Giles Wheeler QC, working with Caren Pegg of Appleby (Isle of Man), represented Royal Bank of Scotland International Limited in successfully resisting an appeal to the Privy Council brought by a Cayman Island based investment fund, JP SPC 4, against the decision of the High Court of Justice of the Isle of Man (Staff of Government Division) striking out a claim against the Bank for damages of over £60 million.
The case arose from the much-publicised collapse of the Axiom Legal Financing Fund, which has been alleged to have been operated as a fraudulent scheme to divert money away from the Fund for the benefit of the alleged fraudsters behind it. In the proceedings brought against RBS International in the Isle of Man, the Fund alleged that accounts held with the Bank in the name of an Isle of Man company operating as the Fund’s loan manager were used as a vehicle for conducting the fraud.
The Bank’s application to strike out the claim was originally dismissed by the Isle of Man Court. On appeal by the Bank, that decision was reversed and the claim was struck out.
The Fund’s subsequent appeal to the Privy Council raised the question of whether a bank owes a duty of care in tort to a person who is known to be the beneficial owner of monies held in the account of a customer of the bank and who has been defrauded by the customer. Following a number of recent cases focusing on the Quincecare duty, in a further significant appellate decision in this field, the Privy Council rejected an argument that a bank’s Quincecare duty could be extended to a duty of care owed in tort to the beneficiary of an account known by the bank to be a trust account. On that basis, the Privy Council upheld the striking out of the claim in what is the first significant appellate decision under the modern law of negligence to address a bank’s duties in tort in respect of trust accounts.
A copy of the Privy Council judgment is available here.
