Nicholas Stones, the recently retired senior partner of Wiggin & Co, is facing a £40m claim for dishonesty.
The case is linked to the collapse in 1991 of leisure giant Brent Walker Group (BWG), which led to several charges against its founder and former chairman George Walker.
Stones acted as a trustee for the Bacchus Trust, whose main beneficiaries were Walker's children.
The case against Stones rests on the definition of dishonesty, which is due to be considered in interlocutory hearings by the Lords. If he is found to have been dishonest, then he is guilty of breach of trust and thus liable for the £40m, the claimants say.
Walker built up BWG into the UK's largest leisure group. In 1994, Walker was cleared on charges of theft, false accounting and conspiracy to falsify accounts relating to his activities at BWG.
In 1990, Stones used the trust's principal assets – shares in an unnamed holding company – as security for a loan which a subsidiary, called 'J', obtained from Standard Chartered Bank. J owned equity in two other companies that had large interests in French vineyards.
“If Stones was dishonest enough to get the claim off the ground, the Court of Appeal said he cannot be acting under the orders of the firm”
Caroline Kean, Wiggins
J used the loan from Standard Chartered to buy bonds in BWG, thus raising capital for that company.
However, a drop in BWG's share value resulted in J becoming insolvent.
Lawyers close to the case say the major part of Stones' Lords appeal is on the definition of dishonesty. They argue that Stones cannot have been dishonest as he was acting in what he believed to be the interests of the beneficiaries.
They also say that Stones can only be liable for the £40m if he is guilty of dishonesty under an exemption clause in the trust agreement. They claim that this excludes the trustees from liability from anything done in the course of them acting as trustees, other than dishonesty.
At appeal, it was ruled that a person may act dishonestly even though he genuinely believes his action is morally justified.
The claimants are also appealing the refusal of the Court of Appeal to make Wiggins vicariously liable.
Wiggins head of litigation Caroline Kean said: “If Stones was dishonest to that degree necessary in order to get the claim off the ground, the Court of Appeal has said he cannot be acting under the orders of the firm and therefore it cannot be liable.”
Guy Newey QC of Maitland Chambers, inst-ructed by Lovells, is acting for Stones. Geoffrey Vos QC of 3 Stone Buildings and Thomas Lowe of Wilberforce Chambers, instructed by David Parry & Co are acting for Walker's children. Andrew Simmons QC and Anna Clarke both of 5 Stone Buildings are acting for Wiggins.