Title: Court of Appeal Rules in Favor of Cape Verde Property Scheme Investors against Clydesdale Bank

Background

The Court of Appeal handed a significant victory to investors in the failed Cape Verde Paradise Beach property development, allowing them to claim their lost funds from Clydesdale Bank. Here’s a summary of the events leading to this judgment.

• Investors collectively put over £1.5m into the project through the bank.
• Arck LLP, tasked with raising capital for the luxury property complex in Cape Verde, failed, leading investors to seek reimbursement from the bank.
• Arck’s founder, Richard Clay, was sentenced to ten years in prison for fraud charges unrelated to the Paradise Beach project in 2015.

Previous Ruling and Reversal

In a previous High Court ruling, the bank was absolved of any responsibility to repay the investors. In late 2021, the Court of Appeal overturned this decision with the following key findings:

1. Arck had requested Clydesdale Bank to open a segregated client account with the condition that the investment cash could only leave the account upon receiving written undertakings from developers’ lawyers.
2. The Arck letter was deemed a binding contract, regardless of whether the investors had seen it or not.

Legal Argument and Court’s Ruling

Clydesdale Bank contested that investors would have lost their money regardless of whether the segregated account was opened. However, the court ruled that the burden of proof was on the bank to prove that potential loss, but it failed to do so.

Investor’s View

Steven Richards, lead partner at Foot Anstey representing the investors, commented, “[This ruling] brings hope to our clients and their families, who have been attempting to recover their losses for nearly a decade.” The investors expressed satisfaction with the judgment, regarding it as a vindication of their stance that the bank had a duty to protect their investments.

Bank’s Response

A CYBG spokesperson for Clydesdale Bank stated, “[We have received] the Court of Appeal’s judgment and are evaluating the next steps in light of its content.”

Implications

This ongoing legal saga stresses the complexities and responsibility of financial institutions in dealing with international property investment schemes.