T – Tracing
3/8/15
FEDERAL REPUBLIC OF BRAZIL v DURANT INTERNATIONAL CORPORATION [2015] UKPC 35
Bribes of £10.5m paid to a public official were paid to a feeder account then to the defendants’ bank accounts. The defendants argued that only £7.7m was traceable either because the last payment into the feeder account came after the last payment to the defendants, or because the feeder account contained other money and on occasion the balance was less than the amount of the bribes, so the payments then made to the defendants did not represent the bribes. Both arguments were rejected. There may be cases where there is a close causal and transactional link between the incurring of a debt and the use of trust funds to discharge it. If the court is satisfied that the various steps are part of a coordinated scheme, it should not matter that a debit appears in the bank account of an intermediary before a reciprocal credit entry. The Board therefore rejected the argument that there could never be backward tracing, or tracing of proceeds of an asset into an overdrawn account. There has to be a coordination between the depletion of the trust fund and the acquisition of the asset which is the subject of the tracing claim, looking at the whole transaction, such as to warrant the court attributing the value of the interest acquired to the misuse of the trust fund. This is likely to depend on inference from the proved facts. In the present case a sufficient connection had been established.
24/3/15
CREDIT AGRICOLE CORPORATION & INVESTMENT BANK v PAPADIMITRIOU [2015] UKPC 13
The true owner of goods claimed to trace their proceeds of sale through companies in Panama and Lichtenstein to the bank. The bank’s defence was that it was a bona fide purchaser for value of the proceeds which had been deposited with the bank and subsequently dissipated. The issue was whether the bank had constructive notice of the claimant’s proprietary rights because it failed to make inquiries which would have revealed their existence. Mere notice of a claim is not sufficient. But a bank must make inquiries if there is a serious possibility of a third party having a proprietary right or if the facts known to the bank would give a reasonable banker in the position of the particular banker serious cause to question the propriety of the transaction. If unexplained features of a transaction are indicative of wrongdoing, an explanation must be sought. If the bank had given adequate consideration to the commercial purpose of the transaction, it would have concluded that the inter-position of companies in Panama and Lichtenstein had been to conceal the origin of the funds and for the improper purpose of money laundering. The bank was therefore fixed with notice.
16/7/14
FHR EUROPEAN VENTURES LLP v CEDAR CAPITAL PARTNERS LLC [2014] UKSC 45
The Court of Appeal had been right to hold that where an agent receives a secret commission in breach of the fiduciary duty owed to his principal, the agent held the money on trust for his principal, so the principal had a proprietary claim to it. Cases suggesting that there is no trust are wrong.
28/3/14
RELFO LTD v VARSANI [2014] EWCA Civ 360
The judge below had been entitled to infer that funds which a director caused a company to transfer to another company’s account were the source of money paid by that company to the defendant. What matters is that there has been an exchange of the value of the claimant's property into other property for which it was substituted, and so on down the chain of substitutes (Foskett v McKeown, 2001). There is no need for the payments to be in chronological order so long as they are made in exchange for a promise of reimbursement. There was also an alternative claim in unjust enrichment. Although any principle for recovery in unjust enrichment from indirect recipients needed refining in later cases, here on the judge's findings, as a matter of substance, or economic reality the defendant was a direct recipient or the causal connection between the payment and receipt was sufficiently made out.
11/4/13
THOMPSON v NATIONWIDE BUILDING SOCIETY, Ch D
Where a mortgage fraud had been perpetrated by the applicant falsely claiming to be buying a property, the lender was entitled to trace part of the mortgage advance into the hands of the defendant who had temporarily loaned the balance of the supposed purchase price to the applicant and whose loan had been repaid. The court had been entitled to find that the defendant had dishonestly assisted the applicant and the defendant had not satisfied the court that the funds he received were not part of the claimant’s advance.
29/1/13
FHR EUROPEAN VENTURES LLP v MANKARIOUS [2013] EWCA Civ 17
A secret commission paid by the seller of an hotel to the buyer’s agent was held on constructive trust for the buyer. It could not be traced into the agent’s hands, because when the seller paid the purchase price it had intended the buyer to obtain legal and beneficial title to the money. But the agent had been a fiduciary and had taken advantage of an opportunity belonging to the buyer, because the buyer might have delayed contracting if it had known that the commission was to be paid to the agent from the purchase money, or the buyer might have negotiated down the fee it paid to the agent thereby reducing the overall cost of the transaction to the buyer.
6/12/12
PROCTOR v PROCTOR [2012] EWHC 4050 (Ch)
Where gifts of money were set aside for undue influence, the claimant was entitled to trace the money into, and to an equitable lien on, property which the donee had bought using the money.
28/2/12
INDEPENDENT TRUSTEE SERVICES LTD v G P NOBLE TRUSTEES LTD [2012] EWCA Civ 195
Assets misappropriated by a husband from a pension scheme and paid to a wife in settlement of a matrimonial lump sum order could be traced into the hands of the wife. Although the wife had originally been a bona fide purchaser for value without notice, she lost that status when the order in the matrimonial proceedings had been set aside for non-disclosure by the husband. It made no difference that another order was later made in the matrimonial proceedings because by then the wife had notice of the claim.