First City Monument Bank Plc v Zumax Nigeria Ltd

A payment instruction identifying the customer to be credited does not, without more, create an express or Quistclose trust. A Quistclose trust requires objective evidence that the recipient lacks free disposal of the money and that the arrangement preserves the payer’s rights and controls its use. Pooled correspondent accounts and ordinary bookkeeping entries do not ordinarily provide that evidence. The ordinary banker-customer relationship is contractual, that of debtor and creditor. On summary judgment, the court may decide a short point of law where the evidence is sufficient, but must permit a defence to proceed where fuller investigation may materially alter the evidence and gives a real prospect of success. New evidence may be admitted on appeal where reasonable diligence is shown and it is sufficiently significant.

Zumax claimed that ten dollar transfers made through correspondent bank accounts were held on trust for it and sought an account and payment. Barling J granted summary judgment for Zumax, except in respect of the third transfer, in [2017] EWHC 2804 (Ch). The application had previously been stayed pending a jurisdiction dispute, resolved in Zumax’s favour in [2016] EWCA Civ 567.

FCMB appealed, contending that no trust arose and that it had real prospects of defending the claims on payment, abuse of process and cause of action estoppel grounds. The central issues were whether the transfers were impressed with a trust and whether the payment defences should proceed to trial.

The court unanimously allowed the appeal in part. It allowed the appeal on the trust issue and on the payment defence, but dismissed the challenge concerning the tenth transfer.

1. No trust. Payment for a particular purpose does not itself create a Quistclose trust. The question is whether the objective structure and contractual arrangements show that the recipient was denied free disposal of the money and that the payer retained beneficial control. The reasoning in Twinsectra Ltd v Yardley [2002] UKHL 12 and Bieber v Teathers Ltd [2012] EWCA Civ 1466 was applied.
2. The instructions for further or final credit to Zumax were equally consistent with an instruction to credit Zumax’s account and did not manifest an intention to create a trust. The ordinary banker-customer relationship is one of debtor and creditor, as explained in Foley v Hill (1848) 2 HLC 28. The funds were mingled in pooled correspondent accounts. The account entries amounted to bookkeeping and did not constitute meaningful segregation.
3. The trust issue could properly be decided on summary judgment. The court had the evidence necessary to determine the short legal issue and no further evidence was likely to alter the conclusion, applying the approach in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch).
4. Zumax’s proprietary claim in the earlier interpleader proceedings did not renounce or bar a separate personal claim against FCMB. The interpleader proceedings concerned proprietary claims, and FCMB suffered no relevant prejudice because Zumax gave credit for the amount recovered. The tenth-transfer ground therefore failed.
5. FCMB had a real prospect of establishing that it had paid or accounted for the first, second, fourth, fifth, seventh, eighth and ninth transfers through parallel-market transactions. Those issues required fuller investigation and were to proceed to trial, applying Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2006] EWCA Civ 661 and Lexi Holdings v Pannone and Partners [2009] EWHC 2590 (Ch). A newly discovered memorandum relating to the sixth transfer was admitted because FCMB had exercised reasonable diligence and the document gave that defence sufficient substance, applying Langdale v Danby [1982] 1 WLR 1123. Limitation observations below were obiter and were to be reconsidered afresh.

• Court of Appeal (Civil Division): appeal allowed on the trust issue and payment defence; appeal dismissed concerning the tenth transfer.
• High Court of Justice, Business and Property Courts, Business List (Chancery Division): Barling J granted summary judgment for Zumax on all transfers except the third and ordered FCMB to pay the sterling equivalent of the principal sum, in [2017] EWHC 2804 (Ch) .
• Court of Appeal (Civil Division): the jurisdiction dispute was resolved in Zumax’s favour in [2016] EWCA Civ 567 .