Vol 3 (2006) - Issue 2

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Liability for Dishonest Assistance: Barlow Clowes International Ltd (in liquidation) & Ors v Eurotrust International Ltd & Ors [2003] UKPC 37

Introduction
This decision represents a welcome clarification of the law on third party liability for dishonest assistance. This is particularly so given the rise in the number of claims being brought against recipients and accessories in fraud-related matters.
Those who suffer financial loss as a result of a fraud are often forced to seek to recover monies from third parties to the transaction(s), in particular where the principal offender is unlikely to have sufficient funds to satisfy any judgment. Third party professionals are a common target, in view of their comprehensive insured status. Given the limitations on the recovery of economic loss in negligence claims, a claimant’s only route to recover his loss may be by way of a claim that the defendant received funds derived from a breach of trust or that he assisted in such a breach.
Background
Barlow Clowes had operated a fraudulent off-shore investment scheme which purported to invest funds in UK gilt-edged securities. Most of the GBP 140 million invested was dissipated in the personal business ventures and lavish lifestyle of Mr Clowes and his associates.
In 1988, Mr Clowes was imprisoned following the collapse of the scheme. About GBP 8.6 million of investors’ funds had been misappropriated through bank accounts maintained by companies administered from the Isle of Man by a company providing off-shore financial services ((formerly known as) ‘ITC’).
Barlow Clowes commenced proceedings in the High Court of the Isle of Man against ITC and two of its directors,including the second defendant, Mr Henwood. All three defendants were found to have dishonestly assisted Mr Clowes and one of his associates (‘Mr Cramer’) to misappropriate funds. Mr Henwood successfully appealed against the finding of the lower court that he had been a dishonest assistant on the basis that this conclusion was not supported by the evidence. Barlow Clowes appealed that decision to the Privy Council.