MGN Ltd v Horton

A person who receives money into an account under his or her control, knowing that there is no entitlement to it, or deliberately shutting his or her eyes to that fact, acts dishonestly. That conclusion supports claims in restitution and for knowing assistance in a fraudulent breach of trust. Where fraud could not reasonably have been discovered earlier, the limitation period does not begin until the fraud is discovered under Limitation Act s.32. A volunteer relying on change of position bears the burden of establishing the defence.

The claimant, publisher of the People newspaper, sought recovery from the defendant of money dishonestly procured by her husband, a senior employee. Payments totalling at least £371,880 had been made to accounts controlled by the husband, the defendant and others. The defendant admitted receiving substantial sums but denied knowledge of the fraud and relied on innocent expenditure and change of position.

The claims were brought in knowing receipt, knowing assistance in a fraudulent breach of trust, and money had and received. The issues included the defendant’s dishonesty, whether the claims were time-barred under Limitation Act s.32, and whether change of position defeated restitution.

1. The claim succeeded on all causes of action. The claimant was entitled to recover the sums paid and compound interest.

2. The defendant’s account that she had simply trusted her husband and had not noticed the payments was rejected. Her conduct, including signing or preparing cheques and transferring money, was inconsistent with complete ignorance. Either she knew what was happening or deliberately shut her eyes to the obvious fact that her husband was laundering money.

3. On either analysis, the defendant was dishonest. She knew that she had no right to receive the money into her own accounts or the florist account, and knew that she was assisting her husband’s fraud. The claimant therefore succeeded in restitution and in the claims based on knowing receipt and knowing assistance.

4. The limitation defence failed. The claimant established that the fraud could not, with reasonable diligence, have been discovered before its discovery in August 2008. Time therefore did not begin to run before that date under Limitation Act s.32, and none of the claim was statute-barred.

5. Had the defendant’s evidence been accepted, she would still have faced the burden of proving change of position. She was a volunteer and could succeed on that defence only by discharging that burden. This observation was unnecessary because the evidence was rejected.

not stated in the judgment.