everyday event. And the Commissioners are right that they were not claiming substantive relief against the Bank as a claimant seeks it against a defendant. But I think the Bank is right to say that that is not the whole story, for three main reasons. First, the effect of notification of the order is to override the ordinary contractual duties which govern the relationship of banker and customer. This is not something of which a bank can complain or of which the Bank does complain. A bank's relationship with its customers is subject to the law of the land, which provides for the grant of freezing injunctions. But the effect is nonetheless to oblige the bank to act in a way which but for the order would be a gross breach of contract. Such a situation must necessarily be very unwelcome to any bank which values its relationship with its customer. Secondly, the order exposes the bank to the risk that its employees may be imprisoned, the bank fined and its assets sequestrated. Of course, this is only a risk if the bank breaches the order in a sufficiently culpable way. But it is not a risk which exists independently of the order, and not a risk to which anyone would wish to be exposed. Thirdly, I think that the notice informing a bank of its right to set aside or discharge the order, addressed to both the customer and to the notified party, recognises its potentially prejudicial nature. If an order were neutral in its effect on the notified party, there would be no need to inform it of its right to vary or discharge it. While, therefore, the relationship of the Commissioners and the Bank was not, on notification of the order, that of hostile litigating parties, I think the Bank is right to describe the relationship as adverse.
14.   I do not think that the notion of assumption of responsibility, even on an objective approach, can aptly be applied to the situation which arose between the Commissioners and the Bank on notification to it of the orders. Of course it was bound by law to comply. But it had no choice. It did not assume any responsibility towards the Commissioners as the giver of references in Hedley Byrne (but for the disclaimer) and Spring, the valuers in Smith v Bush, the solicitors in White v Jones and the agents in Henderson v Merrett may plausibly be said to have done towards the recipient or subject of the references, the purchasers, the beneficiaries and the Lloyd's Names. Save for the notification of the order (and treating as irrelevant the letters written by the Bank: see para 3 above) nothing crossed the line between the Commissioners and the Bank (see Williams v Natural Life Health Foods Ltd, p 835). Nor do I think that the Commissioners can be said in any meaningful sense to have relied on the Bank. The Commissioners, having obtained their orders and notified them to the Bank, were no doubt confident that the Bank would act promptly and effectively to comply. But reliance in the law is usually taken to mean that if A had not relied on B he would have acted differently. Here the Commissioners could not have acted differently, since they had availed themselves of the only remedy which the law provided. Mr Sales suggested, although only as a fall-back argument, that the relationship between the Commissioners and the Bank was, in Lord Shaw's words adopted by Lord Devlin in Hedley Byrne (p 529), "equivalent to contract". But the essence of any contract is voluntariness, and the Bank's position was wholly involuntary.
15.   It is common ground that the foreseeability element of the threefold test is satisfied here. The Bank obviously appreciated that, since risk of dissipation has to be shown to obtain a freezing injunction, the Commissioners were liable to suffer loss if the injunction were not given effect. It was not contended otherwise. The concept of proximity in the context of pure economic loss is notoriously elusive. But it seems to me that the parties were proximate only in the sense that one served a court order on the other and that other appreciated the risk of loss to the first party if it was not obeyed. I think it is the third, policy, ingredient of the threefold test which must be determinative.
16.   In urging that a duty of care should be imposed on the Bank the Commissioners submitted that the orders were made by the court and notified to the Bank to protect their interests; that recognition of a duty would in practical terms impose no new or burdensome obligation on the Bank; that the rule of public policy which has first claim on the loyalty of the law is that wrongs should be remedied (X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 663, 749); that, since there are no facts here which would found a claim for effective redress in contempt, the Commissioners will otherwise be left without any remedy, that a duty of care to the Commissioners would not be inconsistent with the Bank's duty to the court; and that there would, in such a case, be no indeterminacy as to those to whom the duty would be owed. These are formidable arguments and I am not surprised that the Court of Appeal accepted them. But I have difficulty in doing so, for six main and closely associated reasons.
17.   First, as already shown, the Mareva jurisdiction has developed as one exercised by court order enforceable only by the court's power to punish those who break its orders. The documentation issued by the court does not hint at the existence of any other remedy. This regime makes perfect sense on the assumption that the only duty owed by a notified party is to the court.
18.   Secondly, it cannot be suggested that the customer owes a duty to the party which obtains an order, since they are opposing parties in litigation and no duty is owed by a litigating party to its opponent: Digital Equipment Corporation v Darkcrest Ltd [1984] Ch 512; Business Computers International Ltd v Registrar of Companies [1988] Ch 229; Al-Kandari v J R Brown & Co [1988] QB 665. It would be a strange and anomalous outcome if an action in negligence lay against a notified party who allowed the horse to escape from the stable but not against the owner who rode it out.
19.   It is clear, thirdly, that a duty of care in tort may co-exist with a similar duty in contract or a statutory duty, and I would accept in principle that a tortious duty of care to the Commissioners could co-exist with a duty of compliance owed to the court. But I know of no instance in which a non-consensual court order, without more, has been held to give rise to a duty of care owed to the party obtaining the order, and one would have to ask whether a similar duty is owed by the subject of a search order, or a Norwich Pharmacal order, or a witness summons, in any case where economic loss is a foreseeable consequence of breach. It would seem that the Commissioners' argument involves a radical innovation.
20.   Fourthly, it is a notable feature of this appeal that the Commissioners adduce no comparative jurisprudence to support their argument. The House was referred to no material from any Commonwealth jurisdiction to show recognition of a duty such as that for which the Commissioners contend. One learned author has ventilated the suggestion that a third party with knowledge of a Mareva order may owe a duty of care to the party in whose favour the order is made (see Mark Hoyle, The Mareva Injunction and Related Orders, 3rd edn (1997), pp 138-139), but the same author recognises (ibid, p 131) that there is no right to sue a contemnor for the contempt alone and acknowledges that there is no civil right to damages and no power for the court to award compensation to the other party for the contemnor's actions, citing Re Hudson, Hudson v Hudson [1966] Ch 209 and Chapman v Honig [1963] 2 QB 502.
21.   Fifthly, the cases relied on by the Commissioners as providing the closest analogy with the present case do not in my opinion, on examination, reveal any real similarity. The first case relied on is Al-Kandari v J R Brown & Co [1988] QB 665. A defendant husband had on a previous occasion kidnapped two children whose custody was the subject of proceedings before the English court. The plaintiff mother was anxious that the same thing should not happen again. To reassure her the husband deposited his passport (on which the children were entered) with his solicitor, who negligently allowed him to regain possession of the passport and again remove the children. The wife sued her husband's solicitor in negligence, and it was held at first instance ([1987] QB 514) and on appeal that the solicitor owed the wife a duty of care. The judge (p 523) found that the solicitor had given the wife an implied undertaking. The Court of Appeal held that the solicitor had accepted responsibilities towards the wife (pp 672, 675) and had acted as an independent custodian of the passport subject to the joint directions of both parties as well as the court (pp 676, 675). There was in that case a very clear and entirely voluntary assumption of responsibility by the solicitor towards the wife.
22.   The facts of the second case relied on, Dean v Allin & Watts [2001] EWCA Civ 758, [2001] 2 Lloyd's Rep 249, are a little more complicated. An unsophisticated lender running the business of a car mechanic wanted to lend money to borrowers on the security of real property owned by an associate of the borrowers. The borrowers instructed the defendant solicitors to give effect to this transaction. The solicitors knew that the lender had no solicitor of his own, and there was a meeting between the solicitors and the lender. The solicitors' instructions from the borrower were to provide the lender with effective security, which was for his benefit and was fundamental to the transaction (para 40 of the judgment of Lightman J giving the leading judgment in the Court of Appeal). There was, as the solicitors at all times knew, an identity of interest between borrower and lender. In this situation there was, again, a voluntary assumption of responsibility by the solicitors towards the lender and the trial judge's decision that no duty arose was, I respectfully think, rightly reversed. But I do not think this authority bears any close analogy with the present case.
23.   Lastly, it seems to me in the final analysis unjust and unreasonable that the Bank should, on being notified of an order which it had no opportunity to resist, become exposed to a liability which was in this case for a few million pounds only, but might in another case be for very much more. For this exposure it had not been in any way rewarded, its only protection being the Commissioners' undertaking to make good (if ordered to do so) any loss which the order might cause it, protection scarcely consistent with a duty of care owed to the Commissioners but in any event valueless in a situation such as this.
24.   I would allow the appeal and dismiss the Commissioners' claim with costs in the House and below.

LORD HOFFMANN

My Lords,

25.   The question in this case is whether a bank served with a freezing order (ci-devant Mareva injunction) upon a customer's account owes a duty to the claimant to take reasonable care to ensure that no payments are made out of the account. The Court of Appeal held that it did but in my opinion it does not.
26.   The claimants are the Commissioners for Revenue and Customs, who, in one of their former incarnations as the Commissioners of Customs and Excise, were owed a total of over £6m of VAT by two companies called Brightstar Systems Ltd ("Brightstar") and Doveblue Ltd ("Doveblue"). How these debts were allowed to accumulate is unknown, but the Commissioners, apprehensive that the companies might remove their assets from the jurisdiction, applied for freezing orders against Brightstar on 26 January 2001 and against Doveblue on 30 January 2001. In both cases the orders restrained the companies from dealing with their assets and in particular with specified accounts with Barclays Bank.
27.   The Brightstar order was served on Barclays by fax at 12:33 pm on 29 January. At 2:30 pm Brightstar made an application by fax to transfer £1,240,570 out of the account and although Barclays had taken routine steps to freeze the account, by an "operator error" the payment was authorised and made. The Doveblue order was served on Barclays by fax at 11:38 am on 30 January but a payment of £1,064,289 out of the account was authorised at 2:00 pm, before the arrangements to freeze the account had taken effect. In both cases, the money paid out of the accounts has not been recovered and the judgments subsequently obtained by the Commissioners remain unsatisfied.
28.   On these facts, alleged by the Commissioners and assumed to be true, a preliminary issue in the nature of a demurrer was tried by Colman J. Barclays submitted that the action was bound to fail because they owed the Commissioners no duty of care. The judge agreed but the Court of Appeal reversed his decision and allowed the action to proceed. Barclays appeal to your Lordships' House.
29.   A freezing order is an injunction made against the putative debtor to which the bank is not a party. But the existence of the injunction may have an effect upon third parties in two ways. First, it is a contempt of court to aid and abet a breach of an injunction by the party against whom the order was made. Secondly, it is an independent contempt of court to do an act which deliberately interferes with the course of justice by frustrating the purpose for which the order was made: see Attorney General v Times Newspapers Ltd [1992] 1 AC 191 and Attorney General v Punch Ltd [2003] 1 AC 1046 for the general principle and Z Ltd v A-Z and AA-LL [1982] QB 558, 578 for an explanation by Eveleigh LJ of its application to Mareva injunctions. The purpose of serving the bank with the order is therefore to give the bank notice that payment out of the account will frustrate its purpose and, if done deliberately, will be a contempt of court. However, as Lord Hope of Craighead said in Attorney General v Punch Ltd [2003] 1 AC 1046, for the third party to be liable for contempt
"it has…to be shown there was an intention on his part to interfere with or impede the administration of justice. This is an essential ingredient, and it has to be established to the criminal standard of proof."

30.   In the present case, there is no suggestion that anyone at Barclays intended deliberately to flout the order. The allegation is that they failed to take reasonable care to ensure that money was not paid out of the account.
31.   How does one determine whether a duty of care is owed? In cases of pure economic loss such as this, it is not sufficient that the bank ought reasonably to have foreseen that unless they had proper systems in place and their employees took reasonable care to give effect to any freezing orders which came along, the beneficiaries of those orders might suffer loss. In the case of personal or physical injury, reasonable foreseeability of harm is usually enough, in accordance with the principle in Donoghue v Stevenson [1932] AC 562, to generate a duty of care. In the case of economic loss, something more is needed.
32.   The Court of Appeal applied what it called the "three-fold test" proposed by Lord Bridge of Harwich in Caparo Industries plc v Dickman [1990] 2 AC 605, 617-618:
"In addition to foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of 'proximity' or 'neighbourhood' and that the situation should be one in which the court considers it fair, just and reasonable that the court should impose a duty of a given scope upon the one party for the benefit of the other."

33.   Longmore LJ held that this test was satisfied. Foreseeability was conceded; service of the order created proximity (even though the bank "may not be particularly willing to have a relationship to the commissioners": see paragraph 30) and it was "eminently fair, reasonable and just" that a bank should take care not to allow a defendant to flout the order. The order placed a burden on the bank but provided for the bank to be paid its reasonable charges for compliance. Peter Gibson LJ agreed: "practical justice requires the recognition of such a duty" (paragraph 63). So did Lindsay J.
34.   Mr Brindle QC, who appeared for the bank, said that this was the wrong approach. One should ask whether the bank had assumed responsibility for monitoring the account. As authority for applying this test, he relied upon Lord Goff of Chieveley's analysis in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 180-181. In this case, he said, the bank never assumed responsibility. If anything, it had responsibility thrust upon it.
35.   There is a tendency, which has been remarked upon by many judges, for phrases like "proximate", "fair, just and reasonable" and "assumption of responsibility" to be used as slogans rather than practical guides to whether a duty should exist or not. These phrases are often illuminating but discrimination is needed to identify the factual situations in which they provide useful guidance. For example, in a case in which A provides information to C which he knows will be relied upon by D, it is useful to ask whether A assumed responsibility to D: Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465: Smith v Eric S Bush [1990] 1 AC 831. Likewise, in a case in which A provides information on behalf of B to C for the purpose of being relied upon by C, it is useful to ask whether A assumed responsibility to C for the information or was only discharging his duty to B: Williams v Natural Life Health Foods Ltd [1998] AC 830. Or in a case in which A provided information to B for the purpose of enabling him to make one kind of decision, it may be useful to ask whether he assumed responsibility for its use for a different kind of decision: Caparo Industries plc v Dickman [1990] 2 AC 605. In these cases in which the loss has been caused by the claimant's reliance on information provided by the defendant, it is critical to decide whether the defendant (rather than someone else) assumed responsibility for the accuracy of the information to the claimant (rather than to someone else) or for its use by the claimant for one purpose (rather than another). The answer does not depend upon what the defendant intended but, as in the case of contractual liability, upon what would reasonably be inferred from his conduct against the background of all the circumstances of the case. The purpose of the inquiry is to establish whether there was, in relation to the loss in question, the necessary relationship (or "proximity") between the parties and, as Lord Goff of Chieveley pointed out in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 181, the existence of that relationship and the foreseeability of economic loss will make it unnecessary to undertake any further inquiry into whether it would be fair, just and reasonable to impose liability. In truth, the case is one in which, but for the alleged absence of the necessary relationship, there would be no dispute that a duty to take care existed and the relationship is what makes it fair, just and reasonable to impose the duty.
36.   It is equally true to say that a sufficient relationship will be held to exist when it is fair, just and reasonable to do so. Because the question of whether a defendant has assumed responsibility is a legal inference to be drawn from his conduct against the background of all the circumstances of the case, it is by no means a simple question of fact. Questions of fairness and policy will enter into the decision and it may be more useful to try to identify these questions than simply to bandy terms like "assumption of responsibility" and "fair, just and reasonable." In Morgan Crucible Co plc v Hill Samuel & Co Ltd [1991] Ch 295, 300-303 I tried to identify some of these considerations in order to encourage the evolution of lower-level principles which could be more useful than the high abstractions commonly used in such debates.
37.   In Henderson v Merrett Syndicates Ltd itself, the House used the concept of assumption of responsibility in a situation which did not involve reliance upon information but where, once again, the issue was whether the necessary relationship between claimant and defendant existed. The issues in that case were whether the managing agents of a Lloyd's syndicate owed a duty of care in respect of their underwriting to Names with whom they had no contractual relationship and whether they owed a separate duty in tort to Names with whom they did have a contractual relationship. In fact, the arguments in Henderson's case were a re-run of Donoghue v Stevenson in a claim for economic loss. In that case, as it seems to me, the use of the concept of assumption of responsibility, while perfectly legitimate, was less illuminating. The question was not whether the defendant had assumed responsibility for the accuracy of a particular statement but a much more general responsibility for the consequences of their conduct of the underwriting. To say that the managing agents assumed a responsibility to the Names to take care not to accept unreasonable risks is little different from saying that a manufacturer of ginger beer assumes a responsibility to consumers to take care to keep snails out of his bottles.
38.   Even in this context, however, the notion of assumption of responsibility serves a different, weaker, but nevertheless useful purpose in drawing attention to the fact that a duty of care is ordinarily generated by something which the defendant has decided to do: giving a reference, supplying a report, managing a syndicate, making ginger beer. It does not much matter why he decided to do it; it may be that he thought it would be profitable or it may be that he was providing a service pursuant to some statutory duty, as in Phelps v Hillingdon London Borough Council [2001] 2 AC 619 and Ministry of Housing and Local Government v Sharp [1970] 2 QB 223. In the present case, however, the duty is not alleged to arise from anything which the bank was doing. It is true that the bank was carrying on the business of banking, handling money on behalf of its customers. But that is not alleged to have been either necessary or sufficient to generate the duty in this case. Not necessary, because if such a duty is created by notice of the freezing order, it must apply to anyone who has possession or control of the defendant's assets: the garage holding his car, the stockbroker nominee company holding his shares, his grandmother holding a drawer-full of his bank notes. On being given notice of the order, they would all be under an obligation to take reasonable care to ensure that the defendant did not get his hands on the assets. Not sufficient, because there is no suggestion that, apart from the freezing order, the bank in carrying on its ordinary business would be under any duty to protect the position of the Commissioners.
39.   There is, in my opinion, a compelling analogy with the general principle that, for the reasons which I discussed in Stovin v Wise [1996] AC 923, 943-944, the law of negligence does not impose liability for mere omissions. It is true that the complaint is that the bank did something: it paid away the money. But the payment is alleged to be the breach of the duty and not the conduct which generated the duty. The duty was generated ab extra, by service of the order. The question of whether the order can have generated a duty of care is comparable with the question of whether a statutory duty can generate a common law duty of care. The answer is that it cannot: see Gorringe v Calderdale Metropolitan Borough Council [2004] 1 WLR 1057. The statute either creates a statutory duty or it does not. (That is not to say, as I have already mentioned, that conduct undertaken pursuant to a statutory duty cannot generate a duty of care in the same way as the same conduct undertaken voluntarily.) But you cannot derive a common law duty of care directly from a statutory duty. Likewise, as it seems to me, you cannot derive one from an order of court. The order carries its own remedies and its reach does not extend any further.
40.   Colman J relied upon the fact that the advisers of one party to litigation owe no duty to the other party and for this purpose treated a party's bank as being in much the same position as his lawyers. For my part I prefer to place no particular weight upon this factor. The freezing order suspended the bank's duty to its client and compliance would therefore have created no conflict of interest. The Court of Appeal relied upon the fact that the order provided for payment to the bank of its reasonable costs incurred as a result of this order. I do not regard this as a material factor either. It is one thing to have to do some paper work and another to be put on risk for millions of pounds.
41.   I would therefore allow the appeal and restore the judgment of Colman J.

LORD RODGER OF EARLSFERRY

My Lords,

42.   The presumed facts giving rise to this appeal are of the simplest. In January 2001 the Commissioners of Customs and Excise intended to raise proceedings for payment of very large sums which they alleged that two companies, Brightstar Systems Ltd and Doveblue Ltd, owed them in respect of Value Added Tax. On 26 January the Commissioners obtained a freezing order (familiarly known as a Mareva injunction) against Brightstar. The order was in the usual terms, prohibiting Brightstar from removing from England and Wales or in any way disposing of or dealing with or diminishing any of its assets in England and Wales, including, in particular, any money in account number 70845302 at Barclays Bank plc ("Barclays"). The limit was £1,800,000 (though it was subsequently increased). The Commissioners undertook to pay any reasonable costs which the bank incurred as a result of the order. At about 12.33 pm on 29 January the Commissioners notified Barclays of the order. Despite this, at about 2.30 pm on the same day, due to an error, Barclays authorised payments totalling £1,240,570 to be made out of the Brightstar account. In their proceedings against Brightstar the Commissioners obtained judgment in default for £2,285,788.98, but Brightstar have paid nothing. In the present action the Commissioners seek damages for the loss which they claim to have suffered as a result of Barclays' negligence in authorising the payments after being notified of the order.
43.   On 30 January 2001 the Commissioners obtained a similar freezing order against Doveblue with a limit of £3,928,130. It referred in particular to money in account numbered 10902284 at Barclays Bank, Hounslow. The Commissioners notified Barclays of the order at 11.38 am on 30 January but, again due to an error, at about 2 pm Barclays allowed £1,064,289 to be paid out of the Doveblue account. In due course the Commissioners obtained judgment in default against Doveblue for £3,944,095.85, none of which has been paid by Doveblue. The Commissioners again seek damages for the loss which they claim they suffered as a result of Barclays' negligence.
44.   The preliminary issue in the case is whether, on these assumed facts, Barclays owed a duty of care to the Commissioners. Colman J held that they did not, but the Court of Appeal held that they did.
45.   The assumed facts do not make any reference to the time when the freezing orders were actually served on Brightstar and Doveblue. More particularly, they do not spell out whether the orders were served on the companies after Barclays were notified. It would, however, be usual for the bank to be notified first, in order to minimise the risk that, once made aware of the orders, the companies would try to dispose of the funds in their accounts. I consider the position on that basis.
46.   In opening the appeal on behalf of Barclays, Mr Brindle QC focused on the fact that at the relevant time both Brightstar and Doveblue were customers of Barclays. The Commissioners had obtained freezing orders against Barclays' customers and soon they would serve those orders on the bank's customers and commence adversarial proceedings to recover the VAT from them. The Commissioners were therefore the adversaries of Barclays' customers and in that fight Barclays were, in effect, on their customers' side. As the companies' bankers, Barclays were in a roughly similar position to the companies' solicitors or counsel and, like them, they did not owe a duty of care to those on the other side.
47.   I do not find the analogy compelling. When parties embark on contested court proceedings, even under the rules of procedure in force today, they are entitled to treat the other side as opponents whom they wish to vanquish. So they do not owe them a duty of care: Business Computers International Ltd v Registrar of Companies [1988] Ch 229. Equally, when the parties employ solicitors and counsel to act for them in the proceedings, in general, those representatives owe no duty of care to the other side: Al-Kandari v J R Brown & Co [1988] QB 665, 675F-H per Bingham LJ. But, as the narrative of events shows, Barclays did not represent their customers in their dispute with the Commissioners. In reality, they were no more on the companies' side in that dispute than the companies' butchers, bakers or candlestick-makers.
48.   Mr Brindle next argued that no-one owed a duty of care to avoid causing financial harm to another unless he had voluntarily undertaken responsibility towards that other person. Here Barclays had not undertaken any responsibility to the Commissioners for the way in which they would freeze the companies' accounts. They had just been required to act due to the notification of the order. Mr Sales argued in reply that assumption of responsibility was not the only criterion for holding that someone owed a duty of care. It was just one factor to be taken into account. The correct approach was to adopt the so-called "threefold test" and to ask whether the loss was reasonably foreseeable, whether the parties were in a relationship of proximity and whether it would be fair, just and reasonable that the defendant should owe a duty of care to the claimant. It is common ground that in this case the loss was reasonably foreseeable.
49.   There is no doubt that some passages in speeches in your Lordships' House provide support for the view that voluntary assumption of responsibility is the touchstone of liability for pure economic loss. In the first and most famous case, Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, 528-529, Lord Devlin held that the categories of special relationships which might give rise to a duty of care in word as well as in deed are not limited to contractual relationships or to relationships of fiduciary duty,
"but include also relationships which in the words of Lord Shaw in Nocton v Lord Ashburton are 'equivalent to contract' that is, where there is an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract."

He then continued in what was to become a famous passage, at p 529:

"I have had the advantage of reading all the opinions prepared by your Lordships and of studying the terms which your Lordships have framed by way of definition of the sort of relationship which gives rise to a responsibility towards those who act upon information or advice and so creates a duty of care towards them. I do not understand any of your Lordships to hold that it is a responsibility imposed by law upon certain types of persons or in certain sorts of situations. It is a responsibility that is voluntarily accepted or undertaken, either generally where a general relationship, such as that of solicitor and client or banker and customer, is created, or specifically in relation to a particular transaction."

Much of Lord Devlin's concern was to avoid the risk that people would be held liable for remarks made in a social or other informal context. Hence the emphasis on liability arising because the defendant himself assumes responsibility for what he says. None of the other members of the House analysed the basis of liability in quite this way, but nevertheless, to begin with at least, Lord Devlin's analysis was to prove influential. It fell out of favour, however, as a result of the criticisms of Lord Griffiths ("unlikely to be a helpful or realistic test in most cases") and Lord Jauncey in Smith v Eric S Bush [1990] 1 AC 831, 864-865, 870C-F, and of Lord Roskill and Lord Oliver of Aylmerton in Caparo Industries plc v Dickman [1990] 2 AC 605, 628F-G, 637E-G. But, in a trio of cases a few years later its fortunes revived when it found a powerful supporter in Lord Goff of Chieveley.

50.   First, at the beginning of July 1994, in Spring v Guardian Assurance plc [1995] 2 AC 296, where counsel for the plaintiff had not put his case on the footing of Hedley Byrne and the other members of the majority were proposing to allow the appeal on a broader basis, Lord Goff set out the reasoning, based on a Hedley Byrne assumption of responsibility, which he preferred. Lord Lowry agreed with his interpretation, at p 325C. Next, towards the end of that same month, in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 178B Lord Goff returned to the point and identified voluntary assumption of responsibility as "the governing principle". He sought to defuse the criticisms of Lord Griffiths and others by saying, at p 181A, that, "at least in cases such as the present", in which there is no problem in keeping the number of persons owed a duty of care within reasonable bounds, "there seems to be no reason why recourse should not be had to the concept…." Where a case fell within the Hedley Byrne principle, "there should be no need to embark upon any further enquiry whether it is 'fair, just and reasonable'": 181D. Finally, in February 1995, in White v Jones [1995] 2 AC 207, where the plaintiff was an intended beneficiary under a will which the deceased's solicitors had negligently failed to prepare before his death, Lord Goff acknowledged, at p 268A-B, that the Hedley Byrne principle could not "in the absence of special circumstances, give rise on ordinary principles to an assumption of responsibility by the testator's solicitor towards an intended beneficiary." Nevertheless, in his opinion, the House
"should in cases such as these extend to the intended beneficiary a remedy under the Hedley Byrne principle by holding that the assumption of responsibility by the solicitor towards his client should be held in law to extend to the intended beneficiary who (as the solicitor can reasonably foresee) may, as a result of the solicitor's negligence, be deprived of his intended legacy in circumstances in which neither the testator nor his estate will have a remedy against the solicitor."

51.   Part of the function of appeal courts is to try to assist judges and practitioners by boiling down a mass of case law and distilling some shorter statement of the applicable law. The temptation to try to identify some compact underlying rule which can then be applied to solve all future cases is obvious. Mr Brindle submitted that in this area the House had identified such a rule in the need to find that the defendant had voluntarily assumed responsibility. But the unhappy experience with the rule so elegantly formulated by Lord Wilberforce in Anns v Merton London Borough Council [1978] AC 728, 751G-752A, suggests that appellate judges should follow the philosopher's advice to "Seek simplicity, and distrust it."
52.   Therefore it is not surprising that there are cases in the books - notably Ministry of Housing and Local Government v Sharp [1970] 2 QB 223, approved by Lord Slynn of Hadley in Spring v Guardian Assurance plc [1995] 2 AC 296, 332F-G - which do not readily yield to analysis in terms of a voluntary assumption of responsibility, but where liability has none the less been held to exist. I see no reason to treat these cases as exceptions to some over-arching rule that there must be a voluntary assumption of responsibility before the law recognises a duty of care. Such a rule would inevitably lead to the concept of voluntary assumption of responsibility being stretched beyond its natural limits - which would in the long run undermine the very real value of the concept as a criterion of liability in the many cases where it is an appropriate guide. In any event, as the words which I have quoted from his speech in Merrett Syndicates make clear, Lord Goff himself recognised that, although it may be decisive in many situations, the presence or absence of a voluntary assumption of responsibility does not necessarily provide the answer in all cases. Indeed in Hedley Byrne Lord Reid saw it as only one possible basis, the other being where the defendant has "accepted a relationship with the inquirer which requires him to exercise such care as the circumstances require": [1964] AC 465, 486. So I would reject Mr Brindle's submission on this point.
53.   In the absence of any single touchstone, the House finds itself in the familiar position, envisaged by Lord Bridge of Harwich in Caparo Industries plc v Dickman [1990] 2 AC 605, 618B-C, where a court faced with a novel situation must apply the threefold test, while recognising that
"the concepts of proximity and fairness embodied in these additional ingredients are not susceptible of any such precise definition as would be necessary to give them utility as practical tests, but amount in effect to little more than convenient labels to attach to the features of different specific situations which, on a detailed examination of all the circumstances, the law recognises pragmatically as giving rise to a duty of care of a given scope."

54.   For his part, Mr Sales was, of course, anxious to portray Barclays as being in a relationship with the Commissioners which would give rise to a duty of care on the part of the bank if the threefold test were applied. The Commissioners notified Barclays of the freezing order. This alerted them to the existence of the proceedings in which the Commissioners were claiming large amounts of VAT from the companies. They knew that the Commissioners had felt it necessary to protect their position by obtaining a freezing order. Barclays could easily foresee that, if they did not duly freeze the accounts and the companies transferred the funds, the Commissioners might well be unable to enforce any judgment against them. So Barclays would realise that the Commissioners were relying on them to freeze the accounts. In these circumstances Barclays owed a duty of care to the Commissioners.
55.   Essentially, Mr Sales was simply describing the consequences which he said flowed from the notification of the freezing order. This can be seen by supposing that, before applying for any order, the Commissioners had approached Barclays, had told them about their claims for VAT, had explained the risk that the companies might defeat those claims by transferring the funds in their accounts and had asked for Barclays' help. Knowing all that, the bank would have been under no obligation to help the Commissioners. For one thing, you do not come under a duty in tort to prevent someone causing me financial harm just because I tell you what is likely to happen to me if you do not take steps to prevent it. In addition, of course, Barclays would have been contractually bound to transfer the funds if their customers so instructed and even if they knew that this was likely to cause the Commissioners financial harm. So they could have done nothing to help, even if they had wanted to.
56.   The position changed when Barclays were notified of the freezing order. In Z Ltd v A-Z and AA-LL [1982] QB 558, 578D-E Eveleigh LJ stated the consequences which ensue when there are acts or omissions which are contrary to the terms of an injunction:
"(1) The person against whom the order is made will be liable for contempt of court if he acts in breach of the order after having notice of it. (2) A third party will also be liable if he knowingly assists in the breach, that is to say if knowing the terms of the injunction he wilfully assists the person to whom it was directed to disobey it. This will be so whether or not the person enjoined has had notice of the injunction."

Eveleigh LJ went on, at p 578G-H, to deal with the argument that the liability of a third party arose because he was treated as aiding and abetting the defendant (ie as an accessory) and that, since the defendant could himself not be in breach unless he had notice, it followed that there was no offence to which the third party could be an accessory:

"In my opinion this argument misunderstands the true nature of the liability of the third party. He is liable for contempt of court committed by himself. It is true that his conduct may very often be seen as possessing a dual character of contempt of court by himself and aiding and abetting the contempt by another, but the conduct will always amount to contempt of court by himself. It will be conduct which knowingly interferes with the administration of justice by causing the order of the court to be thwarted."

    For Lord Denning MR, [1982] 1 QB 558, 574D-E, the juristic principle was:

"As soon as the bank is given notice of the Mareva injunction, it must freeze the defendant's bank account. It must not allow any drawings to be made on it, neither by cheques drawn before the injunction nor by those drawn after it. The reason is because, if it allowed any such drawings, it would be obstructing the course of justice - as prescribed by the court which granted the injunction - and it would be guilty of a contempt of court."

57.   In Attorney General v Times Newspapers Ltd [1992] 1 AC 191, the House applied Eveleigh LJ's analysis of the position of a third party. Lord Oliver of Aylmerton noted, at p 222C-D, that
"Once the conclusion is reached that the fact that the alleged contemnor is not party to or personally bound by the court's order then, given the intention on his part to interfere with or obstruct the course of justice, the sole remaining question is whether what he has done has that effect in the particular circumstances of the case."

According to the speeches in Attorney General v Leveller Magazine Ltd [1979] AC 440, the gravamen of the offence of contempt of court would be that the contemnor's act "frustrates, thwarts, or subverts the purpose of the court's order and thereby interferes with the due administration of justice in the particular action." Lord Oliver added, [1992] 1 AC 191, 223A-B:

"'Purpose', in this context, refers, of course, not to the litigant's purpose in obtaining the order or in fighting the action but to the purpose which, in seeking to administer justice between the parties in the particular litigation of which it had become seized, the court was intending to fulfil."

58.   In Attorney General v Punch Ltd [2003] 1 AC 1046, 1056, Lord Nicholls of Birkenhead quoted this passage with approval and went on, at para 43, to explain the position of a third party in this way:
"When proceedings come before a court the plaintiff typically asserts that he has a legal right which has been or is about to be infringed by the defendant. The claim having come before the court, it is then for the court, not the parties to the proceedings or third parties, to determine the way justice is best administered in the proceedings. It is for the court to decide whether the plaintiff's asserted right needs and should have any, and if so, what interim protection. If the court orders that pending the trial the defendant shall not do certain acts the court thereby determines the manner in which, in this respect, the proceedings shall be conducted. This is the court's determination on what interim protection is needed and is appropriate. Third parties are required to respect this determination, as expressed in the court's order. The reason why the court grants interim protection is to protect the plaintiff's asserted right. But the manner in which this protection is afforded depends upon the terms of the interlocutory injunction. The purpose the court seeks to achieve by granting the interlocutory injunction is that, pending a decision by the court on the claims in the proceedings, the restrained acts shall not be done. Third parties are in contempt of court if they wilfully interfere with the administration of justice by thwarting the achievement of this purpose in those proceedings."

59.   As these authorities show, when the court granted the Commissioners' application for a freezing order, its purpose was to protect the Commissioners by preventing the companies from parting with their assets pending the conclusion of the Commissioners' action for the payment of the VAT. Unlike, say, an arrestment on the dependence in Scots law, the freezing orders were directed at the two companies, not at the bank. But, if the bank had deliberately ignored the orders and set about assisting the companies to transfer their assets, that would have thwarted the court's purpose in granting the orders and the bank would have been in contempt of court, even if the companies themselves had still been unaware of the relevant order. So Barclays had to freeze the companies' assets, not out of any consideration for the Commissioners but because to do otherwise would thwart the purpose of the court and obstruct the course of justice.
60.   The courts make quite extensive use of freezing orders. So, in practice, banks like Barclays can be expected to have in place a system for freezing accounts when they are notified of an order - and to take care when they have to operate the system. But, of itself, this does not mean that if they fail to take care they are liable to the applicant who obtained the order. For instance, as I pointed out in Brooks v Commissioner of Police of the Metropolis [2005] 1 WLR 1495, 1511-1512, para 38, a prosecutor is under a professional and ethical duty to take care in preparing and presenting the case against a defendant whom he is prosecuting. If he fails to take the necessary care, any conviction may be unsafe and he himself may be subject to some disciplinary sanction. Nevertheless, the prosecutor does not assume a responsibility to the defendant to act carefully and owes him no duty of care in the law of tort: Elguzouli-Daf v Commissioner of Police of the Metropolis [1995] QB 335, 349A-B per Steyn LJ.
61.   In most cases the third party will be a bank or similar institution. But sometimes a private individual who happens, for example, to be looking after the addressee's car will be startled to receive notification of a freezing order. This puts him in essentially the same position as a bank which is notified of an order. Usually, he will do his best to respect the order and to hold on to the car. Should the law add to his burdens, however, by exposing him to an uninsured liability in damages if he fails to take the care which is ultimately considered to be reasonable and the addressee makes off with the car?
62.   Punishment for contempt of court is the remedy which the law provides for the addressee's failure to comply with an injunction such as a freezing order. Liability is strict and so he may be guilty of contempt even where he did not deliberately flout the order, the degree of his fault being relevant in determining the appropriate punishment: Attorney General v Times Newspapers Ltd [1992] 1 AC 191, 217G-H per Lord Oliver of Aylmerton.
63.   By contrast, a third party who is notified of an injunction is guilty of contempt of court only if he knowingly takes a step which will frustrate the court's purpose in granting the order. So a bank will be in contempt only if it knowingly fails to freeze a customer's account and pays away sums in the account after being notified of an order. Mr Sales argued that this was not a sufficient sanction: the law of tort could usefully supplement the law of contempt by imposing on the bank a duty of care in favour of the party who obtained the freezing order. I would reject that argument.
64.   The policy of the law is that a third party, such as a bank, which is notified of a freezing order, must not knowingly undermine the court's purpose in granting the order. If this is all that the court which makes the order can demand, it would be inconsistent to hold that, by reason of the selfsame notification, the applicant could simultaneously demand a higher standard of performance from the bank - and then claim damages for the bank's failure to achieve it. Notification imposes a duty on the bank to respect the order of the court; it does not of itself generate a duty of care to the applicant. And here the Commissioners can point to nothing more than the order and Barclays' negligent failure to respond to it.
65.   Mr Sales submitted that, as the bank must know, the applicant relies on it to comply with the order - and this means that the third party must take reasonable care for the applicant's interests. In my view, that is to stretch the concept of reliance too far. If a party wishes to freeze his opponent's bank account, he cannot do so without the intervention of the court. Having obtained a freezing order and notified the bank, the applicant can expect that any responsible bank will respect the order. But he does not rely on the bank doing so. Rather, like anyone else who obtains a court order, he relies on the court being able to enforce its orders. So the applicant relies on the court ensuring that the bank does not flout its order and punishing the bank for contempt if it does. That is, after all, the assistance which the law provides to someone who shows that his opponent's assets should be frozen. In any such proceedings the applicant and the bank are very much at arm's length, even though the applicant has to reimburse the bank's costs. There is nothing which could be regarded as a voluntary assumption of responsibility by the bank for the way in which it would go about freezing the companies' accounts. Similarly, there is nothing which involves the bank in entering into any kind of relationship with the applicant that requires it to exercise such care as the circumstances require. Indeed the bank and the applicant are about as far from being in a relationship "equivalent to contract" as they could be. The bank has to act, but merely because the court order compels it to do so - ultimately on pain of punishment. It gets its reasonable costs, but makes no profit out of performing its duty. Moreover, its duty to respect the order and to act accordingly does not arise out of any relationship with the applicant. If anything, it arises out of the bank's relationship with its customers under which it holds funds that it may be instructed to transfer. Clearly, this relationship - which may well be damaged by the bank having to freeze the funds - cannot give rise to a duty of care to the applicant.
66.   Having regard to all these circumstances, in my view, not only is there not the necessary proximity between the applicant and a third party, such as a bank, who is notified of a freezing order, but it would not be fair, just and reasonable to hold that the third party owes a duty of care to the applicant.
67.   For these reasons I would hold that in this case Barclays did not owe a duty of care to the Commissioners. I would accordingly allow the appeal and dismiss the claim.
LORD WALKER OF GESTINGTHORPE

My Lords,

68.   I have had the great advantage of reading in draft the opinions of all your Lordships. Not without some hesitation, I agree with their conclusion that this appeal should be allowed. I will explain briefly what are the points on which I have no hesitation in concurring in my Lords' views, and what are the points on which I have found it more difficult to concur.
69.   Your Lordships are, I think, largely at one as to what I might call the basic approach to the problem. The development of the tort of negligence since the seminal case of Donoghue v Stevenson [1932] AC 562 has not been one of steady advance along a broad front. It has been a much more confused series of engagements with salients and beachheads, and retreats as well as advances. It has sometimes been only long after the event that it has been possible to assess the true significance of some clash of arms. That may be the case with the decision of this House in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 564, as has been suggested in an important article, criticising what she calls the "pockets of case law" approach, by Professor Jane Stapleton (Duty of Care and Economic Loss: a Wider Agenda (1991) 107 LQR 249, especially at pp259-263). The whole article, although published fifteen years ago (that is, soon after the revision or displacement of Anns v Merton London Borough Council [1978] AC 728) contains much that is still very relevant.
70.   The complicating factors are not limited to the distinction between pure economic loss and personal injury or physical damage to property. Other factors are the interface with breach of statutory duty and the position of public authorities, especially local authorities in discharging their statutory functions in relation to social services, education and highways; special rules relating to defective premises, product liability and marine transport; the distinction (elusive though it sometimes is) between acts and omissions; and the recognition of the need for particular caution in imposing duties of care in tort (other than lawyers' duties to their own clients) in the context of hostile litigation.
71.   Arguably the last fifteen years have seen some modest progress in the direction recommended by Professor Stapleton. The increasingly clear recognition that the three-fold test (first stated by Lord Bridge of Harwich in Caparo Industries plc v Dickman [1990] 2 AC 605, 617-618) does not provide an easy answer to all our problems, but only a set of fairly blunt tools, is to my mind progress of a sort. I respectfully agree with the observation of Kirby J. in Perre v Apand Pty Ltd (1999) 198 CLR 180, 284:
"As against the approach which I favour, it has been said that the three identified elements are mere 'labels'. So indeed they are. . . . Labels are commonly used by lawyers. They help steer the mind through the task in hand."

    (It would be an unnecessary distraction to go into the more recent jurisprudence in the High Court of Australia, noted by Christian Witting, The Three-Stage Test Abandoned in Australia—or Not? (2002) 118 LQR 214.)

72.   This House had indeed, in Caparo itself, recognised both that the elements of the three-fold test are labels, and that their usefulness is limited: see the observations of Lord Bridge [1990] 2 AC 605 at p 618 B-D and Lord Roskill at p628 C-E, both quoted in para 6 of the opinion of my noble and learned friend Lord Bingham of Cornhill.
73.   I would add a footnote in relation to the notion of "voluntary assumption of responsibility." So far as the modern law is concerned, this expression seems to be traceable mainly to the speeches of Lord Reid and Lord Devlin in Hedley Byrne [1964] AC 465 at p486 ("held to have accepted some responsibility") and p529 ("a voluntary undertaking to assume responsibility"). Earlier in his speech Lord Devlin had referred (at p526) to early authority going back as far as Coggs v Bernard (1703) 2 Ld Raym 909, the case of the broken cask of brandy, in which the motion in arrest of judgment had relied on the fact (at p 912) that the defendant "is neither laid to be a common porter, nor that he is to have any reward for his labour." This quotation reflects the fact that there are (at any rate for a lawyer) two threads of meaning in the word "voluntary": without compulsion and without remuneration. A common carrier would have been under an obligation to undertake the task of moving the brandy cask, and would have been remunerated. The old cases show liability being imposed despite the defendant's conduct having been (in one or both senses) voluntary. As the law has developed (and in the field of pure economic loss) liability is imposed because of the voluntary assumption of responsibility. But in the modern context the word "voluntary" is being used, it seems to me, with the connotation of "conscious", "considered" or "deliberate". That appears, for instance, in White v Jones [1995] 2 AC 207, both in the speech of Lord Browne-Wilkinson at p274 and in the dissenting speech of Lord Mustill at pp286-287. That is particularly important in considering whether the defendant has undertaken responsibility for economic loss towards anyone other than the person or persons with whom he is in an obviously proximate relationship. In such cases the voluntary assumption of responsibility towards others, judged objectively, may provide the necessary proximity.
74.   In this case the appellant bank has not, in any meaningful sense, made a voluntary assumption of responsibility. It has by the freezing order had responsibility thrust upon it. But in any case it is not proximity that is the respondents' problem in this case. The duty of care for which the respondents contended successfully in the Court of Appeal, and which they seek to maintain in this House, is not a duty leading to "liability in an indeterminate amount for an indeterminate time to an indeterminate class" (in the very well-known words of Cardozo CJ in Ultramares Corporation v Touche (1931) 174 NE 441, 444). It would be a liability in a known maximum sum (in respect of a precisely identified account), for a brief period, to a single known body corporate. The respondents' problem is whether it is fair, just and reasonable to impose on a bank a novel and substantial liability (on top of its potential liability for contempt of court) if it carelessly fails to comply with a freezing order.
75.   That is the point on which I have found this appeal more difficult than the rest of your Lordships. If this issue affected only banks, I would be slow to conclude that there could never be liability for carelessly failing to comply with a freezing order. Banks are already subject to strict regulation and potential sanctions in connection with money-laundering and similar activities. They are enjoined to know their customers. They become liable for breach of fiduciary duty if they shut their eyes to dishonest dealings by their customers. VAT (and PAYE) collected on behalf of HM Revenue and Customs by trading companies is not trust money, but banks cannot be unaware that VAT (and PAYE) collected in this way is often not properly accounted for, through fraud or mismanagement. There is a public interest in banks responding with particular care, promptness and vigilance to any freezing order obtained by HM Revenue and Customs.
76.   I am also rather disinclined to put much weight on the litigation context. A bank whose customer is a party to litigation may occasionally be joined as a party to the litigation, either for the purposes of a freezing order or in the pursuit of a proprietary remedy. But that is unusual, and it did not happen in this case. The bank's duty to its customer was overridden and suspended by the freezing order. Its position was a neutral position.
77.   However, Mr Sales, appearing for the Commissioners, realistically acknowledged that if in these circumstances a duty of care is to be imposed on a bank, it must also be imposed on any other person affected by notice of a freezing order. In many cases that would produce unfair, unjust and unreasonable results. I too would allow this appeal and make the order which Lord Bingham proposes.

LORD MANCE

My Lords,

78.   The short question on this appeal is whether a bank served with notice of a non-proprietary freezing order (in yesterday's terms a Mareva injunction) owes a duty of care to the claimants who obtained the order against defendants in civil proceedings. The bank is Barclays Bank plc, the claimants are the Commissioners of Customs and Excise and the defendants are two companies, Brightstar Systems Limited ("Brightstar") and Doveblue Limited ("Doveblue"), who have allegedly defaulted in payment of large sums of VAT. The order against Brightstar was made on 26 January 2001 in the sum of £1,800,000 and notice of it was served on the bank by fax at about 12.33 pm on 29 January 2001. The order against Doveblue was made on 30 January 2001 in the sum of £3,928,130 and notice of it was served on the bank by fax at about 11.38 am on that day. The effect of each order was to suspend the bank's mandate in respect of any payment instructions from its customers which would reduce such customers' assets within the jurisdiction to below those sums: cf Z Ltd v A-Z and AA-LL [1982] QB 558, per Lord Denning MR (at p 574C) and Kerr LJ (at p 586D).
79.   In the case of each order about two hours after the bank received such notice, the relevant defendant used the bank's Faxpay system to give direct payment instructions to the bank's payment centre, as distinct from the branch where the relevant accounts (No 70845302 in the case of Brightstar and No 10902284 in the case of Doveblue) were held. The instructions were for payments totalling £1,240,570 (Brightstar) and £1,064,289 (Doveblue). The instructions were on their face in breach of the freezing orders, but the bank in each case met them. For the purposes of the present preliminary issues, it is assumed that the bank failed to act with reasonable competence. The Commissioners, unable to recover the full outstanding VAT in any other way, claim damages from the bank in the sums thus paid out.
80.   The orders were in standard Commercial Court form. They prohibited the defendant companies from removing, disposing of, dealing with or diminishing the value of any of their assets in England and Wales up to the values frozen and included "the following assets in particular", specifying the above-numbered accounts with the bank. They provided
"Variation of [sic] discharge of this Order

The Defendant (or anyone notified of this Order) may apply to the Court at any time to vary or discharge this Order (or so much of it as affects that person), but anyone wishing to do so must first inform the Claimants' legal representatives.

Parties other than the Claimants and Defendant

1.  Effect of this Order:-

It is a Contempt of Court for any person notified of this Order knowingly to assist in or permit a breach of this Order. Any person doing so may be sent to prison, fined or have his assets seized.

2.  Set off by Banks:-

This injunction does not prevent any bank from exercising any right of set off it may have in respect of any facility which it gave to the Defendant before it was notified of this Order.

3.  Withdrawals by the Defendant:-

No bank need enquire as to the application or proposed application of any money withdrawn by the Defendant if the withdrawal appears to be permitted by this Order."

    The orders further recited that the Judge had "accepted the undertakings set out in Schedule B at the end of this Order", which provided:

"Schedule B

Undertakings given to the Court by the Claimants:-

…..

(7) The Claimants will pay the reasonable costs of anyone other than the Defendant which have been incurred as a result of this Order including the costs of ascertaining whether that person holds any of the Defendant's assets and if the Court later finds that this Order has caused such person loss, and decides that such person should be compensated for that loss, the Claimants will comply with any Order the Court may make."

81.   The covering sheets to the faxes notifying of the orders to the bank show that the relevant officer acting for the Commissioners knew and had already spoken to the bank's legal adviser to whom such notices were directed. The first notice relating to Brightstar requested that the attached freezing order be "put into effect with immediate effect", while the second relating to Doveblue said "Many thanks for your assistance in this matter". However, neither in the pleadings nor in argument has anything been sought to be made of the informal preceding conversations. What is relied upon, as a fall-back and in relation to the Brightstar claim only, is the bank's response by letter dated 29 January 2001 written by its Retail Financial Services - Legal department. This said inter alia "We confirm that the Bank will abide by the terms of the Order …", drew attention to the costs which it would incur so doing and to its entitlement under the order to reimbursement and set out on the reverse an explanation of their nature and concluded:
"Almost all of the time expended on service of an Order is by staff of Managerial status and has been carefully costed. Our minimum costs for dealing with this Freezing Order are in excess of £150, but we are prepared to round our costs down to this amount".

    It is clear that this letter was not received by the Commissioners before the Bank's error in making the payment out of Brightstar's account, so that the Commissioners cannot have relied on it. But it may have been sent before the error and, if so, Mr Philip Sales for the Commissioners suggests that the Bank might by the time of the error be regarded as having assumed responsibility for the task and/or towards the Commissioners.

82.   The conceptual basis on which courts decide whether a duty of care exists in particular circumstances has been repeatedly examined. Three broad approaches have been suggested, involving consideration (a) whether there has been an assumption of responsibility, (b) whether a three-fold test of foreseeability, proximity and "fairness, justice and reasonableness" has been satisfied or (c) whether the alleged duty would be "incremental" to previous cases. Mr Michael Brindle QC for the bank argues that in cases of economic loss the only relevant question is whether there has been an "assumption of responsibility". Mr Philip Sales for the Commissioners submits that the primary approach should be through the three-fold test of foreseeability, proximity and "fairness, justice and reasonableness" and that assumption of responsibility and incrementalism are no more than potentially relevant factors under that test.
83.   All three approaches may often (though not inevitably) lead to the same result. Assumption of responsibility is on any view a core area of liability for economic loss. All three approaches operate at a high level of abstraction. What matters is how and by reference to what lower-level factors they are interpreted in practice, see eg Caparo Industries plc v Dickman [1990] 2 AC 605, per Lord Bridge of Harwich (at pp 617H-618D) and Lord Oliver of Aylmerton (at p 633B-D).
84.   As to incrementalism, I note that the House's support for this approach in Caparo was given with reference to a passage in Brennan J's judgment in Sutherland Shire Council v Heyman (1985) 157 CLR 424, 481, where he was rejecting the House's approach in Anns v Merton London Borough Council [1978] AC 728, from which the House itself resiled five months after Caparo in Murphy v Brentwood District Council [1991] 1 AC 398. Brennan J said of Anns:
"I am unable to accept that approach. It is preferable, in my view, that the law should develop novel categories of negligence incrementally and by analogy with established categories, rather than by a massive extension of a prima facie duty of care restrained only by indefinable 'considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed".

    Incrementalism was therefore viewed as a corollary of the rejection, now uncontroversial, of any generalised liability for negligently caused economic loss, rather than as necessarily inconsistent with the development of novel categories of negligence. Having said that, caution and analogical reasoning are generally valuable accompaniments to judicial activity, and this is particularly true in the present area.

85.   The concept of assumption of responsibility derives from the fountain of most modern economic claims, Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465. The concept appears most clearly in the speech of Lord Devlin, who (at pp 528-529) founded himself on the proposition that a duty of care might arise in relationships
"which are ….. 'equivalent to contract', that is, where there is an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract".

    Lord Devlin went on to emphasise (at p.529) that, in the light of the bank's disclaimer in that case, the claim failed because:

"Responsibility can attach only to the single act, that is, the giving of the reference, and only if the doing of that act implied a voluntary undertaking to assume responsibility".

Where there has been an assumption of responsibility in the core sense considered in Hedley Byrne, questions of "foreseeability", "proximity" and "fairness, justice and reasonableness" tend to answer themselves (cf Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, per Lord Goff of Chieveley at p 181C).

86.   In Hedley Byrne the concept was one of assumption of responsibility by the defendant towards the claimant. Lord Devlin's contractual analogy also indicates, and Mr Brindle accepts, that whether there has been an assumption of responsibility is to be assessed objectively: see Henderson v Merrett Syndicates Ltd, per Lord Goff (at p 181B-C), with whose speech all other members of the House agreed. Similarly, an assumption of responsibility may arise from the provision not merely of information or advice, but also of services: see per Lord Goff (at p 180E-F).
87.   However, it has been said on a number of occasions that it is artificial or unhelpful to insist on fitting all claims for breach of a duty of care to avoid economic loss within the conception of assumption of responsibility, and there are several cases involving economic loss where the three-fold test and incrementalism have been preferred.
88.   Thus in Smith v Eric S Bush; Harris v Wyre Forest District Council [1990] 1 AC 831 valuers engaged by the mortgagee council were held to owe a duty of care to house buyers, despite an express disclaimer stating that their report was "intended solely for the benefit of" that council and advising the house buyers to obtain independent advice. Apart from the Unfair Contract Terms Act 1977 the disclaimer would have negatived any duty of care, in the same way as the disclaimer in Hedley Byrne. But, since the disclaimer was unreasonable and so void under the 1977 Act, the valuer was held to owe a duty of care to the buyers. Lord Templeman (at p 847C-D) explained this on the basis that the valuer had "assumed responsibility" to both mortgagee and purchaser, knowing that the latter has paid the fee and would probably rely on the report. But Lord Griffiths (at p 862B-E) thought that assumption of responsibility was not "a helpful or realistic test for liability", and explained its use in Hedley Byrne by reference to the disclaimer which there existed. He went on to say that
"The phrase 'assumption of responsibility' can only have any real meaning if it is understood as referring to the circumstances in which the law will deem the maker of the statement to have assumed responsibility to the person who acts upon the advice".

    Lord Jauncey of Tullichettle took a similar view at p 871C-F. Lord Keith of Kinkel and Lord Brandon of Oakbrook (at p 840D-F) agreed with both Lord Templeman and Lord Griffiths.

89.   In Caparo Industries plc v Dickman [1990] 2 AC 605, Lord Bridge of Harwich (at p 623C-D) found it unnecessary in the context of that appeal to address any difference between an approach based on assumption of responsibility and the three-fold test. But Lord Roskill (at p 628F-G) echoed Lord Griffiths' words in Smith v Eric S Bush; Harris v Wyre Forest District Council and Lord Oliver of Aylmerton (at p 637E-G) said of "the voluntary assumption of responsibility" that
"This is a convenient phrase but it is clear that it was not intended to be a test for the existence of the duty for, on analysis, it means no more than that the act of the defendant in making the statement or tendering the advice was voluntary and that the law attributes to it an assumption of responsibility if the statement or advice is inaccurate and is acted upon. It tells us nothing about the circumstances from which such attribution arises."

    Earlier in his speech (at p 633B-D), Lord Oliver had also expressed doubt about the value of the three-fold test, saying that:

"… although the cases in which the courts have imposed or withheld liability are capable of an approximate categorisation, one looks in vain for some common denominator by which the existence of the essential relationship can be tested. Indeed it is difficult to resist a conclusion that what have been treated as three separate requirements are, at least in most cases, in fact merely facets of the same thing, for in some cases the degree of foreseeability is such that it is from that alone that the requisite proximity can be deduced, whilst in others the absence of that essential relationship can most rationally be attributed simply to the court's view that it would not be fair and reasonable to hold the defendant responsible. 'Proximity' is, no doubt, a convenient expression so long as it is realised that it is no more than a label which embraces not a definable concept but merely a description of circumstances from which, pragmatically, the courts conclude that a duty of care exists."

    Lord Jauncey took as his approach the three-fold test (p 655A-G). The House also expressed its support for Brennan J's preference in Sutherland Shire Council v Heyman 157 CLR 424, 481 for development of novel categories of negligence incrementally.

90.   In Spring v Guardian Assurance plc [1995] 2 AC 296, the issue was whether a company giving a reference owed a duty of care to the subject of the reference, its former employee, who by virtue of the content of the reference had not been appointed to the new post which he was seeking elsewhere. While Lord Goff would have decided in favour of such a duty on the ground of assumption of responsibility, all three other members of the majority proceeded (as Lord Goff recognised at p 316F), on a broader basis, applying the three-fold test of foreseeability, proximity and fairness, justice and reasonableness: see per Lord Lowry (at p 325E-H), Lord Slynn of Hadley (at pp 333C-E, 334H and 336F) and Lord Woolf (at p 342B).
91.   In White v Jones [1995] 2 AC 207 the general approach was revisited. Lord Goff (at p 257A) referred to assumption of responsibility as the test which "as a general rule" determined whether there could be liability for purely financial loss, but he recognised that the testator's solicitor could not be said actually to have assumed responsibility towards a disappointed beneficiary (pp 262B-C and 268A-B). It was only because there would otherwise be a lacuna in the law leading to injustice that he concluded that the House
"should in cases such as these extend to the intended beneficiary a remedy under the Hedley Byrne principle by holding that the assumption of responsibility by the solicitor towards his client should be held in law to extend to the intended beneficiary who (as the solicitor can reasonably foresee) may, as a result of the solicitor's negligence, be deprived of his intended legacy in circumstances in which neither the testator nor his estate will have a remedy against the solicitor".

92.   Lord Browne-Wilkinson (at pp 273G-274G) addressed the doubts expressed by Lord Griffiths in Smith v Bush and Lord Roskill in Caparo Industries plc v Dickman by explaining assumption of responsibility as "assumption of responsibility for the task not the assumption of legal responsibility". He said:
"If the responsibility for the task is assumed by the defendant he thereby creates a special relationship between himself and the plaintiff in relation to which the law (not the defendant) attaches a duty to carry out carefully the task so assumed."

    On this basis he explained Smith v Bush and Caparo as cases where there had been "the conscious assumption of responsibility for the task" (p 274B), and said that, although the categories of cases of special relationship were not closed, the only two hitherto identified were

"(1) where there was fiduciary relationship and (2) where the defendant has voluntarily answered a question or tenders skilled advice or services in circumstances where he knows or ought to know that an identified plaintiff will rely on his answers or advice. In both these categories the special relationship is created by the defendant voluntarily assuming to act in the matter by involving himself in the plaintiff's affairs or by choosing to speak."

    He recognised that neither of these categories covered the circumstances in White v Jones (p 275C). But he considered a duty of care in White v Jones to be justified because "the law in this area has not ossified", because Lord Devlin in Hedley Byrne had himself envisaged that there might be other sets of circumstances in which it would be appropriate to find a special relationship giving rise to a duty of care, and because the case fell within Lord Bridge's statement in Caparo that novel categories of negligence could be developed "incrementally and by analogy with established categories". A duty owed by the negligent solicitor to the disappointed beneficiary was closely analogous with existing categories of special relationship (p 275F).

93.   This review of authority confirms that there is no single common denominator, even in cases of economic loss, by which liability may be determined. In my view the three-fold test of foreseeability, proximity and fairness, justice and reasonableness provides a convenient general framework although it operates at a high level of abstraction. The concept of assumption of responsibility is particularly useful in the two core categories of case identified by Lord Browne-Wilkinson in White v Jones (at p 274F-G), when it may effectively subsume all aspects of the three-fold approach. But if all that is meant by voluntary assumption of responsibility is the voluntary assumption of responsibility for a task, rather than of liability towards the defendant, then questions of foreseeability, proximity and fairness, reasonableness and justice may become very relevant. In White v Jones itself there was no doubt that the solicitor had voluntarily undertaken responsibility for a task, but it was the very fact that he had done so for the testator, not the disappointed beneficiaries, that gave rise to the stark division of opinion in the House. Incrementalism operates as an important cross-check on any other approach.
94.   The present cannot be regarded as a case of assumption of responsibility. The involuntary nature of the bank's involvement with the Commissioners makes it impossible to regard the situation as one "akin to contract"; it is also difficult in any meaningful sense to speak of the bank as having voluntarily assumed responsibility even for the task in relation to which it was allegedly negligent, let alone responsibility towards the Commissioners for the task. In a very general sense any bank, indeed anyone carrying on any activity during the course of which they might have cause to hold the monies or possessions of another, might be said to accept the risk that a third party might obtain a freezing order in respect of such monies or possessions. But that is to assign to the concept of voluntary assumption of responsibility so wide a meaning as to deprive it of effective utility. Further, I do not consider that it can make any difference to the above analysis in the case of Brightstar if the bank's letter of 29 January 2001 was posted before the bank's error. The letter was itself written simply to reflect and acknowledge the legal obligation which the freezing order imposed on the bank. To analyse the situation (as Lord Denning MR did in Z Ltd v A-Z and AA-LL [1982] QB 558, 575A-D) in terms of a request to freeze the account in consideration of payment of the relevant expenses is in my opinion artificial.
95.   Mr Brindle thus submits that no duty of care on the bank can be recognised because the bank did not voluntarily undertake responsibility even for the task which it is now alleged negligently to have executed. But Mr Sales can point to cases where a duty of care has been recognised even though the defendant cannot realistically be said to have voluntarily undertaken the relevant task. Instances may be found in Ministry of Housing and Local Government v Sharp [1970] 2 QB 223, Spring v Guardian Assurance plc and Phelps v Hillingdon London Borough Council [2001] 2 AC 619. Mr Brindle questions the correctness of the first of these decisions, but submits that none of them points towards the recognition of a duty on the present facts. First, it is convenient to summarise their effect.
96.   In Ministry of Housing and Local Government v Sharp Mr Sharp was the local land registrar charged by statute with keeping the local registry, and where requested searching it and issuing a certificate setting forth the result. A clerk was seconded by Hemel Hempstead Rural District Council to assist Mr Sharp with this work. The clerk negligently issued an inaccurate certificate to a prospective purchaser of land, omitting any reference to a claim to reimbursement of compensation which the Ministry had against the seller. The effect was to extinguish the right which the Ministry would otherwise have had to pursue its claim against the purchaser. It was conceded that, if the clerk was liable in negligence to the Ministry, then the council was vicariously liable for its clerk. The Court of Appeal held that the clerk was so liable. Lord Denning MR (at p 268F-G) did not agree that a duty of care could only arise when there was a voluntary assumption of responsibility. Salmon LJ (at p 279D-F) said
"It has been argued …. that since the council did not voluntarily make the search or prepare the certificate for their clerk's signature they did not voluntarily assume responsibility for the accuracy of the certificate and accordingly owed no duty to the Minister. I do not accept that, in all cases, it necessarily depends upon a voluntary assumption of responsibility."

    He added that he was anyway far from satisfied that the council did not voluntarily assume responsibility in circumstances where they had chosen to discharge "this somewhat pedestrian task" through their clerk, so that their registrar "might be left free to carry out other far more difficult and important functions on their behalf". Cross LJ (at p 291B) saw

"no sufficient reason why in an appropriate case the liability should not extend to cases in which the defendant is obliged to make the statement which proves to be false"

97.   In Spring v Guardian Assurance plc the company acting as referee was obliged to give a reference (which the company considering whether to engage its subject was also obliged to seek). The obligation arose under the rules of the relevant self-regulatory body, Lautro (the Life Assurance and Unit Trust Regulatory Organisation), set up under the Financial Services Act 1986. No member of the House saw such obligations as an obstacle to the recognition of a duty of care (see especially per Lord Goff of Chieveley at p 321D-F and Lord Lowry at p 327A-B). The main focus was on whether the existence of a potential defence of qualified privilege in any action for defamation was a bar to the recognition of a duty of care, which the House also held was not the case.
98.   In Phelps v Hillingdon London Borough Council the House was concerned with claims arising in the statutory context of education authorities operating to a considerable extent under the Education Acts. The primary issue was whether the authorities' employees responsible for diagnosing special needs could owe a duty of care to those pupils affected by their diagnoses or failures to diagnose or treat properly. It was not suggested that the statutory duties themselves gave rise to any claim for breach of statutory duty, and the authorities argued that their employees' only duty of care was owed to the authorities. The House held that duties of care existed, even though the failures complained of took place in the course of purported fulfilment of the authorities' statutory duties, and of the employees' duties in that regard to the authorities. Further, Lord Slynn of Hadley did not accept that an authority could never owe a direct duty to pupils affected by its own (as opposed to one of its employees') failures to take care in the exercise of its powers relating to children with special needs (p 658E), while Lord Clyde (at p 676C) was "certainly not prepared to deny the possibility that such a duty may exist". Although there were allegations of damage amounting to physical loss in the cases before the House, the House did not draw any clear distinction between physical and economic loss and Lord Clyde (at p 670C) expressly said that "The loss claimed may be purely of an economic character".
99.   Before considering further the relevance of these cases to the present, it is convenient to look more closely at factors which may assist to determine whether or not a duty of care should be recognised. Starting with the broad framework of the three-fold test, no issue arises regarding foreseeability. The rationale of a non-proprietary freezing order is the risk of dissipation of assets, so the loss to the Commissioners if the order was breached by the defendants or not implemented by the bank is exactly what is foreseen and foreseeable. Proximity is a vaguer notion, which may take in aspects which can also be considered under the head of fairness, justice and reasonableness. In legal, financial and practical terms, the freezing orders once notified to the bank created a most proximate relationship between the Commissioners and the bank. The orders were specifically directed to Brightstar's and Doveblue's accounts, the Commissioners gave direct notice of them to the bank, and the Commissioners were obviously likely to be heavily dependent on the bank's observance of such orders if they were to hope to satisfy any judgments they might obtain against Brightstar and Doveblue.
100.   The key question therefore is whether it is therefore fair, just and reasonable to recognise a duty? Here, in particular, it is necessary to descend to a level of greater particularity. What are the factors which can be identified as relevant? Foremost among those which have militated against the recognition of a duty of care in respect of economic loss in the past has been the fear of the indeterminacy of any resulting liability. This arises both when economic loss is liable to have what the respondents (citing Jane Stapleton in Duty of Care and Economic Loss: A Wider Agenda (1991) 107 LQR 249, 255) call a "ripple" effect, creating a chain or network of potential claimants and when it is likely to give rise to individual claims in indeterminate amounts. But neither of those aspects of the "floodgates" objection has any weight in circumstances such as the present. The freezing orders define both the potential claimants and the maximum amounts of any claim (although situations are conceivable in which it could take a third party given notice of such an order a little time to ascertain what assets belonging to the claimant he was actually holding). The fact that a bank served with a freezing order has, prior to notice of its making, no idea which of its customers may attract such an order seems to me an irrelevance. The bank's duty only arises and is only to comply once it has notice of the order. In practice, of course a reputable and well-organised bank will have machinery in place to meet all the contingencies and requirements which may be expected commonly to arise in banking life. But that does not militate for or against recognition of any duty of care which it would otherwise be appropriate to recognise.
101.   A second potentially relevant factor is the availability of adequate alternative protection for the Commissioners. Here the position is again not unfavourable for the Commissioners' case that a duty of care should be recognised. The bank, once notified of the freezing orders was informed by paragraph 1 under the heading "Effect of this Order" that it was liable to contempt proceedings, if it knowingly assisted in or permitted a breach of their terms. The bank was obliged to do its best to implement the order, and no reputable bank could or should do anything but take the notification of a freezing order extremely seriously. But contempt requires proof to a standard commensurate with the seriousness of the offence, and the sanctions available to the court are not directed primarily at compensation, but at the imposition of a penalty. It is true that, with sensible ingenuity, a sanction can sometimes be tailored in such a way as to encourage the restoration of an asset which has been improperly released from a freezing order or perhaps even compensation: see e.g. the order made by Colman J in Z Bank v D1 and Others [1994] 1 Lloyd's Rep 657, 668. But a civil remedy for breach of a duty of care would be a much more satisfactory and complete protection than potential contempt proceedings for a claimant like the Commissioners.
102.   A third factor is the availability of insurance. There is no obvious likelihood that the Commissioners could have obtained insurance against the risk of negligence by the bank. In contrast, one would, as Mr Brindle accepts, expect any exposure of the bank under any duty of care to be covered by a banker's blanket policy, the terms of which are typically of extreme width. If the recognition of a duty of care involves any risk which the bank's insurers have not yet taken into account, any additional premium could either be a basis for increasing the conventional sum (in 2001 £150) which the bank charges those obtaining freezing orders against it, or be factored more generally into the bank's profit and interest margins. However third parties other than banks may be notified of a freezing order, e.g. individuals or businesses holding a defendant's assets or monies. It is not so obvious that they will have or could obtain insurance to cover the risk of negligent release to the defendant of such assets or monies. A distinction might, possibly, be advanced between third parties like banks whose business it is to look after monies and who could be expected to have procedures and insurance in place to meet the requirements and cover the risks of a freezing order and others of whom this would or could not necessarily be expected. But this would, I think, prove a difficult distinction both to justify in principle and to draw and apply.
103.   A fourth factor to be considered is whether the suggested duty of care to the claimants would be inconsistent with the bank's or the defendants' duty to the court. Clearly it would not. It would complement and if anything reinforce performance of that duty, as Colman J recognised in paragraph 63 in his judgment: [2004] 1 WLR 2027, 2052.
104.   Fifthly, the suggested duty of care would be equally consistent with the bank's duty to the defendants as its customers, bearing in mind that each freezing order revoked the bank's mandate to make payments pursuant to the relevant defendant's instructions to the extent necessary to ensure compliance with its terms.
105.   Sixthly (and associated with the previous two points), the nature of a freezing order means that a duty could without difficulty be recognised, although it would amount to a duty to take care to avoid a disposition which would itself involve an intentional contempt of court by the bank's customer.
106.   A seventh factor which weighed heavily and proved decisive with Colman J was that the bank was in his view in a similar position to an adverse party or an adverse party's legal representative in civil proceedings. An adverse party owes no duty of care in the commencement of proceedings: cf Business Computers International Ltd v Registrar of Companies [1988] Ch 229, where a petitioner had negligently caused the plaintiff to be put into liquidation by serving a petition for the plaintiff's winding up at the wrong address. This decision was approved in Al-Kandari v J R Brown & Co [1988] QB 665, where Bingham LJ (as he was) went on to say:
"In the ordinary course of adversarial litigation a solicitor does not owe a duty of care to his client's adversary"

107.   Starting from this point, Mr Brindle pointed out that a solicitor might well hold client money which might be caught by a freezing order of which he was given notice, and submitted that, if such a solicitor could not owe a duty of care to the claimant, no more could or should the bank in the present case. But that submission assumes what it has to prove - it assimilates the role of a defendant's solicitor to whom a freezing order is notified with his adversarial role on behalf of his client. In some (albeit rare) circumstances one party's solicitor may at the same time occupy a separate, non-partisan role giving rise to a duty of care to the other party. The decision in Al-Kandari demonstrates this. The solicitors there agreed to hold the defendant's passport to the order of the court. As Lord Donaldson of Lymington MR said (at p 672D):
"In voluntarily agreeing to hold the passport to the order of the court, the solicitors had stepped outside their role as solicitors for their client and accepted responsibilities towards both their client and the plaintiff and the children."

    Bingham LJ (as my Lord then was) said (at p 675E);

"If the client intends to confer a benefit on a third party, the solicitor may owe a duty to the third party to take reasonable care to see that effect is given to the client's intentions."

    He went on (at 676D-E):

"In so holding the passport the [solicitors] were not acting as solicitors and agents of the husband, their client, but as independent custodians subject to the directions of the court and the joint directions of the parties."

    The first passage quoted from Bingham LJ's judgment refers to circumstances like those in White v Jones. In Dean v Allin & Watts [2001] 2 Lloyd's Rep 249, on which Mr Sales relied, the Court of Appeal took the view that such circumstances existed in the context of a property transaction where one party's solicitor was instructed and endeavouring to put security in place to enable a transaction to proceed in both parties' interests.

108.   Mr Brindle points out that third parties such as banks may not only be affected by notification of freezing orders, but may themselves actually be joined as co-defendants or sued in separate proceedings for relief (usually by way of disclosure, but in appropriate circumstances also by way of freezing order) which is essentially ancillary to a freezing order against the main defendant, the bank's customer: see eg A v C (Note) [1981] QB 956, 961, TSB Private Bank International SA v Chabra [1992] 1 WLR 231 and Mercantile Group (Europe) AG v Aiyela [1994] QB 366. (They may also, and not uncommonly are, sued for disclosure of information about apparent wrong-doing in which they have innocently become involved: Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133.) Apart from the relative rarity of the cases in which banks are joined as defendants to obtain freezing orders against them in respect of assets of the main defendant, I do not consider that their ancillary role as defendants in such cases would of itself be a reason for refusing to recognise a duty of care, if it were otherwise appropriate to do so.
109.   This brings me back to what is in my opinion the determinative factor in this case, that is the absence of any real voluntary aspect to the involvement of a third party such as the bank in relation to a claimant's freezing order such as the present. Al-Kandari is a quite different case to the present, since the specific task was there voluntarily undertaken. In White v Jones and Dean v Allin & Watts the solicitors also acted voluntarily on 0their clients' instructions, although the scope of their resulting duty was extended to third parties for whose benefit they so acted. In Spring v Guardian Assurance plc the relevant regulatory regime did no more than impose an obligation to obtain and give a reference of a familiar type which a former employer would commonly give, irrespective of any compulsion. It would have been incongruous if a duty of care was owed, when such a reference was not given under compulsion, but was absent just because it was. Further, if the reference had been unduly favourable, the recipient's reliance on it would have introduced an element bringing the situation close to that in Hedley Byrne, and it would have been strange if a duty were not also owed to the subject of an unduly unfavourable reference (cf per Lord Goff at p 321F). Phelps v Hillingdon London Borough Council is similarly a case where, although the defendant council and its employees were operating in the context of public statutory duties, they were nonetheless providing services which could equally well be and are provided in the private sector, and it would have been surprising if a similar duty of care were not owed by those providing them to that owed in the private sector: see per Lord Clyde (at pp 670H-671B).
110.   The closest case to the present on which Mr Sales can rely is Ministry of Housing and Local Government v Sharp. But the statutory scheme there was aimed at protecting persons in respect of property purchases and, so far as necessary for that purpose, overriding other proprietary interests. Again, it would have been incongruous if a person relying on such a certificate to his detriment could have a claim because of the closeness of the situation to Hedley Byrne, but the Minister whose cause of action for reimbursement was extinguished had none (cf per Lord Denning MR at p 268H and Salmon LJ at p 278F-H). I consider that Ministry of Housing and Local Government v Sharp was rightly decided. It was referred to without disapproval in the speeches of both Lord Templeman and Lord Griffiths in Smith v Bush (at pp 846D-G and 862F). The result reached was eminently fair, just and reasonable. The role of land registrar was established as a public service to keep accurate records and provide reliable information. The information was to enable buyers to be secure in the property rights they acquired but concomitantly to override other property interests in the public interest in order to achieve this, even though such security and overriding occurred through negligence of the registrar or a clerk fulfilling his function. It would be unjust if no compensation could be obtained for the adverse consequences on property rights of negligence of an official performing such a service in the public interest.
111.   There is no analogy between any of these cases and the present. The recognition of a duty of care in the present case would not be closely incremental upon any existing duty. Here, the bank has not been entrusted by statute or otherwise with the provision of any public service. It has simply been notified of an order made by the court in favour of a claimant, and warned that it will be liable for contempt if it knowingly assists or permits a breach of that order. In a case of contempt, the court has control of the situation and a discretion which enables it to match the appropriate penalty to the seriousness of the particular contempt. It may be said that, if the court can revoke the bank's contractual mandate from its customer and can impose on the bank a potential liability for contempt in a case of knowing assistance in or permission of a breach, the court may also go further and impose a duty on the bank towards the claimant to take care to avoid any disposition of the defendants' frozen assets contrary to the freezing order. But that would be to impose a liability on an involuntary third party which would be outside the court's control, and which might be measured in very large sums, even for quite venial fault. The amounts caught by a freezing order can be very large, even though one would usually expect a third party notified of such an order to be able to ascertain quite quickly, from the order itself and from its own records, how much is actually caught by such an order. Nor does it seem to me that such a liability is required to maintain standards or ensure good practice. In practice, banks must and will try to do their best to ensure compliance with freezing orders, while their clients are, as this case shows, likely to try to evade them. Problems are, as here, most likely to arise at the very outset of such orders, when assets have not been fully ascertained or all possible avenues of evasion have not been closed.
112.   A further subsidiary consideration is that the Commissioners, at least in a case such as the present, cannot be said to have relied to their detriment on anything said or done by the bank. All that has happened is that the defendants have succeeded in abstracting assets which the Commissioners hoped to have frozen. In addition, if a duty of care were owed by a bank in this type of situation, it would be difficult to avoid the conclusion that other third parties, even private individuals, would also owe a duty of care, on receiving notification of a freezing order in respect of a defendant's assets which they happened to be holding. In the case of physical assets, questions could arise as to how far that would impose duties similar to those incurred by bailees to preserve or guard such assets (although I would accept that, if such duties were owed, it might be possible to limit them in extent to those owed to the defendant).
113.   Despite the consistency of many of the factors in play with the recognition of a duty of care, I would therefore answer the question whether it is fair, just and reasonable to impose such a duty on the bank in the negative. The common law has, it seems to me, developed a system offering very significant protection for claimants, together with very considerable incentives, backed by ample sanctions, for banks and other third parties to do their best to comply. Having imposed such an obligation on a third party, I do not consider that it should go further by imposing a duty on the third party towards a claimant to take care to prevent abstractions committed by the defendant in breach of a freezing order. This would not be analogous with or incremental to any previous development of the law. The position as it is without any such duty of care seems to me to represent a fair and normally effective balance between the respective interests involved.
114.   I would therefore allow the appeal, and restore the order made by Colman J.