Lazard Bank Jersey and Lazard Trust Company Jersey had been sued for alleged fraud, forgery and breach of trust by a Gloucester- based inventor, Brian West.
Mr West, 60, was claiming pounds 4m from the bank and trust company, which acted as his advisers in a series of property transactions at Stroud, Gloucester, in 1985.
He claimed that the bank and its then managing director, the late David Bulstrode, had lied, forged and destroyed documents. He also claimed that without his consent Mr Bulstrode had sold Stone House Farm, Stroud, which belonged to Mr West's trust, to Jeffrey Pike, a property developer and fellow Lazard bank customer and a friend of Mr Bulstrode, for pounds 1.
In one of the longest civil hearings on the island, in which Lazard's costs are estimated at more than pounds 1m to date, the judge found in favour of Mr West. The judge, Commissioner Francis Hamon, said that there was evidence that Lazard was in breach of Jersey's trust laws and that its handling of the affairs of a trust company set up for Mr West amounted to 'staggering incompetence'.
He said that a number of 'get out' clauses, which Lazard had inserted in trust documents, were contrary to the island's law and 'morally repugnant' and ordered that they be waived.
He heard how five copies of vital trust deed documents had disappeared, and asked how a bank or a trust company could allow the assets of its clients to be transferred without the knowledge of the client.
While there was no evidence of any criminal fraud under Jersey law, he said: 'We have no doubt that civil fraud did take place.'
He awarded damages to Mr West estimated at about pounds 500,000. A decision on costs has been reserved until 9 December.