Eagle Trust Plc v S.B.C. Securities Ltd

JurisdictionEngland & Wales
CourtChancery Division
Judgment Date15 Jan 1991

Chancery Division

Before Mr Justice Vinelott

Eagle Trust plc
and
SBC Securities Ltd

Crime - fraud - constructive trustee - liability of stranger

Holding stranger liable as a constructive trustee

Before a stranger, to whom money had been paid in breach of trust, could, after he had parted with it, be held liable as a constructive trustee to account for it to its defrauded owner, the court must be able to infer from the circumstances that (i) he knew of the breach, or (ii) he turned a blind eye to it, or (iii) he wilfully or recklessly failed to make such enquiries as an honest and reasonable man would make.

The requisite degree of knowledge would be inferred only if the facts were such that an honest and reasonable man would infer from them that the money was probably trust money which was being misapplied and would either not have accepted it or would have kept it separate until he had satisfied himself that the payer was entitled to pay it to him.

Mr Justice Vinelott so held in the Chancery Division, in granting a motion by the defendant, SBC Securities Ltd, that the plaintiffs claim that the defendant account to it for £1.3m of its money, which had been paid to the defendant in December 1987 by reason of fraud by its then chief executive, be struck out and its action dismissed.

Mr Jonathan Sumption, QC and Mr Mark Hapgood for the defendant; Mr Peter Goldsmith, QC and Mr Michael Brindle for the plaintiff.

MR JUSTICE VINELOTT said that the question was whether, if the plaintiff were able to establish the truth of all the allegations, many of which were disputed, in its statement of claim, and if the defendant were to call no evidence, the plaintiff could succeed.

In Baden, Delvaux and Lecruit v Societe General pour Favoriser le Development du Commerce et de l'Industrie en France SAUNK ([1983] BCLC 325), Mr Justice Peter Gibson had said: ". . . knowledge can comprise any of five different mental states . . . (i) actual knowledge; (ii)...

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34 cases
7 books & journal articles
  • Placing bankers in the front line: the secondary liability of bankers for their customers’ regulatory contravent
    • United Kingdom
    • Journal of Financial Crime Nbr. 12-3, July 2005
    • 1 July 2005
    ...2 Ch. 276, 301,per Edmund Davies LJ; Lipkin Gorman v Karpnale Ltd [1987] 1WLR 987 (per Alliot J); Eagle Trust plc v SBC Securities [1992]4 All ER 488 (Vinelot J). `Commercially unacceptablePage conduct' (per Knox J in Cowan de Groot Properties Ltd v EagleTrust plc [1992] 4 All ER 700, 761) ......
  • The Practical and Legal Aspects of Interdicting the Flow of Dirty Money
    • United Kingdom
    • Journal of Financial Crime Nbr. 3-3, January 1996
    • 1 January 1996
    ...The Times, 23rd October, 1995. (44) Polly Peck International plc v Nadir (1992) 4 All ER 769, Eagle Trust plc v SBC Securities Ltd (1992) 4 All ER 488, Cowan de Groot Properties v Eagle Trust plc (1992) 4 All ER 700, In Re Polly Peck International (1992) BCLC 1025, Re Montagu's Settlement T......
  • The Impact of Recent Money Laundering Legislation on Financial Intermediaries
    • United Kingdom
    • Journal of Financial Crime Nbr. 3-2, March 1995
    • 1 March 1995
    ...Journal of International Planning 57, 66. (31) Agip (Africa) Ltd v Jackson [1990] Ch 265. (32) Eagle Trust plc v S.B.C. Securities Ltd [1992] 4 All ER 488. (33) See, eg, Strong, 'Civil Asset Recovery Procedures: How Equity Deters Fraud', 13 Company Lawyer 44. (34) Mummery, ref. 30 above. (3......
  • Constructive Trusts and Tracing
    • United Kingdom
    • Journal of Financial Crime Nbr. 2-3, April 1994
    • 1 April 1994
    ...4 All ER 385 (Millett J), affirmed [1992] 4 All ER 451 (Court of Appeal). 14 Ibid., at 407a-b. 15 Eagle Trust Plc v SBC Securities Ltd [1993] 1 WLR 484. 16 Mantis Asia Co Inc. v Standard Chartered Bank 1988, unreported. 17 See ref. 2 above. 18 Chase Manhattan Bank NA v Israel-British Bank [......
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