UK Law and Practice Contributed by: Simon Bushell and Gareth Keillor, Seladore Legal
structive trust for the victim of fraud (eg, where an asset has been misappropriated in breach of fiduciary duty). Breach of Duty of Care by a Bank Where fraudulent transactions have been administered by a bank on the instructions of a customer’s agent (eg, a company’s director), it may be possible to recover resultant losses from the bank for a breach of the “Quincecare” duty (so called because of the case from which it derives). This duty prevents a bank from carrying out instructions, where the bank has reasonable grounds to believe that the agent is attempting to defraud the customer. The bank may breach its duty: • where it executes the instructions knowing (or shutting its eyes to the fact) that they were made dishonestly; • where it acts recklessly in failing to make reasonable enquiries; or • where there were reasonable grounds for believing that the instructions were an attempt to misappropriate funds. There are limits to this duty. First, it is possible for banks to expressly exclude the duty in their contractual terms. Second, the duty does not extend to situations where the instructions are valid and clear. 1.4 Limitation Periods The limitation period for the wronged party in a fraud claim is typically six years, starting from when they either discovered the fraud or could have done so using reasonable diligence. Importantly, in the context of fraud (whether in relation to trust property or otherwise), where the defendant has deliberately concealed any fact
that is relevant to the victim’s ability to bring a claim, the limitation period will not begin to run until that concealment has been discovered or could reasonably have been discovered. An exception to the general six-year rule also exists in relation to trust property. Specifically, there is no set limitation period in respect of: • any fraudulent breach of trust; or • any action to recover trust property that the trustee has taken for themselves. This allowance relates only to trustees who have assumed responsibility for trust property (and therefore does not apply to trusts that arise solely at the discretion of the courts). Further - more, dependent on the remedy that is being sought, the court may still have discretion to say that there has been unreasonable delay and that it would be unfair to the trustee to allow the claim to proceed. 1.5 Proprietary Claims Against Property Where property has been fraudulently obtained and transferred to a third party, the victim may have a proprietary claim in respect of that prop - erty (or its proceeds), unless it has been obtained by a third party in good faith, for value and with - out notice of the relevant fraudulent activity. A proprietary claim will be particularly significant where the third party or the wrongdoer is insol - vent, as it enables the wronged party to rank ahead of general creditors. A proprietary interest also becomes particularly relevant (and particularly helpful to a victim of fraud) where a fiduciary or trustee has made a financial gain through a wrongful act, as this will enable the victim to obtain that gain for them - selves. By way of example, where a financial
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