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Published 22 May 2019
The recent judgment handed down by the Court of Appeal in Chudley & Ors v Clydesdale Bank PLC  EWCA Civ 344 is of particular interest as the decision provides clarity as to how s.1(3) of the Contract (Rights of Third Parties) Act 1999 (the “Act”) is to be applied, and more specifically it confirms that a Claimant is not required to plead and prove a counterfactual for a claim in breach of contract in order to succeed.
The case concerned funds provided by the Appellants (the “Claimants”) to Yorkshire Bank (“the Bank”) towards the development of Cape Verde resorts, in particular one known as Paradise Beach. Arck LLP (“Arck”), the development company, obtained the investmentsvia its existing account with the defendant Bank. A Letter of Instruction (“LOI”) was issued from Arck to the Bank which contained statements about how the investors’ deposits would be held. The LOI specifically envisaged that the deposits would be held in a segregated account on certain terms, including that a solicitor’s undertaking would be required for the release of funds. Upon discovering that certain of Arck’s schemes were fraudulent, and that funds had been released by the Bank without the solicitor’s undertaking, the Claimants issued proceedings against the Bank for breach of the LOI.
At First Instance the Commercial Court, found that the Claimants were unsuccessful for the following reasons:
The Claimants appealed the Judge’s findings.
The Court of Appeal in favour of the investors for the reasons set out below:
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