Court of Appeal Holds Banks Owe No Suremime Duty of Care to Customers – Abdulali Jiwaji and Nikoletta Beneki

By Abdulali Jiwaji

Partner Abdulali Jiwaji and Associate Nikoletta Beneki examine the Court of Appeal’s decision that the IHRP Review necessitates no duty of care for banks to customers, published in Financial Regulatory Briefing.

Abdul and Nikoletta’s article has been published in the August 2017 edition of Financial Regulatory Briefing and the October 2017 issue of International Finance.


On 24 July 2017, the Court of Appeal handed down its judgment on three joined appeals, CGL Group v RBS, Bartels v Barclays and WW Property v NatWest, on the question of whether the banks owed a duty of care to their customers in the context of a review undertaken by the banks of their sales of interest rate hedging products, under a settlement agreement with the Financial Conduct Authority (FCA). The judgment (which departs from Suremime Ltd v Barclays Bank Plc where permission was granted for pleadings to be amended to include a claim for breach of duty), clarifies the uncertainty following conflicting first instance judgments.


In June 2012, the FCA made an agreement with various banks that they would review their sales of interest rate hedging products to “non-sophisticated customers” and that they would provide appropriate redress in cases of mis-selling. The process would be scrutinised by an independent reviewer appointed under section 166 of FSMA, who would ultimately determine the redress offers to be made to the customers, and would be overseen by the FCA. The agreement further provided that no person, except the banks and the FCA, would have any rights (under the Contracts (rights of Third Parties) Act 1999) or could enforce any term of the agreement.

In 2013, the Appellants received notifications from their respective banks that they were eligible to opt in to the review which they did. Upon conclusion of that review, they were made redress offers. Following such offers, the Appellants brought proceedings against the banks for mis-selling and they subsequently applied to amend their pleadings to include a claim in respect of the banks’ conduct in relation to the review. The claims, as originally pleaded, were struck out and the applications to amend were dismissed.

Permission to appeal was granted on the common issue of whether the review conducted by the banks gave rise to a duty of care owed to the customers to carry out those reviews with reasonable care and skill.

The Court of Appeal judgment

The Court of Appeal referred to the three tests to be used in order to determine whether a duty of care has arisen in respect of economic,  being (1) whether the defendant assumed responsibility to the claimant, (2) the threefold test in Caparo Industries plc v Dickman [1990] 2 AC 6057 of whether (a) loss was a foreseeable consequence of the defendant’s actions or inactions, (b) the relationship of the parties was sufficiently proximate, and (c) it would be fair, just and reasonable to impose a duty of care on the defendant towards the claimant, and (3) the incremental test.

The Court concluded that the assumption of responsibility was not the most appropriate test. First, the regulatory context of these cases went against the imposition of a duty of care.  This was a highly-regulated environment where the circumstances under which particular individuals may bring proceedings have been prescribed by statute and the FCA had a wide range of powers. Second, the communications passing between the banks and the Appellants in relation to the review did not suggest that the banks assumed responsibility voluntarily towards the customers, since they were merely complying with their contractual and regulatory obligations to the FCA in the context of a review that, practically, had been imposed on them. Further, the existence of an independent reviewer, who had the final say and a central role in the review process, suggested no assumption of responsibility by the banks.

Turning to the threefold test, the Court concluded that it was not “fair, just and reasonable” to impose a duty of care on the banks. Factors that led to this conclusion were the fact that (1) the breaches of duty complained about were in essence a restatement of the original mis-selling claims, which however had been time-barred, (2) there was no “lacuna” in law, which a common law duty of care needed to rectify, since it was the FCA which was empowered to carry out investigations and to decide whether to bring enforcement proceedings when a review was not conducted properly and (3) a duty of care could put the banks in a position of conflict with their customers. Also, the incremental test was said to be of little value by itself and it was not the focus of the Appellants’ case.

It was, therefore, held that no duty of care was owed to the bank’s customers and the appeals were dismissed.


The decision brings some certainty following Suremime which left the position far from clear. It confirms the courts’ reluctance to recognise private rights of action against a regulatory and statutory framework where the FCA holds a central role.

It means that with these redress schemes both the FCA and the independent reviewer need to be proactive and rigorous in their approach as the scope for civil remedies by approved customers may be limited. The role of the independent reviewer will be further scrutinised by the courts in light of the appeal of the decision in R (Holmcroft Properties Limited) -v- KPMG LLP & Ors) (where the court found that a skilled person’s actions were not amenable to judicial review) which is due to be heard in December 2017.

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