DEPOSIT PROTECTION BOARD v BARCLAYS BANK PLC
| DOI | https://doi.org/10.1108/eb024832 |
| Published date | 01 January 1995 |
| Date | 01 January 1995 |
| Pages | 96-102 |
| Author | Keith, Goff, Browne‐Wilkinson, Mustill, Lloyd |
| Subject Matter | Accounting & finance |
DEPOSIT PROTECTION BOARD v BARCLAYS BANK PLC
(House of Lords) Lord Keith, Lord
Goff,
Lord Browne-Wilkinson
(giving judgment), Lord Mustill and Lord Lloyd
Date of
Hearing:
December 1993
Date of Judgment: May 1994
Reported at: [1994] 2
Weekly
Law
Reports
732
THE FACTS
This case concerned the validity of a
scheme entered into by some de-
positors in the Bank of Credit and
Commerce International (hereinafter
referred to as 'BCCI') in order to
increase the level of payouts from
the Deposit Protection Fund in
respect of their original deposits
with BCCI.
The Deposit Protection Board
(hereinafter referred to as 'the
Board') and the Deposit Protection
Fund (hereinafter referred to as 'the
Fund') are constituted and em-
powered under the banking legisla-
tion of 1979 and 1987. The Board is
obliged to pay compensation from
the fund to any depositor in a bank
authorised under banking legislation
which has become insolvent. The
term 'depositor' was not expressly
defined in the legislation.
The amount of compensation
payable under the scheme is 75 per
cent of a maximum deposit of
£20,000 (s. 58(1) Banking Act 1987).
For the purposes of compensation
becoming payable from the Fund, a
bank is deemed to have become
insolvent on the date of the making
of the winding up order rather than
the earlier date of presentation of
the winding up petition.
On 5th July, 1991 the Bank of
England petitioned that BCCI be
wound up on the ground that it was
insolvent; provisional liquidators
were then appointed and depositors
ceased to be able to make with-
drawals. It was thus apparent that
depositors were at risk of losing
their monies and would only recover
the statutory compensation from the
Deposit Protection Fund.
A firm of accountants wrote to
depositors in BCCI suggesting they
assign £20,000 tranches of their
deposit (retaining £20,000 them-
selves for their own claim) to 'family
members or close friends who can
be trusted' with a view to each such
assignee being able to claim £15,000
statutory compensation in addition
to the original depositor's claim,
96
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