E&Y's £800m claim against Bank of England struck out

The High Court's decision to strike out an £800m claim against the Bank of England over the collapse of the Bank of Credit & Commerce International (BCCI) has made legal history.

It is believed to be the first time a judge has decided to review all the evidence in a claim and then strike it out. Judges usually make strike-out decisions rapidly but in this case Mr Justice Clarke was persuaded by the Bank of England's counsel, Nicholas Stadlen QC of Fountain Court Chambers, to take 12 days to delve into all 100 pages of BCCI liquidator Ernst & Young's pleading as well as over 80 bank documents before striking the claim out on the basis that it was “frivolous and vexatious”.

Freshfields partner John Goddard, who acted for the Bank of England, said: “The judge himself said that it was either very rare or unique for a court to exercise such a draconian power.”

The decision, which saved an expensive year-long trial, may reflect a new willingness among judges to spend more time in case management in the early stages of litigation in order to avoid lengthy trials, in line with Lord Woolf's reforms.

Liquidator Ernst & Young alleged that the Bank of England should not have granted a licence to BCCI. It was shut down in July 1991 after revelations of fraud, and the Bank of England was criticised in a report by Lord Justice Bingham for laxity in its supervision.

The Bank of England is protected from standard negligence claims by rulings of the Privy Council but Ernst & Young, advised by Lovell White Durrant litigation partner Christopher Grierson, used an obscure tort of “misfeasance in public office” in order to claim against it.

In 1996 the Bank of England successfully argued before Mr Justice Clarke that it was a tort of dishonesty and that, for it to succeed, the Bank would have had to have been dishonest.

Ernst & Young applied to amend their plea but Mr Justice Clarke last week ruled its claim would not succeed.

It intends to appeal Justice Clarke's original ruling on the definition of the tort.

Grierson said “The case is not over yet by a long way. Watch this space.”