The Claimants (“JP SPC 4”) provided litigation finance to UK law firms via loans. A company incorporated in the Isle of Man (“Synergy [IOM] Ltd”) handled these loans and held an account at the Bank (“Royal Bank of Scotland International Limited”) to do so. Allegedly, two individuals within Synergy fraudulently withdrew around £45 million by writing cheques on the account. These were honoured by the Bank in the standard manner.

The Claimants asserted that the Bank had breached its duty of care “in tort to exercise reasonable care and skill”. This, they argued, was caused due to the Bank’s failure to protect the Claimants’ funds from losses caused by fraudulent misappropriation of funds by a customer of the Bank. The Claimants contended that by virtue of their status as beneficial owners of the monies held in the Bank’s account, the Bank owed them this duty of care.

Initially, the Bank applied to strike out the claim before trial and denied the allegations put forward by the Claimants. Whilst the Isle of Man Court dismissed the application at first instance, the decision was reversed on appeal to the Staff of Government Division, who disagreed that the Bank owed third parties the stated duty of care. On appeal to the Privy Council, the Claimants argued that a bank’s Quincecare duty extends to a duty of care in tort beyond that which is owed to the bank’s customer.

The Privy Council rejected the Claimants’ argument and upheld the Bank’s application to have the claim struck out.

This judgement is a seminal decision that has drawn boundaries in a hitherto highly-contested area of banking law. It confirms the legal position regarding the duties a bank owes to the beneficiary of an account held by one of its customers acting as a fiduciary or trustee. This will no doubt be seen as good news for banks concerned about recent attempts to extend their Quincecare duties beyond their own customers.

It is absolutely necessary that defrauded third parties protect their legal rights and act in their best interest, especially when looking to settle a high-value dispute with a major bank such as the Royal Bank of Scotland. Legal rights can be protected by taking urgent legal advice and by instructing specialist financial services litigation solicitors

Our Financial Services Litigation team of Solicitors and Barristers in London is highly experienced in banking litigation and specialises in representing clients in banking disputes. Our litigators carefully assess case prospects and can then issue or defend legal claims in all manner of contentious issues, ranging from financial services litigation against major banks and their ‘magic circle’ or other lesser legal teams (all of whom we regularly succeed against), injunctions (such as obtaining emergency Mareva freezing orders or restraining orders), winding-up petitions and other company court disputes and injunction or validation applications. Our London litigation solicitors and barristers advise our clients on disputes relating to claims involving fraud and deceit, commercial contracts, buildings and property, sale of goods, banking and mortgage fraud, directors’ disqualification, judicial review and insolvency.

Our high profile and high value cases regularly appear in the national and international media. We have successfully managed and settled court litigation against all major UK banks. Call us on  ☎ 02071830529 or complete our online contact form.

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