Abou-Rahmah & Anor v Abacha & Ors [2005] EWHC 2662 (QB)

Case No HQ02X03988[2005] EWHC 2662 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 28 November 2005
Before
THE HONOURABLE MR JUSTICE TREACY
Between
(1) Adnan Shaaban Abou-RahmahClaimants(2) Khalid Al-Fulaij & Sons General Trading & Contracting CoClaimant(1) Al-Haji Abdul Kadir AbachaDefendants(2) Qumar BelloDefendant(3) Aboubakar Mohammed MaigaDefendant(4) City Express Bank of LagosDefendant(5) Profile Chemical LimitedDefendant
Mr Rupert D’Cruz (instructed by Sohal & Company, Solicitors) for ClaimantsMr Richard Slade (instructed by Constant & Constant, Solicitors) for 4 th DefendantHearing Hearing dates: 23/05/2005 – 27/05/2005 & 01/09/2005 – 02/09/2005
Judgment
[1]This claim arises out of a fraud of which the Claimants say they were victims. The perpetrators of the fraud are alleged to be the 1st to 3rd Defendants. There is also a claim against the 5th Defendant. This trial has been solely concerned with the actions of the 4th Defendant, City Express Bank of Lagos.[2]The background to the fraud is as follows. In about May 2001 the 1st Claimant was contacted by the 2nd Defendant. The 2nd Defendant wanted the Claimant’s assistance on behalf of the 1st Defendant to invest some $65m in an Arab country. Subsequent to this request, the 1st Claimant went to the West African country of Benin and met the 1st to 3rd Defendants to discuss the matter. During his meeting with them he was told that the 1st Defendant intended to create a family trust of some $65m which he wished to transfer to the 1st Claimant as a Trustee to invest in an Arab country. A formal Trust agreement was entered into on the 14 August 2001. In return for his assistance, the 1st Claimant was promised some 40% of the Trust capital and some 15% of the income produced. The agreement, he says, was that those monies once transferred to Kuwait, (from which country the 1st Claimant emanates), would be invested in real estate. He claims that the real estate market in Kuwait was very buoyant and that very generous returns on investments were possible.[3]The 2nd Claimant agreed to assist the 1st Claimant in making suitable investments with the proposed trust money and there was an agreement asserted to exist between those two claimants that they would share in any monies made from the 1st Claimant’s agreement with the 1st to 3rd Defendants. That agreement between the 1st and 2nd Claimants does not appear ever to have been reduced to writing.[4]The 1st to 3rd Defendants claimed that the trust money was located in Benin. Having obtained the agreement of the 1st Claimant to act as their trustee in Kuwait in administering the scheme after receipt of funds, there then emerged, according to the 1st to 3rd Defendants, a series of bureaucratic obstacles to transfer which could only be overcome by payments being made. Over a period of time, the 1st Claimant was asked by the 1st to 3rd Defendants, to contribute towards those payments. A pattern emerged of unexpected requests for money which the 1st to 3rd Defendants said they would pay, but to which they eventually ended up asking the 1st Claimant to make a contribution. In compliance with their requests, the 1st Claimant, in August 2001, paid $100,000 in cash as part of the fee of $450,000 which it was claimed had to be paid to the Ministry of Finance in Benin in order to secure authorisation for the transfer of the alleged Trust money. In October and November 2001 the 2nd Claimant, at the request of the 1st Claimant, paid a total of $450,000 as part of what the 1st Claimant had been told was a fee which needed to be paid to the Benin Drug Enforcement Agency in order to obtain a drugs certificate required for the release of the money. On 9 January 2002 and on 5 February 2002 the 2nd Claimant, at the request of the 1st Claimant, paid $400,000 and $225,000 respectively into the 4th Defendant’s HSBC Bank account in Poultry London. Those payments were made with instructions that the money was to be held for the benefit of Trust International, which was the name of the party to whom the 1st Defendant had instructed the 1st Claimant to pay the money. The 1st Claimant had been told that these two payments of $400,000 and $225,000 were VAT payable on the alleged trust money.[5]In March 2002, the 2nd Claimant, again at the request of the 1st Claimant, paid the sum of $200,000 as part of what he was told was the fee for an Anti-Terrorist certificate required for transfer of the alleged trust money. Despite these payments having been made and despite assurances throughout the process that each successive payment would trigger the release of the trust money, the trust money was never transferred to the 1st Claimant. The 1st, 2nd and 3rd Defendants have disappeared. It became clear that the scheme was a scam used to defraud the Claimants of a total of $1.375m, representing the sums referred to above.[6]The 4th Defendant is a Nigerian registered Bank, hereinafter referred to as “the Defendant”. It has no branches in the UK. It held a bank account at HSBC in London known as the “CEB Independent Account”. This account was used to receive sums in dollars and sterling in London. Against that account, the 4th Defendant could release sums in Nigerian Naira to customers in Nigeria. Payments of $400,000 and $225,000 matching those referred to at Paragraph 4 above were released to customers at the Defendant’s branch in Apapa, Nigeria. The customers to whom the money was released do not appear to be any of the first three Defendants. The customers who obtained the monies opened the account using names of Mr Ibrahim and Mr Saminu. They operated under the business name Trusty International. The name of this account, it will be noted, varies from the name of Trust International for whose benefit the money paid into the HSBC account by the Claimants was instructed to be held.[7]The Claimants raise four heads of claim. Firstly, they contend that the circumstances of the Defendant’s receipt and handling of the total of $625,000 amounts to knowing or dishonest assistance on its part in the fraud which was committed against the Claimants. Secondly, the Claimants maintain that they have an action in negligence. They say that the payments by the Defendant of the sum of $625,000 to a party other than the one identified in the Claimant’s instructions as the proper beneficiary, give rise to a claim in negligence. Next, the Claimants assert that the money that was held by the Defendant on a resulting or Quistclose trust which was breached when the money was paid to a party other than the one identified in the Claimant’s instructions as the proper beneficiary. Fourthly, the Claimants maintain that the circumstances of the payment give rise to a claim for restitution of the money on the basis of money had and received and/or mistake.[8]The Defendant responds in this way to those four heads of claim. Firstly, there is an over-arching allegation of illegality. It is said that the Claimant was knowingly involved in a dishonest scheme or was involved in the illegal performance of a scheme in such a way as to disentitle him to relief from our courts.[9]Turning to the individual heads of claim, so far as knowing or dishonest assistance is concerned, the Defendant denies that it had any necessary degree of knowledge which would render it liable under this head of claim. As to negligence, it is contended that the Defendant did not owe the Claimants a duty of care in relation to the money paid into its HSBC account. It denies breach of any duty in paying the money to Trusty International and it denies in any event that loss has been sustained as a result of any action that it carried out. Further, in relation to negligence, it is asserted that if negligence is established, then there was contributory negligence on behalf of the Claimants.[10]As to the Quistclose or resulting trust head of claim, the response of the Defendant is to deny that the instructions which were given and which accompanied the payments of the monies into the HSBC account were capable of amounting to an express trust. Further, it is said that by paying the money to HSBC, the Claimants had parted with any beneficial interest in the money which they had previously had.[11]Turning finally to the action for money had and received, the case for the Defendant is that it changed its position by reason of having remitted the money to the account of Trusty International, and, having released the monies to Messrs Ibrahim and Saminu, that such payment was made in innocence and good faith and consequently this head of claim must fail.[12]The evidence before me has consisted of: i) Oral evidence from the 1st Claimant with a confirmatory statement from the 2nd Claimant, ii) A trial bundle of documents evidencing the working and progress of the fraud by the 1st to 3rd Defendants and the mechanisms of money transfers involved. iii) Oral evidence from: a) Dare Faronbi, Branch Manager of the Defendant’s Apapa branch in 2001-2. b) Aderemi Adejobi, Head of Operations at the Apapa branch in 2001-2. And c) Olusola Adeoti, Director and Chief Executive Officer of the Defendant.

Illegality

[13]It is convenient first to consider the issue of illegality raised by the Defendant and which, if made out, would lead this court to refuse to grant the Claimants any relief. No direct claim of illegality is raised against the 2nd Claimant; the submission is that the 1st Claimant is tainted and that that is sufficient. No argument to the contrary has been raised. The burden of proof rests with the Defendant.[14]The Defendant submitted that the court should find the necessary illegality by reference to various circumstances which I will shortly consider. The Defendant acknowledged that the 1st to 3rd Defendants were fraudsters, and that the Claimants had been deceived by them and were the primary objects of their fraud. Nonetheless, the Defendant maintained that the Claimants (and the 1st Claimant in particular) had knowingly participated in an illegal scheme, namely the handling of the proceeds of crime. It is plain to me that the 1st to 3rd Defendants were indeed fraudsters whose prey was the Claimants. It is clear that this was a highly sophisticated scam which employed people in Benin and abroad to give considerable colour and verisimilitude to the activities of the fraudsters. It is clear that the Claimants were enmeshed by a gradual process of apparently genuine official requests for “one-off” payments of one kind or another, each of which arose at the last moment and each of which, it was alleged, represented the final obstacle to the release of the $65million. It is clear to me that , in truth, the $65million fund never existed, and that its purported existence was a false assertion upon which the fraud upon the Claimants was founded.[15]I have to say, therefore, that the fact that the Claimants were duped as the fraudsters intended them to be tends to point away from the assertion of illegality made by the Defendant. Nonetheless, it is necessary to consider the Defendant’s submission in greater detail.[16]The Defendant says that the court should bear in mind that the 1st Claimant had a long background and experience as a Kuwaiti lawyer and businessman. I agree that this is relevant. The Defendant then points to the following matters: i) The Claimant was to reap vast rewards from the scheme – up to 40% of the fund and 15% of the income. ii) The absence of documentation either between the 1st to 3rd Defendants and the 1st Claimant or between the 1st and 2nd Claimants. This, it is said, is an indicator that matters were being dealt with in a clandestine manner inconsistent with an honest transaction. iii) The assertion that each of the payments made by the Claimants, including the two payments the subject of this action, must from the circumstances have been recognised as bribes or other illegal payments. iv) The assertion that the 1st Claimant must have realised that the monies to be transferred were associated with the Abacha family, and thus were the proceeds of crime. v) The references to money laundering in correspondence sent by the 1st Defendant to the 1st Claimant in May and June 2002, and the 1st Claimant’s non-rebuttal thereof. vi) The reference in a letter of 31/01/2002 sent by the 1st Defendant to the 1st Claimant in which he refers to the transfer of monies to London as being “due to the gifts we had given out”.[17]For the purposes of the illegality submission I have assumed at present that the Defendant has surmounted three other hurdles. Firstly, that the matter of illegality has been sufficiently pleaded by the Defendant; secondly, it is enough if the Claimants’ claim is, in reality, based on illegality (as opposed to specifically pleaded on an illegality); and thirdly, that the Claimants’ conduct, if made out, is sufficiently closely linked to the subject matter of the claim.[18]The Defendant submits that the matters set out at Paragraph 16 above show on the balance of probabilities that the 1st Claimant either believed that the trust money was the proceeds of crime or that he believed that the payments made by the Claimants were bribes or other corrupt payments. If either of those matters is made out, then the court should not permit the Claimants to prove any claims and should not grant any relief sought.[19]I have weighed Mr Slade’s submissions carefully, but I conclude that the evidence does not establish either individually or cumulatively matters which could operate as a bar to the Claimants on grounds of illegality.[20]On the issue of the potentially large rewards available to the Claimants, the 1st Claimant gave evidence of a very buoyant property market in Kuwait in which very high returns on investments were to be expected. As the person under the scheme who would be providing the requisite knowledge as to what would be successful real estate investment in Kuwait, it was not surprising, he said, that he should be well remunerated. The 1st Claimant gave examples in his evidence of the scale of property value increases which had been experienced in Kuwait. Further, for the scheme to work it was necessary, under Kuwaiti law, for a Kuwaiti national to be involved. Although the scale of potential reward for the Claimants was indeed generous, I did not find the 1st Claimant’s evidence incredible on this issue or so adversely affected by cross-examination that I could not accept it. No evidence to counter the Claimant’s case was put forward by the Defendant. Bearing in mind where the burden of proof lies, I do not find that this aspect demonstrates improper and illegal involvement by the Claimants.[21]The absence of documentation setting out how the money was to be invested in Kuwait or dealing with other practical aspects of the working of trust scheme does not persuade me of the Defendant’s argument. There is ample documentation of the contacts between the 1st to 3rd Defendants and the Claimants which militates against the general assertion of a clandestine operation. The names, addresses and contact points for the Claimants are transparent and genuine. In the light of this, the absence of documentation relating to the setting up of and workings of the scheme is consistent with a situation whereby that aspect of the matter would be attended to once the trust money had successfully made its way from Africa to Kuwait.[22]As to the payments made by the Claimants, it has to be borne in mind that the whole object of the fraudulent scheme was to deceive the Claimants into making them. In each instance great care was taken to provide an apparently genuine justification for the various fees said to be necessary. The scam involved, as I find, the introduction of the 1st Claimant to individuals falsely posing as high-ranking government or banking officials in Benin. He was taken to buildings which were apparently government or public offices. Appropriate security measures were in place. Appropriate bureaucratic steps were gone through. Suitably convincing official documents and receipts were produced. The whole framework of the fraud was highly sophisticated, convincing and, with hindsight, carried out with ruthless efficiency. In those circumstances although the Defendant is now able to point out anomalies or raise queries about individual payments, I am satisfied that the Claimant was duped, firstly into believing that the trust money genuinely existed and secondly into believing that the payments made were genuinely required to enable release of the money for transfer to Kuwait. It is quite clear that the 1st Claimant had repeatedly to be cajoled into making such payments, and that the 1st to 3rd Defendants falsely pretended that they themselves were making substantial contributions to the allegedly necessary fees. It is clear also that from time to time the 1st Claimant queried aspects of the matter in a way which I find inconsistent with a belief that he was participating in a nefarious scheme or payments. Two examples suffice. Firstly, he checked with “Salim” who purported to be an official in the Benin Drugs Enforcement Agency that the 1st to 3rd Defendants had indeed paid their share of the necessary fee. Secondly, he queried an instruction to pay the second tranche of “VAT” payments to a trading company with an account at the Taiwan Business Bank, having made the first “VAT” payment to the account of the Defendant at HSBC London. He would not have raised queries in this way had he been improperly involved with the 1st to 3rd Defendants.[23]The next matter concerns the Abacha family. The 1st Claimant’s evidence was inconsistent as to when he first learned that the 1st Defendant was said to be the brother of General Abacha, the former President of Nigeria. It was either shortly before or shortly after he signed the Trust Agreement on his first visit to Benin in August 2001. This inconsistency does not seem significant to me. On any view, the knowledge that the 1st Defendant claimed to be related to General Abacha pre-dated any of the payments made by the Claimants. I should say at this stage that I regard the claimed relationship to General Abacha as yet another component of the fraud perpetrated upon the Claimants; I consider it extremely doubtful that any such relationship existed. Although no doubt the relationship was mentioned with a view to demonstrating the 1st to 3rd Defendants’ links to power and wealth, I do not accept that the acquisition of this information means that the 1st Claimant thereby became aware that the trust money was the proceeds of crime. There is no evidence that he became aware at any relevant time of assertions now made by the Defendant that General Abacha was a criminally corrupt Head of State. Some newspaper clippings have been exhibited asserting such misconduct, but they post-date payments relevant to this case. The 1st Claimant was a Kuwaiti-based lawyer, not a Nigerian or Benin-based resident. He had had no prior connection with that part of the world. There is no evidence to show that he had knowledge or information at any relevant time such as to fix him with the knowledge or belief that the trust fund monies were criminal in origin. Indeed, in the course of his dealing with the 1st to 3rd Defendants, the 1st Claimant met individuals purporting to be bankers, ministers and other public officials in Benin, none of whom raised any issue of the legitimacy of the fund, although they were in a position to do so. There was in my view nothing which arose in the plausible pretence played out before the 1st Claimant when he visited Africa, and maintained in correspondence thereafter to put him on notice or enquiry.[24]Letters were sent by the 1st Defendant to the 1st Claimant in May and June 2002 which refer openly to the proposed transfer of the trust money as being money laundering. These letters came at a time when the 1st Claimant had become highly suspicious of the activities of the 1st to 3rd Defendants, and had begun to make his own investigations. They had undoubtedly got wind of this. I regard these letters as no more and no less than the end-game of the fraud. They were deliberately couched in these terms to smear the 1st Claimant and to seek to deter him from investigating further or going to the authorities. The letters post-dated any relevant payments and so cannot affect them. I reject the argument that the letters have retrospective effect. They do not, in my judgment, confirm knowledge previously imparted to the 1st Claimant. They represent a new twist in the story designed to protect the 1st to 3rd Defendants. The 1st Claimant’s failure to rebut the assertions was understandable. He wanted to maintain contact in the hope of being able to recover his money. To confront them would, he justifiably feared, cause them to disappear into thin air. Further, it is relevant to bear in mind that the 1st Claimant reported this matter to British Police, Interpol, and police in Benin. He has disclosed the documentation which underlies this story including the “money-laundering” correspondence. These facts also point away from knowing involvement in some criminal scheme.[25]As to the letter of 31/01/2002, (see Paragraph 16 (vi) above), this was not relied on by the Defendant in his comprehensive written closing submissions, but was raised by me during oral argument. If this shows illegality, it would affect the second of the two “VAT” payments – that is the $225,000 paid on or about 5 February 2002. I accept the 1st Claimant’s evidence that he had not been party to the making of any gifts to officials in Benin and that until he received this letter he was unaware that any gifts had changed hands. I accept that he did not relate these “gifts” to the payments made purportedly as various fees necessary to enable transfer of the trust money to take place. I accept that he was thinking in terms of something much smaller in value such as a watch. It is clear from some correspondence I have seen that there was a level of acceptable gift-making involved in this matter – the fraudsters solicited gifts for themselves from the 1st Claimant as a token of trust and friendship, and he complied. This supports the 1st Claimant’s assertion as to what he understood by “gifts”. Whether or not “gifts” of the type he contemplated were over-generous, they did not in my judgment, constitute corrupt bribes, and certainly did not reflect any part of the substantial payments he was prevailed upon to make. I find nothing in this episode which taints the Claimants, and certainly not in a way which is anything other than wholly incidental to the matters as a whole.[26]The effect of the foregoing paragraphs is that I reject the Defendant’s submission that the Claimants are to be denied relief on grounds of illegality.

Transfer of monies:

[27]I will next deal with an issue raised by the Claimants as to the transfer of the two “VAT” payments from the Defendant’s account at HSBC London to Messrs Ibrahim and Saminu, who were operating an account at the Defendant’s branch in Apapa, Nigeria under the name of Trusty International.[28]The Claimants submit that the Defence has changed its case on the transfer of monies and should not be allowed to do so. They point out that at Paragraph 12.3 of the Defence it is asserted that: “the Fourth Defendant remitted all the sums received into its HSBC bank account to the account of Trusty International, and its customer withdrew all those sums from the account by 20 April 2002”.[29]Shortly before trial information provided by the HSBC cast doubt on the assertion that monies were so remitted. The Defendant’s pre-trial skeleton implicitly recognised this by reciting that:
“in reliance upon the payments made to the HSBC account by C2 [the 2nd Claimant] … it permitted Mr Ibrahim and Mr Saminu to make withdrawals from the Trusty International account and the monies are no longer available on the Trusty International account.”
[30]At trial, it emerged that what had occurred was not a transfer of monies from HSBC to Apapa, but a Transfer of an equivalent amount in Nigerian Naira from a Domiciliary account of the Defendant in Lagos to the Trusty International account with the Defendant’s branch in Apapa. In other words, rather than a direct transfer of monies from HSBC, the matter was dealt with by internal bookkeeping in the way described once the Defendant was aware of receipt of funds from the 2nd Claimant into its HSBC account in London.[31]The Claimants described this change as so fundamental that I should not permit the Defendant to proceed on this basis. I disagree. Whether the sums paid by the Claimants as “VAT” payments went directly or indirectly to Messrs Ibrahim and Saminu, (who must have been in league with the fraudulent 1st to 3rd Defendants), the effect was the same. The fraudsters were enabled to obtain their money from the Claimants using the Defendant’s account at HSBC as a means of doing so. In my judgment, the Claimants were put at no disadvantage. They say that they would wish to have had disclosure of the Defendant’s Domiciliary Account documents. However, they did not invite me to adjourn for such a purpose, although they had at trial complained with some justification about the quality and timing of some disclosure by the Defendant. The evidence before me led me to conclude that the difficulty in locating documents which were produced at a late stage was due to the Defendant’s problems in locating documents which had been moved away from Apapa and into storage. The evidence of Mrs Adeoti, the Defendant’s Chief Executive, together with that of Mr Faronbi, in describing the problems of searching for documents in a warehouse into which banking documents from a number of branches had been put haphazardly was entirely credible. The Defendant’s disclosure of documents has been inefficient but not deliberately or dishonestly so.[32]The Claimants’ second argument on this issue is that, even if I were against them on the first point, the evidence now before the court as to the flow of money into the hands of Ibrahim and Saminu (Trusty International) is not credible. I should, they say, approach the case on the basis that the monies paid into the Defendant’s account at HSBC are still there and have not been accounted for to any person. I do not accept this argument. Firstly, Mr Faronbi’s evidence explained how the Defendant used its Lagos funds (the Domiciliary account) to credit Trusty International because of the receipt of funds to the same value into the Defendant’s HSBC account in London. I accept this evidence as reliable. It is supported by an examination of the Trusty International bank statements (which had been properly disclosed). An attempt by Mr D’Cruz to call into question the integrity of the Trusty International bank statements fails. The issues he raised are explicable by the use of different print ranges and the use of American rather than British style dating. I reject the suggestion that any anomaly is sinister or discredits the bank statement as a reliable record. Moreover, Mr Faronbi produced some late-discovered documents (now at pages 299.46 to 299.49 of the Trial Bundle) which I accept as genuine. They show instructions from the 2nd Claimant’s bank in Kuwait relating to the “VAT” monies paid into the Defendant’s HSBC account. He said, and I accept, that these documents had been provided to him by Trusty International, (Ibrahim and Saminu). They are an additional confirmatory record of the fact that the payments made at Apapa to the credit of Trusty International were derived from the Claimants’ monies paid to the Defendant’s account at HSBC.[33]Accordingly, I intend to approach the case on the basis that the evidence established that the sums of $400,000 and $225,000 were paid by the Claimants to the Defendant’s London HSBC account, and by means of internal bookkeeping within the Defendant were credited and/or paid to Trusty International who were in league with the fraudulent 1st to 3rd Defendants.

Knowing Assistance in a breach of trust:

[34]The Claimants acknowledge that no cause of action arises simply from knowing assistance in a tort – see Credit Lyonnais Bank v ECGD (1998) 1 Lloyds Law Rep 19. It is also acknowledged that a fiduciary or trust relationship and a breach of trust is a prerequisite to a claim against a stranger (as the Defendant is) for knowing assistance – see Royal Brunei Airlines SDN BHD v Tan (1995) 2AC 378.[35]Thus far the parties are agreed. However, they part company on whether there was any fiduciary relationship in this case. The Defendant asserts that it is a contortion to call the proposed transaction, whereby the 1st Claimant was to invest the supposed $65m on behalf of the 1st to 3rd Defendants, a constructive trust whereby a fiduciary relationship was owed by the 1st to 3rd Defendants to the 1st Claimant. It was the 1st Claimant in whom those Defendants were proposing to repose trust as trustee of their supposed $65m. The 1st to 3rd Defendants therefore owed no fiduciary duty to the 1st Claimant. His remedy and protection against their scam lies not in breach of trust but in the tort of deceit whose reach cannot be extended to the Defendant in this case by the remedy of knowing assistance.[36]The Claimant’s submission in reply is that the necessary fiduciary relationship is shown, and reliance was placed on the decision of Etherton J in Murad and another v Al Saraj and another (2004) EWHC 1235 (Ch) at paragraphs 325-332. Their argument is that the nature of the agreement between the 1st Claimant and the 1st to 3rd Defendants was that of a partnership or joint venture in that the essence of their bargain was that the parties would collaborate to invest the trust money and would share profits generated from the investment. They go on to say that partners and joint venturers owe a duty to one another to act in good faith in their dealings with one another. Accordingly, a fiduciary relationship existed in relation to the implementation of the agreement, which was breached by the fraud perpetrated on the Claimants including the fraudulent representations made to induce payment of the $625,000 into the Defendant’s HSBC account.[37]For my part, I accept that the agreement referred to at Paragraph 2 above was in the nature of a joint venture. I accept that such a venture can give rise to fiduciary duties including a mutual duty on the parties to act in good faith in their dealings with one another.[38]Did such duties arise in this case? I hold that they did for the following reasons: i) The 1st Claimant and the 1st to 3rd Defendants were joint venturers in the proposed investment of the $65m; ii) Their relationship was one of trust and confidence because: a) All the 1st Claimant’s actions were predicated on the fundamental representation that such a fund existed, b) The 1st to 3rd Defendants took elaborate positive steps to convince him of that at all relevant times; c) The whole relationship was orchestrated by the 1st to 3rd Defendants in a way calculated to win the trust and confidence of the 1st Claimant who responded to situations devised by the 1st to 3rd Defendants. The 1st Claimant was reliant on information given to him by or through the 1st to 3rd Defendants.[39]The frauds perpetrated upon the 1st Claimant are a clear breach of fiduciary duty. I therefore reject the Defendant’s initial challenge to this head of claim.[40]The Defendant however contends that it is not liable under this head for a second reason, namely that the Claimants cannot show that the Defendant knowingly assisted in the breach of fiduciary duty.[41]The Claimants accept that it is necessary to show requisite knowledge on the part of the Defendant before liability can be established.[42]The state of mind of the person assisting was considered by the Privy Council in the Royal Brunei case (supra). That decision was considered and applied by the House of Lords in Twinsectra Ltd v Yardley & Ors (2002) 2AC 164. After oral submissions in this case had concluded, the Privy Council returned to the topic in Barlow Clowes International Ltd (In Liquidation) and others v Eurotrust International Ltd and others (Privy Council Appeal No 38 of 2004: Judgment delivered 10 October 2005). Both Counsel have accepted my invitation to present additional written submissions in the light of this recent decision. I am grateful to Mr Slade for properly drawing the decision to my attention although in part it did not support some of his earlier submissions.[43]Having considered submissions and authorities, I hold that: i) A dishonest state of mind on the part of the person assisting is required in the sense that that person’s knowledge of the relevant transaction had to be such as to render his participation contrary to normally acceptable standards of honest conduct. ii) Such a state of mind may involve knowledge that the transaction is one in which he cannot honestly participate, (e.g. a misappropriation of other people’s money), or it may involve suspicions combined with a conscious decision not to make enquiries which might result in knowledge. iii) It is not necessary for the Claimants to show that the person assisting knew of the existence of a trust or fiduciary relationship between the Claimants and the First to Third Defendants and/or that the transfer of the Claimants’ monies to Trusty International via the Defendant involved a breach of that trust or fiduciary relationship. iv) As Lord Hoffman put it at Paragraph 28 of Barlow Clowes:
“…. It was not necessary ….that Mr [H] should have concluded that the disposals were of monies held in trust. It was sufficient that he should have entertained a clear suspicion that this was the case. Secondly, it is quite unreal to suppose that Mr [H] needed to know all the details ….before he had grounds to suspect that [X] and [Y] were misappropriating their investors’ money”

He later continued:

“Someone can know, and can certainly suspect, that he is assisting in a misappropriation of money without knowing that the money is held on trust or what a trust means: see Twinsectra Ltd v Yardley (2002) 2 AC 164 at Paragraph 19 (Lord Hoffman) and Paragraph 135 (Lord Millett).”
He later continued:[44]At Paragraph 137 of Twinsectra, Lord Millett said this:
“The gravamen of the charge against the accessory is not that he is handling stolen property, but that he is assisting a person who has been entrusted with the control of a fund to dispose of it in an unauthorised manner. He should be liable if he knows of the arrangements by which that person obtained control of the money and that his authority to deal with the money was limited, and participates in dealing with the money in a manner which he knows is unauthorised.”
[45]The Claimants’ factual case on knowledge asserted that the Defendant was liable by: i) Allowing Trusty International (Messrs Ibrahim and Saminu) to open an account which it knew would be used for money laundering; ii) Allowing money to be transferred into that account which it had reasonable grounds to suspect was laundered money; iii) Allowing the money to be transferred into Trusty International’s account even though Trusty (as opposed to Trust) International was not the named beneficiary of the money; iv) Allowing its HSBC account to be used by Trusty International to transfer money in and out of the country without checking the reasons for the payments.[46]These assertions are principally based upon the Claimants’ analysis of the evidence of Mr Faronbi. He was the Branch Manager of the Defendant’s Apapa branch and dealt with the opening of the Trusty International account by Messrs Ibrahim and Saminu. The Claimants contended as follows. Firstly, Mr Faronbi’s evidence showed that he was aware at the time of the opening of the account that the Trusty International account would be used at least in part for laundering money for Nigerian politicians. Secondly, they argued that his conduct in the account opening procedures was lax and not in accordance with the Defendant’s internal checking policies designed to combat money-laundering and was due to a willingness to assist Trusty International dishonestly. Thirdly, they pointed to the fact that the monies paid into their HSBC account for the benefit of Trust International had been paid out to Trusty International. Fourthly, they said that the Defendant, through Mr Faronbi, was in breach of the 1993 Money Laundering Decree No3 by failing in the obligation to enquire in certain circumstances into the origin and destination of the funds, and the aim of the transaction and the identity of the beneficiary. Fifthly, it was said that the provision of details of the Defendants’ HSBC account to customers for their use in transferring funds in and out of Nigeria without enquiry as to the purpose and source of payments was not the conduct of an honest banker.[47]There was controversy as to whether the evidence warranted the propositions put forward in the preceding paragraph. I do not find the allegations to have been made good. In particular, I found no evidence that the Defendant, through Mr Faronbi, was aware of the existence of a situation giving rise to a fiduciary duty owed to the 1st Claimant, or that such a duty had been breached, or that the funds passing through the Defendant’s HSBC account were the fruits of the breach of duty, or had been obtained by fraud. There was in this case no evidence of such matters or of any link between the 1st to 3rd Defendants and the monies paid into the HSBC account which was known to the Defendant or its employees. There was no evidence of any link between the 1st to 3rd Defendants and the Claimants and/or Messrs Ibrahim and Saminu, which was known to the Defendant or its employees.[48]I think it necessary to comment further on the five points previously referred to. As to the first point, although Mr Faronbi’s evidence was not always easy to assimilate into a consistent whole, I have come to the conclusion that at the time of opening the account for Trusty International Mr Faronbi’s evidence showed that he: i) Was aware of widespread practices by which corrupt Nigerian politicians would seek to launder money by sending it out of the country. ii) Was aware that Messrs Ibrahim and Saminu were involved in the bureau d’exchange business which included international transactions. iii) Was aware that such businesses were a common means of laundering money. iv) Was aware that a substantial number of Trusty International’s clients were politicians. Although he made those concessions, Mr Faronbi denied knowing that Messrs Ibrahim and Saminu were aiding corrupt politicians at the time, although he said he now viewed matters differently. I have come to the conclusion that at the time, Mr Faronbi did not know, but probably suspected, in a general way that Messrs Ibrahim and Saminu might be in the course of their business, from time to time assisting corrupt politicians to launder money. There is nothing to show that he had any particular suspicions about the two transactions the subject of this case. I do not consider that this was a situation where he entertained a suspicion and made a conscious or deliberate decision not to make enquiries in case they resulted in knowledge of an untoward nature about these transactions. I accept his evidence and that of Mrs Adeoti, that to a large extent the economy of Nigeria legitimately operates on cash transactions. Moreover, all receipts and payments out were reported at the relevant time by Mr Faronbi to the Nigerian Drugs and Law Enforcement Agency as required by Regulation 10 of the Money Laundering Decree. He was aware that the Agency could then investigate a transaction if it wished. I do not consider that Mr Faronbi acted dishonestly in relation to these transactions. He did not have any knowledge or suspicions concerning these transactions which was such as to render his, or his employers’, participation in them contrary to normally acceptable standards of honest conduct.[49]Turning to the second point, although there was evidence demonstrating a laxity in following the Defendant’s procedures with regard to opening accounts, I do not regard any of the demonstrated failures as indicative of dishonest malpractice as opposed to administrative inefficiency or oversight caused by Mr Faronbi’s informal approach to his customers. The third point is not in my view indicative of dishonesty as opposed to oversight.[50]As to the fourth point, I do not find anything sinister in the failure to report under Regulation 6. This only requires reporting in circumstances of a transaction which is suspicious or unduly complex. I accept Mr Faronbi’s evidence that he did not consider that Regulation 6 applied to the two transactions in this case as credible.[51]Finally, as to the fifth point, the mechanics of the operation of the HSBC account as explained by Mrs Adeoti, (which I accept as credible evidence), do not give rise to any evidence of the sort of knowledge required to sustain this head of claim.[52]In my judgment, then, this head of claim fails as Mr Faronbi (and thus the Defendant) did not in relation to these transactions fall within the ambit of liability as explained by Lord Millett in Twinsectra (see Paragraph 44 above), and did not have dishonest knowledge (in the sense discussed above) of misappropriation from anyone.

Negligence:

[53]The Claimants maintain that the payment of $625,000 to Trusty International was a payment other than one identified in the Claimants’ instructions as the proper beneficiary and thus gives rise to a claim in negligence.[54]It was submitted that the Defendant as receiving bank owed a duty of care to pay monies received only to the beneficiary identified in the payer’s instructions. Reliance was placed on Royal Bank of Canada v Stangl (1992) 32 ACNS (3d) 17 Ontario Court, General Division and also on Law of Banking Payments, Brindle and Cox (3rd Ed at Para 3-091).[55]It was further submitted that in so far as there was any discrepancy between the intended beneficiary identified in the paying instructions and any party claiming payment of the money in question, the Defendant was under a duty to clarify any such discrepancy with the Claimants and obtain their approval before paying any money to the claiming party.[56]Thus, the payment to Trusty International was a breach of those duties, since the monies were paid without checking the discrepancy (as to the words Trust International) on the paying instructions and obtaining authorisation from the Claimants to pay Trusty International.[57]As a result of the Defendants’ negligence it is said the Claimants lost $625,000 paid into the Defendant’s HSBC account.[58]The foregoing claims were disputed by the Defendant as to the existence of a duty of care from the Defendant to the Claimants, as to breach of any such duty and as to loss flowing therefrom.[59]The relevant facts are as follows: i) On 9 January 2002 and on 5 February 2002 the 2nd Claimant, at the request of the 1st Claimant, paid $400,000 and $225,000 respectively in the Defendant’s HSBC bank account in London. ii) The payments were made because the 1st Claimant had been duped by the 1st to 3rd Defendants into believing that they represented VAT payments necessary to secure the release of the $65m fund. iii) The details of the HSBC account showing Trust International as the beneficiary were provided to the 1st Claimant by the 2nd Defendant. iv) The Swift transfer documentation from Gulf Bank Kuwait, (the 2nd Claimant’s bank), to HSBC showed in field 59 the “Beneficiary Customer” or recipient as “CED Independent Account” with the Defendant’s correct account number. “CED” was in error for “CEB”. v) Mr Funmi, Deputy Head of International Operations for the Defendant in Lagos, queried the description of the beneficiary with HSBC. vi) HSBC after checking with Gulf Bank confirmed that the “beneficiary name” should read as “CEB Independent Account”. vii) On the occasion of the first transfer Gulf also confirmed that “all other particulars of payment remain unchanged”. viii) Field 70 of the Swift transfer document on the first occasion read as follows:- “70. Details of Payment. Beneficiary: Trust International Attn: Mr Mike McDade.” Beneficiary: Trust International Attn: Mr Mike McDade.” ix) Field 70 of the transfer document on the second occasion read as follows:- “70. Details of Payment. Attn: Mike McDade Benen: Trust International.” These details were reconfirmed to Mr Funmi at his request. Attn: Mike McDade Benen: Trust International.” x) I do not consider anything turns on the different descriptions under Field 70 in the two transfers. Neither party contended to the contrary. xi) After the first payment had been made, the 1st Claimant received instructions initiated by the 1st to 3rd Defendants that the second payment ($225,000) should be paid to a bank in Taiwan. The 1st Claimant queried this with the 1st Defendant who then instructed him to make the second payment in the same way as the first (i.e. to the HSBC bank). xii) Each of the two payments was in due course credited by the Defendant to the account of Trusty International opened by Messrs Ibrahim and Saminu at the Defendant’s Apapa branch in Nigeria in December 2001.

Attn: Mike McDade

[60]The Claimants’ assertion that the Defendant, as receiving bank, owed a duty of care to pay monies only to the beneficiary identified in the payer’s instructions was founded on the decision in Royal Bank of Canada v Stangl in which a judge of the Ontario Court of Justice held the receiving bank negligent in crediting sums received from the paying bank into the wrong account, that is an account not named in the instructions from the paying bank, but bearing a similarity to that name. This decision is cited in Brindle and Cox’s Law of Bank Payments (3rd Edition) with the observation that the facts of a particular case “may make it possible for claims to be brought against receiving banks in negligence”.[61]It is to be noted that the judgment in Royal Bank of Canada does not reveal that there was any argument or judicial consideration of whether a duty of care was owed in the circumstances.[62]The decision is out of line with other Canadian authorities. In the earlier case of Groves-Raffin Construction Limited & others v Bank of Nova Scotia & others (1975) 64 DLR (3rd) 78, the British Columbia Court of Appeal held that a bank owed no duty of care to a non-customer drawer of a cheque. To impose such a duty would be “an unjustifiable extension” (per Bull J.A.) and would “place a well-nigh intolerable burden on banks and seriously interfere with the expeditious transaction of banking business” (per Robertson J.A.).[63]This decision was not considered in the Royal Bank of Canada case, nor was Toor and Toor v Bank of Montreal (1992) 2 Bank LR 8 which followed Groves-Raffin. In Toor, the Defendants drew a cheque on 16 October 1988 payable to Hews Development Corporation. On 20 October 1988 the Defendant bank accepted the cheque for the credit of an account opened on 4 October 1988 by one Price in the name of Hews Development. The submission that the defendant bank had a duty to inquire pursuant to a duty to the drawer of the cheque to be careful to credit the proceeds of that cheque to the payee and not some stranger was rejected.[64]Groves-Raffin has been followed in Dennison v Cronin, a decision of the Ontario Court (General Division) of 20 January 1994 and Kyser v Bank of Montreal, a decision of the Ontario Court of Appeal of 15 June 1999.[65]No English decision has been cited to me, but I have been referred to Paget’s Law of Banking (12th Edition) at Paragraph 23.21 where Groves-Raffin and Toor are referred to, and where the authors observe:
“It remains to consider whether the collecting bank owes a duty of care to other parties, [i.e. non-customers], such as the drawer of a cheque. It is submitted it does not. Such parties are not persons who can reasonably rely on the collecting bank to protect their interests.”
[66]Notwithstanding the apparent weakness of Royal Bank of Canada as a persuasive authority, the Claimants invite me to hold that the Defendant owed a duty of care to the Claimants who were not its customers and to whom it had undertaken no special responsibility.[67]I remind myself that this case is concerned purely with economic loss and that the common law is reluctant to impose a duty of care save in special circumstances. I have also had regard to the threefold test of foreseeability, proximity and reasonableness enunciated in Caparo Industries PLC v Dickman (1990) AC 605 in determining the existence of a duty of care.[68]The following matters seem relevant in this context: i) The Claimants were not the Defendant’s customers. ii) No special responsibility had been undertaken by the Defendant to the Claimants. iii) Until the monies were received by the Defendant there had been no contact from the Claimants – the monies were simply paid by the Claimants to the Defendant’s HSBC bank account. iv) The Defendant received the monies as the agent of its customer to whom it owed duties arising from their contractual relationship. v) A bank has a huge number of potential payers who can remit monies without significant control by the bank. vi) The imposition of a duty of care in relation to such persons (in the absence of special circumstances) would in practice impose very heavy burdens on banks and significantly hamper their efficiency.[69]Whilst I accept that in Groves-Raffin what was under consideration was the obligation of checking the signatory on a cheque whereas in the present case the obligation relates to checking the name of the recipient of the monies, I am not persuaded that the approach to the question of whether a duty of care exists should be different.[70]The Claimants also relied on that fact that in the view of Mr Faronbi, the Apapa branch manager, expressed during cross-examination, there was a responsibility on the Defendant’s International Operations Department at the Head office in Lagos to compare the name of Trust International on the money transfer document with the name of the Defendant’s account holder before processing the payment and to clarify the matter if they noticed a discrepancy.[71]I do not consider that Mr Faronbi’s view provides an authoritative basis for reaching conclusions as to whether in fact a duty of care was owed by the Defendant as receiving bank.[72]Having considered the Canadian authorities, the absence of English authority to support the Claimants’ proposition, and the threefold test emerging from Caparo v Dickman, I have come to the conclusion that no duty of care arises in this case.[73]If I had held that a duty of care existed, would it have been breached by the Defendant’s payment to Trusty International when the Swift transfer document referred to Trust International in Field 70? Would any loss have been caused thereby? There was no evidence before me to suggest that the Defendant’s International Operations Department noticed the difference between “Trust” and “Trusty”. Mr Faronbi accepted that he had not noticed the difference. However, he asserted, and I accept, that either Mr Ibrahim or Mr Saminu had brought into his branch copy documents which constituted clear evidence that they were the intended recipients of the money as far as the fraudsters were concerned. Mr Faronbi produced the documents to the court and I accept his evidence that they were produced to him as stated. They show to me a clear link between Trusty International (Messrs Ibrahim and Saminu) and the primary perpetrators of the fraud, the 1st to 3rd Defendants. I referred to these earlier at Paragraph 32 above.[74]In my judgment, even if Mr Faronbi had noticed the discrepancy between “Trust” and “Trusty” the production of the documents would reasonably have overridden any question in his mind as to the intended recipient of the monies. Indeed the entire logic of the situation is that the 1st to 3rd Defendants intended the Claimants to pay the monies to Trusty International as part of the fraudulent extraction of monies from the Claimants. It would have been entirely counterproductive from the fraudsters’ point of view to create obstacles to their aim of relieving the Claimants of their monies. I conclude that in all probability the discrepancy between “Trust” and “Trusty” was an unintended error.[75]I do not consider, therefore, that any breach of duty could be established if such a duty existed.[76]Nor do I consider that any loss could have been caused by any breach. Although the 1st Claimant had received a number of instructions from the 1st Defendant that the monies were to be paid to Trust International, it seems clear to me that any enquiry initiated by the Defendant would have been referred back up the chain to the 1st Defendant. In order to obtain the money he would in my view have confirmed that the monies should be paid to Trusty International. Further, if he had done this, the Claimants would have accepted this as it was immaterial to them whether the name of the recipient was Trust or Trusty International. The Claimants would have ended up in exactly the same position as they now find themselves.[77]For these reasons, I hold that the claim in negligence fails. In those circumstances it is unnecessary to consider in detail an allegation of contributory negligence. I will merely state my conclusion that it would not have succeeded. With the benefit of hindsight it has been open to the Defendant to point to clues or pointers to the true situation which were missed by the 1st Claimant. I did not consider that any of the matters raised sufficed to show contributory negligence. The reason the pointers were missed was because of the great skill with which this fraud was perpetrated. It was in my view such that at the time these payments were made, the 1st Claimant did not have the misgivings he later had. I do not consider that he is shown to have failed reasonably and properly to have looked out for his own interests.

Quistclose trust:

[78]The Claimants’ assertion that a Quistclose or resulting trust existed and that there was a breach of trust by the Defendant in paying the $625,000 to Trusty International makes two assumptions. Firstly, it is argued that the Claimants, by paying the monies to the Defendant’s HSBC account, retained a beneficial interest in the monies. Secondly, it is argued that the payment out to Trusty International represents a failure to apply the monies as instructed, and that the Claimants’ purpose in remitting the monies to the Defendant has failed. Accordingly, the Claimants argue, the money should have been retained by the Defendant on trust for the Claimants and the payment out to Trusty International is a breach of that trust.[79]I do not consider that either argument is made out. Once the Claimants had paid the monies to the Defendant’s HSBC account in accordance with the instructions given by the 1st Defendant they had parted with the monies unconditionally. There was no retention of a beneficial interest by them in the monies in a way comparable to the situation arising from the undertaking set out at Paragraph 9 of the Twinsectra case, or the specific arrangement underlying the loan in Barclays Bank Ltd v Quistclose Investments Ltd (1970) AC 567. What the Swift transfer document required, (see Paragraph 59 above), after correction inspired by the query of Mr Funmi of the Defendant’s International Operations Department, was the transfer of the monies to the Defendant’s account at the HSBC. Once this was done the Claimants had disposed of the monies and had not retained an interest in it. Moreover, the fact that Field 70 of the Swift Transfer Document referred to Trust International as the account within the Defendant to which the monies should be attributed does not suffice to impose a trust obligation on the Defendant vis à vis the Claimants.[80]Further, as I have held earlier, it was indeed the wish and intention of the fraudsters to obtain the $625,000 from the Claimants through the medium of the Trusty International account held with the Defendant. The fact that the discrepancy between Trust and Trusty was apparently not picked up by Mr Faronbi or any other employee of the Defendant enabled the 1st to 3rd Defendants’ wishes to be put into effect. There is therefore no failure of purpose of the type which renders a recipient of funds liable to return them to the provider of the funds by reason of a Quistclose trust.

Money had and received:

[81]The Claimants accept for the purposes of this case that they bear the burden of showing that the monies paid to the Defendant were paid under an operative mistake of fact. I consider that they have discharged this burden. The Claimants were positively deceived into making these as part of the chain of deceptions perpetrated upon them by the 1st to 3rd Defendants. In particular I find that they were deceived into mistakenly believing that: i) The $65m fund existed and was ready for transfer to Kuwait. ii) The payments of $400,000 and $225,000 were required to pay VAT necessary to secure the release of the fund. iii) The 1st to 3rd Defendants intended to make a contribution of $575,000 towards the alleged VAT liability. I do not consider that there was any operative mistake as to the ultimate recipient of the monies being Trust International. Whether their name was Trust or Trusty would not have been a matter of concern to the Claimants who would have complied with instructions from the 1st Defendant to pay either form of the name.[82]The Defendant responds that even if an operative mistake (or mistakes) of fact is shown liability does not arise for two reasons: a) By the time of these two payments the 1st Claimant must have suspected that he was the victim of a trick. Having made those payments in these circumstances he is to be taken to have had doubts and swallowed them, and thus assumed the risk vis à vis the Defendant in making the payments. Reliance was placed on Goff &Jones (12th Edition) Para 4-032 and Kleinwort Benson v Lincoln City Council (1999) 2 AC 349 per Lord Hope at 410 B-C. b) The Claimants’ claim is defeated by the Defendant’s change of position in good faith in releasing the monies to Messrs Ibrahim and Saminu of Trusty International.[83]As to the first of these matters, I do not consider that the Claimants entertained or suppressed any doubts as to the existence of the material operative mistakes of fact identified at(i) (ii) and(iii) of Paragraph 81 above. The Claimant’s belief in the existence of the $65m fund underpinned all his actions in this matter until May/June 2002. The 1st Claimant had been told not only by the 1st Defendant of the need for VAT payments, but the matter had been convincingly supported by letters from a purported financial institution named Global Link claiming to be based in London which provided convincing (but bogus) “proof” that the funds had been transferred from Benin to London. The 1st Claimant was much comforted by this, believing that, if the funds were in London, he was dealing with a reputable institution which was genuinely confirming to him that the payment of VAT was the final step prior to release of the $65m. In so far as the matter is to be viewed more generally, I repeat the findings which I have made above in the section dealing with illegality. Accordingly, this first response by the Defendant fails.[84]I turn, then, to the issue of change of position. As already stated the Defendant asserts that by releasing the monies to Messrs Ibrahim and Saminu, it has changed its position in good faith and it therefore would be unjust to require the Defendant to make restitution now that the monies are no longer available to it. The Defendant relies on Lipton Gorman (a firm) v Karpnale Ltd (1991) 2 AC 548. I have had particular regard to the speech of Lord Goff at p580 C to H.[85]I have dealt earlier in this judgment with the question of whether the monies paid to HSBC are to be regarded as having been paid to Trusty International. See Paragraphs 27 to 33 above.[86]The Claimants’ retort is that whilst the Defendant may have changed its position, it has not done so in good faith and therefore cannot rely on the defence of change of position. They highlight the following matters: a) The payment to Trusty International was in breach of the Swift transfer instructions which directed payment to Trust International in Field 70 of both transfer documents. b) The payment to Trusty International was made to money launderers without reference back to the Claimants as to whether Trusty International was the correct beneficiary.[87]Further they point to NIRU Battery Manufacturing Co and another v Milestone Trading Ltd and Others (2003) EWCA Civ 1445, (and in particular Paragraphs 164 and 165 and 190 to 192) where it was held that what amounts to failure to act in good faith depends on the circumstances of the individual case, but is “capable of embracing a failure to act in a commercially acceptable way and sharp practice of a kind that falls short of outright dishonesty as well as dishonesty itself”. At Paragraph 164 Clarke LJ quoted with approval from the judgment of Moore-Bick J at first instance in these terms:
“The factors which will determine whether it is inequitable to allow the claimant to obtain restitution in a case of mistaken payment will vary from case to case, but where the payee has voluntarily parted with the money much is likely to depend on the circumstances in which he did so and the extent of his knowledge about how the payment came to be made. Where he knows that the payment he has received was made by mistake, the position is quite straightforward: he must return it. This applies as much to a banker who receives a payment for the account of his customer as to any other person: see, for example, the comment of Lord Mersey in Kerrison v Glyn, Mills, Currie & Co (1912) 81 LJKB 465 at 472, [1911-13] All ER Rep 417 at 424. Greater difficulty may arise, however, in cases where the payee has grounds for believing that the payment may have been made by mistake, but cannot be sure. In such cases good faith may well dictate that an enquiry be made of the payer. The nature and extent of the enquiry called for will, of course, depend on the circumstances of the case, but I do not think that a person who has, or thinks he has, good reason to believe that the payment was made by mistake will often be found to have acted in good faith if he pays the money away without first making enquiries of the person from whom he received it.”
[88]I adopt the foregoing as the appropriate approach, and only add that both sides accepted that mere negligence would not suffice to show a lack of good faith and thus to defeat the defence of change of position.[89]In my judgment, the Defendant’s payments to Trusty International were not made in the knowledge that the payments received from the 2nd Claimant were made by mistake. As I have found earlier, the Defendant was ignorant of the fact that the 2nd Claimant was paying in reliance on the various deceptions practised by the 1st to 3rd Defendants. The Defendant simply had no knowledge of those matters, merely acting as receiving bank for the 2nd Claimants funds. Nor did the Defendant have any grounds for believing that the payments may have been made by mistake on the part of the 2nd Claimant. There was nothing to put him on enquiry for that reason.[90]The next question is whether the failure to revert back to the 2nd Claimant and enquire whether there had been an error as between “Trust” and “Trusty” amounts to a lack of good faith. In the circumstances I do not consider that it does. The failure to observe the discrepancy between “Trust” and “Trusty” was not a wilful or reckless closing of eyes. It represented a failure to notice; something which could not be put any higher than mere negligence. In any event, as I have previously held, any enquiry of the 2nd Claimant would have eventually resulted in confirmation that the monies were indeed to be paid to Trusty International.[91]Is the position affected by my earlier finding that Mr Faronbi probably had suspicions that some of the business activities of Trusty International involved assisting corrupt politicians to pay monies in and out of the country? In my judgment the answer to that question is in the negative. Such suspicions as Mr Faronbi had did not relate to these two transactions, and it is the fact that they had properly been reported to the anti-money laundering authorities. In addition, I have found that Mr Faronbi was shown and properly relied upon the documents shown to him by Mr Ibrahim or Mr Saminu which showed that Trusty International was in truth the correct destination of the monies.[92]In the circumstances, I hold that the Defendant changed its position by releasing to Trusty International sums equivalent to the sums paid into the Defendant’s HSBC account by the 2nd Claimant. I do not find that the Defendant acted otherwise than in good faith. I consider that, in these circumstances, it would be inequitable and unjust to subject the Defendant to a restitutionary remedy when it in reality did no more than that which the Claimants in their deceived state of mind would have wished it to do. It follows that the Defendant has a good defence to this head of claim.

Conclusion:

[93]None of the Claimants’ heads of claim succeeds for the reasons given.

Cited in 4 later judgments