Bank deposits: Commercial Court clarifies stakeholder duties and compliance risks

Background

In 2013, Hinduja Banque, a Swiss private bank controlled by the Hinduja family, placed nearly US$31 million on deposit with the London branch of Bank of Baroda (BoB). The funds originated from Amas Ltd, a Bahamian company linked to the family, for which Hinduja Banque acted as fiduciary under Swiss law. The deposit, governed by English law, served as security for a credit facility extended to one of the Hinduja brothers.

By 2024, the facility had been repaid, leaving US$11 million due for return. Amas instructed BoB to transfer the funds directly to its account, arguing Hinduja Banque was merely an agent. Hinduja Banque opposed this, insisting the funds be returned only to it and citing Swiss KYC obligations. It refused to indemnify BoB against potential claims from Amas.

Legal issue

The central question was: when multiple parties assert control over the same bank account, who has the legal right—under English law—to direct the deposit-taking bank?

Court’s findings

The Court reaffirmed key principles:

1. Contractual privity is determinative: The named account holder (Hinduja Banque) retained authority to instruct the bank.
2. Equitable claims must be resolved separately: Amas’ beneficial ownership claims did not override BoB’s contractual obligations.
3. Stakeholder protection under CPR Part 86: BoB was entitled to pay the funds into court and be discharged from liability.

The Court found that BoB faced genuinely competing claims. Amas’ arguments—based on Swiss law assignment and potential fiduciary breach—were sufficient to engage CPR Part 86. Importantly, the Court clarified that stakeholder relief is appropriate even where jurisdiction clauses (e.g., Swiss law) exist, as long as the dispute concerns English law obligations.

Compliance and governance implications

This case underscores critical compliance obligations:

1. KYC and AML: Institutions must ensure all parties are properly identified, especially in disputes.
2. Cross-border fiduciary duties: Conflicts of law must be managed through robust internal policies.
3. Reputational risk management: Neutrality and procedural transparency are essential.

Practical takeaways

1. Follow the mandate: Banks must act strictly in accordance with account mandates.
2. Document beneficial interests separately: Fiduciary arrangements must be enforceable against the correct counterparty.
3. Use stakeholder tools proactively: CPR Part 86 offers protection against litigation risk.

Why this matters

This judgment is a timely reminder that under English law, contractual rights govern banking relationships. Beneficial claims may be valid, but they do not override the bank’s obligations to its contractual customer. For financial institutions, maintaining neutrality and procedural integrity remains the safest course when caught in multi-party disputes.

Donna Goldsworthy is a Partner at Fieldfisher in the Dispute Resolution Team specialising in banking and finance disputes, and Jayne Backett is a Partner at Fieldfisher in the Banking and Finance Team.