First City Monument Bank Plc v Zumax Nigeria Ltd

This is an appeal from a decision of Barling J granting the claimant, Zumax Nigeria Limited (“Zumax”), summary judgment.

Zumax is a Nigerian company which formerly provided engineering and other services to oil companies. It is based in Warri, Nigeria.

The defendant, First City Monument Bank plc (“FCMB”), is a Nigerian bank. As a result of a merger with Finbank plc, which had itself come into being as a result of a

The proceedings relate to some bank transfers dating from 2000 to 2002. At that time,

IMB, too, had a Naira-denominated account in Nigeria with Standard Trust Bank, as well as ones with Guaranteed Trust Bank and Citizens Bank. It also held two US dollar-denominated accounts, numbered 160122964015 and 160122964010, at the London branch of Commerzbank. A third US dollar-denominated account with Commerzbank (“the IMB Morgan Account”) was held by an entity associated with IMB, IMB Morgan plc (“IMB Morgan”, formerly known as “IMB Securities plc”), and for the purposes of this appeal FCMB accepts that no distinction is to be drawn between IMB and IMB Morgan. All three Commerzbank accounts were

“correspondent” accounts.

At least in part, the oil companies for which Zumax undertook work would be invoiced in US dollars and asked to pay the money into an account that Redsear Limited (“Redsear), a company incorporated in the Isle of Man, held with Chase Manhattan International (“Chase”) in London. Barling J described Redsear as a nominee of Zumax, and it was common ground before us that Redsear held the funds that it received from Zumax’s customers on trust for Zumax. Money in the account (“the Redsear Account”) would be used to meet Zumax’s US dollar business needs, with any surplus funds being transferred to Nigeria.

The accounts that IMB and IMB Morgan held with Commerzbank had a central role in these arrangements. Where money was to go to Nigeria, either to Zumax itself or (say) to one of the company’s suppliers, it would in the first instance be transferred from the Redsear Account to one or other of the Commerzbank accounts. In the case of money destined for Zumax, the plan, according to Zumax, was that it should be credited with Naira to a corresponding value on its account with IMB in Lagos. FCMB, in contrast, maintains that Zumax would often prefer to use an informal “parallel” market which offered a more attractive exchange rate than the official rate. Mr Toyin Owolabi, who was IMB’s treasurer and head of treasury/business development between 2000 and 2004, has said in a witness statement that in such circumstances:

“IMB would pay through its local NGN [i.e. Naira] account with Citizens Bank, by issuing a cheque to the customer or paying into one of the customer’s local current accounts with another bank in Nigeria or direct to a third party (such as a supplier) as the customer wishes”.

The present proceedings concern ten transfers from the Redsear Account to the Commerzbank accounts that were made between May 2000 and April 2002. The transfers were as follows:

Five of the transfers were into the IMB Morgan Account and the remainder into one or other of IMB’s own accounts. In each instance, save in respect of the third transfer, Chase received manuscript instructions from Mr Edwin Chinye, who was a director of Redsear and the signatory on its account with Chase. Mr Chinye was also the managing director of IMB (and a director of Zumax), but it is common ground that he was not acting on behalf of IMB in signing the Redsear instructions (see paragraph 66(vii) of the judgment). To a substantial extent, Mr Chinye’s instructions were then reflected in the relevant entries in the statements that Commerzbank produced for the three accounts.

In the case of, for example, the first transfer, the manuscript instructions asked Chase to transfer $205,000 to one of IMB’s accounts with Commerzbank, stating:

“Beneficiary: International Merchant Bank IMB for further credit to

Zumax Nigeria Limited

Ref: By order of Redsear Ltd UK”.

The Commerzbank statement then recorded in respect of the credit entry (for $204,985, after deduction of a $15 charge):

“FOR FURTHER CREDIT TO ZUMA[X] NIGERIA LIMITED BEING USD 205000 LESS OUR CHG REDSEAR LTD”.

Similar wording was to be found in the manuscript instructions relating to the other eight transfers to which this appeal relates (the third transfer not being the subject of the appeal). All the instructions included either “for further credit to Zumax” or “for final credit to Zumax”. In the majority of cases, that language was reflected in the entries in the Commerzbank statements (though “for further credit” was abbreviated to “FFC” on two occasions). With the seventh and eighth transfers, however, there was no reference to Zumax in the bank statements. The entry for the eighth transfer, for example, stated:

“RFB [i.e. reference for beneficiary] /BY ORDER/REDSEAR LIMITED//ATTENTION FARRAH UDIN

REDSEAR LIMITED 24 RIDGEWAY STREET DOUGLAS ISLE OF MAN”.

The present proceedings were issued on 3 October 2013. By them, Zumax claims a declaration that FCMB is liable to account “as trustee” for the total of the ten transfers (viz. $3,752,000), an order for FCMB to pay the sum found due on the taking of such account, and interest. The amended particulars of claim allege:

“Upon receipt of the said funds IMB, its agent/nominee and its successors (including FCMB) held the said fund on resulting or constructive trust for Zumax which retained an equitable proprietary interest in the said funds. Further, or in the alternative, as bankers IMB and its successors (including FCMB) owed Zumax a fiduciary duty to ensure that the said funds were transferred to Zumax.”

Zumax goes on to allege that Zumax never received any of the money and that FCMB therefore “holds the said funds on trust or on constructive trust for Zumax”. As regards interest, this is said:

“The sum total of the interest amounts claimed by Zumax … is U.S.$211,894,783 (equivalent to £169,823,310 at the closing exchange rate on 21 November 2016 … ). Zumax further claims such interest amount as accrues from 21 November 2016 until judgment at the compound rate of 30% per year or such other rate as the court thinks fit.”

On 5 March 2014, Zumax applied for summary judgment. The application was stayed to await the outcome of a dispute as to jurisdiction (which was resolved in Zumax’s favour: see [2016] EWCA Civ 567), but eventually came before Barling J in 2017. As the judge explained, Mr Francis Collaço Moraes, who appeared for Zumax (as he also did before us), made clear at the outset of his submissions that the claim was a proprietary one and that the application was made “solely on the basis that a trust in favour of Zumax exists” (paragraph 55 of the judgment). FCMB both denied that there was any trust and advanced a number of other defences. The judge, however, did not consider that there was anything of substance in FCMB’s arguments against the existence of a trust (paragraph 83) and concluded (in paragraph 82):

“In the light of the evidential material shown to me, I consider that all the criteria are satisfied for the transfers in question to be impressed with a trust in favour of Zumax at the stage when the funds arrived in the relevant Commerzbank accounts. In my view the trust constitutes an express trust, but failing that it is a Quistclose trust.”

The judge further rejected a suggestion from FCMB that it would be Redsear rather than Zumax that would have the right to enforce any trust, saying (in paragraph 80):

“I consider that such a submission is unsustainable. First, I consider that the settlor was clearly Zumax, acting through its agent/nominee Redsear. But even if the settlor was Redsear, I can see no principled reason why, in the present circumstances, Zumax, as the sole and express beneficiary, is not entitled to enforce the trust. I am fortified in that view by the decision of Mr Michael Crystal QC, sitting as a Deputy High Court Judge, in Re Magaretta Limited [2005] BCC 506 at paragraphs 15-30. See also Carreras Rothmans v Freeman Matthews Treasure Limited [1985] Ch 207 at 222F-223G per Peter Gibson J, and General Communications Limited v Development Finance Corporation of New Zealand Limited [1992] LRC (Comm) 247 at 257-260.”

FCMB suggested that the third transfer was a mistake (see paragraph 88 of the judgment), and Barling J did not feel able to reject that defence as hopeless (paragraph 90). That apart, however, he considered that FCMB had no real prospect of making out any of its defences. He therefore granted Zumax summary judgment on all the transfers other than the third and ordered FCMB to pay £2,659,576.89 (the sterling equivalent of $3,507,450 on 10 November 2017). The extent of FCMB’s liability for interest was to be determined in a subsequent accounting exercise.

FCMB now challenges Barling J’s decision in this Court. The appeal is much narrower in scope than the argument below. Some of the points that FCMB took before the judge were not pursued before us, in part because on 5 October 2018 Mrs Justice M. O. Obadina had given judgment against it in related proceedings in the High Court of Lagos State, holding that terms of settlement and a consent order dating from 2005 were vitiated by fraudulent misrepresentation and concealment of material facts.

The central question raised by the appeal is whether, as Barling J considered was the case, the transfers at issue were impressed with a trust. FCMB also contends that, contrary to the judge’s view, it has a real prospect of successfully defending the proceedings on the basis that (a) Zumax’s claim in respect of the tenth transfer is barred as an abuse of process or by reason of cause of action estoppel and (b) it paid or otherwise accounted to Zumax for transfers other than the tenth. I shall begin, however, by addressing the dispute as to whether there was a trust.

As I have said, Barling J considered there to have been an express trust or, failing that, a “Quistclose” trust.

The first of these, an express trust, requires the “three certainties” recognised in Knight v Knight (1840) 3 Beav 148. In that case, Lord Langdale MR said (at 172173):

“As a general rule, it has been laid down, that when property is given absolutely to any person, and the same person is, by the giver who has power to command, recommended, or entreated, or wished, to dispose of that property in favour of another, the recommendation, entreaty, or wish shall be held to create a trust.

First, if the words are so used, that upon the whole, they ought to be construed as imperative;

Secondly, if the subject of the recommendation or wish be certain; and,

Thirdly, if the objects or persons intended to have the benefit of the recommendation or wish be also certain.”

“Quistclose” trusts take their name from Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. A trust of this kind can potentially arise where money or other property is transferred to someone else for a particular purpose. In Quistclose itself, the respondent had lent money to Rolls Razor Limited to enable it to pay a dividend and a separate bank account had been opened to receive the loan. Rolls Razor Ltd having gone into liquidation without having paid the dividend, the House of Lords held that the money was held on trust for the respondent. Lord Wilberforce said (at 582):

“In the present case the intention to create a secondary trust for the benefit of the lender, to arise if the primary trust, to pay the dividend, could not be carried out, is clear and I can find no reason why the law should not give effect to it.”

The basis of Quistclose trusts was considered by Lord Millett in Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164. He concluded that such a trust involves a resulting trust coupled with a power. He said at paragraph 100:

“The lender pays the money to the borrower by way of loan, but he does not part with the entire beneficial interest in the money, and in so far as he does not it is held on a resulting trust for the lender from the outset. Contrary to the opinion of the Court of Appeal, it is the borrower who has a very limited use of the money, being obliged to apply it for the stated purpose or return it. He has no beneficial interest in the money, which remains throughout in the lender subject only to the borrower’s power or duty to apply the money in accordance with the lender’s instructions. When the purpose fails, the money is returnable to the lender, not under some new trust in his favour which only comes into being on the failure of the purpose, but because the resulting trust in his favour is no longer subject to any power on the part of the borrower to make use of the money. Whether the borrower is obliged to apply the money for the stated purpose or merely at liberty to do so, and whether the lender can countermand the borrower’s mandate while it is still capable of being carried out, must depend on the circumstances of the particular case.”

In the course of his judgment, Lord Millett explained that a Quistclose trust requires more than just payment for a specific purpose. He said:

“73.

A Quistclose trust does not necessarily arise merely because money is paid for a particular purpose. A lender will often inquire into the purpose for which a loan is sought in order to decide whether he would be justified in making it. He may be said to lend the money for the purpose in question, but this is not enough to create a trust; once lent the money is at the free disposal of the borrower. Similarly payments in advance for goods or services are paid for a particular purpose, but such payments do not ordinarily create a trust. The money is intended to be at the free disposal of the supplier and may be used as part of his cashflow. Commercial life would be impossible if this were not the case.

74.

The question in every case is whether the parties intended the money to be at the free disposal of the recipient: In re Goldcorp Exchange Ltd [1995] 1 AC 74, 100 per Lord Mustill. His freedom to dispose of the money is necessarily excluded by an arrangement that the money shall be used exclusively for the stated purpose, for as Lord Wilberforce observed in the Quistclose case [1970] AC 567, 580:

‘A necessary consequence from this, by a process simply of interpretation, must be that if, for any reason, [the purpose could not be carried out,] the money was to be returned to [the lender]: the word “only” or “exclusively” can have no other meaning or effect.’”

Lord Millett also said this (at paragraph 83) about the position of the borrower in the context of a Quistclose trust:

“The borrower’s interest pending the application of the money for the stated purpose or its return to the lender is minimal. He must keep the money separate; he cannot apply it except for the stated purpose; unless the terms of the loan otherwise provide he must return it to the lender if demanded; he cannot refuse to return it if the stated purpose cannot be achieved; and if he becomes bankrupt it does not vest in his trustee in bankruptcy. If there is any content to beneficial ownership at all, the lender is the beneficial owner and the borrower is not.”

In Bieber v Teathers Ltd [2012] EWCA Civ 1466, Patten LJ stressed the importance of the “structure of the arrangements and the contractual mechanisms involved” to whether a Quistclose trust arose. He said (at paragraph 15):

“in deciding whether particular arrangements involve the creation of a trust and with it the retention by the paying party of beneficial control of the monies, proper account needs to be taken of the structure of the arrangements and the contractual mechanisms involved. As Lord Millett stressed in Twinsectra (at [73]) and the judge repeated in [17] of his own judgment, payments are routinely made in advance for particular goods and services but do not constitute trust monies in the recipient’s hands. It is therefore necessary to be satisfied not merely that the money when paid was not at the free disposal of the payee but that, objectively examined, the contractual or other arrangements properly construed were intended to provide for the preservation of the payor’s rights and the control of the use of the money through the medium of a trust.”

Treacy J held that there was no Quistclose trust in a case with facts somewhat similar to those of the present case, Abou-Rahmah v Abacha [2006] 1 Lloyd’s Rep 484.

Turning to points relating to banking, the basic banker-customer relationship is that of debtor and creditor, not that of trustee and beneficiary. In Foley v Hill (1848) 2 HLC 28, Lord Cottenham LC said (at 36-37):

“The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal, but he is of course answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands.”

A “correspondent” bank (such as Commerzbank was in the present case) is one that provides services for another financial institution. A bank may use a correspondent bank, in particular, to service transactions originating in a foreign country in which it does not have a physical presence. An international funds transfer will require the services of at least one correspondent bank unless the payer’s bank and the payee’s bank are themselves correspondents (i.e. hold accounts with each other).

Strictly, a transfer between bank accounts does not involve an actual transfer of property. In Foskett v McKeown [2001] 1 AC 102, Lord Millett explained (at 127128):

“We speak of money at the bank, and of money passing into and out of a bank account. But of course the account holder has no money at the bank. Money paid into a bank account belongs legally and beneficially to the bank and not to the account holder…. We speak of tracing money into and out of the account, but there is no money in the account. There is merely a single debt of an amount equal to the final balance standing to the credit of the account holder. No money passes from paying bank to receiving bank or through the clearing system (where the money flows may be in the opposite direction). There is simply a series of debits and credits which are causally and transactionally linked.”

“Transfer” (as used in “account transfer”), Staughton J observed in Libyan Arab Foreign Bank v Bankers Trust Co [1989] QB 728 (at 750), “may be a somewhat misleading word, since the original obligation is not assigned …; a new obligation by a new debtor is created”. One chose in action is extinguished or reduced pro tanto, and a chose in action is brought into existence representing a debt in an equivalent sum (see R v Preddy [1996] AC 815, at 834).

Barling J observed in paragraph 71 of his judgment that “the terms of the instructions are simple and unequivocal: ‘for further credit to Zumax’ or, in the case of three of the transfers ‘for final credit to Zumax’”. He went on in the next paragraph:

“In my view those unequivocal instructions, conveyed by Redsear/Zumax to Redsear’s bank (Chase), and passed on by the latter to FCMB’s bank (Commerzbank), which recorded them in its own account documents, are (subject to any relevant context which points the other way) capable of only one sensible construction, namely that they evince a clear intention on the part of those concerned, and in particular Mr Chinye, that the funds transferred should be held by FCMB in its Commerzbank accounts, not for its own benefit but for the benefit of Zumax. That is the only reasonable, objective interpretation of the instructions. I accept Mr Moraes’s submission that there was a clearly specified purpose and a clearly specified beneficiary.”

In paragraph 74 of his judgment, the judge said:

“Not only were the purpose of the transfer and identification of the beneficiary expressly acknowledged by Commerzbank by the designation in its own documents, which reflected the instructions of Mr Chinye, but by the same token the funds were segregated by being so identified on the face of the Commerzbank account statements. It is clear beyond argument that both Commerzbank and the account holder were aware of this, at the latest, when the funds reached the account.”

In the judge’s view, there was “clear and uncontroverted support in the evidential material … that funds transferred to the accounts in question were treated by FCMB and Commerzbank as identifiable and segregated” (paragraph 75). The judge further considered that the various matters that he listed in paragraph 76 make “clear that the funds in question were also regarded by FCMB as belonging to Zumax”.

Miss Poonam Melwani QC, who appeared with Mr Paul Henton for FCMB (neither of whom appeared below), argued that none of the nine transfers at issue was subject to a trust. There was, she submitted, neither the requisite certainty of intention for an express trust nor, as would have been necessary for a Quistclose trust, any intention that the particular money should be used exclusively for Zumax and not be at the free disposal of IMB. The correct analysis, she maintained, was that IMB never became a trustee but had a personal obligation to credit Zumax with the amounts of the transfers. In any case, IMB would not have known that the transfers were for the benefit of Zumax until it saw the relevant entries in the Commerzbank statements, by which time the funds would already have been IMB’s legally and beneficially and it would have been too late to impress them with a trust. The entries in respect of the seventh and eighth transfers, furthermore, did not even mention Zumax. Further, were any transfer to have been subject to a Quistclose trust, it would have been Redsear rather than Zumax which would have been entitled to enforce it.

In contrast, Mr Moraes supported Barling J’s decision. The judge was right, he said, to find that there was a clear intention to create a trust and that the funds were not to be at the free disposal of IMB. IMB will, moreover, have become aware of the trust at the latest when a transfer reached the Commerzbank account in question. Even supposing that there was a Quistclose trust rather than an express one, proceedings could be brought in Zumax’s name, as opposed to Redsear’s, for the reasons that the judge gave. Mr Moraes further prayed in aid matters relating to (a) interpleader proceedings initiated by Commerzbank in 2003 and (b) what FCMB has said about the tenth transfer.

We indicated to the parties during the hearing that we had concluded that the transfers were not subject to any trust. I give my reasons in the paragraphs which follow.

In the first place, the fact that a transfer may have been made for a particular purpose need not of itself mean that it was the subject of a trust. As Lord Millett explained in Twinsectra, a Quistclose trust “does not necessarily arise merely because money is paid for a particular purpose” (see paragraph 21 above).

Secondly, I do not think that the entries in respect of the transfers in the Commerzbank statements manifest an intention to create a trust or that the funds should not be at IMB’s free disposal. The words are at least as apt to refer to an intention that the money should be credited to Zumax, without any trust. Redsear will have needed to identify the entity for whose benefit the transfers were made regardless of whether they were to be impressed with a trust. Payers must routinely seek to identify to whom a payment is to be credited without any trust being intended.

Thirdly, the funds cannot, as it seems to me, be said to have been “segregated” in any meaningful way. In the Quistclose case, the money had been paid into a separate bank account opened specially for the purpose. In Twinsectra, the funds had been credited to a solicitor’s client account and so could fairly be described as “segregated”: the money standing to the credit of the account will have been held on trust for clients (see e.g. In re A Solicitor [1952] Ch 328; Twinsectra, at paragraph 12; and Menelaou v Bank of Cyprus UK Ltd [2016] AC 176, at paragraph 137) and subject to strict regulatory rules. There was nothing comparable in the present case. The transfers at issue will have been mingled with money transferred into the Commerzbank accounts from numerous sources for the benefit of a range of recipients and with funds that on any view were IMB’s alone. In Twinsectra, Lord Millett spoke of someone in IMB’s position under a Quistclose trust having to “keep the money separate” (see paragraph 22 above). That neither happened nor was ever agreed.

Fourthly, the context, including the “structure of the arrangements and the contractual mechanisms involved” (to quote from Patten LJ in Bieber v Teathers Ltd), suggests that there was to be no trust. The transfers were made because Zumax banked with IMB, and the basic banker-customer relationship is that of debtor and creditor (see paragraph 25 above). The principle that “money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases” (see paragraph 25 above) is both long-established and fundamental to how banking is carried on. Of course, it is possible for a banker to become a trustee for a customer, but that is very much the exception rather than the rule. In Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, Lord Browne-Wilkinson noted (at 704) that “wise judges have often warned against the wholesale importation into commercial law of equitable principles inconsistent with the certainty and speed which are essential requirements for the orderly conduct of business affairs”. In the present case, Zumax’s submissions, if accepted, could confuse and complicate the operation of correspondent accounts. After all, were the transfers in dispute held on trust, would it not follow that payments into correspondent accounts must commonly be subject to trusts? It is notable, too, that on Zumax’s own case the idea was for IMB to end up owing Zumax equivalent sums (once the money had been credited to Zumax’s Naira account with IMB, according to Zumax). If there was to be a personal obligation at that stage, why should it be inferred that Zumax was meant to have a proprietary claim against IMB en route to that destination?

As I have mentioned, Barling J considered that matters that he listed in paragraph 76 of his judgment made it clear that the relevant funds were regarded by IMB/FCMB as belonging to Zumax. I do not myself, however, see them as important. Those identified in sub-paragraphs (i), (ii) and (iii) all involved occasions when IMB/FCMB said that money “belonged” to Zumax or something similar. Thus, sub-paragraph (i) referred to a letter that IMB sent to Commerzbank on 27 June 2002, shortly after the IMB Morgan Account had been frozen (see paragraph 41 below), in which the heading included the words “Re: USD Credits: $409,985.00 Belonging to Zumax Nigeria Ltd.” and the writer then said that, if Commerzbank checked through its records, it would appreciate that it had “been receiving payments on their behalf over the years”. In sub-paragraph (ii), the judge said that FCMB’s defence in the present proceedings contended that relevant funds had been paid to Zumax by bankers’ drafts, a contention which, the judge considered, “indicates that they belonged to Zumax”. As for sub-paragraph (iii), this was based on the witness statement of Mr Owolabi,

In a similar vein, Mr Moraes suggested that a paragraph in a witness statement from a solicitor then acting for FCMB was inconsistent with FCMB’s case. The witness statement was made soon after Barling J had given judgment and in support of an application to discharge a freezing order that the judge had granted against FCMB. The paragraph in question included this:

“As the court knows, like any correspondent bank account, the Bank’s correspondent bank accounts in London and elsewhere are pooled accounts into which are credited all customer receipts and disbursements without segregation. The monies in these accounts are customer monies and not the bank’s own assets, but the injunction seeks to prevent the bank from dealing with the monies in accordance with customers’ instructions.”

I do not think, however, that this is of any significance. Far from dating from the time of the relevant dealings, the witness statement was made long afterwards, at a point when it was perfectly clear that FCMB disputed the existence of a trust. The author may have used language loosely, but his comments are of no help with the trust issue.

Paragraph 76(iv) of the judgment arose from some entries in Commerzbank statements. Sums received into an IMB account early in 2000 of, respectively, $45,298 “FAV FARIOG NIG. LTD” and $220,000 “IN FAVOUR OF FINANCE APPLICATIONS SYSTEMS LTD” are shown as having been transferred out by way of “internal transfer” within a short period. At the end of 2001 and beginning of 2002, there were also three “internal transfers” totalling $330,000 from an IMB account to the IMB Morgan Account where “ZUMAX NIG LTD” featured in the entry. Zumax contends that these matters indicate that funds were earmarked. However, the entries in question related to only a very few of the multitude of receipts into the Commerzbank bank accounts (relating both to Zumax and to other customers) and are in any event explicable on the basis that they may in one way or another have helped IMB to keep track of what it owed to customers.

Paragraph 76(v) of the judgment concerned the interpleader proceedings that I have already mentioned. These concerned the IMB Morgan Account and a sterling account that IMB Morgan also held with Commerzbank. The accounts were frozen from May 2002 as a result of, among other things, suspicion that they were being used for money-laundering. Commerzbank issued an interpleader application in relation to the money standing to the credit of the two accounts, and claims far exceeding the amounts in the accounts were advanced. Giving judgment on 30 November 2004 (see

Zumax put forward one claim, in respect of the IMB Morgan Account. Lawrence

Since, however, the claims on the IMB Morgan Account far exceeded the balance on it, Zumax and other claimants received only about 9% of their claims (see paragraph 51 of Lawrence Collins J’s judgment).

Barling J noted in paragraph 76(v) of his judgment that Lawrence Collins J had “held … that Zumax had a proprietary interest in the 10^th transfer” and that “IMB Morgan itself had made no claim to the monies”. I do not myself, however, see the interpleader proceedings as lending any support to Zumax’s case on the trust issue. While Lawrence Collins J may have held Zumax to have had a proprietary interest in the tenth transfer, that was on the (mistaken) basis that the money derived from an unrelated fraud perpetrated by Mr Chinye. Zumax did not suggest to Lawrence Collins J (and he did not find) that the tenth transfer, or any of the other transfers now at issue, was subject to either an express trust or a Quistclose trust. Further, it is hardly surprising that IMB Morgan did not assert any claim to money in the IMB Morgan Account when the balance on it was wholly inadequate to meet the proprietary claims, almost entirely founded on fraud, to which it was subject.

Mr Moraes also placed reliance on the stance that FCMB adopted to the tenth transfer in the context of this appeal. Among other things, Mr Moraes cited a paragraph in Miss Melwani’s skeleton argument in which she said that the tenth transfer “was trapped in the frozen IMB Morgan account” and that FCMB “therefore accepts that it has not paid or accounted for this transfer”. Mr Moraes submitted that the fact that money in the IMB Morgan Account was “trapped” could not have affected FCMB’s liability to discharge a personal obligation and, hence, that it was implicitly being accepted that money in the account had been held on trust for Zumax. To my mind, however, this is at most a forensic point, especially since the very skeleton to which Mr Moraes referred made it perfectly plain that FCMB’s position was that the transfers at issue were not subject to any trust. The point does not go to the substance of the dispute.

Mr Moraes took us, too, to McGraddie v McGraddie [2013] UKSC 58, [2013] 1 WLR 2477. In that case, the Supreme Court stressed how rarely an appellate Court should interfere with a trial judge’s factual findings. I cannot see, however, that McGraddie v McGraddie is of any relevance in this case, where there has been no trial and no oral evidence.

As I have indicated, I concluded, differing from Barling J, that the transfers at issue were not the subject of any trust. It seems to me that, having accepted the various transfers that had been made for the credit of one of its customers (viz. Zumax), IMB was obliged to credit Zumax with them, either through Zumax’s Naira account in Lagos or (on FCMB’s case) potentially in some other way, via the parallel market. I do not, however, consider that IMB became a trustee. Its obligations were personal.

That view chimes with Abou-Rahmah v Abacha, the facts of which are summarised in paragraph 24 above. In paragraph 68(iv) of his judgment, Treacy J said:

“The defendant [i.e. the Nigerian bank] received the monies as the agent of its customer to whom it owed duties arising from their contractual relationship.”

The present appeal arises, of course, in the context of an application for summary judgment, but in my view it is possible to determine now, without waiting for a trial, that no trust arose. There is no reason to suppose that additional evidence would cast significant light on the issue. In this connection, a passage from the judgment of Lewison J (as he then was) in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) is in point. Lewison J said in paragraph 15(vii):

“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”.

It is to be noted, moreover, that FCMB said in its appellant’s notice that the relief that it was seeking from this Court included an order to the effect that it was not a trustee.

The conclusions I have arrived at thus far mean that I do not need to address FCMB’s arguments to the effect that IMB would not have known that the disputed transfers were for the benefit of Zumax until it was too late to impress them with a trust and that it would anyway have been Redsear rather than Zumax which would have been entitled to enforce any Quistclose trust. I would not wish, however, to be taken to have endorsed paragraph 80 of the judge’s judgment (quoted in paragraph 13 above).

The conclusion that the transfers at issue were not the subject of a trust does not dispose of the proceedings as a whole. Although Zumax’s application for summary judgment was founded on its trust arguments, its particulars of claim also include an allegation that IMB and its successors owed Zumax a fiduciary duty. That allegation is not developed and, as presently pleaded, the relief sought is dependent on the trust claim. However, Miss Melwani did not suggest that we were in a position to rule on whether the claim based on breach of fiduciary duty was well-founded although, if it is to proceed, the particulars of claim will require amendment. I thus need to address two further grounds of appeal that FCMB advances.

FCMB’s case is that it should be allowed to take to trial the contention that, having made a claim for the tenth transfer in the interpleader proceedings on the basis of fraud, Zumax should not be allowed to seek relief in respect of the transfer on a different basis in the present proceedings.

Barling J rejected such an argument. He gave this explanation of what had happened (in paragraph 134 of his judgment):

“It is clear from [Zumax’s evidence in the interpleader proceedings], read alongside the judgment of Mr Justice Lawrence Collins, that Zumax was claiming a quite different sum of $441,000, but the judge had access to documents referring to the 23 April 2002 $410,000 transfer. Presumably these included the Commerzbank statements of the account, which were not at this time available to Zumax. As the judge was willing to grant Zumax the sum of $410,000, it understandably did not press a claim for the difference between the two sums.”

The judge went on to refer to evidence that “in 2004 the information available to Zumax was limited, and that it was the court not Zumax who identified the receipt of $410,000 into the IMB Morgan Commerzbank Account, and confirmed that Zumax had a proprietary right to the sum” (paragraph 135).

Miss Melwani’s position is that Zumax in fact had all the material it reasonably needed to advance its claim in the interpleader proceedings on an express/Quistclose trust basis. With a view to substantiating that, she seeks permission to adduce new evidence. She submits that, in the circumstances, FCMB has at least an arguable defence, as regards the tenth transfer, of abuse of process or cause of action estoppel.

I am not persuaded. Zumax cannot be criticised for not asserting in the interpleader proceedings a personal claim such as it is now to take forward in the present proceedings. It could not have availed it to do so since only those with proprietary claims were to receive anything, and then only a small fraction of what they were seeking. As mentioned above (paragraph 41), Lawrence Collins J explained in his judgment that claimants had to “show that they have a proprietary right, i.e. a right in property and not simply a debt due from IMB [Morgan]”. In advancing, moreover, a proprietary claim to funds in the IMB Morgan Account, Zumax was not saying anything about whether it had a personal claim against IMB. Zumax cannot, in the circumstances, be said to have renounced whatever personal claim it might have against FCMB. Further, there is no question of FCMB having been prejudiced by Zumax’s recovery of a small proportion of the tenth transfer as a result of the interpleader proceedings: Zumax accepted in its particulars of claim that it should give credit for what it received.

It seems to me that this ground of appeal fails.

The other ground of appeal that I need to consider relates to payment. FCMB contends that it should be allowed to pursue the defence that it paid over and/or otherwise accounted to Zumax for the first, second and fourth to ninth transfers.

In the past, FCMB relied on a document referred to as the “Warri Schedule”, which it suggested showed the amounts of bankers’ drafts provided to Zumax but which proved in fact to record “sums which were debited to Zumax’s Naira Account with FCMB, and which can be seen to increase Zumax’s overdraft” (paragraph 112 of the judgment). By the time of the hearing before Barling J, FCMB was relying on other schedules produced by Mr Chinye, but the judge concluded that FCMB was “clutching at straws” (paragraph 127) and that its payment defence was hopeless. He said this:

“138.

In my view there is no substance whatsoever in the current version of this defence, based on a notional set of bankers’ drafts which were said arguably to have been issued at about the same time and in the same amounts as, and in addition to, the drawdown payments referred to in the Warri Schedule. There is no evidence that any such additional bankers’ drafts existed, and the suggestion that they did is wholly implausible in the circumstances. There is no reason to suppose that further relevant material would become available at a trial or that oral evidence would make a difference. FCMB have identified no issue in this regard which requires a trial. The current bankers’ draft defence is hopeless.

139.

FCMB have only been constrained to rely on this point because their two earlier defences (the initial denial of receipt of the transfers, and the subsequent Warri Schedule defence) have been shown to be false. FCMB’s inability to point to any real evidence in support of the latest defence inevitably falls to be seen in the context of those earlier assertions, which were vigorously made and later abandoned….”

The judge went on to say that an expert report dealing with the parallel foreign exchange market did not affect his view (paragraph 140).

I shall come in a moment to the sixth transfer. As regards the other relevant transfers (the first, second, fourth, fifth, seventh, eighth and ninth), Miss Melwani argued that FCMB has a real prospect of successfully defending the proceedings on the basis that Zumax was paid as a result of parallel market transactions. On that basis, she said, Zumax could be expected to have received sums corresponding to the transfers into one or other of its Warri accounts (none of which was held with IMB).

The arguments that Miss Melwani advanced on this aspect of the case included these:

Mr Moraes, for his part, denied that there was any substance in such arguments. Among other things, he said:

On the other hand:

There is undoubtedly force in the points that Mr Moraes made. Should statements for Zumax’s Warri accounts for the relevant period become available and prove to lend no support to FCMB’s case, it may need to re-evaluate its position. As matters stand, however, I have concluded, on balance, that FCMB does have a real prospect of defeating the claim as regards the first, second, fourth, fifth, seventh, eighth and ninth transfers on the strength of the payment defence.

That brings me to the sixth transfer. Here, FCMB wishes to rely on a new document, that was not before Barling J, which it says indicates that Zumax was paid via its Naira account in Lagos. The document in question is an internal IMB memo dated 16 July 2001 in which Mr Chinye said:

“Zumax has requested for a temp OD to accommodate an immediate cash requirement of N100 million against $1 million Dollars or 120 million Naira receivables expected from Chevron and Shell within the next week.

I have verified these receivables and hereby grant approval to their request.

Make a draft of GTB or STB payable at Warri in favour of the company today. Company MD will be in the Bank at 6.00 pm to collect same.”

With the benefit of this document, FCMB maintains, the sixth transfer can be linked to a credit entry on Zumax’s Naira account in October 2001. The point was summarised as follows in one of Miss Melwani’s skeleton arguments:

“[T]he memo shows that Zumax requested a temporary overdraft increase to accommodate an immediate cash requirement of Naira 100 million, offset against receivables of US$1 million/Naira 120 million expected from Chevron/Shell within the next week. The memo anticipates a payment of US$1 million from Chevron/Shell for the benefit of Zumax in the latter half of July; and in fact a payment of US$901,000 ($900,985.00 after the $15 charge) was made by Redsear from the Chevron/Shell contract into the IMB Commerzbank Account (the 6^th transfer) on 13 August 2001. Zumax’s account statements then show a credit entry of Naira 119,369,250 in respect of a cheque deposit on 15 October 2001. Absent any other competing explanation (Zumax has supplied none), this cheque deposit appears to relate to the 6^th transfer, which offsets/reduces back down the temporary overdraft increase.”

With regard to whether the memo could with reasonable diligence have been obtained for use at the hearing before Barling J, FCMB accepted that it had had the document in its possession but said that it had been identified only as a result of extensive searches going far beyond what might be expected for a summary judgment hearing. A witness statement explained that FCMB knew that it had some old IMB documents in three archive locations and that these were searched in advance of the summary judgment hearing both generally and in relation to a specific disclosure request that Zumax had made. However, the documents in question amounted to 3714 boxes and 114 bags which, while they had some generic labelling on the outside, were not otherwise indexed or catalogued, and the memo was not found at that stage. It came to light when, following Barling J’s judgment, FCMB made a “wholesale nondiscriminatory search of every document at all three locations, looking for any document anywhere that referred to ‘Zumax’”, involving 10 people searching through boxes and bags for some 78 days.

Mr Moraes argued that FCMB could with reasonable diligence have obtained the memo in time for the hearing before Barling J. He further submitted, among other things, that:

In considering whether the memo could with reasonable diligence have been obtained for use at the hearing before Barling J, it is of some relevance that the case had not reached trial. In Langdale v Danby [1982] 1 WLR 1123, Lord Bridge said (at 1133):

“It may well be that the standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial.”

At all events, my own view is that FCMB satisfies the reasonable diligence requirement, in the light of the matters mentioned in paragraph 65 above.

In other respects, there is once again force in Mr Moraes’ contentions. Even so, it seems to me that the memo is of sufficient significance, and the defence based on it of

I would therefore allow the appeal on this ground.

One of FCMB’s grounds of appeal related to observations which Barling J made about limitation matters. As the judge recognised, what he said was obiter, and it was agreed between Miss Melwani and Mr Moraes that any limitation issues should be addressed afresh, without reliance on the judge’s comments, in the context of the claims that are now to proceed. I do not therefore need to say anything on the subject.

I would allow the appeal on ground 1 (the trust issue) and ground 3D (payment). In my view, the transfers at issue were not the subject of any trust (either express or Quistclose), and FCMB should be allowed to take to trial the defence that it paid over and/or otherwise accounted to Zumax for the first, second and fourth to ninth transfers. In contrast, I would dismiss the appeal on ground 3E (relating to the tenth transfer).