Banking in UK Law

In those circumstances, our ability to do the job effectively would be even more restricted than if we had assumed the role officially from the outset. This is because we have to be satisfied under our new legislation not only that an institution will be prudently run but that it will be run with integrity—and our experiences with BCCI in the past make such a judgment difficult.

And to load a plaintiff/depositor with the further burden of proving that, despite the regulator's self-imposed ignorance, it foresaw damage in the particular form in which it occurred seems to me, with respect, even more illogical and unjust in a common law remedy the purpose of which is to provide a remedy for abuse of public duty.

What facts ought to be known to the banker, i.e. what inquiries he should make, and what facts are sufficient to cause him reasonably to suspect that the customer la not the true owner, must depend upon current banking practice, and change as that practice changes.

As to the effect of the ruling in the present case, in my judgment, it is clear that the Court of Justice concluded that the words "debt collection" in the carve out have a meaning capable of being applied to "transactions concerning payments" within the exemption in article 13B(d)(3) (judgment, paragraph 28, last sentence). It then has to be decided whether the actual transaction in question falls within the exemption or the carve out, and this will depend on its precise facts.

To this general statement of principle as to the contractual obligations of the confirming bank to the seller, there is one established exception: that is, where the seller, for the purpose of drawing on the credit, fraudulently presents to the confirming bank documents that contain, expressly or by implication, material representations of fact that to his knowledge are untrue. The courts will not allow their process to be used by a dishonest person to carry out a fraud.

For these reasons I have come to the view that, just as there is now a single test of dishonesty for knowing assistance, so ought there to be a single test of knowledge for knowing receipt. The recipient's state of knowledge must be such as to make it unconscionable for him to retain the benefit of the receipt.

The answer must be that, where an innocent defendant's position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution.