Arena Television Limited & Anor v Bank of Scotland Plc & Anor

For summary judgment or strike out, the court must decide whether the claim has a realistic prospect of success without conducting a mini-trial. Where the law is uncertain or developing, final determination will generally require findings at trial.

An agent’s actual authority may arguably be limited to acting honestly in pursuit of the principal’s interests. The scope of a bank’s ordinary duty concerning payment instructions is generally confined to protecting the customer against unauthorised payments, together with consequential losses falling within that risk. It does not ordinarily extend to losses arising from authorised payments or transactions which the customer could not have entered into had the account been suspended.

Two linked Commercial Court actions concerned alleged large-scale asset-backed lending frauds involving Arena Television Limited, Arena Holdings Limited and Sentinel Broadcast Ltd. The claimants alleged that directors or controllers gave payment instructions without actual authority and that the defendant banks breached mandate and related duties by processing them.

The banks applied for strike out or summary judgment on claims for account reconstitution and consequential losses. The Arena claimants also challenged pleaded assertions of actual authority and contingent counterclaims in deceit and unlawful means conspiracy.

The court had to determine which issues could be resolved on the pleaded facts and which required a trial, including the ambit of actual authority and the scope of the banks’ duties.

1. Applications concerning actual authority. The applications to strike out or summarily dismiss the claims based on alleged unauthorised payment instructions were dismissed. On the pleaded facts, there was a realistic argument that an agent’s actual authority is limited to acting honestly in pursuit of the principal’s interests, as reflected in Article 23 of Bowstead & Reynolds on Agency and Lord Leggatt’s reasoning in Philipp. Whether the directors and controller acted honestly, or exercised powers against their principals’ interests, required trial.
2. The court declined to determine finally whether a distinction could be drawn between fraud by a company and fraud on a company, or whether the cited authorities established the banks’ proposed dividing line. The circumstances in which authority was conferred and the transactions themselves required factual investigation.
3. The alleged control of the Arena companies did not provide a discrete basis for summary determination. Agents could not self-authorise the misapplication or misappropriation of company funds. The significance of control remained part of the trial assessment of actual authority.
4. The account mandates and terms were capable of being relevant to actual authority, but the terms relied upon did not confer authority on the directors to engage in fraudulent activities. They concerned the bank’s ability to act on instructions without inquiry and did not expand the directors’ authority. This part of the Arena cross-application succeeded.
5. Scope of duty. Applying the scope-of-duty principle, the ordinary duty pleaded was directed to avoiding unauthorised payments. It could cover the amount of those payments and consequential losses such as interest, overdraft fees or currency losses. It did not ordinarily cover losses from authorised payments or external transactions which would not have occurred had the bank suspended operation of the account. Claims falling outside that scope were struck out or summarily determined against the claimants.
6. Counterclaims. The contingent counterclaims in deceit and unlawful means conspiracy were not struck out. They relied on representations beyond the payment instructions themselves, including representations about equipment, business purposes and the alleged fraud. Whether those representations existed, were distinct, were relied upon, or formed part of the very thing the banks had a duty not to act upon required trial. The counterclaims were dismissed only insofar as the applications sought summary disposal.
7. The court ordered that Ground 1 of the Arena Application and the Sentinel Application be dismissed; Ground 1 of the Arena Cross-Application succeed as to the mandates and terms but fail as to control; Ground 2 of the Arena Application succeed as to losses outside the scope of duty; and Ground 2 of the Arena Cross-Application be dismissed.

Not stated in the judgment. The decision was a first-instance determination of summary judgment and strike-out applications in linked Commercial Court proceedings.