“We speak of money at the bank, and of money passing into and out of a bank account. But of course the account holder has no money at the bank. Money paid into a bank account belongs legally and beneficially to the bank and not to the account holder. The bank gives value for it, and it is accordingly not usually possible to make the money itself the subject of an adverse claim. Instead a claimant normally sues the account holder rather than the bank and lays claim to the proceeds of the money in his hands. These consist of the debt or part of the debt due to him from the bank. We speak of tracing money into and out of the account, but there is no money in the account. There is merely a single debt of an amount equal to the final balance standing to the credit of the account holder. No money passes from paying bank to receiving bank or through the clearing system (where the money flows may be in the opposite direction). There is simply a series of debits and credits which are causallyandtransactionally linked. We also speak of tracing one asset into another, but this too is inaccurate. The original asset still exists in the hands of the new owner, or it may have become untraceable. The claimant claims the new asset because it was acquired in whole or in part with the original asset. What he traces, therefore, is not the physical asset itself but the value inherent in it….Tracing is thus neither a claim nor a remedy. It is merely the process by which a claimant demonstrates what has happened to his property, identifies its proceeds and the persons who have handled or received them, and justifies his claim that the proceeds can properly be regarded as representing his property. ”
“It is, of course, beyond dispute that the money which was received in the Keristal No 2 account was the Canadians' money. It is, however, true that the plaintiff is unable by direct evidence to identify that money with the money which Mr D'Albis had sent to Panama only a few weeks before. If the question arose in proceedings between the plaintiff and the Canadians, then, in the absence of evidence to the contrary, the court would draw the necessary inference against the latter, for they would be in a position to dispel it. But DLH is not; it is as much in the dark as the plaintiff. Nevertheless, in my judgment there is sufficient, though only just, to enable the inference to be drawn. One of the two sums received in the Keristal No 2 account was$1,541,432 received on12 May 1986 from Bank of America. That corresponds closely with the sum of$1,600,000 transferred to Bank of America, Panama on1 April 1986 . In relation to the later transaction, Bank of America may, of course, merely have been acting as a correspondent bank in New York and not as the paying bank; and the closeness of the figures could be a coincidence. It is not much, but it is something; and there is nothing in the opposite scale. The source of the other money received in the Keristal No 2 account is not known, but from the way in which the Canadians appear to have dealt with their affairs, if one sum came from Panama, then the other probably did so, too…. … the fact remains that there is no evidence that the Canadians had any substantial funds available to them which did not represent proceeds of the fraud. This is acknowledged by counsel for DLH. For the source of the money he points to the$1 ·4345m received by Zawi and the payments totalling$4,927,000 made by Herron and Wilmington which cannot be accounted for. …The money in the accounts of Herron and Wilmington represented proceeds of the fraud. It can be traced in equity from those accounts to the Keristal No 2 account as well as through Zawi or any other intermediate recipient as through the first and second tier Panamanian companies. The victims of a fraud can follow their money in equity through bank accounts where it has been mixed with other moneys because equity treats the money in such accounts as charged with the repayment of their money. If the money in an account subject to such a charge is afterwards paid out of the account and into a number of different accounts, the victims can claim a similar charge over each of the recipient accounts. They are not bound to choose between them. Whatever may be the position as between the victims inter se, as against the wrongdoer his victims are not required to appropriate debits to credits in order to identify the particular account into which their money has been paid. Equity's power to charge a mixed fund with the repayment of trust moneys (a power not shared by the common law) enables the claimants to follow the money, not because it is theirs, but because it is derived from a fund which is treated as if it were subject to a charge in their favour…. In my judgment, there is some evidence to support an inference that the money which reached the Keristal No 2 account represented part of the moneys which had been transmitted to Panama by the second tier Panamanian companies some six weeks previously, and the suggestion that it was derived from any other source is pure speculation.”
“Equity acts on the conscience of the recipient; and the existence of a direct causal connection between it and the credit should sufficiently identify the one as the source of the other to enable the money credited to [the defendant’s] account to be taken to represent the money debited to [the claimant’s] account. ”
“Nothing passed between Tunisia and London but a stream of electrons. It is not possible to treat the money received by Lloyds Bank in London or its correspondent bank in New York as representing the proceeds of the payment order or of any other physical asset previously in its hands and delivered by it in exchange for the money. The Banque du Sud merely telexed a request to Lloyds Bank to make a payment to Baker Oil against its own undertaking to reimburse Lloyds Bank in New York. Lloyds Bank complied with the request by paying Baker Oil with its own money. It thereby took a delivery risk. In due course it was no doubt reimbursed…”
“Banque du Sud ‘bought’ on credit, from Lloyds Bank, a payment to Baker Oil; or it borrowed money from Lloyds Bank and directed that the lent money should be paid to Baker Oil. It later paid the loan with a certain value; hence that value could be traced into the payment to Baker Oil and onwards.”
“There is simply a series of debits and credits which are causallyandtransactionally linked. We also speak of tracing one asset into another, but this too is inaccurate. The original asset still exists in the hands of the new owner, or it may have become untraceable. The claimant claims the new asset because it was acquired in whole or in part with the original asset. What he traces, therefore, is not the physical asset itself but the value inherent in it….”
“A beneficiary of a trust is entitled to a continuing beneficial interest not merely in the trust property but in its traceable proceeds also, and his interest binds every one who takes the property or its traceable proceeds except a bona fide purchaser without notice.”
“8 At the claimant’s expense: general (1) The defendant’s enrichment is at the claimant’s expense if the benefit obtained by the defendant is- (a) from the claimant and (b) directly from the claimant rather than by way of another person. (2) In any of the following cases, it does not matter that the benefit obtained by the defendant (D) is from the claimant (C) by way of another person (X) – (a) where X transfers as an asset to D but C has a better right to that asset than X; (b) where X transfers an asset to D but X was holding the asset on trust for C; (c) where X is acting as C’s agent in respect of the benefit; (d) where X charges and receives from C an amount representing tax on X’s supply of goods and services to C and pays or accounts for that amount to D (Her Majesty’s Revenue and Customs) as tax due; (e) where C is subrogated to X’s (or another’s) present or former rights against D in a situation where the benefit was supplied to D by X; (f) where X was under a legal obligation to supply the benefit to C but instead supplied the benefit to D and – (i) the supply to D discharged X’s obligation to C, or (ii) the supply to D was in breach of X’s fiduciary duty to C but C’s claim against X has been exhausted. (3) In a contract for the benefit of a third party, the third party’s benefit is to be treated as obtained directly from the contracting party who required the benefit to be supplied rather than from the contracting party who supplied it. (4) Even if the benefit obtained by the defendant is directly from the claimant, the enrichment is generally not at the claimant’s expense if the benefit is merely incidental to the furtherance by the claimant of an objective unconnected with the defendant’s enrichment.” (1) The defendant’s enrichment is at the claimant’s expense if the benefit obtained by the defendant is- (a) from the claimant and (b) directly from the claimant rather than by way of another person. (b) directly from the claimant rather than by way of another person. (2) In any of the following cases, it does not matter that the benefit obtained by the defendant (D) is from the claimant (C) by way of another person (X) – (a) where X transfers as an asset to D but C has a better right to that asset than X; (b) where X transfers an asset to D but X was holding the asset on trust for C; (c) where X is acting as C’s agent in respect of the benefit; (d) where X charges and receives from C an amount representing tax on X’s supply of goods and services to C and pays or accounts for that amount to D (Her Majesty’s Revenue and Customs) as tax due; (e) where C is subrogated to X’s (or another’s) present or former rights against D in a situation where the benefit was supplied to D by X; (f) where X was under a legal obligation to supply the benefit to C but instead supplied the benefit to D and – (i) the supply to D discharged X’s obligation to C, or (ii) the supply to D was in breach of X’s fiduciary duty to C but C’s claim against X has been exhausted. (i) the supply to D discharged X’s obligation to C, or (ii) the supply to D was in breach of X’s fiduciary duty to C but C’s claim against X has been exhausted. (3) In a contract for the benefit of a third party, the third party’s benefit is to be treated as obtained directly from the contracting party who required the benefit to be supplied rather than from the contracting party who supplied it. (4) Even if the benefit obtained by the defendant is directly from the claimant, the enrichment is generally not at the claimant’s expense if the benefit is merely incidental to the furtherance by the claimant of an objective unconnected with the defendant’s enrichment.”
“[68] The real question, therefore, is whether claims of the present type should be treated as exceptions to the general rule. So far as I am aware, no exhaustive list of criteria for the recognition of exceptions has yet been put forward by proponents of the general rule, and I think it is safe to assume that the usual preference of English law for development in a pragmatic and step-by-step fashion will prevail. Nevertheless, in the search for principle a number of relevant considerations have been identified, including (in no particular order): (a) the need for a close causal connection between the payment by the claimant and the enrichment of the indirect recipient; (b) the need to avoid any risk of double recovery, often coupled with a suggested requirement that the claimant should first be required to exhaust his remedies against the direct recipient; (c) the need to avoid any conflict with contracts between the parties, and in particular to prevent 'leapfrogging' over an immediate contractual counterparty in a way which would undermine the contract; and (d) the need to confine the remedy to disgorgement of undue enrichment, and not to allow it to encroach into the territory of compensation or damages.”
“I think it should be recognised that one is here concerned with a restitutionary remedy and that the appropriate questions are therefore, first, whether the defendant would be enriched at the plaintiff's expense; secondly, whether such enrichment would be unjust and thirdly, whether there are nevertheless reasons of policy for denying a remedy. An example of a case which failed on the third ground is Orakpo v Manson Investments Ltd.[1975] AC 95 , in which it was considered that restitution would be contrary to the terms and policy of the Moneylenders Acts.”
“Accordingly so far as is relevant to this appeal, the remedy of equitable subrogation is a restitutionary remedy available to reverse what would otherwise be unjust enrichment of a defendant at the expense of the claimant. The defendant is enriched if his financial position is materially improved, usually as here where the defendant is relieved of a financial burden – see Peter Birks, An Introduction to The Law of Restitutionpage 93. The enrichment will be at the expense of the claimant if in reality it was the claimant’s money which effected the improvement. Subject to special defences, questions of policy or exceptional circumstances affecting the balance of justice, the enrichment will be unjust if the claimant did not get the security he bargained for when he advanced the money which in reality effected the improvement, and if the defendant’s financial improvement is properly seen as a windfall. The remedy does not extend to giving the claimant more than he bargained for. The remedy is not limited to cases where either or both the claimant and defendant intended that the money advanced should be used to effect the improvement. It is sufficient that it was in fact in reality so used. The remedy is flexible and adaptable to produce a just result. Within this framework, the remedy is discretionary in the sense that at each stage it is a matter of judgment whether on the facts the necessary elements are fulfilled.”
“Whilst the precise range of relevant factors which are relevant may require consideration in other cases, for my part I would hold that there was a sufficiently close causal connection in the present case between the Bank's agreement to part with its estate in Rush Green Hall and the enrichment of Melissa to hold that Melissa was enriched at the Bank's expense.”
“Mr Gorecia felt under considerable pressure in his relationship with the Varsani family because the Corn and Odessa investments were doing badly by early 2004, at great potential cost to the Varsanis. He therefore decided to divert funds under his control (in the form of the money still held by Relfo, which otherwise would only be lost to the taxman) to the Varsanis in an effort to make some amends. He was aware that the Ukrainian businessmen with whom he dealt had access to networks of entities which could be used as different vehicles to effect payments in ways which obscured the true source of monies and were used to preparing corrupt and fraudulent accounting books and records. He used one or other of his contacts in the Ukraine to arrange to transfer the money from Relfo to the Varsanis in a way that disguised its source and the purpose of the payment. The Intertrade payment represented the onward transmission of the Relfo/Mirren payment, effected and disguised using the complex networks which his contacts had at their disposal.”
“However, it was clear from Mr Gorecia's own evidence and the schedules of payments and receipts in respect of the Corn and Odessa investments that the shadowy Ukrainian business associates of Mr Gorecia were used to channel payments through business entities which did not on the face of it have anything to do with the transactions to which the payments related and were involved in falsifying books and records in relation to those investments. In my view, therefore, Mr Gorecia had access to Ukrainian business-people who had the capacity and willingness, depending on the circumstances, to use networks of companies to effect payments in ways which could not readily be traced or followed. I find, on the evidence taken overall, that Mr Gorecia made use of his access to these contacts and networks to arrange for transfer of the Relfo/Mirren payment to Bhimji Varsani's account with Citibank Singapore.”