Abou-Rahmah and another v Abacha and Others
| Jurisdiction | England & Wales |
| Neutral Citation | [2006] EWCA Civ 1492 |
| Date | 2006 |
| Year | 2006 |
| Court | Court of Appeal (Civil Division) |
Banking - Bank's liability - Dishonest assistance in breach of trust - Claimants as victims of fraud paying money to bank for transfer to bank's client party to fraud - Bank not acting dishonestly in paying money to client - Whether bank liable for dishonest assistance in breach of trust - Restitution - Unjust enrichment - Change of position - Bank acting in good faith in paying claimants' money to client party to fraud on claimants - Whether bank having defence of change of position to claim for restitution of money had and received
The claimants, as victims of the first to third defendants' fraud, made payments in US dollars to the London bank account of the fourth defendant, a Nigerian bank, for transfer to the account of its client, which was party to the fraud. The bank paid out the equivalent of the dollars in naira to the client. The claimants brought claims against the bank for, inter alia, (i) damages for knowing or dishonest assistance in a breach of trust and (ii) restitution of money had and received. The judge found that the bank had probably suspected “in a general way” that the client might be from time to time involved in money-laundering but had not suspected that the transactions in question involved money-laundering. He held that, in those circumstances, (i) the bank's conduct had not been contrary to normally acceptable standards of honest conduct, so that it was not liable for dishonest assistance, and (ii) the bank had changed its position in good faith, so that it would be inequitable to require the bank to make restitution.
On the claimants' appeal—
Held, dismissing the appeal, (1) that since the judge had found no dishonesty in the bank's conduct, his conclusion that the bank was not liable for dishonest assistance in a breach of trust would stand (post, paras 40, 59, 72, 98).
Per Rix LJ. It is difficult to see why a bank which has a clear suspicion that a prospective client indulges in money-laundering can be said to lack that knowledge which is the first element in the tort (post, para 37).
(2) (Rix LJ dubitante) That, since the judge found that the bank had paid the client in good faith when the bank, though probably suspecting the client of involvement in money-laundering, was not conscious that the transactions in question constituted a money-laundering scheme, it would be inequitable to require the bank to make restitution and it was entitled to rely on the defence of change of position (post, paras 59, 82, 84, 87, 99, 102–103).
Per Rix LJ. It is not commercially acceptable conduct for banks who suspect would-be customers of being involved in money-laundering to open up accounts for them. If a bank opens an account for suspected money-launderers and nevertheless is justified in saying to defrauded claimants who seek restitution that it is entitled to make good a defence of change of position in the absence of knowledge or suspicions about individual transactions, then the international concern with the vice of money-laundering will not be taken seriously (post, paras 52, 55).
The following cases are referred to in the judgments:
Agip (Africa) Ltd v Jackson [
Attorney General for Jersey v Holley
Barlow Clowes International Ltd v Eurotrust International Ltd
Brinks Ltd v Abu-Saleh (No 3) [
Dextra Bank and Trust Co Ltd v Bank of Jamaica
Grupo Torras SA v Al Sabah [
Kelly v Solari (
Lipkin Gorman v Karpnale Ltd [
Mazur Media Ltd v Mazur Media GmbH
Niru Battery Manufacturing Co v Milestone Trading Ltd
Quistclose Investments Ltd v Rolls Razor Ltd [
R v James
R v Smith (Morgan) [
Royal Brunei Airlines Sdn Bhd v Tan [
Scottish Equitable plc v Derby
Spectrum Plus Ltd, In re
Twinsectra Ltd v Yardley
No additional cases were cited in argument.
The claimants, Adnan Shaaban Abou-Rahmah and Khalid Al-Fulaji & Sons General Trading & Contracting Co, appealed from the decision of Treacy J, sitting in the Queen's Bench Divison on 28 November 2005, that the fourth defendant, City Express Bank of Lagos, was not liable to the claimants for knowing or dishonest assistance in a breach of trust or for restitution for money had and received.
The facts are stated in the judgments of Rix and Arden LJJ.
Rupert D'Cruz for the claimants.
The bank did not appear and was not represented.
8 November. The following judgments were handed down.
RIX LJ
1 The appellants are the victims of a fraud, and the respondent is a Nigerian bank to which they paid money on the instructions of the fraudsters, for onward transfer to the account of a client of the bank. That client was a party to the fraud and assisted the fraudsters in money- laundering the payments concerned.
2 The judge [
3 The claimants in these proceedings, the appellants, are Mr Adnan Shaaban Abou-Rahmah, a lawyer practising in Kuwait, and a client of his, Khalid Al-Fulaij & Sons General Trading & Contracting Co, a Kuwaiti trading company. In May 2001 Mr Abou-Rahmah was contacted by Mr Oumar Bello (the second defendant) on behalf of Mr Al-Haji Abacha (the first defendant) seeking Mr Abou-Rahmah's assistance in investing about $65m, the capital of a family trust, in an Arab country. Mr Abou- Rahman met Mr Abacha, Mr Bello, and a third man, Mr Aboubakar Maiga (the third defendant), to discuss the matter further. In a series of meetings, the claimants agreed to identify suitable investments and to manage those investments on behalf of the trust. In return the claimants were offered 40% of the trust capital and 15% of its income. A formal agreement was entered into on 14 August 2001.
4 The three fraudsters claimed that the trust money was in Benin and that bureaucratic conditions involving various payments had to be satisfied before it could be transferred out of that country. Over a period of time the claimants were asked to contribute to those payments. Between August 2001 and March 2002 the claimants paid a total of some US$1,375,000 to this end. This appeal concerns two of those payments, a sum of $400,000 paid on 9 January 2002 and a further sum of $225,000 paid on 5 February 2002, in relation to what was said to be VAT payable on the alleged trust money.
5 These two payments were paid, on the fraudsters' instructions, into the account of a Nigerian bank, City Express Bank, the fourth defendant (the “bank”), held at HSBC in London, for onward transfer to a client of that bank, described as Trust International. The bank transferred equivalent sums of money in naira to its client's account held at its branch in Apapa, Nigeria. The actual name of the client was Trusty (not Trust) International. Its principals, who used the names of Yusuf Ibrahim and Nasir Saminu, were accomplices in the fraud.
6 No trust money ever materialised. The fraudsters disappeared. Messrs Ibrahim and Saminu cleared the money out of their company's account almost as soon, if not before, it had reached it.
The claims7 The claimants brought claims against the bank under four heads: knowing/dishonest assistance, restitution of money had and received, negligence, and breach of a resulting or Quistclose trust [Quistclose Investments Ltd v Rolls Razor Ltd (In Liquidation) [
8 In its defence the bank, first of all, alleged that any claim must fail for reasons of illegality, viz, that the claimants, or at any rate Mr Abou- Rahmah, were knowingly involved in a dishonest scheme or were involved in the illegal performance of a scheme in such a way as to disentitle them to relief in our courts. The judge found that that defence failed. There is no respondent's notice.
9 As for knowing/dishonest assistance in a breach of trust, the judge agreed with the claimants' case that the fraud amounted to a...
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