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England and Wales High Court (Commercial Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Terna Energy Trading DOO v Revolut Ltd [2024] EWHC 1419 (Comm) (12 June 2024) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2024/1419.html Cite as: [2024] EWHC 1419 (Comm), [2024] WLR(D) 269, [2024] Bus LR 1401 |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
LONDON CIRCUIT COMMERCIAL COURT (KBD)
Rolls Building, Fetter Lane, London, EC4A 1NL |
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B e f o r e :
(sitting as a Judge of the High Court)
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| TERNA ENERGY TRADING doo |
Claimant/Respondent |
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- and – |
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| REVOLUT LTD |
Defendant/Applicant |
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Daniel Burgess (instructed by Payne Hicks Beach LLP) for the Respondent
Hearing dates: 27 February 2024
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Crown Copyright ©
HHJ Paul Matthews :
Introduction
Jurisdiction
Summary judgment
"The court may give summary judgment against a claimant or defendant on the whole of a claim or on an issue if—
(a) it considers that the party has no real prospect of succeeding on the claim, defence or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
In this connection, it is well established that, on an application for summary judgment, the burden of proof rests on the applicant: ED&F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472, [9]; Daniels v Lloyds Bank plc [2018] EWHC 660 (Comm), [49]. That is so, even though at the trial of the claim the burden of proving that claim would rest on the respondents as claimants.
"15. … the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a 'realistic' as opposed to a 'fanciful' prospect of success: Swain v Hillman [2001] 1 All ER 91;
ii) A 'realistic' claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]
iii) In reaching its conclusion the court must not conduct a 'mini-trial': Swain v Hillman
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."
"41. For the amendments to be allowed the Appellants need to show that they have a real as opposed to fanciful prospect of success which is one that is more than merely arguable and carries some degree of conviction … A claim does not have such a prospect where (a) it is possible to say with confidence that the factual basis for the claim is fanciful because it is entirely without substance; (b) the claimant does not have material to support at least a prima facie case that the allegations are correct; and/or (c) the claim has pleaded insufficient facts in support of their case to entitle the Court to draw the necessary inferences …
42. The court is entitled to reject a version of the facts which is implausible, self-contradictory or not supported by the contemporaneous documents and it is appropriate for the court to consider whether the proposed pleading is coherent and contains the properly particularised elements of the cause of action relied upon."
Although that was said of the phrase "real prospect of success" in the context of an application for permission to amend a statement of case, the same applies to the same phrase in the context of an application for summary judgment: see King v Stiefel [2021] EWHC 1045 (Comm), [21].
Striking out
"(2) The court may strike out a statement of case if it appears to the court—
(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;
(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or
(c) that there has been a failure to comply with a rule, practice direction or court order."
"1.4 The following are examples of cases where the court may conclude that particulars of claim (whether contained in a claim form or filed separately) fall within rule 3.4(2)(a):
(1) those which set out no facts indicating what the claim is about, for example 'Money owed £5,000',
(2) those which are incoherent and make no sense,
(3) those which contain a coherent set of facts but those facts, even if true, do not disclose any legally recognisable claim against the defendant.
1.5 A claim may fall within rule 3.4(2)(b) where it is vexatious, scurrilous or obviously ill-founded."
"25. … it is worth bearing in mind that there are some differences between the summary judgment procedure under CPR Part 24 and applications for striking out for lack of reasonable grounds to bring or defend a claim under rule 3.4(2)(a). In particular, questions of striking out are generally determined by reference to the pleaded case and are not apt for the determination of any factual dispute, whereas applications under Part 24 are more likely to involve the scrutiny of evidence."
Statements of case
Particulars of claim
"33. By reason of the receipt of the Payment into the Revolut Account, the Defendant was enriched by the amount of the funds thereby received. Following such receipt, the Defendant obtained legal and beneficial title to the funds, and had the benefit of being entitled to use the funds for its own purposes subject to the rights of its customer and/or its regulatory obligations.
34. As to such regulatory obligations:
a. As an EMI, the Defendant was required pursuant to regulation 20(2) of the Electronic Money Regulations 2011 ("EMR 2011") to 'safeguard' all funds received in exchange for electronic money issued in accordance with one of the two safeguarding methods in regulation 21 and 22 of the EMR 2011 respectively.
b. Pursuant to clause 11 of the Defendant's standard 'Business Terms' (which governed the operation of the Revolut Account at all material times), the Defendant purported to safeguard all monies it received in accordance with regulation 21.
c. Specifically, the Business Terms stated that the Defendant would 'either: place the money into our ring-fenced accounts that we hold with large global banks (ringfenced accounts are separate from our own money); or invest the payment in low-risk assets held in a separate account with financial institutions'.
d. In both scenarios, the Defendant was entitled to (and, pending disclosure, it is to be inferred did) obtain a return on funds safeguarded in this manner, either by way of interest on the 'ring-fenced account' or by way of return from its investment in the 'low-risk assets'.
35. The Defendant's enrichment was at the expense of the Claimant. The transactions by which the Payment was made constituted, as a matter of substance, the direct transfer of value from the Claimant to the Defendant, notwithstanding that the funds were transferred by electronic means via correspondent banks.
36. Without prejudice to the generality of the foregoing, the transfer via correspondent banks constituted:
a. A direct transfer via agents; and/or
b. A set of coordinated transactions which should be treated as forming a single scheme or transaction."
Defence
"32. Paragraph 33 is denied. The Defendant was not enriched by the Payment as alleged or at all:
(1) The funds that the Defendant received were exactly offset by an increased liability to Zdena Fashions represented by the electronic money credited to the Revolut Account. The net benefit to the Defendant was therefore nil.
(2) While the Defendant legally and beneficially owns any funds it receives, it receives the funds ministerially, as agent for its customers. It had a duty to account to its customer (in this case Zdena Fashions), which alone was enriched. The Defendant accordingly has a defence of ministerial receipt.
(3) The funds were segregated for the benefit of the Defendant's customer in accordance with the provisions cited at paragraph 8 above, such that the Defendant could not lawfully access the funds for its own use or lend them to others. The position was therefore different to the position where funds are received by a bank, are not segregated and can be used for the bank's benefit (for example, by making loans to other customers within the limits of the bank's capital adequacy requirements).
33. Paragraphs 34a to c are admitted. Paragraph 8 above is repeated. As to paragraph 34d:
(1) Any interest or other return received on safeguarded funds is irrelevant since, as a matter of law, the use value of money is not obtained at a claimant's expense.
(2) In any event, the funds were substantially all dissipated within a day. The interest accruing in that period, if any, is de minimis. The Defendant also received fees in the total sums of £2,098.12, €946.17 and $0.06 in respect of currency conversions and outbound payments. If (which is denied) the return on safeguarded funds is relevant, any enrichment was limited to these sums.
34. Paragraphs 35 and 36 are denied. If (which is denied) the Defendant was enriched by the Payment, that enrichment was not at the Claimant's expense:
(1) There was no direct transfer of value from the Claimant to the Defendant:
(a) There was no direct flow of funds from the Claimant to the Defendant. Further, the funds representing the Payment were mixed with other funds in the international payment process. Paragraph 7 above is repeated.
(b) Moreover, the proceeds of the Payment, when received by the Defendant, were mixed with funds held for the Defendant's other customers. Paragraphs 8(3) and (4) above are repeated.
(2) Nor was there an indirect transfer of value of the sort required by the law of unjust enrichment:
(a) The Claimant and the Defendant did not deal with each other through agents. Paragraph 36a does not identify the alleged agents and the Defendant is accordingly unable to respond further.
(b) There was no single scheme of coordinated transactions. The payment mechanism described at paragraph 7 above amounted to a multilateral scheme by which the funds provided to the Defendant came from multiple sources.
(c) The proceeds of the Payment were not traceable at common law because they passed through mixed accounts in the international payment process and in the Defendant's safeguarding account(s). It is noted that the claim is brought only at common law and not in equity.
(3) Further, the Defendant was only an agent for Zdena Fashions and is to be disregarded in favour of its principal.
Reply
"6. The second sentence of paragraph 32(3) is denied. Notwithstanding that the Defendant was an EMI, the Defendant was enriched from the receipt of its customer's funds in materially the same way as a bank is so enriched. Specifically:
6.1. The Defendant was able to, and did, use the funds it received (including the Payment) for its own benefit by either investing those funds in low risk investments or by holding the funds in interest bearing accounts. The Defendant further had recourse to part of the segregated funds in order to extract fees in the sums alleged at paragraph 33(2).
6.2. The Defendant retained for its own use those fees, the return on any such low risk investments and any interest received (as applicable).
6.3. Regulation 20 of the EMR 2011 merely placed limits on the type and extent of the benefit that the Defendant (as an EMI) was permitted to obtain from use of the funds, as compared to a bank.
6.4. The averments in Responses 17 to 19 of the RFI Response (which are not admitted) to the effect that the Defendant did not as a matter of fact obtain any return on the Payment by these means are not determinative of this issue. The Defendant was able to use the Payment for its own benefit in at least the ways set out in paragraph 6.1 above and was thus enriched by its receipt.
7. As to paragraph 33, paragraph 5 above is repeated.
"8. Paragraph 34 is denied. The Defendant's enrichment was at the expense of the Claimant for the reasons set out in paragraphs 35 and 36 of the PoC. Further:
8.1. As is clear from paragraphs 35 and 36 of the PoC, the relevant agents were UniCredit Serbia, UniCredit S.p.A and Barclays. Specifically:
8.1.1. UniCredit Serbia acted as agent of the Claimant in executing the Payment on its behalf;
8.1.2. UniCredit S.p.A acted as agent of UniCredit Serbia (and sub-agent of the Claimant) in effecting the Payment to Barclays; and
8.1.3. Barclays acted as agent of the Defendant in receiving the Payment and passing it on to the Defendant.
8.2. The Defendant does not, and does not need to, rely on common law tracing to establish that the enrichment was at the expense of the Claimant. The repeated references to the Payment passing through mixed funds are thus inapposite."
Background
The parties
The payment
Payment mechanism
"Safeguarding"
Unjust enrichment
"The law of restitution is the law of all claims … which are founded on the principle of unjust enrichment."
In 1985, it was followed by An Introduction to the Law of Restitution by Peter Birks, a much more theoretical work. Since then there have been a number of other works published, including textbooks by Andrew Burrows (now Lord Burrows) (1993), Graham Virgo (1999), and Steve Hedley (2001), and a great many scholarly essays and conference papers.
"The creation of the legal category of unjust enrichment … is arguably the most remarkable development in English law in recent times. It was effectively the work of a single legal scholar, Professor Peter Birks, who succeeded in having his ideas accepted by the Law Lords of the day, and whose pupils (and their pupils in turn) have subsequently reinforced his influence through their dominance of scholarship in this area of the law."
(I should perhaps make clear that I, too, studied the law of restitution, as it was then called, under Professor Birks. I am not however sure that anything I have done since has reinforced his influence. But he was certainly a brilliant teacher and scholar.)
" … the solicitors' claim in the present case is founded upon the unjust enrichment of the club, and can only succeed if, in accordance with the principles of the law of restitution, the club was indeed unjustly enriched at the expense of the solicitors. The claim for money had and received is not, as I have previously mentioned, founded upon any wrong committed by the club against the solicitors. But it does not, in my opinion, follow that the court has carte blanche to reject the solicitors' claim simply because it thinks it unfair or unjust in the circumstances to grant recovery. The recovery of money in restitution is not, as a general rule, a matter of discretion for the court. A claim to recover money at common law is made as a matter of right; and even though the underlying principle of recovery is the principle of unjust enrichment, nevertheless, where recovery is denied, it is denied on the basis of legal principle."
" … any claim to restitution raises the questions: (1) has the defendant been enriched? (2) If so, is his enrichment unjust? (3) Is his enrichment at the expense of the plaintiff? There are several factors which make it unjust for a defendant to retain the benefit of his enrichment; mistake is one of them. But a person cannot be unjustly enriched if he has not been enriched at all. That is why it is necessary to ask all three questions and why the fact that a payment may have been made, eg. by mistake, is not by itself sufficient to justify a restitutionary remedy."
"24. In answering the question, both parties followed the approach adopted by Lord Steyn in Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221, 227, and asked: (a) Has the defendant been benefited, in the sense of being enriched? (b) Was the enrichment at the claimant's expense? (c) Was the enrichment unjust? (d) Are there any defences?"
If this matter goes to trial, it is anticipated that that trial will largely be concerned with the matters at (c) and (d). This application, however, is concerned with the matters at (a) and (b). I will deal with each of these in turn.
"40. … the adoption of the concept of unjust enrichment in the modern law, as a unifying principle underlying a number of different types of claim, does not provide the courts with a tabula rasa, entitling them to disregard or distinguish all authorities pre-dating Lipkin Gorman [v Karpnale Ltd [1991] 2 AC 548]. … Although judicial reasoning based on modern theories of unjust enrichment is in some respects relatively novel, there are centuries' worth of relevant authorities, whose value should not be underestimated. The wisdom of our predecessors is a valuable resource, and the doctrine of precedent continues to apply. The courts should not be reinventing the wheel.
41. … Lord Steyn's four questions [in Banque Financière de la Cité] are no more than broad headings for ease of exposition. They are intended to ensure a structured approach to the analysis of unjust enrichment, by identifying the essential elements in broad terms. If they are not separately considered and answered, there is a risk that courts will resort to an unstructured approach driven by perceptions of fairness, with consequent uncertainty and unpredictability. At the same time, the questions are not themselves legal tests, but are signposts towards areas of inquiry involving a number of distinct legal requirements. In particular, the words 'at the expense of' do not express a legal test; and a test cannot be derived by exegesis of those words, as if they were the words of a statute.
42. The structured approach provided by the four questions does not, therefore, dispense with the necessity for a careful legal analysis of individual cases. In carrying out that analysis, it is important to have at the forefront of one's mind the purpose of the law of unjust enrichment. As was recognised in Menelaou [v Bank of Cyprus UK Ltd [2016] AC 176] (para 23), it is designed to correct normatively defective transfers of value, usually by restoring the parties to their pre-transfer positions. It reflects an Aristotelian conception of justice as the restoration of a balance or equilibrium which has been disrupted. That is why restitution is usually the appropriate remedy."
Enrichment
Respondent's authorities
"286. The long-accepted rule – established by Lord Mansfield in Buller v. Harrison [(1777) 2 Cowp 565] – is that where an enrichment is received by an agent, the agent will be liable to repay the claimant, unless the agent has accounted to his principal for the enrichment so received without notice of the claimant's claim. Where there is notice, the agent must interplead and will be liable if the monies are paid away. It is quite clear that where the agent has simply credited his principal with the enrichment, without actually transferring it to the principal, the agent remains liable to the claimant.* Millett LJ stated the position in Portman Building Society v. Hamlyn Taylor Neck (A Firm) [[1998] 4 All ER 202, 207]:
'[W]here the plaintiff has paid money under (for example) a mistake to the agent of a third party…[and] the agent still retains the money…the plaintiff may elect to sue either the principal or the agent, and the agent remains liable if he pays the money over to his principal after notice of the claim. If he wishes to protect himself, he should interplead. But once the agent has paid the money to his principal or to his order without notice of the claim, the plaintiff must sue the principal'."
"The law has been stated thus many times. In addition to the authorities cited in this paragraph, see also: Pollard v. Bank of England, (1871) LR 6 QB 623 at 630 (per Blackburn J); Continental Caoutchouc and Gutta Percha Co v. Kleinwort, Sons & Co, (1904) 90 LT 474; Kleinwort, Sons & Co v Dunlop Rubber Co, (1907) 97 LT 263; Kerrison v. Glyn, Mills, Currie & Co, (1911) 81 LJKB 465; Transvaal and Delagoa Bay Investment Co Ltd v. Atkinson, [1944] 1 All ER 579; Australia and New Zealand Banking Group Ltd v. Westpac Banking Corp, (1988) 164 CLR 662; Agip (Africa) Ltd v. Jackson, [1990] Ch. 265 at 288–289 (per Millett J); Jones v. Churcher, [2009] EWHC 722 (QB) at [41] and [66] to [78] (per His Honour Judge Havelock Allen, QC); Burrows, A Restatement of the English Law of Unjust Enrichment, 1st ed (2012) at Proposition 25; Watts & Reynolds, Bowstead & Reynolds on Agency, 21st ed (2018) (Bowstead & Reynolds) at Article 111 and [9-106]."
"The facts bring the case directly within the terms of the judgment of Lord Loreburn in Kleinwort Sons and Co v Dunlop Rubber Co, where he says, 'it is indisputable that, if money is paid under a mistake of fact and is re-demanded from the person who received it before his position has been altered to his disadvantage, the money must be repaid in whatever character it was received'. An attempt was made to take the case out of this plain and simple rule of law by saying that the defendants, being Kessler & Co's bankers, had, by the receipt of the money, become debtors of Kessler & Co, and could not, therefore, be called upon to repay the plaintiff. This, in my opinion, is a fallacy. No doubt when a banker receives money, either from his customer or from a third person on account of his customer, he becomes his customer's debtor for the amount so received. But this does not entitle the banker to retain money which in common honesty ought not to be kept. If, indeed, the banker has paid over the money to his customer, or has altered his position in relation to his customer to his detriment, on the faith of the payment, the banker may refuse to repay the amount and may leave the person who has paid him to enforce his remedy against the customer. But the circumstances here are that Messes Glyn Mills Currie & Co had in no way altered their position when they were asked to refund the money. They held money which they ought not to retain because it had been paid to them under a mistake of fact, and, in the words of the Lord Chancellor, it does not matter in what character it was received by them."
"It is argued that moneys placed to the credit of a customer's account are sacred and cannot be dealt with under the order of the court, even when it is shown that the money has been paid into the account by someone in mistake of fact, except in the presence of the customer or his legal personal representative. The plaintiffs have cited Cary v. Webster [(1721) 1 Str 480], and in view of that case it is admitted on behalf of the bank that if a person made payment to an agent and the principal was informed of it, yet if the person making the payment could show that it was made in mistake of fact, he can recover it from the agent without making the principal a party. But it is said that the position is different in the case of a bank. Kerrison v. Glyn, Mills, Currie, and Co. (sup.) contains observations which clearly lay it down that banks are in no different position from other agents, and there is no apparent reason why they should be. In my opinion, any contract by which a bank agrees to honour cheques of the customer on his current account does not extend to amounts standing to the credit of that account in so far as they are swollen by inadvertent payments made in mistake of fact. As a result of an order for repayment of the amount claimed, the customer's current account will be deflated by that amount. Any subsequent action by the customer's legal personal representative to recover that amount from the bank would have no reasonable chance of success."
Applicant's authorities
"240. The Claimants undoubtedly did pay money into SEWL's NatWest accounts (principally the No. 2 account) on the basis of their mistaken belief that the hotel business was genuine. The Claimants therefore have a cause of action against SEWL in unjust enrichment to reclaim the payments made, but SEWL has no money to meet such claims. The issue, therefore, is whether the Claimants also have claims in unjust enrichment against NatWest, which received the Claimants' payments into SEWL's accounts.
241. In my judgment, the Claimants have no good claim in unjust enrichment against NatWest, either because NatWest was not enriched by the payments or because (even if on proper analysis it was enriched) it has a good defence.
242. As to the issue of enrichment, it is true that when the Claimants paid sums to NatWest for the account of SEWL, NatWest received those sums and added them to its stock of assets as monies to which it was beneficially entitled. However, the increase in its assets was matched by an immediate balancing liability, in the form of the debt which NatWest owed SEWL reflected in the increase in SEWL's bank balance as a result of the payments. This is how the relationship between bank and customer works. There was no basis - at any rate none known to NatWest at the relevant time as the receipts came in, credit entries were made on the accounts and payments were made out against those credit entries – on which NatWest had any entitlement to withhold payment of sums representing credit balances on the accounts when instructed by SEWL to pay.
243. Therefore, in my judgment, NatWest was not enriched by the payments made by the Claimants into SEWL's bank accounts (in that regard see Box v Barclays Bank Plc [1998] Lloyd's Rep. Bank. 185 and Compagnie Commercial Andre SA v Artibell Shipping Co. Ltd 2001 SC 653, Court of Session, Outer House, at [16] per Lord Macfadyn). The Claimants' proper unjust enrichment claim is against SEWL, whose assets were increased upon the making of the payments to its bank accounts by the increases in its balances on those accounts (representing the debt owed to it by NatWest).
244. Even if I am wrong about that, and NatWest was enriched in a relevant sense by the Claimants' payments, I consider that it would have a good defence to the claim based on the fact that it had a contractual obligation to pay out the sums in SEWL's account in accordance with the instructions of its customer, and did so. Mr Wardell submitted that this gave rise to a defence of good faith change of position and/or to a distinct defence of ministerial receipt (see Portman Building Society v Hamlyn Taylor Neck (A firm) [1998] 4 All ER 202, 207-208)."
"the label per incuriam … is relevant only to the right of an appellate court to decline to follow one of its own previous decisions, not to its right to disregard a decision of a higher appellate court or to the right of a judge of the High Court to disregard a decision of the Court of Appeal."
So, whether or not the first instance decision in Jeremy D Stone offends the rules of precedent, in my view it is not in fact one made per incuriam. A first instance decision that does not follow binding precedent is simply wrong. Here the statement is obiter anyway.
"Mr Malek also made a number of submissions all of which, as it seemed to me, were supportive of a general proposition that, even if the Bank had received what was in law the plaintiffs' money, it was not thereby unjustly enriched. Thus Mr Malek again made the point that in all cases except perhaps that of Mrs Brown, who paid her money to Sylcon before the Mortimer Street property was sold and thus at a time when Sylcon may have been an overall debtor to the Bank, the receipt of money into the No.1 account increased the total sum which the Bank owed to Sylcon. The Bank was not therefore enriched. If it was then Mr Malek argued that such enrichment was not unjust because the plaintiffs had received consideration in the form of Sylcon's contractual obligations. Further the Bank had itself given consideration, albeit to Sylcon rather than to the plaintiffs, because of the reduction in the overdraft on the No.1 account which resulted from the payment of new money into that account.
I think that these arguments have considerable substance, but it is not altogether easy to appraise them in the light of my earlier conclusion that what reached the Bank was Sylcon's money, not the plaintiffs'. It is on the basis of that conclusion that I reject the plaintiffs' claim that they are entitled to succeed against the Bank in a common law claim for money had and received."
"[16] There is, no doubt, a sense in which money paid to a bank to the credit of the account of one of its customers becomes, on receipt, the bank's money - as Lord Mackay said in Royal Bank of Scotland v Skinner [1931 SLT 382], it is 'simply consumed by the banker'. But in that simple situation, the bank is not thereby enriched, because it grants an immediate obligation of corresponding amount to its customer. Receipt by the bank in that way would not, in my opinion afford the necessary foundation for an argument that in the event of the money becoming repayable by the customer to the payer, the bank had been unjustly enriched. I did not understand Mr Glennie [for the charterer] to argue otherwise. The essential foundation for the case of unjust enrichment that the pursuers seek to make is the contention that the second defenders received the advance freight 'as assignees and for their own account'. It is not enough, in my opinion, that they received the advance freight 'as assignees'. The pursuers need to go a step further, and demonstrate that the assignation was absolute, rather than in security, and that for that reason they received the advance freight 'for their own account'. In my view, they are unable to take that further step. For the reasons which I have discussed in the preceding paragraph, I am of opinion that the General Assignment, properly construed as part of the Loan Documentation, effected only an assignation in security. … "
"109. Whether there was an enrichment is a question of fact. An enrichment is constituted by the receipt of a benefit, which can be money or a non-monetary benefit. The benefit must be a real one. Thus, if the receipt of a benefit is matched by a corresponding liability, the net gain to the defendant is zero, and the defendant will not have been enriched (Jeremy D Stone Consultants Limited v National Westminster Bank plc [2013] EWHC 208 (Ch), paragraph 242)."
"113. … The Suspense Account was SocGen's account and funds standing in that account were legally and beneficially owned by SocGen. The moneys were not received to the order or on behalf of 16th Ocean. In fact, if any part of the moneys were frozen in accordance with the EU sanctions regime, the funds would not have been returned to the subsidiaries in any event … There was therefore an immediate and tangible benefit to SocGen in the receipt of this sum. An impediment to that benefit might have arisen if the funds were inaccessible to SocGen by reason of the sanctions regime, but this was not the case as SocGen had received its authorisation beforehand."
Accordingly, the court held that the defendant had been enriched immediately on the payment's being made, before any release of funds to the syndicate banks or itself. So the statement made by the judge in para 109 of his judgment (quoted above) as to matching liabilities was not part of the ratio of the decision, but instead obiter. And, once again, none of the earlier authorities on the point appears to have been cited to the judge.
"169. … it is not in dispute that unjust enrichment is designed to correct normatively defective transfers of value and that it usually does so by restoring the parties to their pre-transfer positions. The recipient of the value transferred must have benefited, or in other words have been enriched, by the transfer of value. The transfer of value must have been at the expense of the claimant. In other words, the claimant must have suffered a loss, in the sense that he or she has given up something of value by providing the benefit to the claimant in the normatively defective transfer …
"170. There is no dispute but that the claimants suffered loss in this sense in paying the sums that have been held to be unlawfully levied ACT. The question on this appeal is the measure of restitution: what was the Revenue's enrichment? Where the transfer involves the provision of services, difficult questions can arise as to the valuation of those services in order to correct the injustice which has arisen by the defendant's receipt of the claimant's services on a basis which was not fulfilled. … Where, as here, the transfer of value is the payment of money, such complex questions do not arise. But the court in ascertaining the defendant's enrichment cannot always conclude its enquiry by saying that because the claimant transferred £X to the defendant, the defendant's enrichment is £X. The court may, as the Revenue argues, have to have regard to liabilities which the defendant incurs as a consequence of the receipt of the money.
171. This point is recognised in academic commentaries. Thus, Professor Virgo, The Principles of the Law of Restitution, 3rd ed (2015), p 73 states:
'In assessing whether the defendant has been enriched by the receipt of money it is necessary to have regard to the net transfer of value. So, where there have been payments between the claimant and the defendant, the net amount will constitute the enrichment. Further, any consequent liabilities which might negate the enrichment also need to be taken into account.' (Emphasis added)
Similarly, Edelman and Bant, Unjust Enrichment, 2nd ed (2016), observe that a defendant is not inevitably benefited by the receipt of money, giving as an example:
'a circumstance where a defendant has assets amounting to $95,000 in value. The defendant receives $15,000 annually in government income support. One condition of the annual income support is that the defendant's assets are valued at less than $100,000. The defendant subsequently receives a mistaken payment of £6,000. This mistaken payment has the effect of removing the $15,000 annual benefit. … There is no enrichment of the defendant from the mistaken payment.'
Lord Burrows in The Law of Restitution, 3rd ed (2011), p 50 makes the same point citing other examples.
172. The point is also recognised in judicial authority. In Jeremy Stone Consultants Ltd v NatWest Bank plc [2013] EWHC 208 (Ch) Sales J addressed a claim to recover from the defendant bank money which it was induced by a third party to pay into a company's bank accounts when the company, unbeknown to the claimants, was part of the third party's fraudulent Ponzi scheme. One of the claims against the bank was for restitution of the moneys in those accounts on the basis of NatWest's unjust enrichment as a result of the moneys having been paid on the basis of a mistake. Sales J rejected the claim based on unjust enrichment on two grounds. First, he held that the defendant bank had not been enriched. He stated (para 242):
'it is true that when the Claimants paid sums to NatWest for the account of SEWL, NatWest received those sums and added them to its stock of assets as moneys to which it was beneficially entitled. However, the increase in its assets was matched by an immediate balancing liability, in the form of the debt which NatWest owed SEWL reflected in the increase in SEWL's bank balance as a result of the payments.'
He held that the claimants' unjust enrichment claim properly lay against the company, whose assets were increased by the payments into its bank accounts. Secondly, even if there had been enrichment, he held that the bank had a defence of good faith change of position and a defence of ministerial receipt, because it had a contractual obligation to pay out the sums in SEWL's account in accordance with its customer's instructions and had done so.
173. On this appeal the Revenue do not assert any defence of change of position. Their case is premised on the submission that their obligation to allow tax credits under section 231 of ICTA was a consequence of the payment of ACT by the companies which made the relevant distributions or at least of the liability of those companies to pay ACT in those sums. It is a central component of the Revenue's argument that the tax credit under section 231 is triggered by the liability of the company making the distribution to pay ACT."
"190. … The unlawfulness of the levy of ACT has no bearing on the shareholder's entitlement to the tax credit. In our view, it follows that the tax credits paid to the ultimate shareholders should not as a matter of domestic law be taken into account in the calculation of the claimants' compensation."
Accordingly, the Revenue had on any view been 'enriched' by the payment of the tax. Despite the citation with approval of the statement of law in Jeremy D Stone Consultants Ltd, the court was not deciding that payment into a bank account did not enrich the bank merely because of an equal credit to the account of its customer. The statements made in paragraphs 169-173 do not amount to saying that liabilities engaged by reason of receipt on a mistaken payment must be taken into account, only that the court "may … have to have regard" to such liabilities (emphasis supplied). And the tax credit was in fact granted by statute independently of the payment made to HMRC. It was granted because of the dividend paid. So the statements made by the court were strictly obiter anyway.
"62. … It is well established that when a bank receives monies from a customer, although there is a notional increase in the bank's assets, there was an immediate corresponding liability assumed by the bank to the customer."
The deputy judge then referred for authority to para 172 of the decision in Test Claimants in the FII Group Litigation v Revenue and Customs Commissioners [2021] 1 WLR 4534, SC, already quoted above. However, once again the judge did not refer to any of the earlier authorities on the subject, mentioned in the footnote to the judgment of Marcus Smith J in the Pakistan case. However, he did mention the possible availability of a defence based on good faith change of position and/or ministerial receipt, referring to the same paragraph in the extract from the FII Group Litigation case. In my respectful opinion, this carries the matter no further.
Discussion
Conclusion
"At the expense of the claimant"
Investment Trust Companies v HMRC
"6. It therefore followed from the legislative treatment of the services supplied to the Lead Claimants as taxable, that the Managers were understood to be entitled to pay to the Commissioners only the surplus of their output tax over their input tax, and to retain the balance of the output tax in their own hands. If the input tax exceeded the output tax, they were entitled to a credit, which could be paid by the Commissioners or carried forward to later accounting periods. Thus, for example, if a Manager made taxable supplies to an ITC, and the VAT chargeable on those supplies was £100, then the Manager was bound to account to the Commissioners for £100. If the Manager had purchased taxable supplies during the relevant period on which the VAT was £25, the Manager was entitled to credit for that £25, and was required to pay the Commissioners only the balance of £75.
"13. … the amounts repaid to the Managers were calculated on the basis that, under section 80(2A), it was necessary to set against the output tax for which they had accounted, the amount of the input tax which they had deducted. It is a matter of agreement that that was the correct approach to the application of section 80. In the illustrative example given in para 6 above, that means that the Managers were entitled to repayment of the £75 which they had paid to the Commissioners, but not of the £25 which they had retained in their own hands."
"43. The nature of the various legal requirements indicated by the 'at the expense of' question follows from [the] principle of corrective justice [referred to in paragraph 42: set out earlier]. They are designed to ensure that there has been a transfer of value, of a kind which may have been normatively defective: that is to say, defective in a way which is recognised by the law of unjust enrichment (for example, because of a failure of the basis on which the benefit was conferred). The expression 'transfer of value' is, however, also too general to serve as a legal test. More precisely, it means in the first place that the defendant has received a benefit from the claimant. But that is not in itself enough. The reversal of unjust enrichment, usually by a restitutionary remedy, is premised on the claimant's also having suffered a loss through his provision of the benefit.
[ … ]
45. It should be emphasised that there need not be a loss in the same sense as in the law of damages: restitution is not a compensatory remedy. For that reason, some commentators have preferred to use different terms, referring for example to a subtraction from, or diminution in, the claimant's wealth, or simply to a transfer of value. But the word 'loss' is used in the authorities, and it is perfectly apposite, provided it is understood that it does not bear the same meaning as in the law of damages. The loss to the claimant may, for example, be incurred through the gratuitous provision of services which could otherwise have been provided for reward, where there was no intention of donation. In such a situation, the claimant has given up something of economic value through the provision of the benefit, and has in that sense incurred a loss.
46. Situations in which the defendant has received a benefit from the claimant, and the claimant has incurred a loss through the provision of that benefit, usually arise where the parties have dealt directly with one another, or with one another's property. Common examples are the gratuitous payment of money, or provision of goods or services, by the claimant to the defendant, where there was no intention of donation. In such a situation, if the enrichment of the defendant is unjust – if, in other words, the transfer of value is defective in a sense recognised by the law of unjust enrichment – then the claimant is prima facie entitled to have the enrichment reversed.
47. There are, however, situations in which the parties have not dealt directly with one another, or with one another's property, but in which the defendant has nevertheless received a benefit from the claimant, and the claimant has incurred a loss through the provision of that benefit. These are generally situations in which the difference from the direct provision of a benefit by the claimant to the defendant is more apparent than real.
48. One such situation is where the agent of one of the parties is interposed between them. In that situation, the agent is the proxy of his principal, by virtue of the law of agency. The series of transactions between the claimant and the agent, and between the agent and the defendant, is therefore legally equivalent to a transaction directly between the claimant and the defendant. … There have also been cases, discussed below, in which a set of co-ordinated transactions has been treated as forming a single scheme or transaction for the purpose of the 'at the expense of' inquiry, on the basis that to consider each individual transaction separately would be unrealistic. …
[ … ]
52. As explained earlier, the 'at the expense of' requirement is not satisfied merely by the direct receipt of a benefit. The claimant must also incur a loss through the provision of the benefit. … That requirement will not normally be satisfied where the provision of the benefit was merely an incidental or collateral result of his expenditure. … In such a situation, the claimant may have received the consideration for which he bargained as the counterpart of his own expenditure, and in that event will not usually have suffered any loss. Even if he has incurred a loss, it will not normally have arisen through his provision of something for the benefit of the defendant, since the benefit received by the defendant will have been merely incidental or collateral to the reason why the expenditure was incurred. A 'but for' causal connection between the claimant's being worse off and the defendant's being better off is not, therefore, sufficient in itself to constitute a transfer of value.
[ … ]
59. Nor is the 'at the expense of' requirement satisfied by a connection between the parties' respective benefit and loss merely as a matter of economic or commercial reality. Economic reality is not only a 'somewhat fuzzy concept', as Moses LJ described it in Menelaou [2014] 1 WLR 854, para 62, but one which is difficult to apply with any rigour or certainty in this context, or consistently with the purpose of restitution on the ground of unjust enrichment. … "
"71. Returning, then, to the question whether the unjust enrichment of the Commissioners was at the expense of the Lead Claimants, and focusing on whether there was a transfer of value from the Lead Claimants to the Commissioners, the answer is in the negative. There was a transfer of value, comprising the notional £100, from the Lead Claimants to the Managers, under the contract between them. It was defective, because it was made in performance of a contractual obligation which was mistakenly believed to be owed. There was a subsequent transfer of value, comprising the notional £75, from the Managers to the Commissioners. It was also defective, because it was made in compliance with a statutory obligation which was inapplicable because it was incompatible with EU law. These two transfers cannot be collapsed into a single transfer of value from the Lead Claimants to the Commissioners.
72. That follows from a number of considerations. First, the Lead Claimants do not challenge the judge's rejection of a connection between the payments made by the Lead Claimants and the payments received by the Commissioners based on agency. The intervention of the Managers cannot therefore be disregarded on the basis that they were in law the proxy of one of the other parties. Secondly, since the payments made by the Lead Claimants formed part of the Managers' general assets, to do with as they pleased, it is impossible to trace those payments into the payments subsequently made by the Managers to the Commissioners, and so to regard the Commissioners as having benefited from the receipt of property in which the Lead Claimants had an interest. Thirdly, the fact that there were two separate transactions – first, between the Claimants and the Managers, and secondly between the Managers and the Commissioners – is not in this context something which can be disregarded. In particular, there is no question of the transactions being a sham or involving an artificial step, or of their comprising a single scheme. The first transfer did not even bring about the second transfer as a matter of causation: the judge's rejection of a 'but for' causal connection between the two transfers is not challenged. The Lead Claimants rely on a connection established by commercial or economic reality. But, for the reasons already explained, the fact that, as a matter of economic or commercial reality, the Lead Claimants bore the cost of the undue tax paid by the Managers to the Commissioners does not in itself entitle them to restitution from the Commissioners.
73. It follows that the Lead Claimants did not in principle have any right to restitution against the Commissioners. They did, on the other hand, have a right to restitution against the Managers. That right was to restitution of the entire amount paid in respect of VAT, ie the notional £100. The Managers did not in principle have a change of position defence in respect of the notional £75 which they paid to the Commissioners, since that change of position was reversible under section 80 of the 1994 Act, as I shall shortly explain. Nor did they have a change of position defence in respect of the notional £25 which they retained."
The decision in Tecnimont
"108. The Supreme Court's decision in ITC represents a watershed. Previously, when considering if a defendant's benefit had been obtained 'at the expense of' the claimant, the courts had been guided by perceptions of fairness rather than by ascertainable and fixed rules of law. … In [earlier] cases, the court answered the 'at the expense of question' by considering the closeness of the connection between the claimant's loss and the defendant's gain. In each case the court asked if the connection was 'sufficient' but laid down no principle to explain when the 'sufficiency' criterion was satisfied. The Supreme Court described this exercise as one that was 'too vague to provide certainty'.
109. Given that unjust enrichment ranks next to contract and tort as part of the law of obligations, the Supreme Court recognised that rights arising from it should be 'determined by rules of law which are ascertainable and consistently applied'. Resort 'to an unstructured approach driven by perceptions of fairness, with consequent uncertainty and unpredictability' was impermissible.
110. In view of 'the uncertainty which has resulted from the use of vague and generalised language' the Supreme Court noted that it had 'a responsibility to establish more precise criteria'. … "
"121. The outcome of the ITC case provides a helpful application of the principles set out in that case. The relevant conclusion is expressed at paragraphs 71 and 72. The claim was dismissed. The following points appear from those paragraphs:
a. The key consideration was: had there been a transfer of value from the claimants to HMRC?
b. There were in fact 2 transfers of value: from the claimant to the managers and subsequently from the managers to HMRC.
c. The 2 transactions could not be collapsed into one for a number of reasons:
i. The managers did not act as the claimant's agents when paying money to HMRC. Their involvement could not be ignored, and they could not be treated as proxies for the claimant when making payments to HMRC.
ii. Payments made to the managers by the claimant were mixed with the managers' funds and could be dealt with as the managers saw fit. The payments could not be traced into the payments made to HMRC.
iii. The fact that there were 2 separate transactions could not be ignored because (in particular) the transaction was not a sham, it did not involve an artificial step and it did not involve a single scheme."
"130. In considering whether the transaction should be treated as a direct transfer in my view the following factors derived from ITC (and from Menelaou and Banque Financiere) are of relevance:
a. The analysis must focus on the transactions and not the effect of the transaction. This reflects the need to avoid considering the 'economic reality' of the transaction.
b. The substance of the transaction is key rather than its form. This reflects 'transactional reality' and ensures that 'apparent' features of the transaction give way to 'real' features. The purpose and genuineness of each step must be considered.
c. The nature of the transactions may be important. The fact that charges and land purchases are 'indissolubly bound together' as a matter of law (see Abbey National v Cann) was an important feature in Menelaou.
d. The number of parties providing (in this case) funds should be considered."
"139. Taking each of the factors set out above into account, and taking an overall view of the transactions, it is clear that it would be wrong to treat the international inter-bank transactions in the present case as forming a single scheme or transaction. On analysis it is necessary (and realistic) to treat individual transactions separately.
140. It is only by taking a broad (and impermissible) view of 'economic reality' that it could be said that the present case should be treated as a direct transaction case. Mr Anderson QC noted in closing submissions that 'only a lawyer' could describe the transfer of value as indirect. In my judgment this makes the point. A pragmatic non-lawyer observer might conclude otherwise, but in doing so would be attempting (inappropriately) to apply an oversimplified version of 'economic reality'.
141. I have also considered if the agency exception might apply. In my view it does not. If A makes a payment to B and B makes a payment to C it would be appropriate to treat the co-ordinated transactions as a direct transfer from A to C if B is the agent of one party or the other (110a above and paragraph 48 of ITC). While the exception allows the agent's involvement to be ignored, it does not create a direct transfer where there is none.
142. In my judgment, the conclusion that the Bank was enriched 'at the expense of' the claimant would be contrary to the decision in ITC and would fail to recognise the established manner in which international bank transfers are made."
Analysis of Tecnimont
Discussion
The doctrine of precedent
"a judge of first instance, though he would always follow the decision of another judge of first instance, unless he is convinced the judgment is wrong, would follow it as a matter of judicial comity. He certainly is not bound to follow the decision of a judge of equal jurisdiction. He is only bound to follow the decisions which are binding on him, which, in the case of a judge of first instance, are the decisions of the Court of Appeal, the House of Lords and the Divisional Court."
"9. So far as the High Court is concerned, puisne judges are not technically bound by decisions of their peers, but they should generally follow a decision of a court of co-ordinate jurisdiction unless there is a powerful reason for not doing so. … "
To the same effect, most recently, is the judgment of Jacobs J in Gatwick Investment Ltd v Liberty Mutual Insurance Europe SE [2024] EWHC 124 (Comm), [110]-[112]. I respectfully agree.
Conclusion
