Bird & Bird's London dispute resolution team have been successful in a landmark decision against Credit Agricole Corporate and Investment Bank (the Bank) in the Court of Appeal in Gibraltar. This decision is of significant importance to all banks dealing in UK law jurisdictions and their potential liability to non-customer third parties if they fail to ask appropriate questions for transactions they are involved in.
The case was started in 2004 against the Bank by the Greek Michailidis family who had been defrauded of millions of dollars of works of art by their former business partner. In 2000, the Bank received $10.3m which was paid via various off shore companies into the Gibraltar branch of the Bank. The money was the proceeds of the sale of stolen Art Deco furniture belonging to the Michailidis family.. The sum was to act as a silent guarantee for a loan from the London branch incurring vast bank and interest charges.
The proprietary claim against the Bank was part of 76 different matters arising out of the various frauds in 16 jurisdictions. According to the judgement, had the Bank considered the commercial purpose of the transaction as banks are required to do, it would have realised that the transaction was improper and would have held the funds rather than use them to discharge the London loan.
The Court of Appeal confirmed this week that, as the Bank had failed to consider the commercial purpose of the transaction, the transaction was improper and is therefore liable for the funds retained by it to discharge the loan.
The Bird & Bird team was led by partners Ludovic de Walden and Sophie Eyre.
Ludovic de Walden said: "It has been a long haul getting here but the family's position as against the bank has finally been vindicated by this unanimous decision from the Court of Appeal. We have been pushing the bank to settle since the early days but instead of taking a pragmatic view, the bank has dug its heels in and invested huge sums in fighting a case it should have settled. The determination and courage of the client has been matched by the hard work of our team at Bird & Bird."
Sophie Eyre added: "This is a much deserved result for the family and is a lesson to banks that consider the benefit of a transaction to them above its legitimacy."
This is the second landmark banking litigation win for Bird & Bird's dispute resolution team in the last few weeks, following successful representation of Första AP-Fonden, a Swedish public entity that manages pension capital on behalf of the Swedish population, in a negligence case against the Bank of New York Mellon.