Mr Justice Lawrence Collins:
I Background
- This case concerns an enormous fraud perpetrated on a Brazilian bank, Banco Noroeste SA ("the Bank"), by a group of individuals based in mainly in Nigeria including the late Chief Anajemba and Chief Emmanuel Odinigwe. The total loss inflicted was $242.5 million, of which some $190.3 million was transferred from the Bank to third parties by means of electronic SWIFT transfers from an account of its Cayman Islands branch held in New York.
- The loss came to light during the course of the sale of the Bank by its then shareholders. It is said that as part of the sale they reimbursed to the Bank the amounts that had been misappropriated and took an assignment of the right to recover them ("the Assignment"). The shareholders are the claimants in these proceedings and they bring this action pursuant to the Assignment. The validity of the Assignment will be an issue in these proceedings.
- The principal third party recipient was Mr Naresh Asnani ("Mr Asnani"). Between April 1995 and January 1998 about $126 million was fraudulently transferred by means of SWIFT transfers into accounts in Switzerland which were maintained or under the control of Mr Asnani and various members of his family.
- Mr Asnani was arrested in Miami in December 2002, and on March 23, 2005 he was convicted of aggravated money-laundering by the Geneva Correctional Court, which sentenced him to imprisonment for three years, a fine of 100,000 Swiss francs and expulsion from Switzerland for ten years.
II The transfers to Mr Vaswani
- The present application concerns transfers of $6,500,045 between October 30, 1996 and August 25, 1997 by Mr Asnani from accounts in Switzerland to an account at Citibank, Geneva, which had been opened on July 11, 1996 by the forty-second defendant ("Mr Vaswani") under the name "Sarina". The money received into the Sarina account was the product of four transfers aggregating $5,500,000 from an account held by Mr Asnani with Citibank, Geneva ("the Excel Account"), and one transfer of $1,000,045 from an account of his with Lloyds Bank, Zurich ("the Landmark/Evershine Account"). Claims relating to a further $600,000 are not pursued: that sum is made of about $500,000 paid out of the Landmark/Evershine account "by order of Stallion" (the Stallion Group being Mr Vaswani's business vehicle) and of about $100,000 paid to Mr Vaswani's account at American Express Bank, London.
- At the time of the transfers Mr Vaswani was living in Lagos. He now lives in Dubai, following his deportation from Nigeria in May 2003 (which is the subject of a legal challenge). In evidence in these proceedings Mr Vaswani has said that he was born in India in 1963 and came to live in England in 1974, where he was granted British nationality. In 1983 he took up residence in Nigeria. His father is a highly successful business man and he developed his own entrepreneurial talents. He established Nigerian companies bearing the name "Stallion", and developed a large business or importing into Nigeria, including cars. He also established a bank in Nigeria of which he was the principal shareholder. He estimated his own personal wealth at about £25 million.
- He says that he first met Mr Asnani in the early 1980s, and over the years their families developed a social relationship. He and Mr Asnani were part of a tightly knit community of Hindu Sindhis, whose members traded and lived in Lagos.
- The claimants rely on evidence given in the Swiss criminal proceedings by Mr Asnani and Mr Giovagnoni, the manager of Citibank Geneva that Mr Vaswani was the contact point for introducing Mr Asnani to Citibank Geneva so that the Excel account could be opened there. Mr Vaswani denies having introduced Mr Asnani to Citibank. The judgment of the Geneva Correctional Court in March 2005 convicting Mr Asnani states that in June 1997 Mr Asnani opened an account at Citibank Geneva, benefiting for that purpose from the recommendation of Mr Vaswani. But Mr Vaswani did not give evidence at the criminal trial.
- The claimants rely on the fact that Mr Vaswani and Mr Asnani knew each other as part of the Indian community in Lagos, and say that Mr Vaswani knew that Mr Asnani was in business in a relatively modest way as an importer of electrical equipment and general goods from the Far East in importing white goods, and that there was no reason for him to be flush with dollars. They say that Mr Vaswani failed to ask any questions of Mr Asnani as to how it was he had in excess of $7 million to sell; as to whether the dollars belonged to him; as to how he or any other persons obtained them and they did so legitimately, and as to why he required payment for those dollars to be made in Naira and to third parties.
- Mr Vaswani says that the receipt of the $6.5 million is to be explained by transactions, in good faith and as part of his normal commercial operations, in which he, on behalf of his main Nigerian trading company, Stallion Nigeria Ltd, purchased from Mr Asnani US dollars in exchange for Nigerian naira in Nigeria payable to, or to the order of, Mr Asnani. The dollars were used to pay for goods and materials purchased by Mr Vaswani's Nigerian companies on the international market.
III Proceedings
- On November 1, 2000 a criminal complaint was laid by the claimants in Switzerland against Mr Asnani. In January 2001 Mr Vaswani's Sarina account was frozen by the investigating magistrate.
- On February 19, 2001 these proceedings were started. Mr Vaswani was joined to these proceedings by order of Lightman J on February 3, 2003, when a worldwide freezing order was made against him in the total sum of $6.5 million. He was served in England while on a temporary visit. He was sued as a secondary recipient, in that he received the money from the primary recipient, Mr Asnani. The freezing order was subsequently replaced by undertakings and security being given by Mr Vaswani in respect of three flats that he and his wife own in London through a BVI company.
- On February 28, 2003 Mr Vaswani applied (a) for the discharge of the freezing order on the basis of material non-disclosure and (b) for a stay of proceedings on forum conveniens grounds. On May 22, 2003 Sir Andrew Morritt V-C dismissed the applications. As regards the application for a stay, he held: (a) there was no natural forum given that the case involved a misapplication of money from an account held by the Cayman Island branch of the Bank in New York and which money was transferred to transferees in several countries; (b) six of the ten substantive defendants to the proceedings had addresses in England and the English courts had jurisdiction over them; (c) the conduct of Mr Asnani was central to the claims against all the substantive defendants and it would be inconvenient to have claims heard in different jurisdictions with the risk of conflicting findings; (d) the services and procedure provided by the Courts in England were preferable or superior to those of Nigeria. He made no determination as to the applicable law of the claims.
- In the skeleton argument for the hearing before Sir Andrew Morritt V-C, it was contended on behalf of Mr Vaswani that what factors might put him on constructive notice was to be determined by reference to the proper law of the transaction between him and Mr Asnani, namely Nigerian law. That was a factor relied on in relation to the factors pointing to Nigeria as the appropriate forum. The claimants said that the applicable law of the receipt claims was likely to be Swiss law, and accordingly the governing law was a neutral factor in a contest between the English forum and the Nigerian forum. The fact that an issue of Nigerian law arose had been overplayed by Mr Vaswani, because it was not a central issue. In any event the issue of Nigerian law was a straightforward one and principles of Nigerian law were familiar to the extent that they were closely based on English law.
- By the time of the hearing before Sir Andrew Morritt V-C the only issue of Nigerian law which was canvassed was relating to exchange control, and in deciding that Mr Vaswani had not satisfied him that the action or the claim was clearly and distinctly more appropriately tried in Nigeria than in England, he said that the issue of Nigerian law appeared to be a simple point of construction of the statute of a common law country which applied to that issue similar principles to those applied in England.
- Mr Vaswani was served with the claimants' seven-times-amended particulars of claim on July 22, 2003, and he served a defence on September 29, 2003.
- The particulars of claim did not raise any issue of foreign law.
- In his defence Mr Vaswani admitted the underlying fraud, and that the other defendants received funds which had been misappropriated from the Bank. Mr Vaswani's defence to the claim prior to the proposed amendment was that, on behalf of various of his main Nigerian trading company, Stallion Nigeria Ltd, he purchased from Mr Asnani dollars on the well-established parallel currency market in Nigeria, and in return he made payments of Nigerian naira in Nigeria to, or to the order of, Mr Asnani. The dollars were paid into the Sarina account and were used (as has been documented) to pay for goods and materials purchased by Mr Vaswani's Nigerian companies on the international market. Mr Vaswani asserts that his purchase of the dollars was a necessary and common incident of commercial life in Nigeria where US currency was in short supply at the time, and that these dealings with Mr Asnani were conducted in good faith and without cause for suspicion.
- The defence of Mr Vaswani did not raise any issue as to foreign law, or the validity of the assignment, or the availability of a tracing remedy. The defence (paragraph 18) stated that the proper law of the banker-customer contracts between Citibank and Mr Vaswani and the proper law of the relevant banker-customer contracts relating to the Landmark, Evershine and Excel accounts was also Swiss law, but only in the context of an averment that Mr Vaswani became aware of the fact that Citibank operated a due diligence procedure, and that he assumed that other Swiss banks operated a similar procedure.
- In the reply the claimants pleaded that they could follow at law the funds from the Excel account, because it was an unmixed fund, comprised entirely of deposits sent from Citibank, New York to Citibank, Geneva. At that time, the claimants had not appreciated that Citibank, New York, and Citibank, Geneva, were different legal entities, namely Citibank NA and Citibank (Suisse) SA. The claimants accept that the Landmark/Evershine account was a mixed fund. But they do not accept that it follows that the losses on the accounts cannot be recovered by reliance on a restitutionary remedy .
IV Summary judgment application
- On May 25, 2004 Laddie J granted summary judgment for about $8 million against four defendants, Chief Ezugo Dan Nwandu and three companies controlled by him: Barros Mattos Junior v MacDaniels Ltd [2004] EWHC 1188 (Ch), [2005] 1 WLR 247. The funds in question had been transferred to England with a view to most of them being changed into Nigerian naira. The basis of the judgment was that the funds belonged to the Bank, which was entitled to recover them as money had and received. The only possible defences were bona fide purchase or change of position, and the defendants could not rely for that purpose on illegal exchange transactions. No issue was raised or decided as to whether the funds were mixed funds so as to preclude the common law tracing claim.
- The claimants issued an application on October 28, 2004 for summary judgment against Mr Vaswani. Summary judgment was sought on the same basis as against those defendants in relation to whom Laddie J had given summary judgment, namely that: (a) the claimants had a restitutionary claim against Mr Vaswani for $6.5 million, which was not fault-based and would therefore not require a trial; (b) $5.5 million of that could be traced through non-mixed accounts (i.e. it did not seek to recover the $1,000,045 from the Landmark/Evershine account at Lloyds Bank Zurich); (c) Mr Vaswani's pleaded defences were that he was a bona fide purchaser for value of the dollars, alternatively that he had changed his position having purchased the same; (d) both defences relied on exchange contracts concluded in Nigeria by Mr Vaswani with Mr Asnani; (e) under the relevant Nigerian legislation, those exchange contracts (and payments made pursuant to them) were illegal; (f) as such (whether directly or as a result of the operation of the Bretton Woods Order in Council 1946), they could not be relied upon as part of Mr Vaswani's defence, which should be struck out, so that the claimants would be entitled to summary judgment on the claim for $5.5 million.
- The evidence in support of the application included (a) a witness statement of Mr Refinetti, a Brazilian lawyer, designed to establish the validity of the Assignment as to which the claimants had been put to proof in the defence; and (b) a witness statement by Professor Paul Collier, of the Centre for the Study of African Economies, in the University of Oxford, to support the argument that Mr Vaswani's purchase of US dollars from Mr Asnani contravened the then governing Nigerian exchange control regulations, as a consequence of which it was argued that Mr Vaswani could not put forward a "change of position" or "bona fide purchaser for value" defence to the claim against him because it would be founded upon illegality on his part.
- The summary judgment application sought judgment for $5.5 million and was solely founded on the claimants' alleged right (as assignees of the Bank) to trace monies into the Sarina account at common law. As a consequence of this, the witness statement of the claimants' solicitor, Mr Oliver, in support of the application accepted that the summary judgment application had to proceed on the basis that Mr Vaswani was to be treated as "innocent of any knowledge of the fraud [on the Bank] and acted in good faith at all times".
- The evidence on behalf of Mr Vaswani in response to the summary judgment application included (a) a witness statement of Mr Badejo, a Nigerian law expert, in reply to that of Professor Collier on the Nigerian currency issue; (b) a witness statement of Ms Eliana Filippozzi, a Brazilian lawyer, to the effect that the Assignment could not be relied upon in the claim against Mr Vaswani since it had not been registered in accordance with Brazilian law; (c) a witness statement from Mr Vaswani's solicitor to the effect that it would be submitted on his behalf that the applicable law relating to the Swiss accounts and dealings with them was Swiss law; and (d) a witness statement from Maître Bernard Reymann, a Swiss lawyer, whose evidence will be set out in greater detail below. His evidence was to the effect (inter alia) that (i) Swiss law would not recognise the monies received into the Sarina account as belonging to the Bank; (ii) Mr Vaswani would not be liable in Switzerland for unjust enrichment.
- The claimants' solicitors wrote to Mr Vaswani's solicitors on April 22, 2005 to say that (a) the issue as to the proper law of the claims was not at all clear; (b) even if the applicable law were prima facie Swiss law, the English courts would or should apply the doctrine of renvoi and consider the Swiss conflict of laws rules in determining the applicable law of the claim, and the claimants' Swiss law advice was to the effect that under Swiss conflict of laws rules the applicable law was probably Nigerian law; (c) although the issues were in theory amenable to determination summarily (more likely on a preliminary issue combined with a summary judgment), that might take as much time and cost as much as a trial itself and also carried the risk of an appeal or appeals. Accordingly the claimants stated that they would withdraw the summary judgment application and invited Mr Vaswani to agree directions.
V Amendments to the particulars of claim
A. Seven-times-amended particulars of claim
- The case against Mr Vaswani was put in the particulars of claim prior to the present proposed amendment as follows:
(1) He was within the category of receipt-claim defendants, namely those against whom equitable tracing claims were made, together with claims in restitution and for knowing receipt. He was not among the dishonesty-claim defendants, namely those against whom a claim for dishonest assistance in a breach of trust was also made (paragraph 38).
(2) Each recipient of a secondary transfer (that is, money transferred to a third party by a recipient of a direct transfer of the Bank's funds by a SWIFT transfer) received the money as money had and received to the use of the Bank (paragraph 53).
(3) Whenever each receipt-claim defendant received the relevant sums of money his state of knowledge was such as to make it unconscionable for him to retain the benefit of the receipt of that sum (paragraph 54).
(4) The recipient was liable to pay to the claimants the amounts shown in the schedules to the particulars of claim as having been received by him as money had and received to the claimants' use, alternatively was liable to repay such amounts by reason of unjust enrichment. Further or alternatively, each recipient was liable to account as a constructive trustee as having been received as the recipient knowing the money to be trust monies (paragraph 59 (a), (b)). The claimants were entitled to trace into the hands of each recipient any sums or assets which derived from the sums received (paragraph 60).
(5) The relevant paragraphs of Schedule 2A (paragraphs 51 et seq) claim that Mr Vaswani opened the Sarina account, and that $6,500,045 from the Landmark and Excel accounts were paid to the Sarina account for Mr Vaswani's benefit. Those paragraphs were admitted. A plea in paragraphs 53 and 54 that he had the benefit of further transfers of about $600,000 is not pursued. As regards knowledge which would make it unconscionable to retain the benefit of the monies it is pleaded (paragraph 56) that Mr Vaswani knew that Mr Asnani was in a relatively modest way of business as an importer of electrical equipment and general goods from the Far East, but failed to ask any or sufficient questions of Mr Asnani as to how it was he had in excess of $7 million to sell; as to whether the dollars belonged to him; as to how he or any other persons obtained them and they did so legitimately, and as to why he required payment for those dollars to be made in Naira and to third parties, and otherwise so as to satisfy himself (or any other reasonably honest man in his position) that those dollars were not actually or potentially traceable to a breach of trust or fiduciary duty, either by Mr Asnani or by the person identified as controlling them.
B. Proposed amended particulars of claim
- Apart from the claim against Mr Vaswani, there are no longer other live substantive claims against the remaining defendants: they have either been settled or are not being pursued. The proposed amended particulars, therefore, now relate only to Mr Vaswani as the only remaining effective defendant.
- The particulars plead that Mr Vaswani has asserted that the proper law of the claimants' claim against him is Swiss law and not English law. The claimants will say (since the law of the forum has been challenged) that in fact the proper law of the claim is Nigerian law, which in all material respects is the same as English law.
- The pleaded factual justification for this assertion is follows: (a) the alleged contractual arrangement between Mr Asnani and Mr Vaswani was made in Nigeria; (b) the contractual arrangement was concluded purportedly in the course of Mr Asnani's Nigerian-based (and illegal) foreign exchange business, and in the course of Mr Vaswani's Nigerian importation business; (c) the alleged consideration given by Mr Vaswani for the secondary transfers was paid in naira and in Nigeria to Nigerian recipients; and (d) in all the circumstances the Swiss accounts were in reality merely conduits for the proceeds of a Nigerian transaction purportedly made in connection with the running of Nigerian businesses.
- If, which is denied, the proper law of the claim is Swiss law as Mr Vaswani asserts, the English court as the court of the forum will apply the doctrine of renvoi and consider Swiss conflict of laws provisions to determine what the Swiss courts would regard as the proper law. The Swiss conflict of laws provisions are such that a Swiss court would treat Nigerian law as the proper law of the claim, and apply Nigerian law in determining the same.
- If, which is denied, Nigerian law does not apply, the claimants claim under Swiss law.
- The common law restitutionary claim and the knowing receipt claim under English/Nigerian law is in essence unchanged, except: (a) the knowing receipt claim is expanded and put on the basis that whenever Mr Vaswani received the sum or sums of money comprised within the secondary transfers made to him, his state of knowledge was such that it is to be inferred that he knew that each such sum or those sums taken together were the proceeds of a breach or breaches of trust; further or alternatively, was such as to make it unconscionable for him or them to retain the benefit of the receipt of that sum or those sums; (b) the following is added to the particulars of actual knowledge (paragraph 56III): "The claimants will rely on [Mr Vaswani] having introduced Naresh Asnani to Citibank Geneva in order that he could open the Excel account there (established as a fact in the Swiss trial of Mr Asnani), in circumstances where the latter had been required by the officers of Lloyds Bank Zurich to close the Landmark/Evershine account in light of the 'transit' use of the account, and where the first recipient of dollars from the new Excel account was [Mr Vaswani] himself"; (c) particulars of constructive knowledge are given: the particulars of actual knowledge are repeated, and it is averred that although the same are sufficient to have placed Mr Vaswani on enquiry as to the source of Mr Asnani's funds, he failed to make such enquiries as would have been made in those circumstances by a reasonable and honest man.
- If, which is denied, the proper law of the claim is Swiss law, as a matter of law the doctrine of renvoi applies, so as to render relevant the stance of the Swiss court itself on the proper law, under its rules on the conflict of laws. The characterisation under Swiss law of the claimants' claim against Mr Vaswani is that it is a claim for damages in tort. On this aspect the claimants plead Swiss law as follows:
(1) Article 133 of the Swiss Federal Code on Private International Law ("LDIP") provides as follows:
"b. Absence of a choice of law
If the tortfeasor and the injured party shall have their place of habitual residence in the same state, claims founded in tort shall be governed by the law of that State.
If the tortfeasor and the injured party do not have their place of habitual residence in the same state, the claims shall be governed by the law of the State in which the tort was committed. If the result occurs in another State than the State in which the act that caused the result occurred, the law of that State shall be applicable if the tortfeasor should have foreseen that the result would occur there.
Notwithstanding the previous paragraphs, if a tort violates an existing legal relationship between the tortfeasor and the injured party, claims founded in tort shall be governed by the law applicable to that legal relationship."
(2) The claimants have Brazil as their place of habitual residence, whereas (at the time the tort was committed), Mr Vaswani as tortfeasor had Nigeria as his. Accordingly, the first sentence of Article 133 (2) LDIP applies. The state in which the tort was committed was Nigeria. The second sentence of Article 133(2) LDIP does not apply, because (a) the "result", that is to say the wrong to the claimants, was effected in Nigeria, alternatively in jointly in Nigeria and Switzerland, in that Swiss law would understand the "result" to have consisted in the participation by Mr Vaswani in the laundering of funds by which he gave nairas in Nigeria to recipients who were primary participants in the fraud, who thus ultimately received in Nigeria the benefit of the funds taken from the Bank; (b) alternatively and in any event, the tort committed by Mr Vaswani is founded, under Swiss law, on an offence under Art 305bis of the Code Pénal ("CP"), which is characterised as a "pure activity" offence which may be proven regardless of whether there is a "result" in consequence. This being so, the said provision has no application.
- Further or alternatively, if, which is denied, the proper law of the claim is Swiss law and either (which is also denied) the doctrine of renvoi does not apply to this claim, or (which is further denied) the claimants' case on the Swiss conflicts provisions is found to be wrong, then the claimants plead their case against Mr Vaswani on the basis of Swiss substantive law, on the following basis:
(1) Article 41 of the Swiss Code of Obligations ("CO") provides as follows:
"Anyone who unlawfully causes damage to another, either intentionally or through negligence or carelessness, is liable to make compensation"
(2) Article 41 CO is comprised of four elements, an unlawful act, fault, damage and a causal link between fault and damage.
(3) As regards the unlawful act (illicité), Mr Vaswani committed a breach of Article 305bis CP, which provides that:
"Anyone who has acted in such a way as to prevent the identification of the provenance, the discovery or the confiscation of assets which were known by him or should have been presumed by him to have resulted from a crime, will be punished by imprisonment or fined."
(4) The victim of a fraud may raise a civil action under Article 41 CO against a recipient of his assets even when he was not the perpetrator of the original offence, because Article 41 CO is intended to provide the victim with a remedy where a restitutionary claim is unavailable (and it is so unavailable against anyone other than a primary recipient).
(5) In coming into possession of the Bank's dollars, Mr Vaswani is readily regarded under Swiss law as having acted so as to prevent the discovery of assets.
(6) Swiss law would regard him as having known or presumed that the money received by him represented the proceeds of crime for the factual reasons given under particulars of actual and constructive knowledge.
(7) As regards fault, for the factual reasons pleaded in the particulars of actual and constructive knowledge, Mr Vaswani either wilfully or negligently failed to take any or any sufficient steps to meet the standard of care, or to employ the due diligence that any reasonable person in his position would adopt, to ascertain that the funds received by him were not the proceeds of a crime.
VI Swiss law evidence
A. Opinion of Maître Bernard Reymann
- In opposition to the application for summary judgment, Maître Bernard Reymann, a partner in the firm Etude Reymann of Geneva, has given evidence on behalf of Mr Vaswani as follows:-
(1) The provisions in Swiss law relating to movable chattels, including bank notes and coins, have no applications to monies held in bank accounts or transferred between bank accounts. Accordingly, where money is held in a bank account, only the bank concerned has a property right in the money.
(2) If Swiss law applied to money paid into or otherwise credited to the New York account, the Bank would not be regarded as having any property rights, or any other right or interest, to or in that money.
(3) Even if New York law applied to the relationship between Citibank New York and the Bank, once money is transferred to a bank account in Switzerland governed by Swiss law, then Swiss law would apply.
(4) Under Swiss law the Bank would have no basis for claiming that it was in some way the owner of, or otherwise had an enforceable property right to interest in monies credited to the Swiss accounts in relation to monies which it was able to trace through the clearing system.
(5) Although the Bank could not lay claim under Swiss law to any money credited to the Zurich account or to the Excel account, it would be able to institute criminal or civil proceedings against Mr Asnani for fraud, under Article 41 CO and for unlawful enrichment pursuant to Article 62 CO.
(6) The only potential liability that Mr Vaswani might have had to the Bank as a result of the receipt would be in a claim for damages against Article 41 CO, or in an action for unlawful enrichment under Article 62 CO.
(7) There would be an unlawful act for the purposes of Article 41 CO if the defendant knew or ought to have realised the fraudulent origin of the funds transferred from the New York account. If Mr Vaswani acted in good faith, he would not be liable under Article 41 CO.
(8) By Article 62 CO a person who without legitimate cause has enriched himself to the damage of a third party is under an obligation to reimburse that party, but there is not the required connection for the purposes of Article 62 CO between the impoverishment and the enrichment if the value passes through an intermediary property before benefiting and enriching the value of the assets of the enriched party. That applies particularly where monies are transferred through a series of bank accounts, and accordingly the impoverishment of the bank resulted in the enrichment of Mr Asnani, and any onward transfer to Mr Vaswani would not result in him also being treated as an enriched party for the purposes of Article 62. He would be regarded as a "pseudo-enriched party". This is supported by reference to two decisions of the Swiss Federal Court: ATF 87 II 18; ATF 106 II 29.
B. Opinion of Maître Eric Fiechter
- There was no evidence in reply to that of Maître Reymann, but on this application the claimants rely on a witness statement of Maître Eric Fiechter, a partner in the firm Secretan Troyanov, Geneva. His evidence was directed to the question whether the claims in this action, including the claims under Swiss law, are time-barred under Swiss law. His evidence is as follows:
(1) The relevant rules are set out in Article 60 CO and Article 70 CP.
(2) The normal limitation period for tort claims is 1 year from the date when the injured party has received knowledge of the damage and of the person liable, but in any case 10 years from the date when the act which caused the damage occurred: Article 60(1) CO.
(3) By Article 60(2) CO, where an action is based on a tort for which the penal law prescribes a longer period of limitation, then the latter also applies to the civil claim.
(4) The applicable period of limitation in the penal code is in Article 70(1), (3) CP which provides for a 7 year period where the criminal penalty is 3 years imprisonment. The 7 year period has since October 1, 2002 been reduced to 5 years.
(5) The 5 year period starts to run on the day when the last violation of the law has been committed, which appears to be January 13, 1998 (the correct date is in fact August 25, 1997).
(6) Time may be interrupted by the commencement of proceedings, and that includes the freezing of the Sarina account by the investigating judge in the criminal proceedings (January 2001), and by the commencement of the proceedings against Mr Vaswani in England (February 2003).
(7) Accordingly there is no time bar in Switzerland for the Swiss tort claim.
- There is no reply to Maître Fiechter's evidence, although I was told that his opinion on interruption of the running of time is not accepted.
- In the course of the argument on the meaning of "résultat" in Article 133(2) LDIP, Mr Michael Briggs QC, counsel for the claimants, produced a letter from Maître Fiechter dated May 17, 2005 addressed to Ms Purkis, junior counsel for the claimants, apparently for the purposes of preparation of the draft amended pleading. It cannot therefore be regarded as evidence of foreign law for the purposes of this application.
- He is replying to a question whether the expression "injury" in Article 133(2) LDIP refers both to a civil and criminal wrong. He says that a better translation would be "result" and that in the case of a claim related to money-laundering there is a division of authority in Switzerland as to whether the place of the wrong is the place where the first illicit violation of the claimant's property takes place, or whether it is the place where there is an injury to the "good administration of justice" (which appears to be something similar to obstruction of justice by the laundering of funds). His conclusion is that the meaning of "result" is unsettled, but that "under the traditional approach where the violated juridical good is the good administration of justice, the "result" would clearly have occurred in Nigeria.
VII Mr Vaswani's position
- Mr Romie Tager QC, for Mr Vaswani, argued that the new particulars of claim amount to a total abandonment of the claims that the claimants have pursued against Mr Vaswani to date, all of which had been based on English law, and on the assertion that the Bank could follow or trace its defrauded money at law or in equity into the Sarina Account. Even if the court were minded to accede to the application to amend, the claimants should pay Mr Vaswani's costs of the action to date as a condition for such permission being granted.
- The claimants: (a) no longer bring their claim under English law (save in so far as they submit that Nigerian law is the same as English law); and (b) have abandoned their claims for the approximately $500,000 and for the $99,580 received into Mr Vaswani's account with American Express Bank in London (to which I refer in paragraph 5 above), with the abandonment of the latter removing the only link between monies allegedly received by Mr Vaswani and this jurisdiction.
- The amendments which seek to make the claim against Mr Vaswani subject to Nigerian law are hopeless and should not be allowed in any event. Swiss law applies to determine whether there is a claim, since none of the money reached a common law jurisdiction where a notional equitable charge could have attached to it. But, as is conceded by the claimants, Mr Vaswani would not be liable under Swiss law for unjust enrichment. That should be the end of the matter.
- Since the funds were mixed, the claimants can only demonstrate that what was received was their money in equity, and it cannot be followed at law: Agip (Africa) Ltd v Jackson [1990] Ch 265 at 286, per Millett J; [1991] Ch 547 at 566, per Fox LJ. The monies in the Excel account were transferred between different banks and cannot be followed.
- The cause of action for knowing receipt is complete when the money is received, and therefore the cause of action was complete when Mr Vaswani received the dollars in Switzerland: El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717, 736; Macmillan Inc v Bishopsgate Investment Trust plc (No.3) [1998] 1 WLR 387, 407-8 (CA). Mr Vaswani did not receive any of the money in Nigeria. Swiss law does not recognise ownership of money in a bank account and would not recognise the claimants as having property in the money in the account.
- The obligation must be governed by the situation as it existed when the money was received. In relation to a receipt-based claim it is not necessary for there to be a benefit. For the purposes of applicable law, it is not necessary to have a trial to determine whether the matters pleaded as having taken place in Nigeria did happen because they are irrelevant. Acts in Nigeria might be relevant to the defence of good faith, but not to the claim. Nothing will emerge at trial which would strengthen the case that Nigerian law applied.
- The argument that, under English law, it is a restitution claim which would be governed by Swiss law, which would treat the claim as one in tort, and refer the claim to Nigerian law, which would treat it as restitution, is hopeless: Macmillan Inc v Bishopsgate Investment Trust plc (No.3) [1995] 1 WLR 975, 1008.
- Even if the Swiss courts would apply Nigerian law to any claim brought either under Article 41 CO or for unjust enrichment, this is not something that could be taken into account by an English court applying Swiss law to such a claim, because renvoi is excluded in English law in relation to tort claims: Private International Law (Miscellaneous Provisions) Act 1995, section 9(5); Dicey and Morris, Conflict of Laws, 13th ed 2000, para 35-020.
- Even if a renvoi were theoretically possible, there is no real prospect of success. There is no real prospect that the Swiss court would apply Nigerian law. For the purposes of the first sentence of Article 133(2) LDIP any relevant tort could only have been committed in Switzerland, and not in Nigeria.
- The underlying argument that renvoi could apply is founded on the principle that the choice of law in Switzerland is governed by the location of "the result" under Article 133(2) LDIP. The real complaint is that Mr Vaswani was a party to the Swiss bank accounts being used for transfers and the facilitation of fraud. The tort was committed where the wrong done or damage was suffered, which was Switzerland, where the money was received. The Geneva court has already ruled, in its decision that it had jurisdiction in civil proceedings over Mr Asnani in respect of the receipt of misappropriated funds by Mr Asnani, that "the result" occurred where the funds were received. Accordingly, the claimants' reliance on Nigerian law flies in the face of the civil claims that they brought against Mr Asnani in Geneva in which they successfully contended that Swiss law governed those claim because "the result" of the wrongful acts committed by Mr Asnani arose in Switzerland on the basis that is where misappropriated funds were received by him (i.e. into the Excel and Landmark Accounts). No different principles would govern a claim in Switzerland against Mr Vaswani.
- The amendments should not be allowed because they would deprive Mr Vaswani of limitation defences. First, any claim under Nigerian law against Mr Vaswani would now be time-barred. Any common law claims under Nigerian law would be subject to a 6 year limitation period, as would any claims in equity: Cia de Seguros Imperio v Heath [2001] 1 WLR 112. The last receipt of misappropriated funds into the Sarina account was on August 25, 1997, and the claimants knew of their cause of action against Mr Vaswani no later than June 2001. Second, any tort claim under Swiss law would relate to events which occurred some eight years ago. Amendment is precluded by section 35 of the Limitation Act 1980 and CPR 17.4.
- There are new facts pleaded: (1) the plea of Swiss law (Article 41 CO/Article 305bis CP) and the other matters in paragraphs 67 to 70, including criminal money laundering and the new allegation of fault in paragraph 70; (2) the plea that Nigerian law is the same as English law; (3) the new particular of knowledge (paragraph 56III), which is new and highly contentious. The combined effect of section 1(1) and (3) of the Foreign Limitation Periods Act 1984 and section 35 of the Limitation Act 1980 is that there is no relation back to the date of the commencement of proceedings.
- Next, as a matter of discretion, and especially if the only viable claim is under Swiss law, the amendment should be refused on the ground that the claimants' Swiss law claim should properly be tried in Switzerland where the Geneva court has already ruled that they have jurisdiction to entertain such a claim.
- The claim itself no longer has any connection with England and if these proceedings were being commenced afresh confined to the Swiss law claim, the court would not grant permission for them to be served out of the jurisdiction as would be required in respect of Mr Vaswani, who at the time of issue of these proceedings was domiciled and habitually resident in Nigeria and is now habitually resident in Dubai: CPR 6.20 and 6.21.
- The Swiss courts provide a distinctly more appropriate forum for the trial of the Swiss claim, and it would not be unjust to the claimants to be deprived of a trial in England. A Swiss law claim under Article 41 CO gives rise to legal considerations that are quite unknown in England, and to evidential matters of great significance. In Switzerland the judges will be in a far better position than an English judge to determine the standard of care expected of someone in Mr Vaswani's position when dealing with Mr Asnani in the context of Article 305bis CP and the receipt of monies transferred through the Swiss banking system.
- The grounds on which Sir Andrew Morritt V-C declined to stay this action (in so far as they could now be applicable) against Mr Vaswani in favour of the claims against him being disposed of in Nigeria no longer have any application for the following reasons: (i) there is a natural forum for a Swiss law claim, given that the Article 41 CO tort alleged against Mr Vaswani was wholly committed in Switzerland; (ii) there are no longer any claims against any other defendants in these proceedings; (iii) the question of conflicting decisions in different jurisdiction no longer applies. Indeed, the fact that the claimants pursued their civil claim against Mr Asnani in Switzerland would strongly suggest that the Swiss courts should deal with any Article 41 CO claim against Mr Vaswani since they have already been seised of the very matters (both factual and legal) applicable to such a claim; and (iv) it could not be suggested that the services and procedure of the Swiss courts are inferior to those of this country.
- As far as any prejudice to the claimants by the Swiss claim having to be pursued in Switzerland is concerned, Mr Vaswani would be prepared to leave the security over his flat in place pending the outcome of any Swiss proceedings issued by them, subject to such proceedings being commenced within a reasonable period, and subject to an appropriate cross-undertaking as to damages and an undertaking to prosecute the Swiss proceedings with reasonable diligence.
- Finally, a number of other points on the pleading are taken. First, the new tort claim under Swiss law fails to plead any particulars of the critically important allegations (1) that Mr Vaswani "knew that Mr Asnani was in a relatively modest way of business …" (paragraph 56I) and (2) that he "wilfully …. failed to take any or any sufficient steps to meet the standard of care …" (paragraph 70). In particular the latter needs to be particularised, not the least because it is unclear whether this is intended to introduce an allegation of fraud. Second, given that the particulars of claim accept that Mr Vaswani's dealings in Nigeria with Mr Asnani were carried out by Mr Vaswani as an agent acting on behalf of his Nigerian company, Stallion Nigeria Ltd, any claim in respect of those dealings would be confined to a claim of knowing assistance (Agip (Africa) Ltd v Jackson [1990] 1 Ch 265 and [1991] Ch 547 (C.A.), approved in Twinsectra Ltd v Yardley [2002] 2 AC 164 at 194), but no allegation of fraud is expressly pleaded against Mr Vaswani. Third, the claimants should be required to state whether the allegation in paragraph 56III includes an assertion that Mr Vaswani had knowledge of the circumstances in which Mr Asnani had been required to close the Landmark/Evershine Account and, if it is so alleged, particulars should be provided of the basis upon which that allegation is made. No particulars of fraudulent concealment have been given, and the particulars of knowledge are insufficient.
VIII Claimants' position
- Mr Briggs QC, for the claimants, argued as follows. The claimants accept that the claims are to be characterised as restitutionary, but the enrichment should be regarded as having taken place in Nigeria. Nigerian law applies to the restitution claim as the system of law with which the relevant events were most closely connected: Dicey and Morris, para 34R-001. Although the immediate place of payment was the Swiss personal account, the real enrichment occurred in Nigeria. The fact that money enters a country in which the legal system does not recognise equitable tracing (or presumably also following at law), does not affect the claimants' ability to trace the money in equity: El Ajou v Dollar Land Holdings [1993] 3 All ER 717, 736. Whether this is correct is a matter for the trial judge. Mr Vaswani's contrary argument does not constitute a ground for denying permission to amend.
- If the restitution claim depends on Swiss law, Nigerian law can also be reached through a renvoi from Swiss law, which would characterise the claim as a tort claim and apply Nigerian law as the law of the place where the result of the wrongful act occurred. It is common ground that the characterisation of the claim under English law (the law of the forum) is that the claims are restitutionary. Accordingly, the Private International Law (Miscellaneous Provisions) Act 1995 is not engaged and section 9(5) accordingly does not apply.
- The judgment of the Geneva court on jurisdiction in the civil proceedings against Mr Asnani does not negative the case that under Swiss law a wrong may have been committed in Nigeria. The judgment was not an assertion of exclusive jurisdiction but an assertion of competence to entertain the claim against Mr Asnani under Article 41 CO. The facts are very different as between the two men: Mr Asnani went to Switzerland for the specific purpose of opening these accounts when he had none before and put $122 million of funds through these accounts without having or believing that he had any interest in the same (however unjustified such a belief might be). He was physically present in Switzerland for much of the time whilst this occurred. Mr Vaswani on the other hand received 5 transfers pursuant to a transaction undertaken in Nigeria for which consideration passed in Nigeria.
- The claimants accept that the question whether the court would adopt renvoi is in any event not an easy one, but that is no reason for refusing permission to amend.
- The effect of section 35 of the Limitation Act 1980 is that the proceedings against Mr Vaswani were deemed to be a separate action and deemed to be commenced at the start of the action in February, 2001, and not when he was joined in February 2003.
- If Nigerian law applies, then the 6 year period applies by virtue of the Limitation Law 2003, section 8(1)(b)(quasi contract); 13(2) application by analogy of common law claim limitations to claims for equitable relief; 32(1)(breach of trust). In addition by section 58(1)(b) the period of limitation does not run where the right of action is concealed by the fraud of the defendant, until the plaintiff has discovered the fraud or could with reasonable diligence have discovered it. For this purpose fraud includes turning a blind eye.
- The combined effect of Article 41 CO, Article 60(2) CO and Article 70 CP (and the 2001 law amending it as from October 1, 2002) is that the applicable limitation period in Switzerland for the claim under Article 41 CO is 5 years from the date when the last violation of the law was committed.
- In Switzerland any limitation period may be interrupted pursuant to Article 135 CO if proceedings have been commenced or an action brought before a competent court. The Swiss law position is that both the freezing of the Sarina account by the investigating magistrate in January 2001, and the bringing of the English proceedings, interrupts the period and causes it to run again under Art 60(2) CO. The last wrongful act was on August 28, 1997, and the Swiss period for assertion of civil rights arising out of a crime was 5 years, and accordingly the action was in time.
- Even if any relevant limitation periods have expired, under section 1(3) of the Foreign Limitation Periods Act 1984 questions as to the deemed date of commencement of claims are to be dealt with by reference to the English statutory framework contained in section 35 of the 1980 Act, which permits amendments to be made after the expiry of the limitation period if they do not involve the introduction of a new cause of action, and which permit new claims to be made if they are based on the same or substantially the same facts as an existing claim.
- There are not in fact any new claims. Foreign law is not a fact for limitation purposes. So far as a claim under Nigerian law was concerned, all the facts were precisely the same as previously pleaded. In the case of the Swiss law claim the only change was to the test to be applied to the same facts.
- As to the claim based on Nigerian law, the claimants say: (a) that in pleading the claim under Nigerian law they are not seeking to introduce new causes of action within the meaning of section 35; but (b) even if they are, such new causes of action "arise … out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action", thereby engaging section 35(5)(a) of the 1980 Act. The Nigerian claims are identical to those pleaded in England. The only additional fact is that Nigerian law is in all material respects the same as English law. That is not a new fact for limitation purposes.
- If, contrary to the claimants' primary submission, there exists a limitation defence under Swiss law, then: (a) the Swiss claim, though it may under Swiss law be characterised as a claim in tort based upon the wilful or negligent causing of damage, would only amount to a new cause of action if it were based upon new "base" facts, and it is not; (b) in any event, even if that is wrong, the Swiss claim is based upon the same or substantially the same facts as are in issue in the existing claim. The allegation of fault in paragraph 70 of the draft particulars of claim is based on the same facts as have already been relied upon in support of the allegation of knowing receipt. Paragraph 56III converts a matter that has been in evidence against Mr Vaswani since the stay application in 2003 to a pleading of material fact.
- Mr Vaswani has already challenged the jurisdiction of this court and lost. The matter of forum is now res judicata: it is not open to him to take any point about the appropriateness of England as opposed to Switzerland (especially since he had previously sought a trial in Nigeria). This court is already seised of the claim.
- The only reason the claimants are making a case under Swiss law in the proposed pleading is by way of an alternative to their primary case under Nigerian law, lest those arguments fail. It would be absurd to compel the claimants to bring a parallel claim in Switzerland arising out of the same facts against the same defendant. In any event, for as long as this English claim is continuing against Mr Vaswani, the Swiss courts would be obliged to decline jurisdiction under Article 21 of the Lugano Convention, which is applicable notwithstanding the multiplicity of parties in the English action: Case C-406/92 The Tatry [1994] ECR I-5439, [1999] QB 515.
- As regards the pleading points taken by Mr Vaswani, the claimants' position is: (1) as regards the case that there is no material on which to support a claim of tracing at common law, the facts are clearly asserted in paragraph 44, and it is not accepted that the funds in the Excel Account were or became mixed funds. (2) The claimants do not accept that Mr Vaswani acted as agent for Stallion in making the exchange contracts. The claimants make no assertions as to how he operated the Nigerian importation business referred to in the pleading. The Sarina account opening documents show the account to be a personal account and that Mr Vaswani declared himself to be the beneficial owner of the funds in that account. He opened the account 4 months before the first receipt and should be taken to have remembered these facts when the receipt occurred. This point was not pleaded in the defence. It is just as likely that the funds received personally by Mr Vaswani were loaned to Stallion, if in fact Stallion received them.
IX Conclusions
- The only matter before me is the claimants' application to amend the particulars of claim. If Mr Vaswani's objections are successful in full, then their effect would be to prevent trial of this action in England.
- The principal differences between the seven-times-amended particulars of claim and the proposed amended particulars are these:
(1) the plea as to the applicability of Nigerian law by the alternative routes of Nigerian law being the applicable law under English law of the restitutionary claims, or of Nigerian law being the applicable law under Swiss conflict of laws rules relating to tortious claims (paragraphs 48.1 and 48.2)
(2) the plea as to the applicability and content of Swiss conflict of laws rules for the purpose of the applicability of Nigerian law under the second route (paragraph 48.2);
(3) the plea as to applicability and content of the Swiss claim under Article 41 CO (paragraphs 65-72);
(4) the addition, to the particulars of actual and constructive knowledge, of the plea:
"The claimants will rely on [Mr Vaswani] having introduced Naresh Asnani to Citibank Geneva in order that he could open the Excel account there (established as a fact in the Swiss trial of Mr Asnani), in circumstances where the latter had been required by the officers of Lloyds Bank Zurich to close the Landmark/Evershine account in light of the 'transit' use of the account, and where the first recipient of dollars from the new Excel account was [Mr Vaswani] himself" (paragraph 58III); and
(5) the incorporation of the amended particulars of actual and constructive knowledge as particulars of unlawful act and of fault for the purposes of the claim under Article 41 CO (paragraphs 69 and 70).
Amendment: general
- After service, amendment to a statement of case requires consent of all other parties or the permission of the court: CPR 17.1(2). The general principle concerning the power to give permission to amend is that the overriding objective that the court should deal with cases justly includes, so far as practical, ensuring that each case is dealt with fairly; and amendments in general ought to be allowed so that the real dispute between the parties can be adjudicated upon provided that any prejudice to the other party caused by the amendment can be compensated for in costs, and the public interest in the administration of justice is not significantly harmed: Cobbold v Greenwich LBC, August 9, 1999, per Peter Gibson LJ, applied in several subsequent decisions.
- It is not normally appropriate to deal even in strike out applications with complex issues of law in a developing or uncertain area, and the same should apply in an application to amend, especially (but not only) where the determination of the question of law is, or may be, fact sensitive.
- By section 35(1)(b) of the Limitation Act 1980 any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced (except in the case of third party proceedings) on the same date as the original action. By section 35(2) a "new claim" includes (a) the addition or substitution of a new cause of action or (b) the addition or substitution of a new party. The effect of section 35(1)(b) is that the English proceedings against Mr Vaswani were deemed to have been commenced on February 19, 2001, when the proceedings were commenced and not on the date on February 3, 2003, when he was added as the forty-second defendant.
- The effect of section 35(3) and (4) of the Limitation Act 1980 is that a new claim cannot be made after the expiry of any time limit, unless so provided by rules of court, but only if the conditions in section 35(5) are satisfied, subject to any further restrictions the rules may impose. The condition in section 35(5) in the case of a claim involving a new cause of action, is that the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action.
- The relevant rule is CPR 17.4, and the general power of the court to give permission to amend is subject to that rule: CPR 17.3(2)(c). CPR 17.4 provides that where a period of limitation has expired under (inter alia) the Foreign Limitation Periods Act 1984, the court may allow an amendment "whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings": CPR 17.4(1)(b)(ii),(2).
- By the Foreign Limitation Periods Act 1984, section 1(1) where in any action in England the law of any other country is applicable under the English rules of private international law, the law of the country of the applicable law relating to limitation applies. Section 1(3) provides that English law determines for the purposes of the application of the foreign applicable law of limitation:
"whether, and the time at which, proceedings have been commenced in respect of any matter, and accordingly, section 35 of the Limitation Act 1980 (new claims in pending proceedings) shall apply in relation to time limits applicable by virtue of subsection (1)(a) above as it applies in relation to time limits under that Act."
- Section 4(1) of the Foreign Limitation Periods Act 1984 provides that:
"…. References in this Act to the law of any country … relating to limitation shall, in relation to any matter, be construed as references to so much of the relevant law of that country as (in any manner) makes provision with respect to a limitation period applicable to the bringing of proceedings in respect of that matter in the courts of that country and shall include –
a. a reference to so much of that law as relates to, and to the effect of, the application, extension, reduction or interruption of that period; …."
- Consequently, the principal issues are these: (a) whether the amendments raise matters which are unarguable; (b) what law determines, for the purposes of Nigerian or Swiss limitation periods, the effect of the addition of new causes of action; (c) whether the draft amended particulars of claim add or substitute new causes of action, and if so, whether they arise out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings; (d) whether the discretion should be exercised to allow the amendments.
Applicable law
- Mr Vaswani's position is that the amendment to plead Nigerian law as the applicable law of the restitutionary claim, either directly, or indirectly through transmission from Swiss law, is hopeless and should not be allowed. The claimants' position is that it is at least arguable that Nigerian law is the applicable law of their restitutionary claims at common law and in equity. Their primary position is that Nigerian law applies because it is in Nigeria that Mr Vaswani was in reality enriched, and the enrichment is most closely connected with Nigerian law: Dicey and Morris, Rule 200, and para 34-029. Alternatively, if Mr Vaswani is correct is saying that enrichment occurs where the money is received, namely in Switzerland, Nigerian law applies by virtue of the doctrine of renvoi, that is, by Swiss rules of the conflict of laws, Nigerian law applies. For Mr Vaswani it is argued that there is clear authority that Swiss law applies. That means internal Swiss law, because the doctrine of renvoi has very limited application in English law and should not be extended to cases of restitutionary claims.
- Rule 200(1) in Dicey and Morris, 13th edition 2000, para 34R-001 states: "The obligation to restore the benefit of an enrichment obtained at another person's expense is governed by the proper law of the obligation." Rule 200(2) states: "The proper law of the obligation is (semble) determined as follows: (a) If the obligation arises in connection with a contract, its proper law is the law applicable to the contract; … (c) If it arises in any other circumstances, its proper law is the law of the country where the enrichment occurs." The Rule derives from formulations in the sixth and succeeding editions (in chapters on quasi-contract, and later, restitution for which Professor Kurt Lipstein, and later Professor Sir Otto Kahn-Freund had responsibility), and owes much to the American Law Institute, Restatement (First), Conflict of Laws, 1934, ss 452 and 453. The formulation of the Rule has been the same since the 8th edition in 1967. In the sixth and seventh editions the Rule concerned the law applicable to the rights and obligations of the parties to a quasi-contractual relationship, but was otherwise substantially the same.
- The commentary on Rule 200(2)(c), paragraphs 34–029 and 34-030, points out that where money is paid to another person with whom no prior contract or supposed contract exists, the enrichment is likely to be most closely connected with the country in which it occurred. The rationale for the formulation is that in the absence of a prior relationship, the law of the place where the enrichment occurred may be expected to be that which has best claim to be applied to any obligation to restore. The commentary goes on to say that although the proposed Rule, and the passage just mentioned, have been judicially approved, in view of the diversity of situations in which a restitutionary claim may arise, it may be that the place of the enrichment will not always give an answer which corresponds to the law which has the closest connection with the claim.
- In Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105 what is now Rule 200(2)(c) was referred to in argument only, and it was common ground between the parties that the substantive aspects of the mistaken payment (which had been made in New York for the account of an English company) were governed by New York law. In Re Jogia (A Bankrupt) [1988] 1 WLR 484, 495-6 (a case involving an application for leave to serve proceedings out of the jurisdiction in a claim for money had and received in connection with payments made to the defendant after a receiving order) Sir Nicolas Browne-Wilkinson V-C said that the view in Dicey and Morris, 10th edition, p 921, that the proper law of the quasi-contract was the law of the country where the enrichment occurred accorded with the Restatement, and seemed to be sound in principle, but that it was not necessary to reach any final view, because there was no good arguable case on the merits.
- In El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717 (revd on other grounds [1994] 2 All ER 685) the claim against Dollar Land was in connection with the receipt and subsequent investment in property of funds which had been fraudulently extracted from the plaintiff. The proceeds of the fraud were channelled through Geneva, Gibraltar, Panama, and back through Geneva, and then invested in Dollar Land's property development project. The claim failed on the merits at first instance because the plaintiff failed to prove that Dollar Land had the requisite degree of knowledge that the funds were the proceeds of fraud, but this part of the decision was reversed on appeal. At first instance it was argued for Dollar Land that the plaintiff's claim depended on the continuing subsistence of his equitable title and could not be established where the money had passed through the hands of recipients in civil law jurisdictions which did not recognise the concept of equitable ownership. Millett J said that that argument was not open because foreign law was a question of fact which had to be pleaded and proved by expert evidence. The court could not take notice of judicial notice of foreign law, and in the absence of evidence, foreign law was presumed to be the same as English law. No question of foreign law had been pleaded, and no evidence of foreign law had been tendered.
- But Millett J went on to say (at 736) that, even if the argument were open to Dollar Land, he would reject it. A "knowing receipt" claim was the counterpart in equity of the common law action for money had and received. Both could be classified as receipt-based restitutionary claims: "The law governing such claims is the law of the country where the defendant received the money", citing what is now Rule 200(2)(c) in Dicey and Morris, 11th edition, 1987, and Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105. Whatever money or property Dollar Land received was received by it in England and accordingly the claim fell to be governed by English law, including the principles of equity.
- Macmillan Inc v Bishopsgate Investment Trust plc (No.3) [1995] 1 WLR 975, affd [1998] 1 WLR 387 was not a case concerning the tracing of money. It concerned the misappropriation of negotiable shares in Berlitz, a New York company, belonging to the plaintiff, Macmillan, by transferring them to a nominee company in England and then charging them to various New York and Swiss banks in London to raise money for the Maxwell group of companies. The shares were held through the New York depositary system, although in some cases share certificates had been deposited with the relevant bank in London. The principal issue was what law governed the question of priority, which in turn depended on whether the defendants had notice of the plaintiff's title. Macmillan argued that English law applied as the law governing its claim to restitution. Millett J accepted that Macmillan's claim lay in restitution, but it was not sufficient to characterise the nature of the claim, it was also necessary to identify the question at issue, which was one of priority, which was governed by New York law, as the law governing the transactions by which the banks acquired the shares.
- In the Court of Appeal, the decision was affirmed on the ground that the question was the law which governed the issue whether the defendants were purchasers for value in good faith without notice of the plaintiff's shares. That question was to be decided by New York law as the situs of the shares. Staughton LJ referred to the fact that in Re Jogia (A Bankrupt) [1988] 1 WLR 484 Sir Nicolas Browne-Wilkinson had accepted that the restitutionary obligation was governed by the law of the country where the enrichment occurred. Staughton LJ said (at 398) that said that he was prepared to accept that Macmillan's claim was restitutionary in nature, and would accept without deciding that what is now Rule 200 in Dicey and Morris determined what system of law governs such a claim. But the issue was not whether Macmillan had a cause of action in restitution, but whether the defendants had a defence on the ground that they were purchasers for value in good faith without notice: [1998] 1 WLR 387 at 397-398. Auld LJ referred (at 408) to what is now Rule 200(2)(c) as being tentative. After referring to Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105; Re Jogia (A Bankrupt) [1988] 1 WLR 484; and El Ajou v Dollar Land Holdings [1993] 3 All ER 717, he said that "at the highest, as Mr David Oliver, on behalf of Macmillan, put it, 'a tendency to endorse Dicey's proposition.' None of them binds this court and … I do not consider it necessary to express a view on it" (at 408).
- Arab Monetary Fund v Hashim [1993] 1 Lloyd's Rep 543, affd [1996] 1 Lloyd's Rep 589, was one of several cases involving claims against Dr Hashim. In this case it was claimed that he had received bribes from the Bernard Sunley Group in connection with the awards of contracts in Abu Dhabi, where the AMF had its seat. The claim was for the recovery of a payment of about $1.8 million allegedly paid by the Bernard Sunley Group to Dr Hashim as a bribe to a Swiss bank account in the name of a Liechtenstein Anstalt. The contract payments were made in Abu Dhabi to the Bernard Sunley contractor (incorporated in Lebanon) and then transferred to Bernard Sunley & Sons Ltd in London.
- There was an issue as to whether Abu Dhabi law or English law applied because under Abu Dhabi law the giver of a bribe is not liable in restitution. There was a cause of action in tort, but it was barred by limitation. Evans J referred to the then rule in Dicey and Morris, 11th edition, 1987, and said (at 565-566):
"… the 'place of enrichment' test described in sub-r. 2(c) makes obvious sense when the defendant to a restitutionary claim has received a sum of money in a foreign country where either he is resident or for some other reason he receives the benefit of enrichment there. But Dr. Hashim had no connection with Switzerland apart from his interest in the JOJ bank account, and the money paid into that account was dispersed to a number of other jurisdictions, presumably on his instructions and for his enjoyment there. Switzerland was at best a temporary staging post for the money and was never its journey's end. A substantial part of it was used to purchase the English property which Dr. Hashim intended to sell and has since made his home. None, or no significant amount, went to Abu Dhabi. This lends support to the plaintiffs' alternative submission, which is that, even if the place of enrichment fact applies (compare In re Jogia, [1988] 1 W.L.R. 484 at p. 495 per Sir Nicolas Browne-Wilkinson V.-C.) the correct choice in the circumstances of the present case is English law."
- He went on to hold that because Dr Hashim was sought to be held liable for breach of his duty as agent, the claims were governed by the laws of Abu Dhabi, which was the law governing the relationship between Dr Hashim and the Arab Monetary Fund. In particular, the restitutionary claim against the Bernard Sunley Group was to recover in part what was paid under the building contract, which was governed by Abu Dhabi law: 565 to 566.
- Evans J discussed whether the case was in sub-rule 2(a) or (c), and said that the claims both against Dr Hashim and the Bernard Sunley Group were within sub-rule 2(a), but he went on (at 566):
"I prefer to base this conclusion on wider grounds. It seems to me that in such cases the proper law of the restitutionary obligation which the plaintiffs assert is the law of Abu Dhabi. The building transaction was centred there. Dr. Hashim was based there and his duties were owed to the plaintiffs whose headquarters were there. The bribe agreement and the bribe payment were ancillary to the building contract and to Dr. Hashim's employment. If the plaintiffs had contended that the law of Abu Dhabi governed these claims, I doubt whether the contrary suggestion of English law, if it had come from the defendants, would have appeared seriously arguable."
- In the Court of Appeal, Saville LJ (with whom Nourse LJ agreed: p 593) agreed with Evans J's result: [1996] 1 Lloyd's Rep 589, at 597. Saville LJ applied the general rule in Rule 200(1) that the obligation to restore the benefit is governed by the proper law of the obligation, on the basis that, in the context of bribes, the obligation arose from the dishonest abuse of the relationship with the third party. The relationship between the AMF and Dr Hashim was governed by the law of Abu Dhabi, as was the relationship under the building contract obtained through the bribe; and it was in Abu Dhabi that the dishonest abuse occurred.
- In the main proceedings against Dr Hashim and others for breach of duty, Chadwick J, in an unreported decision of June 15, 1994, said that the claim against Dr Hashim and other officers and employees of AMF, as constructive trustees for the restoration of the funds, was governed by the proper law of the underlying obligation, namely the law which governed their relationship with the AMF (citing sub-rule (2)(a)) and not by the law of the place where the funds were held, namely Switzerland.
- In Kuwait Oil Tanker Co SAK v Al Bader, Moore-Bick J, November 16, 1998, unreptd, affd [2000] All ER (Comm) 271, the claimants, Kuwait Oil Tanker Co SAK ("KOTC"), sought to recover about $70 million which they claimed the defendants, who at the relevant times were employees or officers of the claimant, had embezzled in a conspiracy. The claimants alleged four main methods through which this had been effected. The first involved overcharging the claimants for the charter of ships: the claimants' money was transferred from their Kuwait bank account to a Geneva bank account in the name of Mr Al Bader and the excess was transferred from that account to other accounts in Switzerland and Kuwait for the benefit of Mr Al Bader and others; the second involved payments from England by an English brokerage firm of sums due to KOTC into Geneva bank accounts of Mr Al Bader and a company called Gulf Shipping (who, it was alleged, were connected to Mr Al Bader); the third scheme involved obtaining rebates of premiums due to KOTC from insurance underwriters and having the English brokers pay them from an account in England to a bank account in Geneva in the name of a company controlled by the defendants; and the fourth scheme involved fraudulently purchasing travellers cheques from the Kuwaiti bank accounts of the claimants of which substantial sums were cashed by the defendants in Switzerland, Kuwait and London. It was held that the defendants were liable for the tort of conspiracy. The tort had been committed in Kuwait as the conspiracy had been formed, organised and run from Kuwait.
- The defendants were also liable to repay the moneys as constructive trustees due to breaches of their fiduciary obligations owed to the claimants. The issue on constructive trust arose because it affected KOTC's claim to compound interest. The defendants argued that Kuwaiti law applied to the constructive trust claim, and that Kuwaiti law did not recognise the concept of constructive trust. The plaintiffs claimed that the imposition of a constructive trust was remedial, and therefore English law applied. Moore-Bick J held that although the claim in constructive trust was governed by Kuwaiti law, the availability of compound interest was governed by English law as the procedural law.
- Moore-Bick J said that the authorities indicated that in the case of a wrongful acquisition of movable property, the rights were governed by the law of the place where the property was acquired (citing sub-rule 2(c) in the 12th edition, 1993) and that had been approved by the Court of Appeal in Arab Monetary Fund v Hashim [1996] 1 Lloyd's Rep 589. Moore-Bick J held that both under Kuwaiti law and English law the liability of the defendants was equivalent to that of constructive trustees. English law applied to those assets which were obtained in England and the decision of the Court of Appeal in Arab Monetary Fund v Hashim was authority for saying that, so far as the property was obtained in Kuwait, the substantive obligations which arose as a consequence were to be determined by the law of Kuwait. He also held that the defendants were liable by virtue of their fiduciary responsibilities, following the judgment of Chadwick J in Arab Monetary Fund v Hashim.
- In the Court of Appeal the decision on this aspect was affirmed, but on the basis that compound interest depended on the lex causae, and that Kuwaiti law justified an award of compound interest: [2000] All ER (Comm) 271. Nourse LJ said (at 338) that Moore-Bick J had been wrong to consider whether the defendants were constructive trustees: "Plainly they were not. An actual trustee or someone whom the law treats as such cannot at the same time be a constructive trustee." Nourse LJ then went on to summarise the judge's findings:
"The judge held that the claimants' alternative claim was made out. Although his consideration of the question proceeded mainly on the footing that the defendants were liable as constructive trustees, he concluded by holding that they were also liable by reason of breaches of their fiduciary duties to the claimants. On the basis of his previous findings, that conclusion was both justified on the facts and correct in law. However, because the rule of English private international law is that the obligation to restore the benefit of an enrichment such as was obtained by the defendants in this case is governed by the law of the country where the enrichment occurred (see Dicey and Morris (13th edn, 2000) vol 2, p 1485 r 200(2)(c)), it was necessary for the judge's decision to be based, in the first instance, on the law of Kuwait."
- What Nourse LJ appears to me to be saying is that on the judge's (incorrect) classification of the claim as being in constructive trust, he would have been right to apply sub-rule 2(c) in the first instance. In my judgment the ratio of the case on this aspect is in these passages:
"192. In our judgment both the decision of Chadwick J in the Arab Monetary Fund case and the judge's application of it to the present case were correct. In the Arab Monetary Fund case the claimant sought recovery from the defendants on the grounds that they had acted in breach of fiduciary duties under the law of Abu Dhabi. Chadwick J said:
'In the context of a claim to invoke its equitable jurisdiction it is for the English court to decide whether the necessary fiduciary relationship exists. Where the duties to which a relationship gives rise are determined by foreign law, the question for the foreign law is what is the nature of those duties. It is for the English court to decide whether duties of that nature are to be regarded as fiduciary.'
…
193. Our only possible criticism of Chadwick J's judgment is that he too referred to the defendants in that case being treated by English law as constructive trustees and not as actual trustees. There may have been special reasons for that. But whether there were or not, the inaccuracy of the description can have had no effect on the principles by which the defendants were held liable. In the present case the answers to Chadwick J's four questions are the following: (i) the proper law which governed the relationship between the defendants and the claimants was the law of Kuwait; (ii) the duties imposed on the defendants by arts 264 and 267 of the 1980 Civil Code were to make restitution in respect of the sums misapplied by them respectively; (iii) the nature of those duties was such that they would be regarded by an English court as fiduciary duties; and (iv) it would be unconscionable for the defendants to retain the funds. We accordingly hold that the claimants' alternative case is made out."
- I should also add that, despite what Moore-Bick says, I do not see in the decision of the Court of Appeal in Arab Monetary Fund v Hashim [1996] 1 Lloyd's Rep 589 a holding approving the application of sub-rule 2(c). The decisions in the Arab Monetary Fund and Kuwait Oil Tanker cases are concerned with the law governing the liability of defendants who had a relationship with the claimants. The applicable law of the restitutionary obligation depended on the law governing that relationship.
- In Trustor AB v Smallbone, unreptd, May 9, 2000, the claim was that Mr Smallbone, a director of the claimant, a Swedish company, had participated with Lord Moyne in the dishonest transfer of its funds to an account in London in the name of the claimant. Some of the funds were then transferred to another London account in the name of a Gibraltar company, Introcom, controlled by Mr Smallbone, and in turn to Mr Smallbone. The claim against Mr Smallbone was for conspiracy and breach of duty, and restitutionary relief in respect of the misappropriations which he had received; and against Introcom for knowing receipt. The defendants argued that under Swedish law, the claimant had to look first to Lord Moyne for recovery, and could only look to the defendants for any deficiency. The argument was rejected on the basis that Swedish law did not affect Introcom's liability. Sir Richard Scott V-C said:
"61. In addition, Trustor is entitled, under English law, to treat Introcom as a constructive trustee of the money it received from the Trustor account. There is, in my opinion, no conflict of laws problem about this. The money was both paid and received in England. So the proper law of the constructive trust is the law of England (see Rule 200(1)(c), Dicey's Conflict of Laws, 13th Ed., p. 1485). Introcom, the constructive trustee, paid some of the money to Mr Smallbone. Mr Smallbone, of course, had knowledge of all the relevant facts. Indeed, it is through Mr Smallbone that the requisite knowledge of the impropriety of the payments from the Trustor account is properly to be imputed to Introcom. It follows, in my judgment, that Mr Smallbone, in turn, became a constructive trustee of the money received via Introcom. Here, again, in my opinion, no conflict of laws problem arises. The instruction for the payment of the money from Introcom to Mr Smallbone was given in England and acted on in England in relation to money in England. Under English law Mr Smallbone became, in my judgment, a constructive trustee of the money paid to him wherever it was paid.
62. As the judge remarked …, there was no clear evidence as to where Mr Smallbone received the money. But the judge relied on the unreported judgment of Chadwick J., given on 15 June 1994, in The Arab Monetary Fund -v- Hashim and the unreported judgment of Moore-Bick J., given on 16 November 1998, in Kuwait Oil Tanker Company -v- Abdul Fattah Sulaiman Kaled Al Buder [sic], and concluded that Mr Smallbone held the money received from Introcom as a constructive trustee. I agree with the judge's reasoning although I do not think it was strictly necessary. He considered the conflict of laws question and the application of Rule 200(1)(c) on the footing that a free-standing constructive trust under which Mr Smallbone was the trustee came into existence as a result of his receipt of the money from Introcom. A simpler approach, justified by the facts of this case, is to treat Mr Smallbone as holding the money under the constructive trust which came into existence upon Introcom's receipt of the money from Trustor. The proper law of that constructive trust is, in my opinion, unquestionably English law. Mr Smallbone cannot, in my judgment, possibly contend that his receipt of the money from Introcom placed him in any better position than Introcom. It is not, in my opinion, necessary that a separate constructive trust should have come into existence on Mr Smallbone's receipt of the money. The conflict of laws difficulties considered by Chadwick J. and Moore-Bick J. in the two cases referred to by the judge do not, in my judgment, arise in the present case."
- In this decision Introcom had no connection with Sweden. It was liable because it knowingly received in London money unlawfully paid out of a London account. Although Mr Smallbone had a relationship with Trustor, he also received money which had been paid out of Introcom's London account and there was no basis for the application of Swedish law. This was not therefore a case where there was a real choice to be made between English law and any competing law, and the judgment does not suggest that there was any argument on the approach to the applicable law. Mr Tager QC accepts that the statement of principle is obiter.
Renvoi
- In correspondence and in the draft particulars of claim the claimants rely on "double renvoi." This expression (and "total renvoi") would mean that the English court would refer to Swiss law as the law governing restitution, and would interpret that reference as being to Swiss rules of the conflict of laws, including its own rules on renvoi, so that if Swiss law referred to Nigerian law (transmission), and if in the circumstances of the case, Nigerian law would regard the issue as being governed by Swiss law, a further question would arise as to whether Swiss law would "accept" the renvoi and apply its own law. In fact the claimants do not go so far, and rely only on "partial" or "single" renvoi. On their case, the only relevant Swiss conflict of laws rule is that relating to torts, and the Swiss rules on renvoi are therefore not relevant.
- For Mr Vaswani, Mr Tager QC argues that (a) English law does not apply renvoi in claims of the present type, and therefore the reference by English law to Swiss law is a reference to Swiss internal law, and (b) in any event, Swiss law would not refer to Nigerian law, because neither the relevant act nor the "result" occurred in Nigeria for the purposes of Swiss conflict of laws.
- There is no doubt that the application and scope of the doctrine of renvoi in English law is controversial. According to Dicey and Morris, in all but exceptional cases the theoretical and practical difficulties involved in applying renvoi outweigh any supposed advantages it may possess, and it should not be invoked unless it is plain that the object of the English conflict rule in referring to a foreign law will on balance be better served by construing the reference to mean the conflict rules of that law: as a practical matter it would seem that a court should not undertake the onerous task of trying to ascertain how a foreign court would decide the question, unless the situation is an exceptional one and the advantages of doing so clearly outweigh the disadvantages: paragraphs 4-021 and 4-032. See also Lipstein, Rapporteur, The taking into consideration of foreign private international law, in (1999) Annuaire de l'Institut de Droit international, vol 68–I, p 13. The resolution passed in 1999 by the Institut states that renvoi should not be excluded altogether and should be considered where a uniform treatment of an act or a transaction is desirable and can be achieved: ibid, vol 68-II, p 371. I should add that it appears from Professor Lipstein's Report (vol 68-I, at p 25) that by Article 14 of the Swiss Federal Code on Private International Law, renvoi is only admitted if the Code so provides. It does not so provide in restitution and tort claims: see Articles 128 and 129. But for the reasons given above, the Swiss rules on renvoi are not relevant for the purposes of this application.
- In Macmillan Inc v Bishopsgate Investment Trust plc (No.3) [1995] 1 WLR 978 at 1008 Millett J said that the doctrine of renvoi had not been applied in contract or other commercial situations. He went on:
"It has often been criticised, and it is probably right to describe it as largely discredited. It owes it origin to a laudable endeavour to ensure that like cases should be decided alike wherever they are decided, but it should now be recognised that this cannot be achieved by judicial mental gymnastics but only by international conventions.
… In my judgment there is or ought to be no scope for the doctrine of renvoi in determining a question of priority between competing claims to shares, and in the absence of authority which compels me to do so – and there is none – I am not willing to extend it to such a question."
- In the Court of Appeal there was no appeal on renvoi, and Staughton LJ said that "mercifully (or sadly, as the case may be) that has been abandoned" (at 405). See also Glencore International AG v Metro Trading International Inc [2001] 1 Lloyd's Rep 284, 296-7.
- Section 9 of the Private International Law (Miscellaneous Provisions) Act 1995 provides
"(1) The rules in this Part apply for choosing the law (in this Part referred to as 'the applicable law"') to be used for determining issues relating to tort….
(5) The applicable law to be used for determining the issues arising in a claim shall exclude any choice of law rules forming part of the country or countries concerned."
- Section 9(5) is in my judgment concerned exclusively with the mode of application of the English conflict of laws. It is intended to have, and does have the effect, of making a reference to a foreign law in tort claims in England a reference to the internal rules of foreign law, and not to its rules of the conflict of laws. It has nothing to say about the application of renvoi where a foreign law is applicable in a claim for restitution, to which section 9(1) does not apply.
- On the second point, namely whether, even if the doctrine of renvoi applied, Swiss law would indeed refer to Nigerian law, Mr Tager QC relied on the judgment in the civil proceedings of the Court of Appeal of Geneva, of October 16, 2003 rejecting Mr Asnani's objection to Swiss jurisdiction, to cast doubt on the assertion that Swiss conflict rules would refer to Nigerian law.
- Civil proceedings were commenced by the claimants against Mr Asnani in June 2001. On October 10, 2003 in the Court of Appeal of Geneva allowed an appeal by the claimants against the decision of the lower court in Geneva, and held that the Geneva court had jurisdiction over Mr Asnani. Article 129(2) LDIP provides that in tort claims ("actes illicites") where the defendant is not domiciled or habitually resident in Switzerland, and does not have a place of business there, an action may be brought before the Swiss court at the place "du lieu de l'acte ou du résultat." The Court of Appeal recited that the claimants based the jurisdiction of the Geneva court on the opening of accounts at Citibank by Mr Asnani in Geneva, which made Geneva "le lieu de l'acte et du résultat des actes illicites" (page 6 of the judgment) for the purposes of Article 129(2) LDIP. The Court of Appeal held as follows:
(1) The transfer of funds from one bank account to another is a clear example of money laundering, in particular if funds are paid into a foreign country to the benefit of third parties.
(2) At the moment when the funds had been retransferred by Mr Asnani from his bank accounts in Switzerland to other accounts in other banking establishments in Switzerland and in other countries, the identification of their origin had been hindered, and he had therefore likely committed an act of money laundering, which constituted a tortuous act, distinct from the initial diversion of funds.
(3) The violation of Article 305bis CP constituted a tortuous act within the meaning of Article 41 CO on the ground that Article 305bis CP, targeting principally the protection of the good administration of criminal justice, had also for its purpose to protect the assets of the victim of the underlying crime who, due to the money laundering, was deprived of the means of recovering the assets or funds which had been taken from him.
(4) Since the claimants were domiciled in Brazil and Mr Asnani was domiciled in Nigeria, to determine the jurisdiction of the court Article 129(2) LDIP had to be applied.
(5) The claimants took the position that "le résultat" of tortious acts committed by Mr Asnani, that is his money laundering acts, did not occur in Brazil (which is where the first instance court held that the damage to assets occurred) but rather in Switzerland, where the diverted funds had been laundered.
(6) The place of "le résultat" was where the first illicit violation of the legally protected thing occurred, which was not necessarily the same as the place where the subsequent damage was incurred.
(7) Where the place of the result and where the damage occurred were not the same, it was the first which was considered as the connecting factor: ATF 125 III 103.
(8) The damage occurred in Switzerland because the funds were placed in accounts there in order to render the paper trail more difficult, and those were the elements which were the most likely to contribute, from the point of view of causation, to the happening of the result, namely the loss of the claimants' means to recover the funds which had been illicitly taken from them.
(9) Accordingly what Mr Asnani had done had produced a result in Switzerland within the meaning of Article 129(2) LDIP which was sufficient to support the jurisdiction of the Geneva court in particular.
- What the Court of Appeal appears to be considering here is a choice between the place of money-laundering and the place of the patrimonial assets of the Bank, namely Brazil. No evidence of Swiss law has been produced on behalf of Mr Vaswani in relation to whether Swiss law would consider that the wrong had been committed in Nigeria also, and I have already indicated that I do not consider the letter from Maître Fiechter to be evidence for this purpose. In the absence of evidence on Swiss law, I am not in a position to express a view as to whether the implication of this decision is that there was no "result" in Nigeria also for the purposes of the choice of law rule in Article 133(2), which provides for the place of the law of the place of the commission of the act to be displaced where "le résultat s'est produit dans un autre Etat" and where "l'auteur devait prévoir que le résultat s'y produirait.".
Conclusion on applicable law
- There is a degree of artificiality about the argument on the applicable law, since it is clear, or is conceded, that under the competing systems of law, Nigerian law and Swiss law, as under English law, a person who, with actual or constructive knowledge, participates in money-laundering, is civilly liable. The only substantial difference is in the label given to that liability. The label in English law/Nigerian law, tracing at common law or tracing in equity, may be different depending on the route whereby the money came into the hands of the defendant, and the label in English law/Nigerian law (restitution) may differ from that in Swiss law (unlawful acts), but the essence of the liability is the same.
- My conclusions on this aspect are these. The weight of dicta on the applicable law of receipt-based restitutionary claims is against the claimants. There is, however, no decision of the Court of Appeal in which approval of Rule 200(2)(c), or the application of a similar principle, is the ratio. Rule 200(2)(c) is a tentative formulation of the application of the basic principle in Rule 200(1) where the parties have no prior connection. There is no decision that Rule 200(2)(c) must be treated as a free-standing rule mechanically applying the law of the place where bank accounts are kept irrespective of the factual circumstances and irrespective of the particular issue.
- Here parties in Nigeria agreed that one was to sell to the other dollars for delivery in Switzerland in exchange for Nigerian currency in Nigeria. This is just the kind of case where the law of the place of the enrichment will not necessarily give an answer which corresponds to the law which has the closest connection with the claim or with the issue.
- This is an uncertain and developing area of the law and is not suitable for final determination on this application, particularly where the connections with Nigeria have yet to be fully explored in disclosure and at trial. Although there are some difficult areas of law to be explored at trial, and it is possible (although by no means inevitable) that there will be issues of Swiss law, the trial will mainly concern Mr Vaswani's state of knowledge and his connections with Mr Asnani. I am satisfied that at this stage (and without prejudice to any contrary arguments which may be made on any application hereafter for trial of a preliminary issue) the overriding objective will be better achieved by leaving the issue of applicable law for trial.
- If the claimants do not establish a factual basis for their claim against Mr Vaswani, then the applicable law issue will not be relevant. If the evidence on foreign establishes that in substance, rather than in the label to be attached, there is no real difference between Nigerian/English law and Swiss law, then the applicable law issue will be equally irrelevant.
- Similar, but not identical considerations, apply to the application of Nigerian law through a transmission from Swiss law. Although there is no authority directly in point, the claim to the application of renvoi in restitution claims is weak, and even if English law admits the renvoi doctrine, it may be that the claimants will have difficulty in obtain independent expert advice that Swiss law would in the circumstances refer to Nigerian law. But, as I have said, there is as yet no Swiss law evidence on the latter point on which it would be proper to rely. In my judgment, the question whether there should be a determination prior to trial on the route to Nigerian law through Swiss law should be left until the effect of the Swiss conflict of laws rules have been further explored through the experts. If the claimants persist in this argument then it will have to be determined whether (which I doubt) there will be any significant saving in cost or time by determining the question prior to trial.
Limitation
- The claimants' evidence of Nigerian law and of Swiss law on limitation, which has not been answered by Mr Vaswani, indicates that it is arguable that the limitation periods under those laws have not expired, irrespective of the effect of CPR 17.4, section 35 of the Limitation Act 1980 and the Foreign Limitation Periods Act 1984.
- I consider that it would be arguable that the extended period under section 58(1)(b) of the Nigerian Limitation Law applies in any event. Section 58(1)(b) provides that when "the right of action is concealed by the fraud" of the defendant "the period of limitation shall not begin to run until the plaintiff has discovered the fraud or could with reasonable diligence have discovered it." It is very similar to the relevant part of section 26(b) of the Limitation Act 1939 (and the somewhat different formulation in section 32(1) of the Limitation Act 1980). For this purpose fraud is not used in the common law sense, and is used in the equitable sense to denote conduct by the defendant such that it would be against "conscience" for him to avail himself of the lapse of time, and it includes turning a blind eye: King v Victor Parsons & Co [1973] 1 WLR 29, at 33-34 per Lord Denning MR (a case on Limitation Act 1939, section 26(b)), approved in Cave v Robinson Jarvis & Rolf [2002] UKHL 18, [2003] 1 AC 384 at 393 (a case on the Limitation Act 1980, section 32). In the present case, it is arguable that an extended period would apply to the claims against Mr Vaswani if he could be shown to have shut his eyes to the source of the funds. It is not likely that there could be any argument that the claimants could have discovered the involvement of Mr Vaswani more than 6 years ago, since Mr Vaswani himself suggests a date of June 2001. Mr Vaswani does not suggest a date before June 2001 when the claimants knew of their cause of action against Mr Vaswani.
- On the evidence presently before the court the Swiss limitation period of 5 years has not yet expired, since it was interrupted by the Sarina account being frozen in the Swiss criminal proceedings in 2001. Maître Fiechter also makes the point that it was also interrupted under Swiss law by the commencement of these proceedings against Mr Vaswani in 2003. But this was more than 5 years after the last receipt by him of the dollars, and therefore could not have that effect under Swiss law, unless Swiss law allows a limitation period which has been interrupted by the freezing of the account to be further interrupted by subsequent civil proceedings. I deal below with whether the combined effect of Swiss law and English law could have this effect.
- The main question on limitation is the question under English procedural law whether the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the claimants have claimed a remedy in the proceedings. A cause of action is a factual situation the existence of which entitles one person to obtain from the court a remedy against another person: Letang v Cooper [1965] 1 QB 232, at 242-3, per Diplock LJ. In Paragon Finance v Thakerar [1999] 1 All ER 400, 405, Millett LJ referred to the classic definition of the cause of action (Cooke v Gill (1873) LR 8CP 107, at 116) as every fact which is material to be proved to entitle the plaintiff to succeed. Only those facts which were material to be proved were to be taken into account. The selection of the material facts to define the cause of action must be made "at the highest level of abstraction".
- Whether or not the new cause of action arises out of substantially the same facts as that already pleaded is substantially a matter of impression: Welsh Development Agency v Redpath Dorman Long [1984] 1 WLR 1409 at 1418, per Millett J; Convergence Group plc v Chantrey Vellacott [2005] EWCA Civ 290, para 98.
- The only new fact alleged is paragraph 56III, namely the allegation that Mr Vaswani was involved in Mr Asnani's opening of the Excel account with Citibank Geneva. But the fact relevant at the highest level of abstraction is knowledge and that is simply a particular of knowledge. I was told by Mr Briggs QC that the paragraph is not intended to suggest that Mr Vaswani knew about the closing of the Lloyds Bank account. After that concession, what is left in paragraph 56III is not a new allegation. In his affidavit of April 15, 2003 (paragraph 30.6), Mr Tickner, the claimants' solicitor, said that although Mr Vaswani denied having introduced Mr Asnani to Citibank so that the Excel account could be opened there, the Asnanis and also Mr Giovagnoni, the manager of Citibank, had asserted, when giving evidence to the criminal court in Geneva, that Mr Vaswani was the contact point.
- Although foreign law has often been said to be a question of fact, it is "a question of fact of a peculiar kind:" Parkasho v Singh [1968] P 233, 250.
- The Nigerian law claim is not a new cause of action. It has the same legal and factual basis as the existing English law claim. Nor is the Swiss claim based on Article 41 CO a new cause of action. It has the same factual basis as the claim previously based on English law. There is no allegation of fraud under any of the systems of law said to be applicable. In each case the facts alleged are that Mr Vaswani was caught up in a money laundering operation, and should have known that he was.
- If I am right that it is arguable that the periods under Nigerian law and Swiss law have not expired in any event, then it is not necessary to consider whether there is relation back under the combined effect of CPR 17.4, section 35 of the Limitation Act 1980 and the Foreign Limitation Periods Act 1984, for any expired limitation period under Swiss law or the 6 year limitation periods for claims in restitution and knowing receipt under Nigerian law: sections 8, 13(2) and/or 32(1) of the Limitation Law 2003.
- The Foreign Limitations Period Act 1984 was based on the recommendations of the Law Commission, Classification of Limitation in Private International Law, Law Com No.114, 1982. Section 1(1) and section 1(3) are in the same terms as the draft bill proposed by the Law Commission. The commentary to the draft bill states that section 1(3) gives effect to the recommendation in paragraph 4.20, as explained in paragraphs 4.18 to 4.19. The recommendation in paragraph 4.20 is that the domestic law of England should be applied for the purposes of determining the terminus ad quem of a limitation period prescribed by a foreign lex causae. Terminus ad quem is used to describe the step required to be taken by a plaintiff to stop time from running, which is, in general, the institution of proceedings. The Law Commission said that for the foreign terminus ad quem to be applied in proceedings in England, the adoption of such a principle would be likely to give rise to considerable difficulties in practice. The English court would have to investigate the minutiae of foreign procedural rules for the purpose of determining whether to apply them in the context of an English action and, if so, in what way they should be applied. See also Carter (1985) 101 LQR 67, at 74.
- I do not accept the argument for Mr Vaswani that the effect of the Foreign Limitation Periods Act 1984, section 1(3), and of the Limitation Act 1980, section 35, is that CPR 17.4 cannot have the effect that any period which under Nigerian law (or Swiss law) has already expired must enure to the benefit of Mr Vaswani and (questions of discretion apart) cannot be affected by the addition of new causes of action.
- Consequently, the English procedural law of joinder of parties and addition of new causes of action applies to determine the terminus ad quem. Foreign law determines what act stops time running (e.g. commencement of proceedings).
- Even if the plea that Swiss law applied made the claim a new one (because it involved a new cause of action) and did not arise out of the same facts or substantially the same facts, the combined effect of (a) sections 1(3) and 4(1) of the Foreign Limitation Periods Act 1984, (b) section 35(1) of the Limitation Act 1980, and (c) the 5 year limitation period in Swiss law being interrupted by the commencement of proceedings, is that the claim is not barred by the 5 year limitation period under Swiss law.
- Mr Vaswani also says that the Nigerian law claim for money had and received is hopeless, because the funds were mixed funds. The same claim was made in the previous particulars of claim by reference to English law, and is therefore not a new claim introduced by the amended particulars. The contention is really akin to an application to strike out. It has been held that where money goes through a clearing system, and funds go through more than one bank, it must be mixed with other money, and therefore cannot, without recourse to equity, be identified. In such cases a claim at common law must fail: Agip (Africa) Ltd v Jackson [1990] Ch 265 at 286, per Millett J. In the Court of Appeal, Fox LJ agreed, and said that both common law and equity accepted the right of the true owner to trace his property into the hands of others while it was in an identifiable form. The common law treated property as identified if it had not been mixed with other property. Equity would follow money into a mixed fund and charge the fund: [1991] Ch 547 at 566. In Jones & Sons v Jones [1997] Ch 159 at 169 Millett LJ said there was no merit in having distinct and differing tracing rules at law and in equity, given that tracing is neither a right nor a remedy but merely the process by which the plaintiff establishes what has happened to his property and makes good his claim that the assets which he claims can properly be regarded as representing his property. This is a controversial area of the law, and the claimants do not accept that the funds are mixed funds for this purpose. I do not think that this is a suitable stage of the proceedings to entertain an application that this claim should be struck out.
Discretion
- I do not consider that there are any other discretionary elements which would justify refusing permission to amend. The main one relied upon by Mr Vaswani is forum conveniens. It is argued on behalf of Mr Vaswani that the amendment should be refused on the ground that the claimants' Swiss law claim should properly be tried in Switzerland where the Geneva court has already ruled that it has jurisdiction to entertain such a claim. The claimants say that by this argument Mr Vaswani is attempting to reopen the judgment of Sir Andrew Morritt VC of May 22, 2003.
- On this point, it is necessary to add a note of caution. I will assume, without deciding, that the English court may refuse permission to amend on the ground that the appropriate forum is Switzerland, when the effect will be to decline to exercise a jurisdiction which it has under Article 4 of the Lugano Convention. Article 4 provides that, where the defendant is not domiciled in a Contracting State, the jurisdiction of each Contracting State shall (subject to the exclusive jurisdiction provisions of Article 16) be determined by the law of that State. It has been held that the English court may stay proceedings in favour of a Brussels or Lugano Convention Contracting State on forum conveniens grounds where jurisdiction over a defendant who is not domiciled in a Contracting State is based on Article 4: Sarrio v Kuwait Investment Authority [1997] 1 Lloyd's Rep 113; Haji-Ioannou v Frangos [1999] 2 Lloyd's Rep 337; Dicey and Morris, para 12-016. In Case C-281/02 Owusu v Jackson, March 1, 2005, the European Court has held that forum conveniens cannot be used to stay proceedings against a defendant domiciled (where jurisdiction is under Article 2) in a Contracting State in favour of a non-Contracting State. It is an open question whether the reasoning in that case might be applied or extended to stays in favour of other Contracting States in cases where the jurisdiction is under Article 4.
- This is not an application for a stay. The only question on this point is whether the discretion to allow amendment should be affected by forum conveniens grounds. My conclusions on this point are these. If the Nigerian law claims stand, then it would be absurd for there to be two sets of proceedings. Even if the Swiss law claim under Article 41 CO were the only remaining viable claim, I would not have considered that as a matter of discretion the amendments should be disallowed. It is true that several of the forum conveniens factors relied on by Sir Andrew Morritt V-C in his judgment of May 22, 2003 (when he refused to stay these proceedings in favour of the Nigerian courts) no longer apply, particularly those arising from the multiplicity of parties. But in essence, whether the claim is put under Nigerian or Swiss law, the essential factual focus is now on Mr Vaswani's dealings with Mr Asnani in Nigeria, and the contacts he had from Nigeria with Citibank Geneva. In these circumstances I do not think that the governing law is the crucial element in the equation, especially when it is not yet known whether there will be any disagreement as to its content, particularly as regards the standard of care.
- I do not consider that any of the pleading points made by Mr Vaswani need be resolved at this stage. Once the amended pleading is served Mr Vaswani may request further information in the normal way.
- I will therefore allow the amendments.
