Thompson v Nationwide Building Society

On an appeal against findings of dishonesty, the appellate court asks whether the evidence provided an adequate basis for the decision, not whether it would necessarily have reached the same conclusion. A judgment must be read as a whole: an isolated reference to blind-eye knowledge does not establish an incorrect legal test where the judge also required proof of actual knowledge. A person found to have acted dishonestly may be treated as a wrongdoer for tracing purposes. The reverse burden may therefore require that person to prove that money received from a mixed fund was attributable to their own contribution.

The appeal concerned a mortgage fraud involving a loan advanced by Nationwide Building Society on the basis of false representations. Money supplied by the appellant, Anthony Thompson, was used in the transaction and part of the funds was later transferred to his account.

Master Marsh found that Mr Thompson had acted dishonestly, held that he was a wrongdoer for tracing purposes, and applied a reverse burden of proof. Mr Thompson appealed, challenging the factual findings, the approach to dishonesty, the significance of blind-eye knowledge, and the application of the reverse burden.

1. Appeal dismissed. The Master's findings of dishonesty and the resulting tracing relief were upheld.
2. An appellate court reviewing a finding of fact must ask whether there was sufficient evidence to warrant the finding. It is not necessary that the appellate judge would have reached the same conclusion, particularly where the trial judge saw and heard the witnesses. The Master's cumulative assessment of seven factors provided an adequate evidential basis for the finding of dishonesty.
3. The Master applied an appropriate approach to dishonesty. He required Nationwide to establish its allegation by cogent evidence. The judgment, read as a whole, showed that he found actual knowledge that the transaction involved dishonesty. The isolated observation that it was not open to Mr Thompson to turn a blind eye did not mean that mere suspicion or Nelsonian knowledge had been treated as sufficient.
4. A person found to have acted dishonestly in the relevant transaction is a wrongdoer for the purposes of the tracing rules. The reverse burden of proof consequently applied. Mr Thompson had to establish that the money paid into his account represented his own contribution rather than Nationwide's money.
5. The approach was consistent with the equitable tracing principles discussed in El Ajou v Dollar Land Holdings [1993] 3 All ER 717, including the ability to trace money through mixed bank accounts and the equitable treatment of a mixed fund.

• High Court (Chancery Division): Appeal from Master Marsh's reserved judgment dated 12 July 2012. Mr Justice Newey dismissed the appeal.