10. As a result
of such failure
the Plaintiff has suffered loss.
PARTICULARS
(a) Depo VT 4,000,000
(b) Interest 1995-1997 @ 7%
- VT 840,000
/p>
(c) Loss of business
opportunity - VT 10,000,000 Total VT 14,840,000
WHEREFORE
THE
PLAINTIFF CLAIMS against the First and Second Defendants jointly and
severally;”
In summary, the defendants are
sued in that they) granted a banking licence to the Olilian Bank to
conduct business as a local bank’ and are in breach of ‘a
statutory duty of care in respect to the plaintiff’. The
particulars of breach allege various failures on the part of the defendants
without distinction as to their respective
functions or roles in the grant
of the licence to the bank, and without reference to any particular
statutory provisions,
or dates, or period of time as there
should have been. It is also significant that no allegation of malice or
‘bad faith’ is made against the defendants in the Statement of
Claim either in the grant of the banking licence to the bank or
in the particular failures averred. Nor is there a claim based on a common
law duty of care founded upon either an imposed
statutory duty or in the
defendants’ failure to revoke the Bank’s licence sooner than it did.
In esult the first
defendant in its Statement of Defence filed on 20 October 1999 1999, other
than admitting that a banking licence was granted to the Bank, denied any
role in
the issuance of the licence. In similar vein, the second defendant
Commission (VFSC) denied that the licence was granted by it.
In the course of exchanges
between co for the Appellant and members of this Court during oral
al
argument on the appeal
counsel indicated that if the Appellant were
permitted to replead her case she would allege:
(a) that the Minister under
Section 4he Banking Act exercised hied his discretion to grant the banking
licence unreasonably
or carelessly having regard to information about the
bank which was then before him.
(b) The VFSC failed to commence
to inspect ccounts and annual returns urns of the bank soon enough or
sufficiently well
to take remedial action by cancelling the bank’s licence
pursuant to the powers in Section 7(2)(a) of the Financial Services
Act and
Section 4(4) of the Banking Act before the Appellant lost her money.
The first of these allegations
concerns events leading up to the grant of the le in the first
instannstance, and the second
allegation concerns ongoing supervision of the bank
after the licence was granted. Both allegations, like the original
pleadings, base the causes of action on breach, or careless breach, of
statutory power to exercise discretionary statutory
powers, not positive
statutory duties. Counsel informed the Court that he had no instructions or
information to justify
alleging bad faith against any public officer.
Misfeasance in public office is not alleged.
In X (minors) v.
Bedfordshire CC (1995) 3 All E.R. 353 Lord Browne-Wilkinson helpfully
identifies four separate categories of private law claims against public
authorities for damages as follows
(at P.363/4):
“(A) Actions for breach
of statutory duty simpliciter (i.e. perspective of carelessness);
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(B) Actions based solely
on the careless pernce of a statutory duty in y in the absence of any other
common law right
of action;
(C) Actions based on a
common law duty of care arising sing either from the imposition of the statutory
duty or from the
performance of it; and
The plaintiff’s claim
ndoubtedly belongs to category (A) or category (B) of the foregoing
classificaification. In referring to category (A) his Lordship said (at p.364):
“This category comprises
those cases where the Statement of alleges simply: (i) the sthe statutory
duty; (ii) a breach
of that duty; (iii) damage to the plaintiff. The cause
of action depends neither on proof of any breach of the plaintiff’s
common
law rights nor on any allegation of carelessness by the defendant.
The principles
appli in determining whether sucr such statutory cause of action exists are
now well established,… The
basic proposition is that in the ordinary case a
breach of statutory duty
does not, by itself, give rise to any private law cause of action. However,
a private law cause of action will arise
if it can be shown, as a matter of
construction of the statute, that the statutory duty was imposed for a
limited class
of the public and that Parliament intended to confer on
members of that class a private right of action for breach of the duty.”
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In so far as a category (B)
claim is concerned Lord Browne-Wilkinson sat p.365):
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“This category
comprises those cases in which the plaintiff alleges (i) the statutory duty
and (ii) the ‘negligent’
breach of that duty but does not allege that the dependant was under a
common law duty of care to the plaintiff… in
my view the careless
performance of or statutory duty does not itself give rise to any cause of
action in the absence
of either a statutory right of action [category (A)]
or a common law duty of care [category (C)].”
In this latter regard his
Lordship accepted that a common law duty of care may arise in the
performance of statutory functions
but a distinction had to be drawn between
the exercise of a statutory duty and in seeking to establish liability at
common
law for negligence in the exercise of statutory discretion ‘the
first requirement is to show that the decision was outside the ambit of the
discretion altogether: if it was not
a local authority cannot itself be in
breach of any duty of care owed to the plaintiff’.
Later after referring to Anns
rton Borough Council [1977] UKHL 4; [1977] 2 All E.R. 492 and Rowling v. T v. Takaro
Properties Ltd [1988] 1 All E.R. 163, Lord Browne-Wilkinson said (at p.371):
“Where Parliament has
conferred a statutory discretion on a public authority, it is for that
authority, not for the Courts,
to exercise the discretion: nothing which the
authority does within the ambit of the discretion can be actionable at
common law. If the decision complained of falls outside the statutory
discretion, it can (but not necessarily will) give rise
to common law
liability. However it the factors relevant to the exercise of the discretion
include matters of policy
(e.g. social policy, the allocation of finite
financial resources between the different calls made upon social aims as
against the risk to the public inherent in doing so), the Court cannot
adjudicate on such policy matters and therefore cannot
reach the conclusion
that the decision was outside the ambit of the statutory discretion.
Therefore a common law duty
of care in relation to the taking of decisions
involving policy matters cannot exist.”
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A little later in his judgment
his Lordship observed that ‘a comaw duty of care cannot be i be impose
on a statutory duty if the observance of such common law duty of care would
be inconsistent with, or have a tendency to discourage the due performance
by the local authority of its statutory duty’.
In the present case we are
firmly of the view that if liability in damages were to be imposed on the
defendant in the
exercise of their respective statutory duties and
discretion under the Banking Act and the VFSC Act, it is very likely that
they would adopt an overly cautions and more defensive approach to their
duties and may well lead to an unacceptable
level of interference in the
conduct and management of licenced financial institutions through an
over-zealous exercise
of examination and audit powers or by (Ed: incomplete)
Later in his judgment his
Lordship said (also at4): “although the question is one of
statutory tory construction…, it is significant that your Lordships were not
referred
to any case where it had been held that statutory provisions
establishing a regulatory system… for the benefit of the public
at large had
been held to give rise, to a private right of action for damages for breach
of statutory duty. Although
regulatory… legislation affecting a particular
area of activity does in fact provide protection for those individuals
particularly affected by that activity, the legislation is not to be treated
as being passed for the benefit of those individuals
but for the benefit of
society in general.”
The principle that the
existence ofivate right of action for beach of statutory duty depends
nds
on the construction
of the statute concerned has also been accepted in the
High Court of Australia: See Byrne v. Australian Airlines Ltd (1995)
185 CLR
410 at 424.
It is necessaryssary
therefore to consider the provisions of the Banking Act [CAP.63].
Pursuant to Section 2 it is an offence to carry out a banking
business in
Vanuatu
without a licence issued under the Act. Section 3 then provides for
an application for a banking licence to be made to the VFSC and
Section 4(1) provides that the Minister may grant a licence ‘after
consultations with the Commission and the Reserve Bank’. Section
6(2) prohibits however, the grant of a licence to a bank incorporated in
Vanuatu unless the ‘aggregate of its capital issued and paid up in
cash… and its unimpaired reserves is not less than VT50,000,000’.
The Minister is also empowered to revoke a banking licence, again, after
consultations wit the above-mentioned authorities
and after giving
appropriate notice to the bank [Section 4(4)] or he may refuse to
grant the licence altogether and ‘need not give any reason for so
refusing’.
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The grounds upon
pon
which the Minister may revoke a banking licence was particularly relied upon
by counsel for the
appellant and is set out in full. They are (so far as
relevant):
“(a) for any any
contravention of any provisions of this Act or rule made thereunder; or
(c) if in the
opinion of the Commission the licenced financial institution concerned is
carrying on business in… Vanuatu
in a manner detrimental to the public
interest or to the interest of the depositors of such institution; or
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(d) if the
financial institution concerned goes into liquidation or is wound up or
otherwise dissolved.”
The Mihe Minister is
vested with other powers under the Act including, the power to conduct
audits and examinations of
the books and affairs of a bank (Section 15);
and the power to appoint a suitably qualified person to advise about the
proper conduct of a bank’s business (Section 17).
Under Part III
of the Act licenced banks are required to maintain certain minimum amounts
of paid up capital and reserves dependant
on whether it is incorporated
outside or within Vanuatu and in respect of the latter, Banking Rules
made by the Minister requires the maintenance of ‘a minimum level of
capital and reserves within Vanuatu of VT50,000,000’.
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The Vanuatu
Financial Services Commission for its part, was established under an Act
of Parliament (No.35 of 1993) as a body corporate (Section 2)
consisting of a Commissioner, the Governor of the Reserve Bank, the Attorney
General and several other members appointed
by the Minister of which
‘at least two of whom shall have previous knowledge and experience of
financial business’, and all of whom hold office for three years and
thereafter, are eligible for reappointment (Section 3).
Pursuant to
Section 7(2) the Commission has the following specific duties:
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“(a) to seek,
through the provision of effective services for the supervision of financial
business to protect the public
in Vanuatu and elsewhere against financial
loss arising out of dishonesty, incompetence or malpractice on the part of
persons engaged in financial business in or from within Vanuatu;
(b) to protect
and enhance the reputation of Vanuatu as a centre for the carrying on of
financial business and to develop
Vanuatu as such a centre;
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responsible for the general administration of and for the collection of
fees, charges and other revenue due
under the Acts specified in Schedule 1;
(including the Banking Act CAP.63)
(d) to act
internationally as the national authority or representative of Vanuatu in
respect of matters relating to the
supervision and regulation of financial
business;
(e) to provide
advice and assistance to the Government and in particular to prepare and
submit to the Government reports
and make recommendations on the regulation
of financial business and on legislation relating to financial business or
to persons, companies and other undertakings engaged in financial business
in or from within Vanuatu;
(f) to assist
and advise the Government on matters relating to any Act or Regulation
directly or indirectly relevant to
financial business.”
Lord Goff
in Davis v. Radcliffe (1990) 2 All E.R. in words that
could just as easily apply to the above provisions said at p.541:
“No doubt, in establishing a system of licensing for banks, regard was
being had (though this is not expressly stated in the
long title of the Act)
to the fact that the existence of such a licensing system should provide an
added degree of security
for those dealing with banks…, including in
particular those who deposit money with such banks. But it must have been
the statutory intention that the licensing system should be operated in the
interests of the public as a whole; and, when
those charged with its
operation are faced with making decisions with regard, for example, …to
revoking licences, such
decisions can well involve the exercise of judgment
of a delicate nature affecting the whole future of the relevant bank…,
and
the impact of any consequent cessation of the bank’s business…, not merely
on the customers and creditors of the
bank, but indeed on the future of
financial services in the island. In circumstances such as these, competing
considerations
have to be carefully weighed and balanced in the public
interest, and, in some circumstances, …it may for example be more in
the
public interest to attempt to nurse an ailing bank back to health than to
hasten its collapse. The making of decisions
such as these is a
characteristic task of modern regulatory agencies; and the very nature of
the task, with its emphasis
on the broader public interest is one which
militates strongly against the imposition of a duty of care being imposed on
such an agency in favour of any particular section of the public.”
In the present case
there can be no doubting that the principal legislation under consideration
namely, the Banking Act [CAP.63], may be accurately described as
legislation ‘establishing a regulatory system… affecting a particular
area of activity’ i.e. in controlling, through means of a licencing
scheme, the person(s) who may operate a bank or banking business in Vanuatu.
That much is clear from the long title of the Act which reads: “To
provide for the regulation of the business of banking and for purposes
connected therewith.”
Plainly, amongst
those affected or protected by such regulation are depositors of the bank
such as the plaintiff, but
the Banking Act is in no sense confined in
its application to such ‘a limited class of the public’ who
might reasonably be expected to have dealings with the Bank or would be
directly or indirectly affected by its de-registration
or collapse.
It must be noted
also that the plaintiff’s complaint is not about any positive actions that
the defendants had taken
that caused her to lose her fix deposit, rather,
her particularised complaints concerns their failure or omission to take
steps to prevent the loss occurring.
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This distinction
which Lord Nicholls describes as ‘fundamentally sound in this
area of the law’ in Stovin v. Wise [1996] UKHL 15; (1996) 3 All E.R.
801 at 806 “… is based on a recognition that it is one matter to
require a person to take care if he embarks on a course of conduct which
may
harm others. He must take care not to create a risk of danger. It is another
matter to require a person, who is doing
nothing, to take positive action to
protect others from harm for which he was not responsible, and to hold him
liable
in damages if he fails to do so… There must be some special
justification for imposing an obligation of this character. Compulsory
altruism needs more justification than an obligation not to create danger to
others when acting for one’s own purposes.”
Lord Hofd Hoffmann
in the same case, with whose decision the majority of the Court agreed,
expressed a similar view in formulating the test
for negligent omission or
failure to exercise statutory power, when his Lordship said (ibid at p.827):
“Whether a statutory duty gives rise to a private cause of action is a
question of construction… It requires some examination
of the provisions of
the statute to decide whether it was intended to confer a right to
compensation for breach.” And later (at p.828): “The minimum
preconditions for imposing a duty of care upon the existence of a statutory
power (in respect of an omission
to exercise the power), if it can be done
at all, are, first, that it would in the circumstances have been
irrational not to have exercised the power, so that there was in effect a
public law duty to act, and, secondly, that there are exceptional
grounds for holding that the policy of the statute requires compensation to
be paid to persons
who suffer loss because the power was not exercised.”
The power to revoke
e
a licence however, is not unlimited (Section 4(4)) and is undoubtedly
quasi-judicial in character as evidenced by the right to be heard conferred
under Section 4(5) before a revocation order can be made.
Ne in the
Banking Aing Act is the Minister given power to control the day-to-day
management or affairs of any bank. His power is essentially limited to
allowing a bank to conduct business by the grant of a licence or closing it
down by the revocation of a licence. This
alone is a powerful incentive for
a bank to operate its affairs in conformity with the provisions of the Act
but it cannot
guarantee a banks continued credit worthiness or that no loss
will be caused to depositors by determined fraudsters or improvident
bank
managers.
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As was said by y
Lord Keith of Kinkel in delivering the judgment of the Privy Counsel in
Yuen Kun Yeu v. A.G. of Hong Kong (1988) IAC 175 at 197:
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“…reliance on
the fact of registration as a guarantee of the soundness of a particular
company would be neither reasonable
nor justifiable, nor should the
Commissioner reasonably be expected to know of such reliance, if it
existed.”
We are unable to
di discern any intention on the part of the legislature that the Minister in
considering whether to
grant a banking licence under the Act owes any
statutory duty to potential depositors, the breach of which would give rise
to a private right of action.
In our view, given
the nate nature of the economy of Vanuatu and its importance as an international
financial centre and
tax-free haven, it cannot be imputed that Parliament
intended in enacting the Banking Act and VFSC Act to provide a
government guarantee for persons dealing with licenced financial
institutions including banks.
In so far as the
VFSC is concerned we are satisfied that Sections 21, 22 & 23
individually and collectively militate against the imposition of a duty of
care not to expose the plaintiff to the risk
of losing her deposit in the
performance by the VFSC of it s statutory duties.
In the first place,
SectiSection 21 of the Act renders the VFSC immune from any civil suit or
prosecution ‘… for any matter of thing or act done… in good faith by
the Commission under this or under any other any other Act or regulation’;
secondly, Section 22(1) of the Act specifically empowers the Minister
‘…in writing to requires the Commission to make good…’ any failure
on its part to comply with the provisions of this or any other Act or
regulation and, should the Commission
fail to comply with the Minister’s
requirement then subsection (2) of Section 22 empowers the Minister
to apply to the Supreme Court for appropriate remedies. Plainly the VFSC is
responsible and in
our view, is answerable to the Minister for the exercise
of its statutory duties and functions and to no one else; finally,
Section 23 of the Act prohibits any form of execution by attachment of
property being issued against the Commission. This is a major obstacle
to
money judgment being awarded against the Commission and also militates
against the imposition of a duty of care.
