Analysis
The claimant held accounts in Nigeria with IMB International Bank, whose rights and obligations had been inherited by the defendant through a series of mergers. IMB itself held ‘correspondent’ accounts with a London bank. The claimant often received funds to an Isle of Man nominee which held a bank account in London.
In a series of 10 transfers between 2000 and 2002, the claimant’s nominee gave instructions to its bank to transfer sums to one of IMB’s accounts variously identifying the ‘beneficiary’ as IMB but in eight cases ‘for further credit to’ the claimant. Sums totalling $3,752,000 were transferred.
The claimant issued proceedings in October 2013 claiming a declaration that the defendant was liable to account as trustee for the sums transferred, on the basis of an express or, alternatively, a Quistclose trust in favour of the claimant. The claimant then applied for summary judgment. The defendant denied there was any trust but in any event argued that any trust would be in favour of the nominee and not the claimant. It further argued that it had an arguable defence of payment.
Granting summary judgment in favour of the claimant, Barling J held that the sums paid were held on either an express or a Quistclose trust in favour of the claimant; the instructions evinced a clear intention on the part of those concerned that the funds transferred should be held for the benefit of the claimant; and that the defence of payment had no real prospect of success.
The defendant appealed, and sought permission to rely upon additional evidence not before the judge at first instance.
The issues in the appeal were:
- 1) Were the transfers impressed with a trust?
- 2) Was there an arguable defence that the claimant had been paid for the sums transferred?
Held, determining the first issue without a trial:
- 1) The transfers were not impressed with any trust. A Quistclose trust requires more than merely payment for a specific purpose: there must be an agreement that the recipient’s freedom to dispose of the money is excluded and it may only be used for the stated purpose; and the sums paid must be segregated from the recipient’s other funds. The structure of the arrangements and the contractual mechanisms involved must be intended to give rise to a trust – Bieber v Teathers Ltd [2012] EWCA Civ 1466 and Twinsectra Ltd v Yardley [2002] UKHL 12, followed. [20-24, 33]. The entries in respect of the transfers did not manifest an intention to create a trust; the words were at least as apt to refer to an intention that the money should be credited to the claimant, without any trust – Abou-Rahmah v Abacha [2006] 1 Lloyd’s Rep 484, followed. Nor did the context of the transfers suggest a trust was intended; the importation of trust concepts into routine bank transactions would confuse and complicate the operation of correspondent accounts – Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669. [34,36] The funds were not agreed to be, nor were they, ‘segregated’ in any meaningful way; the sums transferred were mingled with other funds in the correspondent accounts for the benefit of a range of recipients – Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 distinguished. [35]
- 2) When considering whether to admit new evidence, the standard of diligence required of a defendant preparing his case in opposition to an application for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial – Langdale v Danby [1982] 1 WLR 1123. The appellant could not with reasonable diligence have obtained the new evidence before the summary judgment hearing. Despite the force in the criticisms of the defence of payment, and in light of the new evidence, the defendant did have a real prospect of successfully defending the claim as regards eight of the transfers on the basis of payment [57-63].
- 3) Per curiam, there was a considerable danger of misunderstanding through loose language in relation to transfers between banks. The relationship between banker and client was one of debtor and creditor, not trustee and beneficiary, and transfers between banks do not involve actual movements of property – Foley v Hill (1848) 2 HLC 28, Foskett v McKeown [2001] 1 AC 102. [25-27, 73-79]
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