Abou-Rahmah & Anor v Abacha & Ors

A claimant deceived into making payments does not lose access to civil remedies merely because the fraud involved apparent irregularities, generous returns or later references to money laundering. Illegality requires proof that the claimant knowingly participated in the relevant unlawful conduct.

A joint venture may create fiduciary duties, and dishonest assistance requires participation with knowledge or suspicion sufficient to make the conduct contrary to normally acceptable standards of honest conduct. A receiving bank ordinarily owes no duty of care to a non-customer payer absent special circumstances. Payments made unconditionally into the bank’s account do not retain a Quistclose trust merely because payment instructions identify an intended beneficiary. A bank that pays away funds in good faith may rely on change of position where it neither knew nor had grounds to suspect the payment was mistaken.

The claim arose from a sophisticated fraud in which the first claimant was induced to believe that a substantial trust fund existed and that payments were required to secure its transfer. The claimants paid a total of $625,000 into the fourth defendant bank’s HSBC London account. Equivalent sums were credited internally to an account operated by Trusty International in Nigeria and withdrawn by its customers.

The claimants sued the bank for knowing or dishonest assistance, negligence, breach of a resulting or Quistclose trust, and money had and received. The bank relied on illegality, denied the alleged duties and trusts, and pleaded change of position. The central issues were whether the claimants were barred by illegality, whether the bank was liable on any pleaded cause of action, and whether restitution was defeated by its good-faith release of the money.

1. Illegality. The bank bore the burden of proving conduct sufficiently connected with the claims to bar relief. The evidence showed that the claimants had been deceived by a sophisticated fraud. Their potential reward, incomplete documentation, apparent fee payments, knowledge of the alleged family connection and later money-laundering correspondence did not establish knowing participation in illegality. The later correspondence post-dated the payments and had no retrospective effect. The illegality defence therefore failed.
2. Transfer of funds. The bank’s evidence established that the claimants’ payments were matched by internal bookkeeping entries and credited to Trusty International. The change in the bank’s explanation did not prejudice the claimants and did not prevent the court from determining the true transaction.
3. Dishonest assistance. A fiduciary relationship and breach of trust are required. The proposed investment arrangement was a joint venture capable of giving rise to mutual fiduciary duties of good faith, and the fraud was a breach of those duties. However, the bank’s employees did not possess the dishonest knowledge required by Twinsectra Ltd v Yardley (2002) 2 AC 164 and Barlow Clowes International Ltd (In Liquidation) v Eurotrust International Ltd (Privy Council Appeal No 38 of 2004). General suspicions about money laundering were insufficiently connected with these transactions, and there was no conscious decision to avoid enquiries. The claim failed.
4. Negligence. Applying the considerations of foreseeability, proximity and reasonableness in Caparo Industries PLC v Dickman (1990) AC 605, the bank owed no duty of care to the non-customer claimants. No special responsibility had been undertaken, and imposing such a duty would burden banking operations. In any event, the discrepancy between Trust International and Trusty International would not have caused loss because the fraudsters and claimants would have confirmed or accepted payment to Trusty International.
5. Trust and restitution. The claimants paid the money unconditionally into the bank’s account and retained no beneficial interest comparable to the arrangement in Twinsectra Ltd v Yardley or Barclays Bank Ltd v Quistclose Investments Ltd (1970) AC 567. The claimants established operative mistakes concerning the existence of the fund, the need for VAT payments and the promised contribution by the fraudsters. They did not establish a mistake about the ultimate recipient. The bank changed its position in good faith by releasing equivalent sums. Mere negligence in failing to notice the name discrepancy did not amount to bad faith, and restitution would be inequitable. All heads of claim failed.