Chudley v Clydesdale Bank plc

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Chudley v Clydesdale Bank plc [2019] EWCA Civ344
One of the JC’s favourite contrary stances is his benevolence towards the much maligned Contracts (Rights of Third Parties) Act 1999 and there is no better example of its utility than this super case, hated though its outcome apparently has become among the legal glitterati.

Arck was a shell company incorporated by what turned out to be fraudulent property developers.

Arck instructed Clydesdale bank to open a segregated client account to hold client money relating to the Paradise Beach project, though for once, readers, you may quell the blare of your CASS klaxons — this case is not about the CASS rules. They are just context. This is the case of the client money account that wasn’t. After some debate the appellate court decided there was a contract between Arck and Clydesdale to open a client account for Paradise Beach. Can you see where this is going?

Arck did a deal with some investors the upshot of which was that Arck would hold the Investors’ money for a while. It didn’t tell the investors, but it instructed Clydesdale to put the money in its client money account.

Clydesdale never opened a client segregated account. It paid all the money into Arck’s main account. Arck went bust, and Clydesdale took all the money.