Tecnimont Arabia Ltd v National Westminster Bank Plc
| Jurisdiction | England & Wales |
| Judge | Bird |
| Judgment Date | 17 May 2022 |
| Neutral Citation | [2022] EWHC 1172 (Comm) |
| Docket Number | Case No: LM-2020-000077 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 1172 (Comm)
HIS HONOUR JUDGE Bird
Sitting as a Judge of this Court
Case No: LM-2020-000077
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LONDON CIRCUIT COMMERCIAL COURT
Royal Courts of Justice
The Rolls Building
7 Rolls Buildings
London
EC4A 1NL
Robert Anderson QC and Mark Vinall (instructed by Mischon de Reya LLP) for the Claimant
Adam Kramer QC and Anthony Pavlovich (instructed by TLT LLP) for the Defendant
Hearing dates: 6th, 7th, 8th and 10th December 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
The claimant company operates in Saudi Arabia and is part of a multi-national Italian corporation. On 30 October 2018, as a result of deception on the part of a fraudster, it instructed its bank to pay US $5 million to a dollar account held at the NatWest Bank (“the Bank”) in Brixton in the name of a third-party, Asecna Limited (“the Account”). The Account was controlled by the fraudster. The fraudster arranged for the majority of the funds to be paid out of the Account over the course of the following 2 days. Some funds have been recovered but the majority has been lost. The claimant seeks restitution of most of the lost sums from the Bank. The claimant is the victim of an authorised push payment (or APP) fraud.
By way of brief chronology (set out in further detail below):
a. The Account was opened on 10 May 2018 with a deposit of $990. On 23 May 2018 $890 was paid out leaving a balance of $100. There was no further activity on the account until 30 October 2018.
b. The $5 Million deposit was received on 30 October. After charges, the sum of $4,999,990.83 was credited to the Account.
c. Between 2.29pm and 3.16pm on 30 October, the sum of $667,287.51 was transferred out by 6 separate transactions to various countries, each via the Bank's online banking system (known as “Bankline”). The authorised Bankline user was Mr Mobondo. The payments ranged in value between $126,019.59 and $95,799.59.
d. On 31 October there were 22 transfers out totalling $4,296,784.11. The transfers ranged in value from $97,919.52 to $1,249,764.55.
e. On 31 October, the Bank received, and acted on, 2 fraud alerts (the “SilverTail” alerts): the first was received at 10.10am; the second at 1.04pm. Each alert resulted in a temporary suspension of Bankline services. In each case the services were reinstated after investigation.
f. On 1 November by 11.56am the Bank became aware of the fraud. At that time the balance in the account was $36,019.21. There was a single transfer out on that date of $33,989.88 at 3.44pm.
g. Taking account of a small balance of $100 already in the Account the transactions (totalling $4,964,071.62) left a balance of $2,029.33
h. The claimant has recovered the total sum equivalent to $641,884.77. That sum, together with the $2,029.33 left in the Account has been paid to the claimant.
i. On 11 November, the Bank's anti-money laundering fraud detection systems triggered an alert in respect of the Account.
The Claim
It is now accepted that the Bank owes no duty of care to the Claimant which was never its customer. The claim is squarely based on the Bank's apparent unjust enrichment or its apparent knowing (or unconscionable) receipt of property subject to a trust. The Bank denies the claims. If the claimant succeeds in establishing unjust enrichment or knowing receipt (both of which are keenly disputed) the Bank relies on the defence of change of position or ministerial receipt as a complete answer to the claim.
If the claimant makes out each aspect of its unjust enrichment claim or succeeds in the knowing receipt claim, the claimant's position is that the Bank has no defence available to it after the first SilverTail alert. It submits that the defences are only available where the change of position (or ministerial receipt) is carried out in good faith. It is suggested that on the facts of the present case, the Bank cannot establish good faith for a number of reasons: first, by reason of the design and operation of the Bank's fraud detection systems, secondly because the second SilverTail alert was dealt with outside the Bank's usual processes and thirdly because the Bank had direct knowledge of the fraud when the final payment out was made.
It is therefore necessary to consider if the claimant has made out its claims for unjust enrichment or for knowing receipt and if the Bank's entitlement to rely on its defences was ever lost.
The Trial
During the course of the trial, it has been necessary to refer to sensitive and confidential Bank documents. Some factual and expert witness evidence has been heard in private. The court sanctioned a confidentiality ring to allow for the disclosure, inspection and use of certain confidential documents by the order of Mr Andrew Hochhauser QC sitting as a Deputy Judge on 18 December 2020. On 30 November 2021, His Honour Judge Pelling QC ordered that any submissions or cross examination which would refer to documents shared within the confidentiality ring was to be held in private.
I am satisfied that the requirements of open justice have been met in this case. The court heard evidence in private only when it was strictly necessary to do so. I have, from an abundance of caution, made orders pursuant to CPR 5 restricting access to any confidential documents referred to during the proceedings.
The Evidence
On the first day of trial, I heard oral evidence from the claimant's witnesses: Massimo Sicari; Arthur Vellozo; Arvel Titong and Fabio Fritelli. I did not hear from the claimant's other witnesses: Fabio Fagioli and Andrea Bonacina but was invited to read their statements.
On the second day I heard from the Bank's witnesses: Eleanor Gordon and Janet Parratt. I did not hear from the Bank's other witnesses: William Amancho; Rebecca Davey; Simon Probert and Nathan Robinson but was invited to read their statements: Scott Bennett was due to give evidence, but a short “fit-note” was produced recording that he was suffering from stress and so would not be attending. He was not available therefore for cross-examination. In assessing the weight to be given to his evidence, I bear in mind the guidance set out at section 4 of the Civil Evidence Act 1995.
On the second and third days I heard from the banking experts: Mr Brigden for the claimant and Mr Rochelle for the Defendant. On day 4 the parties prepared further written submissions and I heard closing submissions on the morning of the fifth day of the trial. I have had the benefit of written submissions from both parties.
I had the benefit of a live note transcription of proceedings and the benefit of a document presentation system provided by TrialView.
The facts
It is important to expand on the brief chronology I have set out above and to examine the evidence with some care.
I formed the clear view that each of the witnesses I heard gave their evidence carefully and with a view to assisting me to understand relevant processes and events. As far as Mr Bennett's evidence is concerned, I draw no adverse inference from his non-attendance. Much of his involvement in the relevant events is catalogued by the Bank's internal systems. The controversial aspects of his evidence relate to the second SilverTail alert and his dealing with it. I am satisfied that the picture painted by other witnesses (in particular Miss Gordon) is sufficient to allow me to make relevant findings. To the extent that Mr Bennett's evidence corroborates the record set out in the Bank's systems and the evidence of others I accept it.
The facts fall into the following chronological segments:
a. The mechanism of transfer.
b. Events before the claimant paid out $5 million. What happened and what should have happened? This goes to whether the Bank's enrichment was unjust. In essence the issue is whether the claimant made the payment by a material “mistake”.
c. Events at the Bank after it received the $5 million payment. What happened and what should have happened? This aspect of the evidence goes to the Bank's defences and the presence or absence of good faith.
Having dealt with these matters, I will deal briefly with the evidence of the experts before turning to the law, the submissions and the application of the law to the facts.
Mechanism of transfer
The transfer is described by Mr Kramer QC in this way:
“[It] was an offshore transfer in US dollars from Saudi British Bank SJSC in Saudi Arabia (“SABB”), via Citibank in the US as SABB's correspondent/intermediary bank, to D in London, communicated using SWIFT messages. The transfer like all transfers involves the adjustment of the balances of different banks, here between SABB and Citibank and then Citibank and D. As Goode explains and is obvious, each pair of banks will net off various balances owed in two directions. Plainly Nat West had more than one dollar payment in or out on 30 October 2018 and the $5m from C was mixed in the process of international payment.”
It follows:
“the claimant instructed SABB to make a payment. SABB issued a payment order to Citibank in the USA requiring Citibank to make the payment on SABB's behalf. Citibank made the required payment and so became a creditor of SABB. At some point Citibank would be instructed by a customer to make a payment in Saudi Arabia and Citibank would issue a payment order to SABB requiring it to make the payment on Citibank's behalf. SABB would make the payment and become a creditor of Citibank. At some point the credit and debit balances would be reconciled and so that (as it is put in Goode and McKendrick on Commercial...
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High Court Considers Receiving Bank's Liability In Context Of APP Fraud
...received by the bank in the context of an authorised push payment fraud (APP): Tecnimont Arabia Ltd v National Westminster Bank plc [2022] EWHC 1172 (Comm). This decision will be of interest to financial institutions faced with claims from non-customers seeking the recovery of funds mistake......