Commerzbank Aktiengesellschaft v IMB Morgan Plc and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lawrence Collins |
| Judgment Date | 30 November 2004 |
| Neutral Citation | [2004] EWHC 2771 (Ch) |
| Docket Number | Claim No. HC03C00651 |
| Court | Chancery Division |
| Date | 30 November 2004 |
[2004] EWHC 2771 (Ch)
Mr Justice Lawrence Collins
Claim No. HC03C00651
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
(SUBJECT TO EDITORIAL CORRECTION)
I Introduction: the IBM accounts
1. Commerzbank AG (“Commerzbank”) is a major German bank, with a London branch at Commerzbank House, 23 Austin Friars, London EC2P 2JD (“Commerzbank, London”). This judgment is given following an interpleader application in respect of competing claims in relation to two accounts at the London branch of Commerzbank in the name of IMB Morgan Plc (“IMB Morgan”), a stockbroker based in Lagos, Nigeria, which was formerly known as IMB Securities Plc. IMB Morgan is a subsidiary of IMB International Bank Plc (“IMB”), formerly known as International Merchant Bank Plc, which is also based in Lagos.
2. The two accounts consist of a US Dollar account (the “Dollar Account”) and a Sterling account (the “Sterling Account”) both under account number 160210002200 (together the “Accounts”), which were opened on December 19, 2000. The balances on these accounts at the time of the commencement of these proceedings were $437,973.61 and £132,579.05 respectively.
3. The Dollar and Sterling Accounts were correspondent bank accounts, i.e. accounts established to receive deposits from, make payments on behalf of, or handle other financial transactions related to a foreign institution (generally a foreign bank).
4. A key feature of the operation of a correspondent account is that all the receipts into the account are mingled. It is not possible to identify any part of the funds as relating to a particular client of the foreign institution. The funds are held on behalf of the foreign institution with whom the correspondent relationship exists, not its individual clients. Accordingly, although funds received into the correspondent account may have related to a particular customer of the foreign institution, Commerzbank may never subsequently have received instructions from the foreign institution to disburse funds on behalf of the same customer. So also Commerzbank may receive instructions from the foreign institution to make a payment from the correspondent account on behalf of a customer in respect of whom funds have never previously been received into the account. In most cases the customers of the foreign institution who are to benefit from the receipt of funds into the account are different from the customers on whose behalf payments are made from the account.
5. The account relationship was between Commerzbank and IMB Morgan. Commerzbank was not obliged to and did not accept instructions from IMB Morgan's customers as to how the funds held in the Accounts should be handled or paid out. Those funds were held for the credit of IMB Morgan, not its customers.
6. Another feature of the correspondent bank account is that Commerzbank would generally have received funds from third parties to be credited to the Accounts without knowing the identity of the IMB Morgan customer to whom the funds would eventually be credited by IMB Morgan. The third parties might or might not include details of which particular IMB Morgan customer was to be credited with the funds. Commerzbank would generally only be provided with a reference or customer name which it would pass on to IMB Morgan, who would have presumably used it to identify their customer and credit that customer's account with IMB Morgan accordingly. However Commerzbank would generally have no knowledge of or access to this IMB Morgan account or the account holder other than the reference or name provided when the funds were received. This reference might be limited to the customer's account number at IMB Morgan.
7. Funds were generally transferred into the Accounts via a SWIFT payment order. SWIFT is a secure form of e-mail which banks used to communicate between each other. It allows transfers of money to be made and provides access to different countries' clearing systems.
8. A SWIFT transfer would typically work as follows. Where a UK company instructed its bank (Bank A) to make a payment to a German company in Euros, Bank A would first complete a foreign exchange transaction to purchase the necessary amount of Euros and then debit its customer's account accordingly. Bank A would then send an instruction via SWIFT to its correspondent bank in Germany (Bank B), asking Bank B to debit Bank A's account at Bank B and make a payment through the German clearing system to the German company's bank, Bank C. Bank C would also receive a SWIFT payment order, either from Bank A or from its German correspondent, Bank B, setting out the details of the payment, including the identity of the beneficiary. Bank C would then credit its customer's account accordingly.
II Freezing of the accounts
9. The Accounts were frozen from May 9, 2002 and the account relationship between Commerzbank and IMB Morgan was terminated on May 16, 2002 as a result of a number of incidents and a subsequent police investigation which concluded that there was strong evidence that the Accounts were being used for money-laundering.
10. The evidence establishes that a significant number of payments into the Accounts were the result of what is known as an “advance fee fraud” or “419 fraud” (after section 419 of the Nigerian Criminal Code). These terms are used to refer to a wide variety of frauds which are commonly practised by fraudsters based in West Africa (and increasingly in other parts of the world), in which victims are asked to part with sums of money (often described as “fees” in an attempt to give them the air of legitimacy) in expectation of receiving much larger sums in return.
11. From early 2001 the attention of Commerzbank was drawn to a number of cases in which the account had been used for questionable payments. They culminated in a series of matters relating to payments expressed to be in favour of “Armani.” Two of the receipts, both received on April 5, 2002, originated from a Mr Claude Frappier of Quebec. The sum of $45,000 was expressed to be in favour of Armani, while a further $40,000 was transferred in favour of an entity described as Gazzaz. Commerzbank was subsequently informed by the City of London Police that Mr Frappier had been the victim of a fraud and that these receipts were the proceeds of that fraud.
12. Another of the payments in favour of Armani, received on April 23, 2002 and totalling $15,500, originated from Mr S Allan Hurvitz of Los Angeles, California, USA. On May 3, 2002, Mr Hurvitz telephoned Commerzbank's payments section, asking whether these funds had been received. He was advised that Commerzbank could not answer this question as he was not the customer and that the only party entitled to this information was IMB. Mr Hurvitz explained that the funds were intended to be sent to a Mr Solanke. Mr Hurvitz stated that Mr Solanke used the name “Armani” and was an attorney in Lagos, Nigeria. Mr Hurvitz explained that when Mr Solanke visited “the bank” (presumably IMB), he had been told that the funds were not there. Mr Hurvitz was advised that Mr Solanke would have to contact IMB who could then contact Commerzbank. He indicated that Mr Solanke worked for IMB and could therefore contact Commerzbank directly.
13. On May 2, 2002, Commerzbank London received a telephone call and two faxes from a Berlin branch of Commerzbank indicating that one of its customers, Hans Koenig, had been kidnapped in Nigeria and instructions issued that $350,000 be paid into the Accounts in favour of Armani in order to secure his release. Commerzbank immediately informed the NCIS, and sought instructions on how to proceed, particularly if the funds were received into the Accounts.
14. On the same day, Commerzbank, London, received a telephone call from the Deputy General Manager of IMB, George Omunubi, inquiring whether Commerzbank had received a credit of $350,000. Mr Omunubi stated that IMB had been expecting the funds since April 23, 2002. Commerzbank advised Mr Omunibi that no funds had been received. On May 8, 2002 Commerzbank provided the NCIS with a Disclosure Report providing this further information and setting out the recent transactions on the Accounts in favour of Armani.
15. On May 9, 2002, the Financial Investigation Unit of the City of London Police (“FIU”) wrote to Commerzbank, London, that the connection between the kidnapping, the Accounts and Armani had given the FIU “reasonable grounds to believe that at least five of the transactions identified … may relate to advance fee fraud (419 FRAUD) involving ARMANI LTD”. Commerzbank was advised that further transactions in relation to these monies connected to “Armani” could constitute the offence of money laundering under Section 93 of the Criminal Justice Act 1988 (as amended). The letter went on to state that:
“…the City of London Police hereby confirm that we are withdrawing consent from Commerzbank, until further notice, to deal with the monies in relation to the six transactions connected to ARMANI LTD. In other words, you are advised that any further transactions conducted by Commerzbank in relation to the monies forming part of the six transactions, and/or any monies appearing to be held or received by or on behalf of ARMANI LTD, may constitute an offence of money laundering, the offences of which are set out in Section 93 Criminal Justice Act 1988 (as amended).”
16. In a letter to Commerzbank dated May 14, 2002 the FIU stated, inter alia, that:
“… we have reasonable grounds for believing that IMB SECURITIES PLC is actively involved in operating accounts for the purpose of laundering criminal proceeds… …. consent is hereby withheld from COMMERZBANK in relation...
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