Moorwand Ltd v Gareth Anthony Hamblin & Ors

In Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363, Steyn J had to consider the rights and duties as between a bank and its customer in relation to the drawing of cheques on a corporate customer’s account, in circumstances in which those cheques had been drawn by the customer’s chairman for his own dishonest purposes. At p.376, Steyn J noted that while the relationship between the bank and its customer was primarily that of debtor and creditor, when it came to the drawing and payment of cheques, the relationship was that of agent and principal. As a result, like any other agent, a bank would ordinarily owe a duty of care in carrying out its principal’s instructions. At p.377, he continued:

“Given that the bank owes a legal duty to exercise reasonable care in and about executing a customer's order to transfer money, it is nevertheless a duty which must generally speaking be subordinate to the bank’s other conflicting contractual duties. Ex hypothesi one is considering a case where the bank received a valid and proper order which it is prima facie bound to execute promptly on pain of incurring liability for consequential loss to the customer. How are these conflicting duties to be reconciled in a case where the customer suffers loss because it is subsequently established that the order to transfer money was an act of misappropriation of money by the director or officer? If the bank executes the order knowing it to be dishonestly given, shutting its eyes to the obvious fact of the dishonesty, or acting recklessly in failing to make such inquiries as an honest and reasonable man would make, no problem arises: the bank will plainly be liable. But in real life such a stark situation seldom arises. The critical question is: what lesser state of knowledge on the part of the bank will oblige the bank to make inquiries as to the legitimacy of the order? In judging where the line is to be drawn there are countervailing policy considerations. The law should not impose too burdensome an obligation on bankers, which hampers the effective transacting of banking business unnecessarily. On the other hand, the law should guard against the facilitation of fraud, and exact a reasonable standard of care in order to combat fraud and to protect bank customers and innocent third parties. To hold that a bank is only liable when it has displayed a lack of probity would be much too restrictive an approach. On the other hand, to impose liability whenever speculation might suggest dishonesty would impose wholly impractical standards on bankers. In my judgment the sensible compromise, which strikes a fair balance between competing considerations, is simply to say that a banker must refrain from executing an order if and for as long as the banker is ‘put on inquiry’ in the sense that he has reasonable grounds (although not necessarily proof) for believing that the order is an attempt to misappropriate the funds of the company.”

That duty, which unsurprisingly became known as a Quincecare duty, was owed by a bank to its customer as an incident of an agent’s general duty to exercise reasonable skill and care in following its principal’s instructions.

Attempts were made to argue that facts which might put a bank “on enquiry” for the purposes of the Quincecare duty might also breach a duty of care owed to a third party who had been a victim of fraud. A claim on this basis was considered by the Privy Council in JP SPC 4 v Royal Bank of Scotland International Ltd [2022] UKPC 18, [2023] AC 461. It was assumed in that case that the claimants had a beneficial interest in the credit represented by the account balance with the bank, that the bank knew this, and that the circumstances were such that a reasonable banker would have had grounds for considering that there was a real possibility that the beneficial owners of the balance were being defrauded. The claimants alleged that the bank owed them a duty of care which required the bank not to honour instructions from the account holders in those circumstances.

The Privy Council upheld a decision to strike out the claim, holding that no such duty was owed:

The nature and scope of the Quincecare duty as between bank and customer was considered by the Supreme Court in Philipp v Barclays Bank UK Plc [2023] UKSC 25, [2024] AC 346, which was also a case in which the claimant was the victim of an APP fraud. The claim was brought by the claimant against her own bank, in circumstances in which the account was held by a natural person who had herself given the bank the instructions to effect the transfers. The first instance judge dismissed the claim on a summary basis, holding that the fact that the account holder had herself given the instructions precluded a Quincecare duty (there being no agent whose authority to give the instructions might be in doubt). The Court of Appeal held that it was arguable that a duty was owed, but the Supreme Court restored the first instance judge’s decision.

It is convenient at the outset to refer to three paragraphs which Lord Leggatt set out at the very start of his judgment:

There has been regulatory intervention in relation to the consequences of APP fraud, including the FPS Reimbursement Rules which took effect on 7 October 2024. These provide a detailed regime for the reimbursement of qualifying victims of APP fraud, including a 50/50 costs split between the sending and receiving banks.

The central issue in Philipp was whether it was arguable that a bank owed a customer a duty to refrain from following her instructions if put on enquiry that the order was an attempt to misappropriate funds from her ([27]). At [35], Lord Leggatt explained the interrelationship of the bank’s duty to follow the customer’s instructions, and the Quincecare duty, as follows:

“The requirement to exercise reasonable care and skill only applies, and is only capable of applying, insofar as the contract gives the supplier any latitude in how the relevant services are carried out. Insofar as the contract prescribes what the supplier must do or achieve in carrying out the services, failure to do or achieve what is required will be a breach of the contract and it is irrelevant whether the supplier has acted with skill or care. The bank’s obligation to carry out payment instructions in accordance with its mandate from the customer leaves the bank with very little latitude in performing the obligation. But where the contract does not completely specify what the bank must do, it must act in the way that a reasonably skilful and careful banker would.”

At [63], Lord Leggatt held that the duty of reasonable care in executing the instruction only arises where the validity or content of the instruction is unclear or incomplete. He explained the Quincecare line of cases on the basis that an order given by the customer’s agent in abuse of its authority will not be a valid order, and the agent will not have actual (although it may have apparent) authority to give an order in those circumstances. At [73], he stated:

“In principle, the scope of an agent’s authority is a matter of agreement between the agent and the principal. Where that agreement is recorded in writing, the question is one of interpretation of the document. No doubt it would be possible in theory for a principal in appointing an agent to agree that the agent may bind the principal even if and when the agent is acting dishonestly with the aim of defrauding the principal. But it seems inconceivable that any sane person would ever agree, or could reasonably be presumed to have agreed, to confer such authority on an agent. As is generally the case in commerce, parties to an agency relationship naturally deal with each other on an unspoken common assumption that each will act honestly in relation to the other. It goes without saying that authority conferred on an agent does not encompass acting dishonestly to further the agent’s own interests in opposition to the interests of the principal.”

It may be relevant to note that this passage in Philipp does not appear to be premised on a legal rule that a principal can never authorise an agent to do a dishonest act to its detriment, but rather reflects what would ordinarily be the compelling presumption that, whatever else the principal is authorising the agent to do, it is not to defraud the principal themselves. To similar effect, at [93]. Lord Leggatt stated:

“I agree with Professor Watts that a mandate giving an agent power to operate a bank account may, depending on its wording, not only represent to the bank that the agent is authorised to sign or give other instructions on the customer’s behalf but also confer authority directly on the bank to follow such instructions. I do not, however, agree that—without express contrary wording—such a mandate should be construed as authorising the bank to follow instructions which the agent has neither actual nor apparent authority to give.”

Finally, at [96- 97], Lord Leggatt made the following significant observations:

“A payment made without inquiry when the bank is on notice that the payment is being made for the signatories’ own purposes is not only a breach of the bank’s duty of care but is also outside the scope of its mandate. Hence the bank is not entitled to debit the amount to the customer’s account. This has the practical significance that, unless the customer is claiming damages for consequential losses over and above the amount of the payment, it is unnecessary for the customer in order to succeed to prove that, if reasonable inquiries had been made, the agent's dishonesty would have been revealed and the loss avoided.

In summary, the duty of a bank which has come to be referred to as the “Quincecare duty” is not, as that epithet might suggest, some special or idiosyncratic rule of law. Properly understood, it is simply an application of the general duty of care owed by a bank to interpret, ascertain and act in accordance with its customer’s instructions. Where a bank is “put on inquiry” in the sense of having reasonable grounds for believing that a payment instruction given by an agent purportedly on behalf of the customer is an attempt to defraud the customer, this duty requires the bank to refrain from executing the instruction without first making inquiries to verify that the instruction has actually been authorised by the customer. If the bank executes the instruction without making such inquiries and the instruction proves to have been given without the customer’s authority, the bank will be in breach of duty. It will also in making the payment be acting outside the scope of its own authority from the customer and will therefore not be entitled to debit the payment to the customer's account.”

(emphases added).

Unpacking those two paragraphs:

Cases of the present kind, when one or more natural persons carrying out a fraud use a company to do so, can engage the legal rules which determine when the knowledge or conduct of a dishonest agent is attributed to the principal, whether for the purpose of a claim by a third party seeking to hold the principal liable for that conduct, or where a third party seeks to defend a claim brought by the company by arguing that the conduct precludes the principal from bringing a claim against them (whether on grounds of illegality or a circuity defence) or when the principal seeks to bring its own claim against the dishonest agent. The principle that the dishonest agent’s acts or knowledge are not, at least in some circumstances, attributable to the principal is sometimes referred to as the Re Hampshire Land principle after the case reported at [1896] 2 Ch 743 to which the Judge referred. It had been suggested either that any principle of non-attribution in such circumstances is a policy-driven exception to conventional principles of agent/principal attribution, or that it is simply the application of those principles in a particular context.

That is a difficult area of law, which has come before the apex court in three important decisions: Stone & Rolls Ltd (in liquidation) v Moore Stephens (A Firm) [2009] UKHL 39,[2009] 1 AC 1391, Bilta and Singularis. It is not necessary in the present context to seek to summarise the current state of the law. It has repeatedly been emphasised that attribution is an issue where the purpose of the legal rule which gives rise to the question in any individual case will be of paramount importance in determining which principle of attribution applies (Bilta, [40-41], [92]; [202-209]; Singularis, [34]).

However, in broad terms:

In the present case, we are not concerned with a claim by a company against a third party for damages caused by its failure to prevent the directors from causing the company loss (although it is not difficult to see circumstances in which a claim of this kind might be brought by a company used by the fraudsters as the payee vehicle in an APP fraud), but rather a suggestion that those acting on behalf of the company did not have authority to order payments from its bank account, and that the third party bank was on enquiry of this.

A similar fact pattern came before the Court of Appeal on an application for permission to amend in Brink’s-Mat Ltd v Noye [1991] 1 Bank LR 68. Gold stolen from Brink’s Mat’s warehouse was delivered to a company called Scadlynn to be melted down, recast and sold. The directors and sole shareholders of Scadlynn (Chappell and Palmer), who were well aware that the gold was stolen, caused the proceeds to be paid into the company’s bank account and then paid away, thus leaving it without assets to meet its liabilities to Brink’s Mat. Brink’s Mat, which had an arguable claim that Scadlynn had received the proceeds as constructive trustee for it, applied to amend the pleadings to assert causes of action Scadlynn was said to have against the bank. This included a claim that Chappell and Palmer lacked authority to make the payments out of the account because this involved a breach of fiduciary duties they owed to Scadlynn and, having effected the payments without Scadlynn’s authority, the bank was liable to restore the sums paid out to Scadlynn’s account. A claim was also brought for damages for breach of a duty of care owed to Scadlynn and for “knowing assistance” in breach of fiduciary duty, as this species of liability in equity was then formulated.

Mustill LJ rejected the suggestion that Scadlynn and Chappell and Palmer were to be equated, such that the latter should be treated as paying their own money out of the account, observing at p.72 that “the corporate entity named Scadlynn was, however odd the notion may seem at first sight, the victim of wrongful arrangements to deprive it improperly of a large part of its assets”. He continued:

“The moneys credited to Scadlynn’s account were impressed with a trust in favour of Brink’s Mat … [T]his additional factor means that Scadlynn as trustee was under a duty to account to Brink’s Mat and Johnson Matthey … and the ability of the company to comply with this duty became progressively diminished as the money was wrongfully bled from the account. It seems to me plain that the acts which created this situation were wrongs committed by the two men against the company, and the fact that they also controlled the company is entirely beside the point … [I]f the facts were nevertheless enough to make it arguable that the bank should have known that some wrong was being done to Scadlynn, then (subject of course to a debate about the scope of the bank’s duty) Scadlynn would have a claim which ought to go to trial.”

Mustill LJ’s analysis very much focussed on the pleaded claim that Chappell and Palmer lacked Scadlynn’s authority to effect the transfers, and he did not find it necessary to consider the remaining causes of action, given that they raised the same issues of evidence and discovery as the lack of authority claim. However, he did say that he was not intending to cast doubt on the views expressed by Nicholls LJ on the other causes of action.

Nicholls LJ at p.73 stated that on the facts as pleaded, Scadlynn “was an intended victim, in that Scadlynn was being used as a vehicle for committing a fraud on its creditors and a fraud on those beneficially interested in property held by Scadlynn”, and that in such circumstances, Chappell and Palmer’s fraud was not to be attributed to Scadlynn. Focussing on the claims of knowing assistance in breach of fiduciary duty, and the allegation of knowledge (now dishonesty) on the part of the bank if they were to succeed, he continued:

“I do not regard the proposition that Chappell and Palmer owed fiduciary duties to Scadlynn as an absurdity. Far from it. The existence of such fiduciary duties is one of the means by which the law seeks to protect a company’s creditors and those who have interests in property held by a company … I recognize that, given the background of the robbery, to speak of fiduciary duties owed to Scadlynn by Chappell and Palmer has a very empty and hollow ring, in the sense that there was never any question of Chappell and Palmer implementing any of those duties. The bullion was acquired by Scadlynn in circumstances and for a purpose which was wholly inconsistent with Scadlynn ever paying the proceeds to those lawfully entitled to receive them and with Chappell and Palmer ever doing anything other than appropriate the proceeds for their own purposes. In my view, however, if and to the extent that the bullion was held by Scadlynn on trust for the plaintiff, the appropriation by Chappell and Palmer for their own purposes was in law a breach of their fiduciary duties to Scadlynn.”

While acknowledging that the use of “these fiduciary duties as a foundation, in part, for a claim against the bank seems at first sight unattractive and artificial”, the outcome reflected the fact that a company had an existence separate from its shareholders, particularly where it had creditors. Nicholls LJ’s focus on the “knowing assistance” claims is particularly apparent in the following passage:

“The allegations sought to be raised against the bank include an allegation that the bank knew that Chappell and Palmer were defrauding Scadlynn, meaning thereby all persons who had genuine interests in property held by Scadlynn or who had claims against Scadlynn. I say ‘the bank knew’ because the allegation is that the bank wilfully shut its eyes to the fact that Chappell and Palmer were defrauding Scadlynn … If true, I can see nothing remarkable in the bank being under a liability to compensate those who had lawful interests in property held by Scadlynn, or who had lawful claims against Scadlynn, but whose interests and claims were defeated by Chappell and Palmer’s misuse of the money held by Scadlynn”.

Sir Roualeyn Cumming-Bruce agreed with both judgments (at p.74), stating that “although there were differences of emphasis in the judgments, I detect no inconsistency between them.”

Finally, while Bilta and Brink’s Mat stress the separate identity of the corporate entities and the fraudsters who controlled them at the time of the fraud, there are contexts in which the victims of such a fraud may be able to “pierce the corporate veil” (see the discussion of the “evasion” principle in Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415).

As noted at [45-46] above, it has been held by the Privy Council that a bank does not owe a duty to a third party when acting on payment instructions given or apparently given by the account holder, even if the bank knows that the third party has a beneficial interest in the credit represented by the account balance with the bank, and the circumstances are such that a reasonable banker would have had grounds for considering that there was a real possibility that the beneficial owners of the balance were being defrauded.

In the present case, however, if Moorwand was put on enquiry that the transfer instructions were given without RND’s authority, then a third party would be able to achieve a similar (and in some respects, at least, better) outcome than it would have obtained had it benefited from a duty of care in tort, through the mechanism of a derivative action. While a derivative action was the mechanism by which the claim was asserted in this case, on the basis of the unchallenged finding that RND held the credit which represented the Hamblins’ investment as a constructive trustee, a similar claim could have been brought if a receiver was appointed over the company’s claim against its bank or payment services provider by way of equitable execution; or if the company was put into administration or liquidation.

While a successful tort claim would have left the Hamblins competing with other creditors of RND in the event of an insufficiency of assets, the effect of the constructive trust finding in this case would appear to be that they would have enjoyed the full benefit of the restoration of the bank account in respect of these transfers. In addition, a tort claim would have left the Hamblins exposed to a reduction of recovery under the Law Reform (Contributory Negligence) Act 1945, the trial judge making a number of findings which would inevitably have featured in an argument of that kind (see the FI Judgment, [36-37], [49], [56], [84-85] and [88]). However, any fault on the part of the Hamblins is not relevant to a claim by RND, nor is any fault by RND relevant to the extent that it pursues a claim in debt.

Finally, the claim did not require the Hamblins to prove that Moorwand knew that it had received trust assets, or assets being applied in breach of fiduciary duty.

The trial judge was very much alive to the potential significance of this aspect of the claim, observing at [9]:

“The short question in this case is whether the novel approach of Mr and Mrs Hamblin in stepping into the shoes of the fraudster RND by means of a derivative action allows them [to] succeed where others have failed to get around this principled binding legal barrier recently set by the Supreme Court and thus sue ML for alleged failings of such duty owed to the fraudster RND in the absence of expert support of the single joint expert.”

The trial judge commented again on the novelty of the claim at [46].

It has not been necessary, given the manner in which this case was argued and the basis on which it was determined by the trial judge and the Judge, to consider a number of issues potentially raised by a case of this kind, including:

Those issues, and no doubt others, will require full argument and careful consideration in a case in which they arise. However, they do not arise here.

In Quincecare, the transfer instructions which it was said that the bank should not have followed were given over the telephone by Mr Stiller to Mr Tomlinson of the bank’s Hull branch, followed by a written order, with Mr Tomlinson then giving instructions to two bank employees (Mrs Steer and Mr Mumby) to effect the transfers. In Philipp, the transfer instructions were given by Mrs Philipp in person at two branches of Barclays (the Thornbury and Broadmead branches) and confirmed by Mrs Philipp by later telephone calls from the bank. In Singularis the payment requests were approved by bank personnel (Mr Hudson and Mr Metcalfe).

In the present case, the precise mechanics by which the transfer instructions given by X were received and actioned remain obscure. On appeal, the argument was advanced that the payments were made “by computer and automatically”. That was challenged on the basis that there was no evidence to support the contention. In circumstances in which the trial judge was never asked to make any findings on whether payment requests were processed without human intervention and no argument was made by Moorwand that a Quincecare duty either did not apply (or applied only in some modified form) were that to be the case, nor were the Hamblins required to raise any counter-arguments as to what, if any, monitoring duty there might be in such circumstances (whether undertaken algorithmically or otherwise), these questions cannot fairly be addressed on this appeal, and I say nothing more about them.

Finally, as an electronic money institution, Moorwand was subject to the 2009 Regulations (since replaced by the Payment Services Regulations 2017/752). So far as the 2009 Regulations are concerned:

The Judge held that the transfers from RND’s account were authorised for the purposes of Regulation 55, but that the existence of authority under the 2009 Regulations were “nothing to do with the Quincecare duty articulated in Philipps” ([30]) and that “a punctilious observance of the mechanics of a mandate does not absolve a payment service provider from observing the Quincecare duty where it arises, as it does here” ([31]). We received no argument on the significance, if any, of authority being established under the 2009 Regulations for the purposes of the Quincecare duty, and this issue does not arise on this appeal.

It is convenient to take Ground 3 first, which raises an argument as to whether the cause of action on which the Hamblins succeeded before the Judge was open on the pleadings. Moorwand suggests that the only basis on which the Hamblins contended that the transfers were not authorised was because the instructions were not given by the real Mr Stanfield.

While the Hamblins did plead that only the real Mr Stanfield was authorised to give instructions in relation to the account (Particulars of Claim, [18]), a more general case was advanced that Moorwand was put on enquiry that the payments were not authorised by RND, by reference to the information received by Moorwand when the account was opened ([20]) and the nature of the payments made from the account ([21]). Paragraph 32 advanced the “real Mr Stanfield” point, but paragraph 34 advanced an alternative case to the effect that “it would have been obvious to any reasonable service provider” who scrutinised the payments “that the Account was not being used for the purpose of any legitimate business activity by [RND], but rather was being used in a manner not properly authorized by [RND] and/or for the purpose of money laundering”.

Paragraph 32 of the Particulars of Claim clearly advanced a case that the payments had been made by Moorwand in a manner which was not authorised by RND for reasons other than the fact that the instructions were not given by the real Mr Stanfield. It is apparent from the skeleton arguments and written closings before the trial judge that the case was fought on that basis (as Mr Salter KC was constrained to accept), and it is clear from the FI Judgment that the case was decided on that basis.

Accordingly, I am satisfied that this argument is without merit.

Ground 1 challenges the Judge’s conclusion as to the first of the two errors of law which he found the trial judge had made and which were said by the Judge to have rendered the trial judge’s evidential assessment flawed.

This ground places particular focus on [20(iv)(b)] of the Judgment, where the Judge stated:

“[The trial judge’s] elision between agent and principal also meant that the Judge failed to take account of the fact that the person acting as soi disant agent of RND was no such thing. The person authorised to act for RND was a Mr Stanfield, a real person who was himself the victim of identity fraud: see paragraphs 15(i) to (iii) above. There was a good deal of material to suggest that the person in fact purporting to act for RND was not Mr Stanfield, hence my use of quotation marks around "Stanfield". The Judge failed to attach weight to these factors by treating the agent acting or purporting to act for RND as indivisible from RND. Thus, the Judge treated all acts by the (unknown) fraudster masquerading as Mr Stanfield as those of RND. Again, for the reasons I have given, this was an error of law.”

Moorwand argues that the Judge erred in law in holding that only the real Mr Stanfield was authorised to act for RND.

If the Judge was intending to hold that the real Mr Stanfield was the person (and implicitly the only person) authorised to act for RND, I am satisfied that that would have been wrong. The real Mr Stanfield’s name appeared on RND’s corporate documents and the documents regulating RND’s relationship with Moorwand without his knowledge and consent. As Mr Salter KC argued, in submissions which were not challenged, a person cannot be made a member or director of a company (and thus subject to the legal duties inherent in those capacities) without their consent. That intuitively obviously correct statement is supported by a number of provisions of the Companies Act 2006:

It is not necessary to determine the further issue of whether the actual shareholder and director of RND is X, even if using the real Mr Stanfield’s identity (a question which raises the “person you are dealing with” argument addressed in a very different legal context in Shogun Finance Ltd v Hudson [2003] UKHL 62, [2004] 1 AC 919). That is because the trial judge’s decision did not rest on X’s actual authority to give the payment instructions in issue, but on whether Moorwand was put on notice that those instructions were given in fraud of RND so as to prevent Moorwand relying on the apparent authority of the person giving the instructions. There was no dispute that, absent Moorwand being put on enquiry, the person purporting to give the instructions on RND’s behalf had apparent authority to do so.

That reveals, however, what I respectfully regard as a further error in the Judge’s analysis. His criticism of the trial judge for equating the knowledge of X and RND, and of disregarding X’s fraud on RND in effecting the payments contrary to the Re Hampshire Land line of authorities, would have force if the trial judge’s decision had been premised on such an attribution (either on the basis that X was acting with RND’s actual authority or by way of a defence of illegality). However, the trial judge did not decide the case on either of those bases, but on the basis that Moorwand was not put on enquiry that X was acting in fraud of RND. That formulation assumes that X did not have actual authority to give the transfer instructions and that if Moorwand had been on enquiry that X was defrauding RND, then the instructions were given without RND’s authority.

The Judge refers to three paragraphs in the FI Judgment – [69], [109] and [187] – which are said to evidence the trial judge’s error:

For this reason, I accept Moorwand’s challenge to the first ground on which the Judge concluded that the trial judge had erred in law in the course of reaching his conclusion that Moorwand was not put on enquiry that the transfer instructions were given without RND’s authority.

The second reason given by the Judge for concluding that the trial judge had erred in his evaluative assessment was that the trial judge had wrongly concluded that the underlying facts which gave rise to alleged breaches of money laundering and other regulations applicable at the point in time when RND opened its accounts were irrelevant to the issue of whether Moorwand was on notice that the instructions to effect the payment transfers were made without RND’s authority because they involved the misappropriation of RND’s funds.

I should immediately accept that if the trial judge had reasoned on this basis, this would have involved an error of law. As the Judge rightly said at [20(vi]):

“Whilst it is entirely right to say that regulatory failures (for instance: failure to monitor for money laundering) are not relevant to the Quincecare duty, it is an error to assert … that where facts are relevant to one duty they are, ipso facto, irrelevant to another.”

I will refer to the error in reasoning the Judge identified as “the ipso facto error”.

The Hamblins’ claim before the trial judge relied upon a series of regulatory breaches, including breaches of the Money Laundering Regulations 2007 and the Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. The Hamblins argued (in effect) that the knowledge which Moorwand was to be treated as having for the purpose of determining if it was put on enquiry that X did not have authority to give the transfer instructions included information which it would have acquired if it had complied with those money laundering obligations.

The Judge identified the paragraphs in which the trial judge had made the ipso facto error as [66], [97], [130], [161], [164], [167], [187], [191] and [192] of the FI Judgment. As to these:

I accept that there are aspects of the trial judge’s phrasing in the paragraphs to which the Judge referred which offer some support for the Judge’s interpretation. However, it is important when interpreting the FI Judgment to have regard to the fact that the trial judge relied upon, and twice confirmed his agreement with, his own interpretation of the only expert evidence before him. There was no suggestion before the Judge or this court that Mr Burns had made the ipso facto error. In these circumstances, I have come to the conclusion that, on a fair interpretation, the trial judge’s decision, like Mr Burns’ opinion, was that “despite” (or in Mr Burns’ words as quoted at [128], “notwithstanding”) the matters giving rise to the regulatory failings, Moorwand was not put on enquiry. Accordingly, I respectfully disagree with the Judge’s conclusion that the trial judge’s evaluative assessment is flawed because the trial judge proceeded on the basis of the ipso facto error.

I accept that the trial judge’s conclusion might well be regarded as a favourable assessment of the evidence so far as Moorwand is concerned. Had the issue been one for the Judge to determine de novo, I would have seen no basis for interfering with his conclusion to the contrary effect. However, I accept Mr Salter KC’s submission that the trial judge’s decision was open to him on the evidence before him. Having concluded that the trial judge did not make the two errors of principle the Judge identified, it follows that the high threshold for interfering with the trial judge’s evaluative assessment of the evidence he heard on what is essentially an issue of fact is not met.

Mr Hill-Smith criticised the trial judge’s interpretation of Mr Burns’ report, suggesting that, read properly, it supported the Hamblins’ case. As I have stated, the report offered something for both parties, and there was some tension in its concluding paragraph, and between the terms in which the issue concerning a potential Suspicious Activity Report was addressed in the concluding paragraph of the report, and earlier in the text. Those issues must have been obvious to both parties when they took the decision not to call Mr Burns to give evidence at the trial, and not to ask any written questions about the conclusion. In those circumstances, the trial judge was left to reach his own interpretation of the report as it stood. In this respect, the position was no different to where a witness in the course of oral evidence gives answers which might be said to point in different directions, and the judge must reach their own view as to the overall effect of the evidence. The interpretation adopted by the trial judge of Mr Burns’ report was reasonably open to him.

Mr Hill-Smith also criticised the inferences the trial judge drew when concluding that the transfers from RND’s account to effect Bitcoin purchases would not have put Moorwand on enquiry. However, it was open to the trial judge to conclude that, in circumstances in which one of the accounts RND had opened was a Bitcoin account, the use of funds received into RND’s GBP account for the purposes of acquiring Bitcoin would not have put Moorwand on enquiry that funds were being misappropriated from RND, because the opening of the Bitcoin account suggested that RND had contemplated some form of dealing in Bitcoin from the outset. Mr Hill-Smith’s criticisms of the trial judge’s inferences as to the reasons for Moorwand’s rapid growth do not engage the key issue of whether Moorwand was put on enquiry that the transfers were not made for RND’s purposes.

For these reasons, I have come to the conclusion that the threshold for revisiting the trial judge’s evaluative conclusion that Moorwand was not put on enquiry that the transfer instructions were given without RND’s authority was not met in this case. As a result, I would allow the appeal.

Grounds 7 and 8 concern the Judge’s decision to award interest under s.35A of the Senior Courts Act 1981 on the amounts transferred from RND’s accounts with Moorwand from the date of the transfers.

Section 35A provides:

“(1)

Subject to rules of court, in proceedings (whenever instituted) before the High Court for the recovery of a debt or damages there may be included in any sum for which judgment is given simple interest, at such rate as the court thinks fit or as rules of court may provide, on all or any part of the debt or damages in respect of which judgment is given, or payment is made before judgment, for all or any part of the period between the date when the cause of action arose and—

(b)

in the case of the sum for which judgment is given, the date of the judgment.”

Section 35A requires a claimant to have a cause of action before statutory interest can run. It is well-established that a claim for declaratory relief does not provide a basis for a s.35A interest award (Abraaj Investment Management Ltd v KES Power Ltd [2026] EWHC 441 (Comm), [65] and Odyssey Aviation Limited v GFG 737 Limited [2019] EWHC 1980 (Comm), [17] and [22]).

A claim against a bank which has wrongly debited a customer’s account is treated as a claim in debt rather than for declaratory relief: Sagicor Bank Jamaica Ltd v Seaton [2022] UKPC 48, [2023] 1 WLR 1759, [19]. Where the account balance carries interest as a matter of contract, that interest will be due on the amounts wrongly debited ([20-21]). Statutory interest, however, requires a cause of action to have accrued (i.e. not simply the existence of a debt, but one which has become payable). Generally, a credit balance in a bank account (and there was no suggestion that a credit balance with an Electronic Money Institution should be treated differently in this respect) only becomes payable after a demand has been made (Joachimson v Swiss Bank Corp [1921] 3 KB 110, 127). There is support for the view that a cause of action in relation to a wrongful debiting similarly only arises after a demand has been made. A passage in the fifteenth edition of Paget’s Law of Banking to this effect is cited with approval in Sagicor, [19] (see now the 16^th edition [22.69]). That is also the effect of National Bank of Commerce v National Westminster Bank plc [1990] 2 Lloyd’s Rep 514, 517, which holds that the cause of action in such a case accrues on the demand for payment, not on the date of the wrongful transfers.

The argument that no demand was made was taken before the Judge who concluded that what would have happened had the wrongful transfers not been made is that the full account balance would have been paid to the Hamblins. The Judge held that this made “the point about the absence of a demand … altogether irrelevant” (Interest Judgment, [8]). The Judge does not appear to have been referred to the authorities which establish that RND’s cause of action did not arise before a demand was made. On that basis, and subject to an additional point raised by Mr Hill-Smith with which I deal below, in my view the requirement in s.35A for a cause of action to have arisen before an award of statutory interest can be made was not satisfied in this case until a demand for payment was made. The fact that the account holder would have withdrawn the funds and accounted for them to a beneficiary for whom the credit balance was held on trust (the Judge’s premise) cannot, in my view, affect the fact that the terms of s.35A were not satisfied. As the Judge rightly recorded, no claim for lost interest as damages was open (Interest Judgment, [3]).

However, at the hearing before us Mr Hill-Smith came up with an alternative argument – that the relationship of banker and customer came to an end on RND’s dissolution on 31 July 2018, with the result that no demand was necessary to render the account balance payable. It is clear that where a bank account has been validly closed, there is no need for a further demand to render a credit balance payable, and that is also the position when the relationship of banker and customer is terminated (Paget’s Law of Banking 16^th ed., [22.68]). However, that argument raised issues as to whether any amount could be said to be payable to RND from the point when it was struck off the register, the effect of its restoration to the register, and whether it could be said to have suffered loss of use of the amount claimed in the intervening period. These issues were not the subject of submissions to us, and in circumstances in which the interest decision is academic, I say no more about them.