Barlow Clowes v Eurotrust [2005]

Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37 is a significant case in English trusts law, concerning breach of trust and the liability associated with dishonest assistance.

Barlow Clowes International Ltd faced liquidation following the exposure of its fraudulent securities scheme, involving the misappropriation of £140 million from investors. The funds were transferred to an Isle of Man company where Mr Henwood served as a director. The liquidator of Barlow Clowes alleged that Mr Henwood dishonestly assisted in dissipating the investors' money.

The deemster, a judge in the Isle of Man, initially held that Mr Henwood acted dishonestly. However, the Court of Appeal later reversed this decision, arguing that there was insufficient evidence for the deemster's finding of dishonesty, emphasising the inadequacy of mere disbelief in oral testimony and reliance on inferences.

Lord Hoffmann, delivering the advice of the Privy Council, reinstated Mr Henwood's liability, affirming the deemster's correct application of principles concerning liability for dishonest assistance. The key aspect was Mr Henwood's suspicion that the funds were misappropriated, and Lord Hoffmann disapproved the notion that one must know about the existence of a trust to be liable. The decision, notably, questioned the understanding from Brinks Ltd v Abu-Saleh (No 3) [1996].

Lord Hoffmann interpreted Twinsectra Ltd v Yardley [2002], highlighting an element of ambiguity in Lord Hutton's decision. The critical point was that a dishonest state of mind could involve either knowledge rendering participation contrary to accepted standards of honest conduct or suspicion combined with a conscious decision to avoid inquiries leading to knowledge. The standard for determining dishonesty remained objective, grounded in ordinary standards of honest conduct.

The Barlow Clowes case reinforces the principle that liability for dishonest assistance is not contingent on explicit knowledge of trust principles. The case clarifies the interpretation of Twinsectra Ltd v Yardley, emphasising an objective standard in assessing dishonesty and affirming that a conscious decision to avoid inquiries, despite suspicion, can render one liable. The decision underscores the importance of maintaining integrity in financial transactions and upholding generally accepted standards of honest conduct.
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