Magner and another v Royal Bank of Scotland International Ltd (Gibraltar)

A bank is generally entitled to act on a solicitor’s instructions concerning a client account without investigating their propriety, but that statutory protection does not extend to dishonest assistance in misappropriating client funds. Dishonesty is assessed objectively by reference to the defendant’s knowledge and ordinary standards of honest conduct. A retrial is a remedy of last resort: the appellate court must ask whether the interests of justice require it and balance all relevant circumstances. An appellate court reviewing that discretionary decision should not interfere unless the lower court applied wrong principles, ignored relevant matters or considered irrelevant matters, and its decision was plainly wrong.

Mr Jim Magner and T & T Trustees Ltd claimed that Royal Bank of Scotland International Ltd was liable for dishonest assistance after the collapse and fraud of their Gibraltar solicitors, Marrache & Co. Jack J found that one bank relationship manager, Mr Howard Shaw, had dishonestly assisted breaches of trust and ordered an account, while dismissing the proprietary claim. The Court of Appeal of Gibraltar allowed the bank’s appeal, held the findings against Mr Shaw unjustified, dismissed the cross-appeal, and refused a late application for a retrial. The Privy Council considered whether that refusal involved an error of law, including the proper test for ordering a retrial and the standard for appellate intervention in a discretionary decision.

The Board unanimously dismissed the appeal and humbly advised Her Majesty accordingly.

1. Dishonest assistance. A claim requires a trust, a breach of trust, assistance by the defendant and dishonesty. Dishonesty is assessed objectively. It is sufficient that the defendant’s knowledge of the transaction makes participation contrary to normally acceptable standards of honest conduct; subjective awareness that the conduct is dishonest is unnecessary. Deliberately closing one’s eyes to suspected misfeasance can satisfy the standard. The Board referred to Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37 and Royal Brunei Airlines Snd Bhd v Tan [1995] 2 AC 378.
2. Bankers and solicitor client accounts. Section 85 of the Solicitors Act 1974, as amended, does not protect a bank from liability for dishonest assistance. It nevertheless establishes the general statutory context: a bank may ordinarily act on a solicitor’s client-account instructions without investigating their propriety and does not owe the solicitor’s clients trustee duties in relation to the funds.
3. Retrial test. Under rule 69 of the Gibraltar Court of Appeal Rules 2004, the question is whether the interests of justice require a retrial. A retrial is a remedy of last resort and should not be ordered where justice can be achieved by another course. An appellate court can usually draw inferences from undisputed facts or correct a legal misdirection without a retrial. A retrial may be necessary where the error prevented a party from presenting its case properly and caused a substantial wrong or miscarriage of justice.
4. Relevant factors. The interests-of-justice assessment is not governed by a test that the case must be inevitably destined to fail. Relevant considerations may include the apparent strength of the case, whether it was properly adjudicated, the circumstances of the error, witness availability, delay and its effect on recollection, and the time, money and resources required. The Board explained that Lavarello and Hyde v Jyske Bank (Gibraltar) Ltd (Civil Appeals Nos 6 and 7 of 2017) (unreported) 15 January 2018 correctly applied the interests-of-justice test. Chen v Ng [2017] UKPC 27 illustrated the importance of proper adjudication and fresh credibility assessment where necessary.
5. Appellate review and application. A discretionary retrial decision should not be disturbed where the lower court applied correct principles, considered relevant matters, excluded irrelevant matters, and reached a decision within the generous ambit of its discretion, unless the decision was plainly wrong. Applying that approach, the Court of Appeal was entitled to refuse a retrial. The proposed retrial would have been a substantially reconstituted case focused on Mr Shaw, despite the claim having been presented and cross-examined at trial. The Claimants had not been unable to present their case, and the Court of Appeal’s decision was not plainly wrong.

• Supreme Court of Gibraltar — Jack J found that Mr Shaw had dishonestly assisted breaches of trust, gave judgment for the Claimants on dishonest assistance and knowing receipt, and ordered an account. The proprietary claim was dismissed and was not appealed.
• Court of Appeal of Gibraltar — On 12 June 2018, the court allowed the bank’s appeal, held the findings against Mr Shaw unjustified, dismissed the cross-appeal, and refused the application for a retrial.
• Privy Council — In [2020] UKPC 5, the Board dismissed the appeal and upheld the refusal of a retrial.