The Court of Appeal has ruled in favour of investors in a failed multi-million pound Cape Verde property scheme, finding they could claim on a contract despite the fact they had never seen it.
The investment scheme was promoted by Arck LLP, tasked with fundraising for luxury property complex Paradise Beach in Cape Verde.
But the scheme, among others promoted by Arck, later failed.
In 2015 Richard Clay was sentenced to ten years in prison, after being charged with eight counts of fraud and pleading guilty to three, which did not include Paradise Beach.
Investors in the Cape Verde Paradise Beach development gave more than £1.5m to Arck in 2009, and when the scheme collapsed sought to reclaim their money from Clydesdale Bank who had operated the accounts through which the invested money flowed.
Last month the Court of Appeal found Clydesdale must repay the scheme’s investors, overturning a previous ruling by the High Court which had found otherwise.
The Appeals court heard Arck had requested in a letter that Clydesdale open a segregated client account stipulating the investment cash could only leave that account once the bank had received written undertakings from the developers' lawyers.
But the court heard Clydesdale never opened the segregated account and the investors’ money was transferred out of the bank without the required conditions being met.
The Court of Appeal ruled the Arck letter was a binding contract, even if the investors had not seen the letter at the time, and Clydesdale was in breach of it by not opening the account under the agreed terms.
When Clydesdale argued the investors would have lost their money in any event, regardless of the account being opened, the court found the burden of proof was on the bank to prove the potential loss - something it had failed to convince the court of.
Steven Richards, lead partner at Foot Anstey, the law firm which represented the investors, said: "This decision means that there is now light at the end of the tunnel for our clients and their families following a near decade-long attempt to recover their lost investments.
"The investors welcome the ruling by the Court of Appeal which vindicates their claim that the Bank could and should have taken steps to protect their money.
"This has been a long and costly battle by the investors for redress and it is hoped that this chapter of the saga can now be brought to a satisfactory end."
A spokesperson for CYBG said: "The Bank has received the Court of Appeal's judgement and we are considering our next steps in light of its content."
rachel.addison@ft.com
