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23 August 2018
The Grand Court has set out the requirements for pleading a cause of action of dishonest assistance and reaffirmed the established principles of the defence of estoppel. The decision in William Ritter and Geneva Insurance SPC Limited (In Voluntary Liquidation) v Butterfield Bank (Cayman) Limited (Unreported, Cause G 224 2015, 29 May 2018, Williams J) provides welcome comfort to corporate entities with robust and thorough systems for detecting fraud.
The claim related to fraudulent transactions in the sum of $725,177 which were made at the request of a former director of Geneva Insurance. The plaintiffs claimed that in making the payments on the basis of forged requests, the bank was liable for:
The Grand Court dismissed the claim of dishonest assistance on the grounds that the pleading was defective and there was no evidence that the bank deliberately allowed fraudulent transactions to be processed. The court also rejected the claims for breach of contract and negligence on the basis that the plaintiffs were estopped from advancing such claims due to a failure to inform.
The court held that in cases of dishonest assistance against a corporate entity, a particular individual or individuals must be identified (by their role if their name is not known) as having acted dishonestly. The statement of claim must identify:
It is not enough to use a so-called 'rolled-up plea' and claim that the corporate entity was or should have been aware of fraudulent actions by the main perpetrator to establish dishonest assistance.
A dishonest assistance claim should not be tacked on to the less serious claims of breach of contract and negligence. Where dishonesty and negligence claims are made based on similar facts, dishonesty must be clearly pleaded first and confined to the fraud, with negligence then pleaded separately. The court reiterated that dishonesty is a serious allegation and must not to be pleaded lightly.
The court found that Ritter had been aware of the forgeries for almost one year before he informed the bank and that his silence was deliberate, holding that:
For further information on this topic please contact Nick Hoffman or Anya Park at Harney Westwood & Riegels' Grand Cayman office by telephone (+1 345 949 8599) or email (firstname.lastname@example.org or email@example.com). Alternatively, contact Vicky Lord at Harney Westwood & Riegels' Hong Kong office by telephone (+852 5806 7800) or email (firstname.lastname@example.org). The Harney Westwood & Riegels website can be accessed at www.harneys.com.
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