Stephen Moverley Smith QC successful in ground-breaking Privy Council decision

March 30, 2015

Stephen Moverley Smith QC acted for the successful Respondent in this ground-breaking decision of the Privy Council (on appeal from the Court of Appeal of Gibraltar) which re-writes the bona fide purchaser defence of banks (and others) to proprietary claims.

The Appellant, the Gibraltar branch of a French bank, had appropriated a security deposit in satisfaction of an overdrawn account. The deposit comprised the proceeds of stolen antiques belonging to the Respondent. The Respondent asserted a proprietary claim to the proceeds, which the bank defended by contending it was a bona fide purchaser without notice. The bank succeeded at first instance but lost in the Court of Appeal.

The Privy Council held that, to avoid having constructive notice of a proprietary right, a bank must make inquiries if the facts known to it would give a reasonable banker in its position serious cause to question the propriety of the transaction in question. The Privy Council found that the Bank, which had omitted to enquire as to the commercial purpose of the transaction, had failed to make appropriate enquires which would have revealed that the transaction was probably improper. It was accordingly not able to defeat the Respondent’s claim.

The Judgment can be accessed here.

Stephen Moverley Smith QC was instructed by Bird & Bird.