Agip (Africa) Ltd v Jackson
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE FOX,LORD JUSTICE BUTLER-SLOSS,LORD JUSTICE BELDAM |
| Judgment Date | 21 December 1991 |
| Judgment citation (vLex) | [1990] EWCA Civ J1221-1 |
| Docket Number | 90/1106 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 December 1991 |
[1990] EWCA Civ J1221-1
Lord Justice Fox
Lord Justice Butler-Sloss
Lord Justice Beldam
90/1106
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR. JUSTICE MILLETT)
Royal Courts of Justice
MR. PETER LEAVER Q.C. and MR. PETER IRVIN (instructed by Messrs. Wedlake Bell) appeared for the Appellants.
MR. MICHAEL TUGENDHAT Q.C. and MR. M. GETTLESON (instructed by Messrs. Shindler & Co.) appeared for the Respondents.
This is an appeal by the defendants from a decision of Millett J.
The following account of the facts follows substantially that of Millett J. I set it out again here for convenience of reference.
The action is by Agip (Africa) Limited ("Agip") to recover a sum of U.S.$518,822.92 of which it was fraudulently deprived by an employee. Agip seeks to follow funds telegraphically transferred by its bank in Tunisia as a result of forged instructions and to recover them not from the recipient company but from the persons who controlled that company and caused it to part with them, namely the first and third defendants. Most of the money was paid away and probably found its way to confederates of the fraudulent employee. The balance, which amounts to about U.S.$45,160 has been paid into court; the defendants make no claim to it.
Agip does not contend that the defendants were parties to the fraud and had actual knowledge of it. The claim is at common law for money had and received. In the alternative, it is contended that the defendants are bound to account in equity as constructive trustees. As against the first and second defendants, Agip relies on the mere receipt of the money. In addition, however, it is alleged that all the defendants and in particular the first and third, were guilty of wilful and reckless failure to make inquiries in order to satisfy themselves that they were not acting in furtherance of a fraud.
The Frauds
Agip was incorporated in Jersey and is a wholly owned subsidiary of Agip S.A. of Milan, an Italian oil company, which is itself a subsidiary of the Italian State holding company. Agip's business is mainly concerned with oil exploration in Africa. In the late 1970's and early 1980's, it was drilling for oil in Tunisia (both on its own behalf and with other companies) under permits and concessions granted by the Tunisian Government. The Tunis branch of Agip held a U.S. dollar account at the Banque du Sud ("BdS") in Tunis from where payments were made to overseas suppliers. Over a period of many years, both before and after 1983, when the defendants first appear in the story, Agip was systematically defrauded of millions of U.S. dollars by its chief accountant, a Mr. Zdiri. He was not a director and not an authorised signatory in respect of Agip's bank account but it was his duty to place the completed payment orders and the invoices to which they related before the authorised signatory and get his signature to them. It was also his responsibility to take the signed orders to the bank or to entrust them to a subordinate for that purpose.
From time to time, however, Zdiri fraudulently altered the name of the payee of the orders and so diverted the payment to a recipient of his own choosing.
Between March 1983 and January 1985 alone sums of more than U.S.$10.5 million were fraudulently diverted in this way: not less than 28 payment orders were involved. The payees in the orders as altered (except Baker Oil Services Ltd. which was registered in the Isle of Man) were all companies registered in England. All were managed by the defendants from the Isle of Man. Seven different payee companies were used in succession. Each had a U.S. dollar account at the High Holborn branch of Lloyds Bank into which the money was paid.
The present action is concerned with a sum of U.S.$518 thousand odd to which I have already referred and which was paid on 8th January 1985 to Baker Oil Services Ltd. ("Baker Oil"). This was the last of the diverted payments. The frauds were discovered soon afterwards.
The Defendants
The first defendant, Mr. Jackson, and the second defendant, Mr. Bowers, practise in partnership together as chartered accountants in Douglas, Isle of Man, under the name Jackson & Co. The third defendant, Mr. Griffin, is an employee of that firm. At all material times they were acting on the instructions of their client, a Monsieur Yves Coulon, a French lawyer. He was almost certainly acting for other principals whose identity is not known.
Jackson & Co. were introduced to the High Holborn branch of Lloyds Bank in March 1983 by a Mr. Humphrey, a partner in the well known firm of Thornton Baker. They probably took over an established arrangement. Thenceforth they provided the payee companies. These companies each had a purely nominal share capital which was usually registered in the names of service companies provided by Jackson & Co. In each case Mr. Jackson and Mr. Griffin were the directors and the authorised signatories on the company's account at Lloyds Bank. In the case of the first few companies Mr. Humphrey was also a director and authorised signatory. Any authorised signatory could sign. None of the companies had any assets or carried on any business activity. None of them was known to or had any dealings or contact with the plaintiffs. In the case of each company except Baker Oil, after two or three payments had been received and paid out, the account was closed and a new account opened for the successor company. Its predecessor was then promptly put into liquidation and Mr. Bowers was appointed liquidator. The payee companies' bank statements all showed the receipts to be derived from payments made by Agip.
When a payment was received by the payee company it was immediately transferred, usually on the same day, to another company, Euro-Arabian Jewellery Limited ("Euro-Arabian"), which also maintained a U.S. dollar account at the same branch of Lloyds Bank. Euro-Arabian was registered in England. Mr. Jackson was one of three directors. He, Mr. Griffin and Mr. Humphrey were the authorised signatories of its account at Lloyds Bank; any one of them could sign. There is no evidence that Euro-Arabian carried on any genuine business activity. It has not been suggested that it was known to or had any dealings or contact with Agip. As soon as it received a payment from a payee company it paid it out to parties overseas.
Most of the money went to Kinz Joailler SARL ("Kinz"), a company incorporated in France and described as carrying on a jewellery business in Paris and elsewhere in France. It appears to have been a wholly owned subsidiary of Euro-Arabian. Mr. Jackson was its sole director but was probably a nominee. Monsieur Coulon was its legal adviser. It has not been suggested that it was known to Agip. Other payments were made to Monsieur Coulon and a Mr. Chouck ben Abdelaziz who has not been further identified.
Monsieur Coulon was introduced by the defendants to Mr. Breeze, the assistant manager of the High Holborn branch of Lloyds Bank. Monsieur Coulon had no authority to operate the accounts of any of the payee companies or of Euro-Arabian but Mr. Breeze was authorised to disclose information concerning the accounts to him. Mr. Breeze was told to expect payments from Tunis at the rate of approximately U.S.$500,000 a month. When a payment was expected he would be notified by Jackson & Co. and would then contact the Overseas Division of Lloyds Bank and ask to be informed when the payment was received. As soon as he learned that the money had arrived he would telephone Jackson & Co. and inform them. They would not, however, give him immediate instructions for the disbursement of the money. There would be a short interval, presumably while they sought instructions from Monsieur Coulon. Disbursement would usually be effected later on the same day on the authority of written instructions delivered by Jackson & Co. by hand to the Douglas branch of Lloyds Bank and read over the telephone to the High Holborn branch. The written instructions usually signed by Mr. Jackson would follow later by way of confirmation.
Monsieur Coulon would visit London from time to time and discuss the state of the accounts with Mr. Breeze. They would lunch together. Mr. Breeze clearly understood Monsieur Coulon to be behind the arrangements and to be the person whose instructions were being relayed to the branch by Jackson & Co. It has not been suggested that he was mistaken.
The Defendants' state of mind
The defendants elected to call no evidence. Their state of mind is therefore largely a matter of inference. Agip relied, however, on three documents as providing some evidence of this. The first is the minutes of the first meeting of the directors of Keelward Limited, one of the payee companies, held at the offices of Jackson & Co. in Douglas on 22nd March 1984. The meeting was attended by Mr. Jackson and Mr. Griffin who were appointed directors of the company with immediate effect, and the minutes signed by Mr. Jackson. They include the following passage:
"Mr. Jackson reported that the Company has been invited to act as Agent for Euro Arabian…in the receipt of monies from Tunisia. This formed part of a long standing arrangement between the beneficial owners of Euro Arabian…the Banque du Sud in Tunis and an offshore subsidiary of Agip S.P.A. called Agip (Africa) Limited. In essence, the arrangement resulted in the extraction of monies from Tunisia in circumvention of the Tunisian Exchange Control...
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