Deane & Ors v Coutts & Co & Anor

A general commercial arrangement or joint enterprise does not itself create a cause of action or secondary liability. Agency requires authority to affect the principal’s legal relations with third parties. Notice of wrongdoing is not, without more, an independent basis for awarding equitable compensation against a lender. The special approach in Barclays Bank v O’Brien and Royal Bank of Scotland v Etridge (No. 2) is confined to the suretyship context. A claimant relying on dishonest assistance must plead the assistance provided and any basis for vicarious liability. An assignee of a loan is not liable for the assignor’s separate secondary liability, and defensive equities cannot support recovery of money from the assignee.

Former professional footballers invested in a Spanish property development after being advised by Kingsbridge Asset Management Limited. They alleged that their advisers had exercised undue influence, breached fiduciary and trust duties, and made fraudulent misrepresentations. Coutts & Co and RBS Gibraltar were said to be secondarily liable through joint enterprise, agency, notice of wrongdoing and, by amendment, dishonest assistance. RBS was sued as the assignee of RBS Gibraltar’s lending book.

The defendants applied to strike out the claim under CPR 3.4(2)(a) or for summary judgment under CPR 24.2. The claimants sought permission to amend their particulars of claim. The central issues were whether the pleaded mechanisms could establish secondary liability and whether the proposed amendments had a real prospect of success.

1. The claim against RBS. RBS was merely an assignee of loans which had been repaid. The common ownership of Coutts, RBS Gibraltar and RBS did not make RBS liable for matters known to, or liabilities allegedly incurred by, RBS Gibraltar. Equities are defensive and cannot enable a debtor to recover money from an assignee. The claim against RBS was bound to fail and had no real prospect of success.
2. Joint enterprise. The expression had no fixed legal meaning and did not itself import a legal relationship or create secondary liability. Investment Compensation Scheme v West Bromwich Building Society did not establish otherwise. The pleaded arrangement was not the common design required for joint tortfeasorship. In any event, the promised 85% unsecured lending was never implemented, the evidence did not support the alleged normal banking practice, and the claim had no real prospect of success.
3. Agency. The pleaded facts showed dealings between the advisers and the banks, but did not show that the advisers had authority to affect the banks’ legal relations with the claimants. The agency claim was not struck out, but had no real prospect of success. The separate lending decision of RBS Gibraltar also undermined the alleged agency and common design.
4. Notice and equitable compensation. The principles in Barclays Bank v O’Brien and Royal Bank of Scotland v Etridge (No. 2) concern lenders’ ability to enforce transactions, particularly domestic suretyships obtained through undue influence. They do not create a general damages claim against a lender merely because it had, or should have had, notice of wrongdoing in an underlying purchase. The claimants had not pleaded wrongdoing by the banks in relation to the loans themselves. Their reliance on simple but-for causation did not bridge the gap between the purchase transactions and the loan transactions.
5. Amendment and limitation. The proposed dishonest assistance claim omitted the essential element of assistance and did not plead any basis for vicarious liability. It was a new claim for CPR 17.4(2) purposes and did not arise from the same or substantially the same facts. The advisers could not be treated as agents of the banks for section 32 of the Limitation Act 1980 on the basis of Applegate v Moss and King v Victor Parsons & Co; those decisions were confined to their particular circumstances.
6. The claim was dismissed. Permission to amend was refused.

First-instance decision. No earlier decision in the same proceedings is stated.