Abou-Rahmah & Anor v Al-Haji Abdul Kadir Abacha & Ors

Dishonest assistance is assessed predominantly objectively, but by reference to the facts actually known to the defendant. The defendant need not reflect upon, or appreciate, ordinary standards of honesty. A bank’s general suspicion that a customer might sometimes launder money does not establish dishonest assistance in particular transactions where the bank has no specific suspicion about them and its conduct has not been found commercially unacceptable.

The defence of change of position depends upon whether restitution would be inequitable in all the circumstances. Good faith may be absent through commercially unacceptable conduct falling short of dishonesty. The impugned conduct must, however, relate sufficiently to the receipt or disposal of the payment. General suspicions about a customer do not necessarily defeat the defence where regulatory requirements were satisfied and no suspicion attached to the payments themselves.

The appellants were induced by fraudsters to make two payments, totalling US$625,000, into the London account of a Nigerian bank for onward credit to the account of Trusty International. Trusty International’s controllers participated in the fraud and withdrew the money.

Treacy J dismissed claims against the bank for dishonest assistance and money had and received in [2005] EWCH 2662 (QB), subsequently reported at [2006] 1 Lloyd’s 485. He found that the branch manager generally suspected that Trusty International’s controllers might sometimes assist corrupt politicians to launder money, but had no particular suspicion about the appellants’ transactions. He also upheld the bank’s defence of change of position.

The appeal concerned whether those general suspicions established dishonest assistance or deprived the bank of the change of position defence.

1. Appeal dismissed. Arden and Pill LJJ held that the trial judge’s findings supported neither dishonest assistance nor the rejection of the bank’s change of position defence. Rix LJ agreed that the dishonest assistance appeal failed. Although he would have allowed the restitution appeal, he did not press that view to a dissent because the appeal was undefended, the other members disagreed and the underlying law was developing.

2. Per Arden LJ, the Court of Appeal should follow the interpretation of Twinsectra given by the Privy Council in Barlow Clowes. Dishonesty does not require consciousness that conduct is dishonest. The defendant must know the elements of the transaction which make participation contrary to normally acceptable standards. The assessment is predominantly objective but takes account of what the defendant actually knew. Pill LJ considered it unnecessary finally to resolve Barlow Clowes’ impact upon Twinsectra, while accepting its explanatory value.

3. The bank manager’s general suspicion that the customer’s controllers might sometimes assist corrupt politicians to launder money did not establish dishonesty in the relevant transactions. The judge had found no particular suspicion about those payments, no knowledge of a specific dishonest act by the customer and no basis for requiring further enquiries. The bank had reported the large transactions and acted upon apparently proper instructions. The dishonest assistance claim therefore failed.

4. The defence of change of position turns upon whether, in all the circumstances, it would be inequitable to require restitution. Good faith is the touchstone. It may be absent where the recipient acts in a commercially unacceptable way or engages in sharp practice falling short of dishonesty. Mere negligence and comparative fault do not determine the defence.

5. Per Arden and Pill LJJ, the bank’s general suspicion did not defeat the defence. Lack of good faith must relate to the receipt or disposal of the payments which constitutes the change of position. The bank had no particular suspicion about these payments, had complied with the applicable reporting requirements and had not been shown to have omitted any further enquiry required by the circumstances. Whether suspicion about a customer makes continued dealing commercially unacceptable is fact-sensitive; it does not automatically require the bank to terminate every dealing.

1. Court of Appeal (Civil Division): The appeal was dismissed by [2006] EWCA Civ 1492 . Rix LJ would have allowed the restitution appeal but did not press his opinion to a dissent.
2. Queen’s Bench Division: Treacy J dismissed the claims for dishonest assistance and money had and received in [2005] EWCH 2662 (QB), subsequently reported at [2006] 1 Lloyd’s 485.