Royal Courts of Justice
Strand
London WC2A 2LL
BEFORE MR JUSTICE LAWRENCE COLLINS
Between :
COMMERZBANK AKTIENGESELLSCHAFT | Applicant |
- and – | |
IMB MORGAN PLC AND OTHERS | Interpleader Claimants |
JUDGMENT
Mr Justice Lawrence Collins:
I Introduction: the IBM accounts
Commerzbank AG (“Commerzbank”) is a major German bank, with a London branch at Commerzbank House, 23 Austin Friars, London EC2P 2JD (“Commerzbank, London”). This judgment is given following an interpleader application in respect of competing claims in relation to two accounts at the London branch of Commerzbank in the name of IMB Morgan Plc (“IMB Morgan”), a stockbroker based in Lagos, Nigeria, which was formerly known as IMB Securities Plc. IMB Morgan is a subsidiary of IMB International Bank Plc (“IMB”), formerly known as International Merchant Bank Plc, which is also based in Lagos.
The two accounts consist of a US Dollar account (the “Dollar Account”) and a Sterling account (the “Sterling Account”) both under account number 160210002200 (together the “Accounts”), which were opened on December 19, 2000. The balances on these accounts at the time of the commencement of these proceedings were $437,973.61 and £132,579.05 respectively.
The Dollar and Sterling Accounts were correspondent bank accounts, i.e. accounts established to receive deposits from, make payments on behalf of, or handle other financial transactions related to a foreign institution (generally a foreign bank).
A key feature of the operation of a correspondent account is that all the receipts into the account are mingled. It is not possible to identify any part of the funds as relating to a particular client of the foreign institution. The funds are held on behalf of the foreign institution with whom the correspondent relationship exists, not its individual clients. Accordingly, although funds received into the correspondent account may have related to a particular customer of the foreign institution, Commerzbank may never subsequently have received instructions from the foreign institution to disburse funds on behalf of the same customer. So also Commerzbank may receive instructions from the foreign institution to make a payment from the correspondent account on behalf of a customer in respect of whom funds have never previously been received into the account. In most cases the customers of the foreign institution who are to benefit from the receipt of funds into the account are different from the customers on whose behalf payments are made from the account.
The account relationship was between Commerzbank and IMB Morgan. Commerzbank was not obliged to and did not accept instructions from IMB Morgan’s customers as to how the funds held in the Accounts should be handled or paid out. Those funds were held for the credit of IMB Morgan, not its customers.
Another feature of the correspondent bank account is that Commerzbank would generally have received funds from third parties to be credited to the Accounts without knowing the identity of the IMB Morgan customer to whom the funds would eventually be credited by IMB Morgan. The third parties might or might not include details of which particular IMB Morgan customer was to be credited with the funds. Commerzbank would generally only be provided with a reference or customer name which it would pass on to IMB Morgan, who would have presumably used it to identify their customer and credit that customer's account with IMB Morgan accordingly. However Commerzbank would generally have no knowledge of or access to this IMB Morgan account or the account holder other than the reference or name provided when the funds were received. This reference might be limited to the customer's account number at IMB Morgan.
Funds were generally transferred into the Accounts via a SWIFT payment order. SWIFT is a secure form of e-mail which banks used to communicate between each other. It allows transfers of money to be made and provides access to different countries’ clearing systems.
A SWIFT transfer would typically work as follows. Where a UK company instructed its bank (Bank A) to make a payment to a German company in Euros, Bank A would first complete a foreign exchange transaction to purchase the necessary amount of Euros and then debit its customer's account accordingly. Bank A would then send an instruction via SWIFT to its correspondent bank in Germany (Bank B), asking Bank B to debit Bank A's account at Bank B and make a payment through the German clearing system to the German company's bank, Bank C. Bank C would also receive a SWIFT payment order, either from Bank A or from its German correspondent, Bank B, setting out the details of the payment, including the identity of the beneficiary. Bank C would then credit its customer's account accordingly.
II Freezing of the accounts
The Accounts were frozen from May 9, 2002 and the account relationship between Commerzbank and IMB Morgan was terminated on May 16, 2002 as a result of a number of incidents and a subsequent police investigation which concluded that there was strong evidence that the Accounts were being used for money-laundering.
The evidence establishes that a significant number of payments into the Accounts were the result of what is known as an “advance fee fraud” or “419 fraud” (after section 419 of the Nigerian Criminal Code). These terms are used to refer to a wide variety of frauds which are commonly practised by fraudsters based in West Africa (and increasingly in other parts of the world), in which victims are asked to part with sums of money (often described as “fees” in an attempt to give them the air of legitimacy) in expectation of receiving much larger sums in return.
From early 2001 the attention of Commerzbank was drawn to a number of cases in which the account had been used for questionable payments. They culminated in a series of matters relating to payments expressed to be in favour of “Armani.” Two of the receipts, both received on April 5, 2002, originated from a Mr Claude Frappier of Quebec. The sum of $45,000 was expressed to be in favour of Armani, while a further $40,000 was transferred in favour of an entity described as Gazzaz. Commerzbank was subsequently informed by the City of London Police that Mr Frappier had been the victim of a fraud and that these receipts were the proceeds of that fraud.
Another of the payments in favour of Armani, received on April 23, 2002 and totalling $15,500, originated from Mr S Allan Hurvitz of Los Angeles, California, USA. On May 3, 2002, Mr Hurvitz telephoned Commerzbank's payments section, asking whether these funds had been received. He was advised that Commerzbank could not answer this question as he was not the customer and that the only party entitled to this information was IMB. Mr Hurvitz explained that the funds were intended to be sent to a Mr Solanke. Mr Hurvitz stated that Mr Solanke used the name “Armani” and was an attorney in Lagos, Nigeria. Mr Hurvitz explained that when Mr Solanke visited “the bank” (presumably IMB), he had been told that the funds were not there. Mr Hurvitz was advised that Mr Solanke would have to contact IMB who could then contact Commerzbank. He indicated that Mr Solanke worked for IMB and could therefore contact Commerzbank directly.
On May 2, 2002, Commerzbank London received a telephone call and two faxes from a Berlin branch of Commerzbank indicating that one of its customers, Hans Koenig, had been kidnapped in Nigeria and instructions issued that $350,000 be paid into the Accounts in favour of Armani in order to secure his release. Commerzbank immediately informed the NCIS, and sought instructions on how to proceed, particularly if the funds were received into the Accounts.
On the same day, Commerzbank, London, received a telephone call from the Deputy General Manager of IMB, George Omunubi, inquiring whether Commerzbank had received a credit of $350,000. Mr Omunubi stated that IMB had been expecting the funds since April 23, 2002. Commerzbank advised Mr Omunibi that no funds had been received. On May 8, 2002 Commerzbank provided the NCIS with a Disclosure Report providing this further information and setting out the recent transactions on the Accounts in favour of Armani.
On May 9, 2002, the Financial Investigation Unit of the City of London Police (“FIU”) wrote to Commerzbank, London, that the connection between the kidnapping, the Accounts and Armani had given the FIU “reasonable grounds to believe that at least five of the transactions identified … may relate to advance fee fraud (419 FRAUD) involving ARMANI LTD”. Commerzbank was advised that further transactions in relation to these monies connected to “Armani” could constitute the offence of money laundering under Section 93 of the Criminal Justice Act 1988 (as amended). The letter went on to state that:
“…the City of London Police hereby confirm that we are withdrawing consent from Commerzbank, until further notice, to deal with the monies in relation to the six transactions connected to ARMANI LTD. In other words, you are advised that any further transactions conducted by Commerzbank in relation to the monies forming part of the six transactions, and/or any monies appearing to be held or received by or on behalf of ARMANI LTD, may constitute an offence of money laundering, the offences of which are set out in Section 93 Criminal Justice Act 1988 (as amended).”
In a letter to Commerzbank dated May 14, 2002 the FIU stated, inter alia, that:
“… we have reasonable grounds for believing that IMB SECURITIES PLC is actively involved in operating accounts for the purpose of laundering criminal proceeds… …. consent is hereby withheld from COMMERZBANK in relation to any future instructions received from IMB SECURITIES PLC, relating to any payment instructions received from IMB SECURITIES PLC until further notice.”
As a result of the statement of the FIU, on May 16, 2002, Commerzbank wrote to IMB Morgan formally advising it that the Accounts had been frozen and the account relationship terminated. The letter noted that there was reasonable cause to believe that payment in favour of certain of its customers might be connected with fraudulent activity and that Commerzbank had a duty to protect the funds whilst further enquiries were conducted. On that date Commerzbank refused to effect any payment instructions from IMB Morgan regarding to the Accounts and returned any new receipts into the Accounts to the remitting banks.
On May 22, 2002, Commerzbank wrote to its regulator, the Financial Services Authority, advising that it had terminated its correspondent account relationship with both IMB and IMB Morgan, and setting out the reasons for this decision.
III Potential claims
Commerzbank was therefore left in the position of having to determine what to do with the funds held in the Accounts and how to deal with the potentially competing claims made to the funds in the Accounts by various parties.
In conjunction with its solicitors, Allen & Overy, Commerzbank carried out an investigation to try and establish what claims could be made to the funds in the Accounts. The investigation consisted of a review of the files relating to the Accounts kept by Commerzbank's Investigations Section to locate queries and claims for refunds raised in respect of the Accounts over the relevant period; and the correspondence with IMB Morgan to identify claims made by customers of IMB Morgan and their counterparties. Commerzbank also reviewed the statements for the Accounts to identify payments made in favour of parties who had previously been identified as being potentially connected with fraudulent activity.
The work done by Commerzbank and Allen & Overy was extensive. The results of the investigation were summarised in a schedule of claims which was produced to the Court, together with supporting documentation.
The Investigations Section team’s file revealed that, in early May 2002, at the same time that Commerzbank was liaising with the FIU over the Armani/Gazzaz incidents, an unusually high number of remitters were claiming that the ultimate beneficiaries who had accounts at IMB had not received the funds.
The FIU provided Commerzbank with a form of words to be used in dealing with enquiries from remitters and other third parties. In order to ascertain the bona fides of the remitters claiming a return of their funds, Commerzbank in each case issued to the remitter's bank or its correspondent a statement using the agreed form of words together with a series of questions. In summary, the statement advised the remitter that Commerzbank was bound by strict UK anti-money laundering legislation and regulations and that Commerzbank had to be satisfied that the funds passing through its accounts were legitimately sourced and were not derived from the proceeds of crime. The questions raised included: the purpose of the original remittance; the identity of the ultimate beneficiary and contact details; the reason for the request of return of funds. Claimants were also asked to provide documentation.
A minority of the claimants responded to the questions. The details of all remitters who had requested a return of funds from Commerzbank and were maintaining this claim were included in the schedule of the claims presented to the Court on the interpleader application.
A second source of information concerning claims was the correspondence with IMB following the freezing of the Accounts. IMB took the position with Commerzbank that funds received in the name of legitimate customers derived from legitimate business activities should not be frozen and requested that certain sums, allegedly derived from such funds, be remitted to third parties in support of further allegedly legitimate business transactions or returned to the remitters. In some cases, IMB provided documentation (e.g. invoices) to support these requests. Although Commerzbank refused to act on these requests from IMB, the instructions to pay funds to third parties were included in the schedule of claims presented to the Court.
A further source of information was the statements for the Accounts. They were reviewed to identify payments into the Accounts in favour of parties who had been identified as being possibly connected with fraudulent activity, either by the police or by Commerzbank itself as a result of earlier incidents. The results of this review identified a number of payments made to these entities which had not been identified elsewhere as no refund request had been made and no correspondence received in respect of such payments.
Other than IMB Morgan itself, the parties with potential claims to part of the funds were:
Victims of a possible fraud, who attempted to make payments via the Accounts to an IMB Morgan customer which has been identified as possibly being connected with fraudulent activity.
Third parties, who attempted to make payments via the Accounts to an IMB Morgan customer in respect of whom no complaint of fraud had been made. These third parties also requested refunds, generally because the intended beneficiary has claimed not to have received the funds.
Apparently innocent IMB Morgan customers in whose favour funds were being transferred as part of an ostensibly legitimate business transaction.
IV Interpleader application
On February 19, 2003, Commerzbank filed an application seeking relief by way of interpleader pursuant to RSC Order 17, rule 3 (in Schedule 1 of the Civil Procedure Rules). Commerzbank proposed to serve the interpleader application on any party who had made a claim to funds held in the Accounts and also on parties who at that time had not made any form of claim but who had made payments into the Accounts in favour of beneficiaries who had been identified as possibly being connected with fraudulent activity. Most of the potential claimants were outside the jurisdiction, and not domiciled in other parts of the United Kingdom or in countries to which the Judgments Regulation or the Lugano Convention applied. Consequently it was necessary to obtain permission to serve most of them outside the jurisdiction.
On April 1, 2003, Chief Master Winegarten made an order by which he:
gave permission to Commerzbank under CPR Rule 6.20 to serve a Part 8 claim form out of the jurisdiction in respect of 97 potential interpleader claimants which had been identified by Commerzbank at this stage and which were set out in a schedule to the Order;
gave permission to Commerzbank under CPR Rule 6.8 to effect such service on certain of the potential interpleader claimants by an alternative method, namely by service on the corresponding remitting bank or notary listed in the schedule to the Order;
gave permission to Commerzbank under CPR Rule 6.8 to effect such service on certain of the potential interpleader claimants by an alternative method, namely service by post, and facsimile where possible (except where such service would be against the law of the country in question);
directed the time for acknowledgement of service;
directed that (with the exception of IMB Morgan) each interpleader claimant need only be served with the claim form, order and a covering letter (i.e. not the evidence in support of the application for interpleader relief);
directed that all hearings be in private;
ordered that the interpleader claimants be permitted to put their claim by way of a letter to the Court, and need not appear on the hearing; and
confirmed that, by direction of the Vice-Chancellor, the case be assigned to me, to hear the application for interpleader relief on December 8, 2003.
Subsequently, Commerzbank sought and obtained two orders (June 12, 2003 and October 13, 2003) for extensions of time for service of the claim form, because of the amount of time required to research the applicable method of service in each jurisdiction, to obtain translations of the documents that were to be served through official channels, and then to serve through official channels.
At the hearing on December 8, 2003, I granted a further extension of time for service of the Part 8 Claim Form on ten potential interpleader claimants who had not then been served. I also ordered that unless certain interpleader claimants, who had been served with the Part 8 Claim Form but had not yet responded, did so respond on or before January 30, 2004, they would be barred under of RSC Order 17, r.5(3) (CPR, Schedule 1) from prosecuting their claims against Commerzbank and/or to the funds.
I also ordered, inter alia, that:
Commerzbank be released from the proceedings, subject to it taking all reasonable steps to effect service of the Part 8 Claim Form on interpleader claimants who had not been served;
the claims made by the interpleader claimants be adjourned for hearing on June 8, 2004 at which hearing the interpleader claimants need not appear in person, but might do so if they wished; and
the funds held in the Accounts be paid into Court following the deduction of Commerzbank’s costs which I summarily assessed in the sum of £140,000 to be apportioned between and deducted from the Accounts as follows: £47,060.27 from the Sterling Account and $162,323.98 (being £92,939.73 at an exchange rate of 0.57256 pounds sterling per dollar as at December 16, 2003) from the Dollar Account.
I directed that Allen & Overy’s costs be paid pro rata from the Accounts because it was not practicable or reasonable to apportion them in any other way. Although more work will have been done on the service aspects of the matter in relation to the Dollar Account, by far the greater part of the work was plainly been done in relation to the investigation and identification of the claimants, and I considered it a proper exercise of the discretion to apportion the costs pro rata.
Since Commerzbank’s application for interpleader relief was issued, Commerzbank identified a further four possible interpleader claimants, namely: Andrew Laws, Abdul Bondrey, Anton Franc Haberthur and Allianz Lebensversicherungs-AG (“Allianz”). In order to avoid the costs involved in an application to add these potential claimants under CPR Rule 19.4(4), Commerzbank’s solicitors, Allen & Overy, wrote to each party suggesting that, if they wished to make a claim, they write to the Court themselves asking to be added as an interpleader claimant. Mr Laws, Captain Bondrey and Mr Haberthur subsequently made claims, but Allianz indicated that it was not pursuing a claim. Subsequently, Zumax Nigeria Ltd applied for, and was granted, permission to make a claim.
None of the potential claimants attended the hearing on June 8, 2004. No claim was made by IMB Morgan. 51 of the 108 parties identified by Commerzbank as having a potential claim to the funds responded. 48 potential claimants served with the Part 8 claim form did not respond to the Court. The remaining 9 potential claimants were not served. Attempts to serve 3 of them have been abandoned: Bellevue Corporation is in liquidation, its address is a condemned building, and its agent for service cannot be located; Gecor Corporation’s address was never apparently used, and its agent for service cannot be located; service on Mr Zaheer Ahmed Siddiqui was effected on what was thought to be his bank, National Bank of Pakistan, but the bank has no record of him as a customer. In the case of the 6 other potential claimants there has been difficulty in effecting service by the only possible means, through diplomatic channels: E-Link Finance Ltd (Taiwan); Mr Chong Moi Fah and Perunding Aziz Sehu Sdn Berhad (Malaysia); Investsberbank (Russia); and Needle Sharp Ltd and Dr Teruo Gotada (Japan). In each of those 6 cases, a copy of the order of December 8, 2003 order was sent by post prior to June 8, 2004 to the potential claimant or its bank. No response was received in any such case. A draft judgment was sent to each of them by post, and on October 20, 2004 I ordered that each of them be debarred from making any claim unless a detailed claim was received by the Court by November 15, 2004. No response was received from any of them.
V Claims
In order to establish a claim to a share in the fund, claimants must show that they have a proprietary right, i.e. a right in property and not simply a debt due from IMB. There are three relevant bases for such a claim, and most of the claimants have a claim (if any) under the first basis, which is that a person who has been defrauded may trace property into the hands of the recipient. “… [W]hen property is obtained by fraud equity imposes a constructive trust on the fraudulent recipient: the property is recoverable and traceable in equity”: Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 716. The victims of fraud can follow their money in equity through bank accounts where it has been mixed with other money because equity treats the money in such accounts as charged with the repayment of their money: El Ajou v Dollar Land Holdings plc (No. 1) [1993] 3 All ER 717 (revd on other grounds [1994] 1 All ER 685). See also Bristol and West Building Society v Mothew [1998] Ch 1; Bankers Trust Co. v Shapira [1980] 1 WLR 1274, 1282. In Bank of Credit and Commerce International (Overseas) Ltd (in liquidation) and another v Akindele [2001] Ch 437 it was held that the recipient's state of knowledge should be such as to make it unconscionable for him to retain the benefit of the receipt. Consequently, even if IMB Morgan was not a party to the frauds, the defrauded claimants have a tracing remedy. The second basis for a claim is that a payment was made by mistake. Whether a person who has made a payment by mistake has a proprietary claim is by no means clear. But I am satisfied that in a case of this kind, where (as in the case of the payment by Citizens Union Bank) double payment was made at the request of the recipient (IMB Morgan), where there is an identifiable fund, and where the recipient has notice of the claim, it would be unconscionable for IMB Morgan (and in effect the other claimants to the fund) to retain the benefit of that payment: Chase Manhattan Bank v Israel-British Bank [1981] Ch. 10, as explained in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 714-715; Virgo, Principles of the Law of Restitution (1999), pp 630-632; and see also Papamichael v National Westminster Bank plc [2003] EWHC 164 (Comm), [2003] 1 Lloyd’s Rep 341 (Judge Chambers QC). Third, where money is paid for a purpose which is not fulfilled, the recipient holds the money on trust for the payer: Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd [1985] 1 All ER 155. The third head applies to the claims by Mr Vine/Hawick Plant Auctions, and Mr Baker.
IMB Morgan has made no claims to the funds, and (as I have said) none of the claimants appeared on the hearing on June 8, 2004. Consequently the proceedings do not have an adversarial character.
The documentation lodged with the Court consisted of some 18 ring binders, including three volumes of bank statements. The amount standing in Court as at September 25, 2004 was $281,117.60 and £89,538.44 representing the respective Accounts, with interest accrued to that date. Further interest will have since accrued.
The claims far exceed the amounts in the Accounts, and an investigation of the claims ranging beyond the documentation available to the Court would have been impracticable and disproportionate. I have endeavoured to adopt the proportionate approach of considering whether, on the basis of the information supplied to the Court , each of the claimants has satisfied me on the balance of probabilities that that claimant has a proprietary claim, and, if so, for what amount. There is no reason to doubt the honesty of any of the claimants. Where possible I have decided the validity of the claim on the basis of the documents submitted by Commerzbank or the claimant to the Court, but in the case of several claimants (where I was not satisfied as to the nature of the claim or the circumstances of the payment), I asked the claimants for additional information. The names of certain entities apparently involved in fraud recur, especially Utrix, Unitrix, Armani, General Supply Limited, and Link Global International.
I set out in Schedule 1 the particulars of the claims which have been made (Part A for the Sterling Account and Part B for the Dollar Account), and my reasons for admitting or rejecting them. At the time a draft of this judgment was circulated, there were queries outstanding in relation to two of the claimants: Mr Graham Litchfield, a claimant in relation to the Sterling Account for £20,971.40; and Mr Andrew Laws, a claimant in relation to the Dollar Account for $8,821.80. I directed that unless, by November 15, 2004, they furnished the information requested by the Court, their claims would be rejected. Mr Laws responded by letter dated November 8, 2004. Mr Litchfield did not respond. The queries were addressed to him on July 16, 2004, and reminders were sent on September 8 and October 13, 2004.
Where the claimant’s bank deducted bank charges the claim has been treated by me as being the net amount received by Commerzbank.
VI The application of the rule in Clayton’s Case
The result of my findings is that the amount of valid claims far exceeds the amount available for distribution. Because the claims exceed the amount held by the Court the question arises as to the method of distribution, and in particular whether the rule in Clayton’s Case (Devaynes v. Noble: Clayton’s Case (1816) 1 Mer. 572) applies.
According to the rule in Clayton’s Case payments out of an account are attributed to payments into the account in the order in which payments were made in. Clayton’s Case was a case about appropriation of payments and not about tracing. The first payment out is attributed to the first payment in, and so on. But it can cause injustice when applied to tracing claims. The result can be “capricious and arbitrary” (Goff and Jones, Restitution, 6th ed Jones, 2002, para 2-039). As Lewin on Trusts, 17th ed Mowbray et al, 2000, para 41-53, points out, the effect of the rule, where withdrawals have been made and spent, is to establish a reverse order of priority. The later the payment into the account the greater the prospect of that payment not being attributed to payments out and hence of still being represented in the remaining credit balance.
In Barlow Clowes International Ltd v Vaughan [1992] 4 All ER 22 (C.A.) the question arose as to the method of distribution of investors’ funds which had been invested in Barlow Clowes. The investors had paid more than £100 million, but the available funds were far short of the claims.
Dillon LJ thought the rule in Clayton’s Case did not apply because the fund was a common fund, and not to be allocated to individual investors. But he rejected the submission that, as between innocent parties with the right to trace, it is illogical and unfair to the earlier contributors to apply the rule as between innocent beneficiaries whose payments have been made into a bank account in which there is not enough money to meet the claims. Dillon LJ concluded (at 33) that it was not for the Court of Appeal to reject the long-established practice that the rule in Clayton’s Case was to be applied when several beneficiaries’ monies have been blended in one bank account and there is a deficiency (citing Re Hallett’s Estate (1880) 13 Ch D 696; Re Diplock [1948] Ch 465).
Woolf LJ (as he then was) and Leggatt LJ agreed with the view of Learned Hand J in Re Walter J Schmidt & Co, 298 F 314, 316 (1923) that to adopt the fiction of first in, first out, was to apportion a common misfortune through a test which has no relation whatever to the justice of the case. Woolf LJ accepted that Re Diplock and the other authorities established that the rule in Clayton’s Case could be applied to determine the extent to which, as between each other, equally innocent claimants were entitled in equity to monies which had been paid into an account and then subject to movements in the account. But the rule did not always have to be applied: “The rule need only be applied when it is convenient to do so and when its application can be said to do broad justice having regard to the nature of the competing claims” (at 39). The use of the rule was a matter of convenience and if it would result in injustice (in that case, as between investors) it would not be applied if there was a preferable alternative. Leggatt LJ’s decision was based on the fact the investors were deemed to have intended their money to be dealt with collectively. He considered that the rule in Clayton’s Case had nothing to do with tracing and was a rule of convenience only, but that it was not open to the Court to disregard it in the context of that case, unless there were an actual or presumed intention that it should not be applied.
In El Ajou v Dollar Land Holdings (No 2) [1995] 2 All ER 213, 222 Robert Walker J said that in Barlow Clowes the Court of Appeal had recognised that a “first in, first out” method of distribution may not be appropriate and perhaps prima facie was not appropriate for those who had the common misfortune of falling victim to a large scale fraud. In Russell-Cooke Trust Co v Prentis [2003] 2 All ER 478, 495 Lindsay J said that it was plain from all three judgments in Barlow Clowes that the rule could be displaced by even a slight counterweight: in terms of its application as between beneficiaries who have met a shared misfortune it might be more accurate to refer to the exception that is Clayton’s Case, rather than the rule in Clayton’s Case. See also Re Eastern Capital Futures Ltd [1989] BCLC 371; Re Lewis’s of Leicester Ltd [1995] 1 BCLC 428; Sheppard v Thompson, unreported, December 3, 2001. The rule in Clayton’s Case has been held in Canada and Australia not to apply to competing beneficial entitlements to a mingled trust fund where there have been withdrawals from the fund: Re Ontario Securities Commission and Greymac Credit Corp (1986) 30 DLR (4th) 1 (Ont CA) , app dismissed (1988) 52 DLR (4th) 767 (Sup Ct) and Re French Caledonia Travel Service Pty Ltd, 2003 NSWSC 1008, (2003) 204 ALR 353, which contains a valuable discussion of the principles by Campbell J.
Where the rule in Clayton’s Case does not apply, then (at least where the claimants have an equal right to be paid) it will normally be appropriate for the parties to be entitled to the mixed fund pari passu, i.e. the fund will be shared rateably amongst the beneficiaries according to the amount of their contributions.
This is a case where the claimants are entitled to trace monies in the Accounts, or where IMB Morgan is an actual or constructive trustee of payments by innocent claimants. Part of the funds have been withdrawn on the instructions of IMB Morgan and replaced with other funds supplied by innocent claimants. Accordingly, there has been mixing (and payment away) of the money held on trust for the claimants. But it would be an extremely onerous (and perhaps impossible task) to determine what sums IMB Morgan has paid away. That is because the nature of a correspondent bank account is such that debits to the account may not necessarily be equated with payments out by IMB Morgan. Some of the debits may be payments to another account held by IMB Morgan, or payments to persons who hold on behalf of IMB Morgan. For example, there are in August 2001 debits of $100,000 (transfer to Bank Nigeria), $250,000 and £25,000 (transfers to Platinum Bank Ltd), $500,000 (Citizens International Bank Ltd).
I am satisfied that the rule in Clayton’s Case should not apply here, because it would be both impracticable and unjust to apply it. The only fair way to share the balances on each of the Accounts would be in proportion to the claims on the respective Accounts.
VII Conclusions
I will therefore order that the Accounts be paid out to the claimants listed in Schedule 2, Parts A (sterling) and B (dollars) in the proportions of their claims. The result is that the claimants will receive only a proportion of their claims, and in particular the dollar claimants will receive a very small proportion. The approximate figures are 46% for the sterling claimants and 9% for the dollar claimants.
As I have indicated, I circulated this judgment in draft. Interested parties will be sent the approved form of the judgment and the formal order of the Court. Schedule 1: the claims
Part A: Sterling
Anderson, Rovina
Mrs Anderson (of Te Awamutu, New Zealand) made a payment of £1,211.60 into the Sterling Account in favour of “Armani” on April 29, 2002. According to the National Bank of New Zealand, Wellington, Mrs Anderson is an elderly lady who had been told to make such a payment so as to enable her to receive an inheritance due to her. I am satisfied that she was a victim of a common advance fee fraud.
Barbour Property Services
On November 1, 2001, Mr Barbour (of Belfast, Northern Ireland) transferred $8,821.80 into the Dollar Account for the benefit of “Unitrix”. From a letter received by the Court from Mary M. Kelly, Mr Barbour’s solicitor and the attached supporting documentation, it appears that Mr Barbour was contacted by a “Mr Nangolo” who requested assistance in securing the release of funds held in South Africa amounting to $27,000,000, which were due to him under a contract. Mr Barbour was promised 25% of this amount in return for his assistance. Mr Barbour was requested to pay the above sum as a “mandatory mobilization fee” which included fees due to lawyers (Sithole & Associates PA, Capetown) as a retainer and fees for the registration of a power of attorney. Mr Barbour was then sent a copy of a letter purportedly from the South African Reserve Bank advising that a further payment was necessary in respect of a “lapsed insurance premium”. As a result, on November 15, 2001, Barbour Property Services made a payment of £32,160 into the Sterling Account, again for the benefit of “Unitrix”. No payment was made to either Mr Barbour or Barbour Property Services and I am satisfied that both have been victims of an advance fee fraud.
Forsyth, Neil
On May 8, 2002, Mr Forsyth (of Lausanne, Switzerland) made a payment of £11,150 into the Sterling Account in favour of “Crystal Chemicals Limited.” Mr Forsyth was contacted by a Francis Nmkalele who told him that the proceeds of his father’s farm in Zimbabwe were under threat from the government but that those proceeds, said to be $8,300,000, had been saved and sent to Amsterdam. Mr Forsyth was persuaded to go to Amsterdam and assist by making the payment which he believed was for the purposes of buying a cleaning agent necessary to clean the secured fund markings off the money. Ultimately the men he was dealing with disappeared and Mr Forsyth was unable to make any further contact with them. I am satisfied that Mr Forsyth has been the victim of a fraud.
Freeman, RL (Roberts Butchers)
On January 3, 2002, a payment of £19,990 to the Sterling Account for the credit of “Utris” was made on behalf of Roberts Family Butchers (of Bagshot, Surrey). In a letter to the Court dated July 30, 2003, Mr Freeman (the owner of the business, which is now carried on by Roberts Butchers Limited) stated that this payment was in respect of legal fees in connection with a contract with the National Nigerian Petroleum Corporation (NNPC). In a letter of August 13, 2003 Mr Freeman gave some further details, namely that the contract was for the supply and installation of computer optimisation equipment at the “Kaduna Refinery” and that the legal fees were for a contract completion certificate. In a letter of August 23, 2004 Mr Freeman stated that the money was sent to settle an outstanding tax bill for Ginger Nigeria Ltd, and that he had become concerned that the money did not reach the correct fund as the contract for Ginger Nigeria Ltd still remained unpaid. In a letter of September 27, 2004 Mr Freeman said that he was instructed to transfer £20,000 to Commerzbank as a clearing bank for NNPC by Dr Jude Gamu, project implementation manager for NNPC, after he was advised by his accountants that this financial obligation remained outstanding which the company was aware would have to be paid on completion. The obligations were for a completion certificate and various taxes. When asked by the Court for further clarification, Mr Freeman sent a email to the Court on October 14, 2004 to say that he was involved with the contract concerning the oil refinery in Nigeria purely as an investor. Mr and Mrs Ginger, the directors of Ginger Nigeria Ltd, were personal friends of his, and they asked Mr Freeman to invest in their company as they had insufficient funds to finish the contract. This claim must be rejected: none of the potential grounds for a proprietary claim are made out. In particular, fraud is not alleged, and there is no evidence that the money continued to be held by Commerzbank or IMB Morgan for the purposes for which it was paid by Mr Freeman.
Haberthur, Anton Franc
On March 11, 2002 Mr Haberthur transferred £9,990 to the Sterling Account by order of “Gordreg Investment Limited.” From the documents sent to the Court by Mr Haberthur on December 1, 2003, it appears that he had agreed with a Dr Alex Mbango to help pay the expenses necessary to effect a release of $6.9 million allegedly owing to Mr Mbango on the basis of an undertaking that his money would be returned when the funds were released. Mr Haberthur has not received any money. I am satisfied that Mr Haberthur has been the victim of an advance fee fraud.
Heke, Maria
On April 26, 2002 and May 1, 2002, Mrs Heke made payments into the Sterling Account in favour of “Armani” of £1,209.60 and £443.10 respectively. Mrs Heke is the daughter of Mrs Rovina Anderson and it appears that the money, although paid in Mrs Heke’s name, was paid on behalf of her mother for the same purpose (see above).
Legal & General Assurance Society (“Legal & General”)
In January 1969 a Mr Oletaju took out an endowment policy with Legal & General. In August 2001, a caller who claimed to be the policyholder telephoned Legal & General to request the surrender of the policy. The caller then signed the requisite forms and requested that the value of the policy (£23,363.60) be transferred into the Sterling Account which was duly done on August 7, 2001. When the true policyholder came to the UK in September 2002 from his home in Nigeria to collect the value of his matured policy he denied ever having requested or received the policy proceeds. Following investigation by Legal & General into the alleged fraud and the issue of proceedings against Legal & General by Mr Oletaju, Legal & General paid out the policy proceeds for a second time. I am satisfied that Legal & General were the victims of a fraud.
Litchfield, Graham
Mr Litchfield, of Litchfields Accountants (Nerang East, Queensland, Australia) made three payments into the Sterling Account of £12,425, £7,114 and £1,432.20 on February 1, 2002, February 8, 2002 and February 19, 2002 respectively. In a letter to the Court dated October 8, 2003, Mr Litchfield stated that he had made the payments to meet fees charged to one of his clients for claiming an inheritance abroad. The Court wrote on July 16, 2004, explaining that there is a common international fraud whereby persons are told that they may have a substantial inheritance abroad and are asked for advance fees to cover legal costs etc. The Court asked Mr Litchfield to provide the following information: (a) whether he had reason to believe that the fees charged to his client for claiming his inheritance overseas were part of a genuine arrangement; (b) what reason he had to believe that the ultimate intended recipients of the fees did not receive them; and (c) why it is that he, rather than his client, has a claim for the return of funds. Reminders were sent on September 8 and October 13, 2004. On October 20, 2004 the Court ordered that unless he provided answers by November 15, 2004, his claim would be rejected. No reply was received, and the claim is rejected.
Safar, Dr Fahim
Dr Safar made three payments into the Sterling Account in favour of “General Supply Limited” namely: £15,279.26 on April 2, 2002; £17,040 on April 15, 2002; and £13,590 on May 10, 2002. From the letter and supporting documentation sent to the Court by Remler Law Group (of Atlanta, Georgia) the lawyers for Dr Safar, it appears that a claim is made only in respect of the final payment of £13,590. The letter also states that it was thought that Dr Safar had been persuaded to provide deposits for alleged transactions which had never occurred. The Court wrote to Remler Law Group on July 16, 2004 explaining that there was reason to believe that “General Supply Limited” was used as a vehicle for fraudulent transactions and that before Dr Safar’s claim could be admitted the Court must be provided with details (by September 3, 2004) of the circumstances in which Dr Safar made the payment and what the payment was intended for. Mr Remler was not able to produce any further information, but I am satisfied on the available material that Dr Safar was the victim of a fraud.
Vine, Terence/Hawick Plant Auctions
On May 9, 2002, Hawick Plant Auctions Ltd transferred £100,000 to the Sterling Account by order of “Gordreg Inv Ltd.” The evidence before the Court is that these funds were paid by Hawick Plant Auctions Ltd on behalf of Mr Terence Vine, and represented a loan by Mr Philip Sharpe-Brash, the managing director of Hawick Plant Auctions Ltd, to Mr Vine. On October 8, 2002, Commerzbank wrote to Hawick Plant Auctions to say that IMB Securities had requested that the funds be returned to Hawick Plant Auctions, and Hawick Plant Auctions made a claim to the funds on the basis that they were still in the account. It subsequently appeared that the Commerzbank letter (which was drafted by Allen & Overy) was based on a mistaken reading of a fax from IMB, which in fact stated that the £100,000 was in fact received and they were not asking for repayment to the remitter. Since the account was effectively frozen on May 9, 2002, it is likely that the payment was not in fact made, although IMB may have made an equivalent payment abroad. From the evidence of Mr Vine, who says that he knew nothing of Gordreg Investments Ltd, I consider it likely that he was the intended victim of a fraud. Hawick Plant Auctions has agreed to account to Mr Vine for the fruits of any claim it may have. Following correspondence with the Court, Mr Vine has applied to be joined as co-claimant. I am satisfied that in the circumstances either Hawick Plant Auctions Ltd or Mr Vine has a claim to a share in the funds.
Part B: Dollars
Alawmeh, Ahmad Talal
On November 29, 2001, Mr Alawmeh paid $9,975.00 via his bank in Jordan to the Dollar Account for the benefit of “Utrix Investments Limited.” In a letter to the Court dated October 2, 2003 from Ellis Taylor, solicitors for Mr Alawmeh, it was stated that he understood that the payment represented a deposit on a tractor which would be shipped to him in Jordan on receipt of the deposit, payment to be completed by monthly instalments. Mr Alawmeh has neither received the tractor, nor had any further contact with Utrix. I am satisfied that he has been the victim of an advance payment fraud.
Baker, James D.
On May 13, 2002, Mr Baker (of Rancho Mirage, California) transferred the sum of $43,485 into the Dollar Account in favour of “General Supply Limited”. Mr Baker wrote to the Court on August 6, 2003 explaining that the payment was a loan made to Dr. Howard Whigham of the Institute for International Medical Exchange and that the monies were never received by the intended beneficiary. The payment was made after the account was frozen, and in any event the name of the intended recipient suggests that Mr Baker and/or Dr Whigham was the victim of a fraud. I am satisfied that the claim should be admitted on the basis that the fund was held on trust for the payment which was never made.
Barbour, Sam
I have dealt with Mr Barbour’s personal claim for $8,821.80 in connection with the Barbour Property Services claim in relation to the Sterling Account.
Barrus, Frank
Mr Barrus (of Nome, Alaska) made a payment of $9,985 to the Dollar Account on April 16, 2002, in favour of “Utrix.” From the material before the Court it appears that Mr Barrus, in his capacity as an investment advisor, became involved with a “Mr Bongo”, who claimed that he and his family needed to move to the west on medical grounds. Mr Bongo claimed that, as a result, he required help transferring his large investment fund of some $12.8 million to an investment account. Mr Barrus, having been persuaded to assist Mr Bongo, made the payment as a fee for the arrangement of the transfer. I am satisfied that Mr Barrus has been the victim of an advance fee fraud.
Bell, G. Sam
On April 19, 2002, Mr Bell (of Bloomington, Indiana) made a payment of $5,285 into the Dollar Account for the benefit of “Utrix”. During a telephone conversation between Mr O’Connor of Commerzbank and Mr Bell, Mr O’Connor ascertained that Mr Bell had believed that he was sending the funds to an insurance company who had guaranteed a very high rate of return. But no payment was ever received by Mr Bell. I am satisfied that Mr Bell was the victim of an advance fee fraud.
Blair, Richard O.
On April 5, 2002, Mr Blair (of San Diego, California) transferred $14,985 into the Dollar Account in favour of “Utrix”. In a letter to the Court dated August 24, 2003, Mr Blair stated that he had been contacted by a Mr Abdulahai Mohammed who claimed to work for the Federal Ministry of Finance and was told that in return for this payment he would be entitled to a 10% interest in the value of an oil shipment travelling from Nigeria to Rotterdam. After making the payment, Mr Blair was informed by a lawyer in Nigeria that there was no person called Mr Abdulahai Mohammed working for the Federal Ministry of Finance. I am satisfied that Mr Blair has been the victim of an advance fee fraud.
Bondrey, Captain Abdul Karim
On September 10, 2001, Captain Bondrey transferred $42,680.56 from his account with Barclays Bank to the Dollar Account in favour of A.A and Sons. In a witness statement of Captain Bondrey, dated December 2, 2003, he stated that A.A and Sons was “an agent for an investor” of his son-in-law and that the funds had never reached the intended recipient. The Court wrote to Quist, the solicitors acting for Captain Bondrey, on July 16, 2004 asking them to supply any available evidence that the funds were not received by AA & Sons. On September 3, 2004 Quist replied to say that Captain Bondrey no longer had contact with the intended beneficiary, and that they were therefore unable to produce records which would demonstrate non-receipt. I do not consider that Captain Bondrey has established a claim.
Carter, Dan
On July 19, 2003, Mr Dan Carter (writing as Genie Tour Coaches, West Richland, USA) wrote to the Court giving details of a number of payments (totalling $53,246) made by him to Link Global International, and stating that he had fallen victim to a fraudulent activity. A payment of $1,985 was made into the Dollar Account on April 2, 2002 by Genie Tours in favour of “Link Global International Limited”. The Court wrote to Mr Carter on July 16, 2004 explaining that although he had made a claim in his letter for $53,246, it seemed that only $1,985 was transferred to Commerzbank. The Court asked that he provide details of the circumstances in which the payment was made and why he says that he was the victim of a fraud. Mr Carter was the victim of a fraud, but it would appear from his reply dated September 2, 2004 that most of the payments were made direct to Nigeria through Western Union. Mr Carter’s claim is therefore limited to $1,985.
Coggin Honda
Coggin Honda, a car dealership (in Orlando, Florida), agreed with a purchaser to accept as payment for certain vehicles a third party cheque endorsed for onward payment to Coggin Honda. The purchase price of the vehicles was $107,211. Coggin Honda received and paid into their account a third party cheque for $132,987.66 (i.e. an amount in excess of the purchase price). It was agreed that Coggin Honda would pay the sum of $5,570 directly to the company which was to transport the cars to Nigeria and that the balance would be refunded to the purchaser. Accordingly a cheque for $20,070.66 was issued to the purchaser. Subsequently, Coggin Honda’s bank discovered that the original cheque for $132,987.66 was stolen and charged this amount to Coggin Honda’s account on the grounds of ‘forged endorsement.’ The cheque issued to the purchaser for $20,070.66 had already been paid by the purchaser into the Dollar Account. The purchaser has not since paid for the cars and so I am satisfied that Coggin Honda were the victims of a deliberate fraud.
Cohen, Annabelle and Morris
On January 25, 2002, a payment of $20,000 was made by Mr and Mrs Cohen from their account with Suntrust Bank Atlanta, to the Dollar Account. It appears from the witness statement of Mr O’Connor that Mr Cohen telephoned him and explained that over a period of two years he had befriended a man who apparently worked in Nigeria in the 1990s and was owed substantial sums of money as a result of his work. The man claimed that he had been contacted by a company called Louis Deavoux International Securities who had apparently claimed that they could assist in recovering the amounts outstanding. Mr Cohen had believed that his payment of $20,000 was the company’s fee to recover the amount owed. I am satisfied that Mr and Mrs Cohen were victims of a fraud.
CUMIS Insurance Society, Inc / WVU Employees Federal Credit Union
Forged transfer instructions were given to WVU Employees Federal Credit Union (“WVU”), purportedly on behalf of their member, Mr Sanjay Shah, to transfer $10,485, on October 29, 2001, to the Dollar Account for the credit of “Utrix”. When the fraud came to light, WVU returned the money to Mr Shah’s account. WVU was insured with CUMIS Insurance Society, Inc (“CUMIS”) (with a deductible excess of £2,500) and CUMIS has paid them $8,000. There are accordingly valid claims of CUMIS for $8,000 and WVU for the balance of $2,485.
De la Cruz, Henry and Victoria
On May 9, 2002, Henry and Victoria De la Cruz (of Deer Park, Texas) transferred $7,735 into the Dollar Account in favour of “General Supply Limited”. Henry and Victoria de la Cruz have informed the Court by letter that they believed they were making the payment in respect of legal expenses incurred in the Nigerian courts. This has proved not to be the case and I am satisfied that they have been the victims of an advance fee fraud.
De la Paz, Reuben
On 28 December, 2001, Mr de la Paz transferred $11,764.27 from his account with Maduro & Curiel’s Bank NV, Santa Maria branch, Curaçao, to the Dollar Account in favour of “Utrix.” Mr de la Paz indicated in his letter to the Court dated 26 January, 2004, that he did not believe himself to have been a victim of fraud. In a letter dated August 23, 2004, Mr de la Paz states that the payment was for expenses caused by delay in taking delivery of jewellery, and that the payment never reached the ultimate beneficiary Global Security and Trust of Spain. He also stated that he could not say whether he had been the victim of a fraud. Mr de la Paz has no basis for a proprietary claim.
Eurofruit Engineering & Supply Services Inc (“Eurofruit”)
Eurofruit (of Hernando, Florida) made 4 payments totalling $201,510.20 into the Dollar Account: $7,904 on June 15, 2001; $61,960 on July 9, 2001; $111,661.20 on August 21, 2001, and $19,985 on December 27, 2001, all in favour of “Unitrix”. In a letter to the Court dated July 31, 2003, Mr Peterson, President of Eurofruit, stated that he was contacted in 2001 by a Mr Barma and following various discussions was contacted by a man claiming to be a lawyer called Mr Ndlovu. A contract was proposed whereby a large amount of construction equipment would be purchased as soon as the necessary funds had been released from the “Ministry of Energy and Mineral Resources.” Orders for the equipment had apparently been placed in 1997 but were frozen because of “apartheid issues”. The role of Mr Peterson and Eurofruit was apparently to assist in releasing these funds in order to complete the contract. The first payment was made to register Eurofruit as a company authorised to conduct business in South Africa and the second and third payments were believed by Mr Peterson to be payments of “back taxes” which needed to be paid before the funds could be released. All activity ceased as soon as Mr Peterson realised that he had been defrauded. I am satisfied that Eurofruit was the victim of an advance payment fraud.
F.E.M.S, Inc
F.E.M.S, Inc (of Sherman Oaks, California) made four payments into the Dollar Account totalling $4,425 namely: $790 on May 7, 2002; $635 on May 7, 2002; $1,300 on May 8, 2002; and $1,700 on May 9, 2002. In a letter to Commerzbank dated June 13, 2002, Mr K. D. Fritz II of F.E.M.S Inc explained that he had formed a business relationship with a lawyer based in a West African country who had agreed to set up bank accounts and make certain business filings on his behalf so that Mr Fritz could develop his import and export business. I am satisfied that the intended beneficiary did not receive the funds. In correspondence, Mr Fritz submitted, inter alia, that the available funds should be distributed on a “last in, first out” apportionment and that Commerzbank should not receive payment of their fees from the Accounts. For the reasons given in this judgment, I have decided that the claimants should rank pari passu.
Fair Oaks Manufacturing, Inc and Wampler Enterprises, Inc
Payments of $51,485 from Fair Oaks Manufacturing, Inc and of $37,415 from Wampler Enterprises, Inc, were made from accounts with the Bank of McCrory (Arizona, USA), to the Dollar Account, on March 5, 2002 and March 27, 2002 respectively, both for the benefit of “Utrix”. In a letter to the Court dated July 28, 2003, Mr J. A. Wampler, President of both companies, stated that he had dealt with a Mr Thomas Binge and a Mr Harold Whitaker who claimed to be representatives of IMB Securities Plc, and that he had believed he was investing money in mining operations in South Africa. Mr Whitaker (who had many aliases) was taken into federal custody in the United States. I am satisfied that these companies have been victims of a fraud.
Frappier, Claude (claim assumed by HSBC Bank Canada as assignee)
On April 4, 2002, Mr Frappier (of Quebec, Canada) made two payments to the Dollar Account via HSBC Bank Canada, the first being a payment of $44,965 into the account in favour of “Armani” and the second a payment of $39,965 for the benefit of “Gazzaz”. In a witness statement given to the Canadian police in May 2002, Mr Frappier explained that he had been given a cheque for $160,000 by a Mr Paul Smith in payment for goods worth approximately Can$24,000. He was then instructed to pay the surplus in three separate amounts, two of which were paid as set out above. Although he apparently waited for confirmation from his bank that the cheque had cleared before making the payments, he was subsequently advised that the cheque was fraudulent and had been dishonoured. Mr Frappier assigned his claim to HSBC Canada on July 15, 2003. I am satisfied that Mr Frappier and the bank have been defrauded.
Han, Bui Chiem
On April 8, 2002, Mr Han (of Torrance, California) transferred $3,985 into the Dollar Account in favour of “Armani”. In a letter to the Court dated July 24, 2003, he explained that he had been the victim of a fraud during 1997-1998. He came into contact with a man who claimed to be a senior director at the Central Bank of Nigeria who undertook to help retrieve the money lost as a result of the fraud. Mr Han believed that the payment to the Dollar Account was in respect of the service fees of this director. Mr Han later discovered that this man did not work for the Central Bank of Nigeria and he has not been in contact since the payment was made. I am satisfied that this claimant has been the victim of an advance fee fraud.
Hughes, Charles R
On September 6, 2001, Mr Hughes (of Crow Haven Arabians, Montana) made a payment of $892,485 into the Dollar Account. In a letter to the Court dated October 6, 2003 Mr Hughes explained that on a business visit to Lome in Togo he was introduced to Eduardo and Patrice Lasambe. The former claimed to be a representative for the “John Smith Company, International Investor Agent for World Security & Finance, S.A, IMB Securities Plc, MMB-CCD Ltd”. Having taken steps to obtain references for Eduardo Lasambe from two banks in Lome and from the Lome office of World Security and Finance, Mr Hughes was persuaded to invest in various projects which he was told included housing developments and a new public library for Lome which subsequently turned out to be fictitious. I am satisfied that Mr Hughes has been the victim of a fraud.
Hurvitz, Allan
On April 24, 2002, Mr Hurvitz (of Los Angeles, California) transferred $15,485 from his account with Bank of America to the Dollar Account in favour of “Armani”. Mr Hurvitz has informed the Court by letter that he made this payment as an activation fee for the payment of a sum of money to him which he never received. I am satisfied that Mr Hurvitz was the victim of an advance fee fraud.
Infections Control World Organisation c/o Dr Edouard Kurstack
On April 16, 2002 this organisation (connected with the Faculty of Medicine, University of Montreal, Canada) paid $5,685 into the Dollar Account in favour of “General Supply Limited.” In a letter dated September 1, 2003, Mr Kurstack, the president of the organisation explained that the money was requested as an advance fee to secure the “legalisation” of a donation fund from which a donation would then be made to the organisation. No such donation was ever received and thus I am satisfied that the organisation was the victim of an advance fee fraud.
Iwashita, Choshu
On February 1 and 22, 2002, Choshu Iwashita (of Kobe, Japan) made payments of $29,985 and $13,985 respectively into the Dollar Account in favour of “Utrix”. Mr Iwashita was asked by someone purporting to be an officer of AfriBank Corp to make the payment as a “fluctuational marginal difference” and was told that, if he did not pay the charge, his fund would not be remitted to Japan. I am satisfied that he was a victim of fraud.
Jones, Hal and Citizens Union Bank
On 12 April 2002, Mr Jones made a payment of $19,985 to the Dollar Account through Citizens Union Bank (of Newton, Georgia) for the benefit of “Link Global International.” Citizens Union Bank were informed by IMB Morgan Plc and Link Global International that they had not received the funds. As a result, Citizens Union Bank forwarded a further $19,985 to the Dollar Account on April 19, 2002, which was frozen and not received by Link Global International. Mr Jones and/or Citizens Union Bank have a claim in respect of both payments, the first payment being the subject of a fraud, and the second payment being a payment in error.
Kim, Hee-Bok
On March 11, 2002, Mr Hee Bok Kim (of Korea) transferred $121,170 into the Dollar Account in favour of “Utrix”. In a letter to the Court dated October 7, 2003 he explained that he had been contacted by an entity calling itself “AfriBank Corp” located in the USA who was apparently interested in investing in the claimant’s business venture. “AfriBank Corp” requested that the sum be transferred in respect of the advance costs of arranging a loan facility of approximately $22,000,000. “AfriBank Corp” severed contact with the claimant a few months later. I am satisfied that Mr Kim has been the victim of an advance fee fraud.
Kinoshita, Shukuko
Mr Kinoshita (on behalf of the Enjuji Group, Tokyo, Japan) made three payments into the Dollar Account totalling $95,129.26 namely: $36,545.89 on January 17, 2002; $38,487.36 on January 25, 2002; and $20,096.01 on February 13, 2002. In two letters to the Court dated August 29 and October 17, 2003, Mr Kinoshita stated that he transferred the funds in the belief that he was paying for a “special solvent” in order to remove markings from US dollar notes to the value of $35.5 million which had been sent from the Republic of Congo to Spain. Once cleaned, Mr Kinoshita was told that all the funds would be transferred to his bank account in Tokyo. Ultimately these funds were not received and Mr Kinoshita was informed that the amount was too great to be transferred in one go. I am satisfied that Mr Kinoshita and Enjuji have been the victims of an advance fee fraud.
Kulka, Peter
On April 11, 2002 Mr Kulka (of Kentfield, California) transferred $20,485 into the Dollar Account in favour of “Armani”. In a letter to the Court dated July 28, 2003, Mr Kulka stated that the money transferred was thought by him to be an advance fee to a Dr. Robert A Collins whom he believed to be his power of attorney in Nigeria. Mr Collins had been recommended to Mr Kulka by a man named Olu Jacobs who claimed to be the managing director of First Chartered Bank International in Nigeria. Mr Jacobs had contacted Mr Kulka and informed him that as the next of kin of a Mr Steven Kulka, a distant cousin of his father, he had inherited $20,500,000 which was being held in a Nigerian bank account. No payment has been received by Mr Kulka in respect of the supposed inheritance. I am satisfied that he has been the victim of an advance fee fraud.
Laws, Andrew
On November 7, 2001, Mr Laws transferred $8,821.80 into the Dollar Account in favour of “Unitrix”. In a letter to the Court dated November 8, 2004, Mr Laws said that he had been approached by a Mr Mkhwane to take part in the execution of a deal whereby Mr Laws would assist the Department of Minerals and Energy of South Africa in obtaining government approval for an overpayment of $12,652,000 which had been made by it to foreign contractors. In return for his assistance, Mr Laws would receive $3.163 million (25% of the overpayment). Mr Mkhwane told Mr Laws that his family was destitute and asked Mr Laws to make an initial payment; accordingly Mr Laws transferred $8,836.80 (less bank charges) to Unitrix. I am satisfied that he has been the victim of fraud.
Leon A. Martin & Associates
On September 24, 2001, Leon A. Martin & Associates (of Tabletop, Australia) transferred $8,617 into the Dollar Account in favour of "Unitrix Investment". From documents sent to the Court by Mr Ian Robert Walsh, of Falkirk Index New Zealand, it appears that a payment of $8,632 (less bank charges of $15) was made by Leon A. Martin on behalf of Falkirk in respect of legal costs due to a South African firm called "Sithole & Associates P.A.". After this payment had been made, Sithole & Associates sent to Mr Walsh a copy of a letter purporting to be from the South African Reserve Bank requesting Falkirk to settle outstanding elapsed insurance premiums, without payment of which Sithole & Associates could not continue to provide legal representation to Falkirk. The insurance premium payments were made by a Wairere Limited on behalf Falkirk (see claimant Wairere Limited below). Mr Walsh has since contacted the South African Reserve Bank who have informed him that the communication he received appears to be related to a fraudulent Nigerian letter scheme. I am satisfied that Leon A. Martin & Associates was a victim of a fraud.
Maner, Tony
On July 19, 2001, Western Pacific Development Corporation (of Reno, Nevada), acting on behalf of American Mobile Services Inc (of which Mr Maner is the President), transferred $49,985 to the Dollar Account in favour of “Unitrix Investments.” On August 6, 2001 Mr Maner himself transferred $15,985 into the Dollar Account, again in favour of “Unitrix Investments.” The letter and the documentation sent to the Court by Mr Maner indicate that he has been the victim of an advance fee fraud. He believed that he, through his company, was dealing with a Mr Ndlovu for the purpose of securing a contract for mining supplies for his company. It appears that the payments were to settle the legal fees incurred by his supposed business partners. American Mobile Services Inc was contractually obliged to repay $50,000 to Western Pacific Development Corporation and Mr Maner had personally guaranteed that obligation. I am satisfied that Mr Maner has been the victim of a fraud.
Neshaaman Industries
On February 20, 2002, $9,660 was paid by Neshaaman Industries (Langhorne, Pennsylvania) to the Dollar Account. According to a letter from Ms Edith Floge dated January 22, 2004 the payment was made in respect of a purchase of veterinary vaccine supplies. Ms Floge believed that she was paying, through Neshaaman Industries (a company she created for the purposes of this transaction) for the provision of free sample vaccines for a purchaser who would ultimately be purchasing the vaccines in large quantities. I am satisfied that Ms Floge and Neshaaman Industries were the victims of a variant of an advance fee fraud.
Northern Enterprises Permit & Boat Storage, Inc (in bankruptcy)
This company (of Anchorage, Alaska) acting by its owner Debbie Moore made three payments to the Dollar Account totalling $189,390 namely: $59,985 on November 5, 2001; $79,985 on November 15, 2001; and $49,420 on December 6, 2001, all in favour of “Unitrix”. A letter to the Court dated July 30, 2003 from Mr Christianson of Christianson, Boutin & Spraker explained that in 2002 petitions in bankruptcy had been filed against Northern Enterprises and Debbie Moore. Mr Christianson acts for William M. Barstow III, the trustee. The letter stated that Debbie Moore had made the payments having been solicited by individuals claiming to be bank or government officials from Nigeria who offered substantial sums of money provided that she sent money to Nigeria. The promise of repayment was fraudulent and nothing was ever received in return. The source of the funds was monies held in trust by Northern Enterprises Inc for the purchase and sale of fishing vessels and fishing permits. I am satisfied that Mr Christianson has a claim. Mr Christianson also submitted that priority should be given in this case as the funds belong to innocent third party victims. For the reasons given in this judgment, I have decided that the claimants should rank pari passu.
Pelley, Charles
On February 26, 2002, Mr Pelley transferred $49,985 to the Dollar Account in favour of “Utrix”. In a letter to the Court dated August 14, 2002, Mr Pelley, writing as Pelley Excavating (of Niles, Michigan) stated that he had paid the money for document that would release a “contract payment”, but, having made the payment, no money was received by him. The documents indicate that he was to pay a total of $250,000 on the instructions of “Global Financial Trust” of Toronto, with a view to the receipt of a much larger sum from “Axcess Financial Trust.” I am satisfied that Mr Pelley has been the victim of an advance payment fraud.
Penner, Helmut
On April 29, 2002, Mr Penner (of Richmond, Canada) paid $63,985 into the Dollar Account in favour of “Krisking Investments”. In a letter to the Court dated November 24, 2003, Mr Penner explained that payment was made to Krisking Investments as agent for his Nigerian lawyer, Mr. Alonzo A. Amadi, in respect of the legal and travel expenses of Mr Amadi and as an advance of funds for a proposed agricultural project that Mr Amadi was attempting to facilitate with the Nigerian government. Mr Penner also stated that he had complete faith in Mr Amadi’s integrity. Krisking Investments was used as a vehicle for advance payment frauds, and I am satisfied that Mr Penner has been the victim of an advance payment fraud. In addition, Mr Penner made a payment of $89,985 on March 27, 2002 in favour of Krisking Investments. In a letter to the Court dated November 24, 2003, he stated that he does not wish to make a claim in respect of the latter payment.
Saunders, Marie
On May 10, 2002, Ms Saunders (of Norcross, Georgia, USA) transferred $4,905 into the Dollar Account in favour of “General Supply Limited.” From the documents available in this case it appears that this payment was made to “Olufemi Peters & Associates” in order to obtain release from the Central Bank of Nigeria of $23,517,000 allegedly payable to Ms Saunders by the Nigerian National Petroleum Company. I am satisfied that Ms Saunders has been the victim of an advance fee fraud.
Sawalha, Mohammed
On December 11, 2001, Mr Sawalha made a payment of $9,959 from his account with Jordan Gulf Bank to the Dollar Account. In his letter to the Court dated September 10, 2003, Mr Sawalha explained that he was contacted by a Mr Tony Okeke claiming to be from the Nigerian National Petroleum Corporation who invited him to invest in a joint business venture. Mr Okeke persuaded Mr Sawalha to travel to Spain to sign a contract and to make the payment for the start up costs of the venture. On returning from Spain and corresponding with his own bank, Mr Sawalha suspected that something was wrong and attempted to claim his money back with no success. I am satisfied that Mr Sawalha has been the victim of an advance payment fraud.
Smith-Reubens, Brenda
On April 12, 2002, Mrs Smith-Reubens (of Lake Worth, Florida) made a payment of $49,985 into the Dollar Account in favour of “Armani”. In a letter to the Court dated July 19, 2003, Mrs Smith-Reubens explained that she had intended the payment to be made to a “prospective business partner” for the purposes of a “joint business venture”. I am satisfied that the claim is a valid one.
Tom Gehl Exhaust Parts, Inc
On December 13, 2001 this company (of Roseville, Minnesota) made a payment of $8,821.80 into the Dollar Account. From the documents sent to the Court by Mr Gehl it appears that in 2001 he was contacted by a Mr Atatah who asked for his assistance in making a claim to funds belonging to him and other officials held by the South African government. The payment was made in respect of the legal costs of establishing the mechanism by which the funds would be retrieved. I am satisfied that the company has been the victim of an advance fee fraud.
Vierra, Frank and Vierra, Joyce (deceased)
Mr Vierra’s deceased wife Mrs Joyce Vierra made three payments in favour of “Utrix” totalling $199,955 namely $69,985 on February 1, 2001; $69,985 on March 7, 2001 and $59,985 on June 28, 2001, all in favour of “Utrix.” In addition Mrs Vierra made very substantial additional payments into other bank accounts. Mrs Vierra was an elderly lady who was persuaded to make the payments by telemarketers who told her that she would receive a substantial return on her investment. Mr Vierra was unaware of the payments until his wife’s death and no money was ever received by either Mr or Mrs Vierra. I am satisfied that Mrs Vierra was the victim of a fraud. These payments were made from funds jointly owned by Mr and Mrs Vierra and consequently Mr Vierra has a claim.
Wairere Limited
On October 8, 2001, Wairere Limited (of Masterton, New Zealand) transferred $68,019 into the Dollar Account in favour of "Unitrix Investment". From documents sent to the Court by Mr Ian Robert Walsh, of Falkirk Index New Zealand, it appears that Falkirk had instructed South African lawyers called “Sithole & Associates P.A.” to act on their behalf. After initial legal costs had been paid on behalf of Falkirk (see claimant Leon A. Martin & Associates above), Sithole & Associates sent to Mr Walsh a copy of a letter purporting to be from the South African Reserve Bank requesting Falkirk to settle outstanding elapsed insurance premiums without payment of which Sithole & Associates could not continue to provide legal representation. As a result, the payment of $68,034 (less bank charges of $15) was made by Wairere Limited on behalf of Falkirk. Mr Walsh has since contacted the South African Reserve Bank who have informed him that the communication he received appears to be related to a fraudulent Nigerian letter scheme. I am satisfied that Wairere Limited has been the victim of fraud.
Wampler Enterprises, Inc
I have dealt with this claim for $37,415 under the heading Fair Oaks Manufacturing Inc and Wampler Enterprises Inc, above.
Zumax Nigeria Ltd
On April 22, 2002, $410,000 was transferred, on behalf of Zumax, from Redsear Limited's account with JP Morgan in London into the Dollar Account. Zumax claims that it had instructed Mr Chinye, the main signatory of Redsear Limited's account (a $ offshore account which had been set up to hold Zumax's hard currency assets), to use money from this account to meet Zumax's obligations in Nigeria; that $441,000 had been intended for use by Zumax in its oilfield supply business with Chevron and Shell; and that as a result of fraud perpetrated by Mr Chinye, this sum was instead directed through the Dollar Account to IMB International Plc in Nigeria to cover otherwise failing loans of that bank. Zumax says that the $441,000 is part of a total of $7,400,000 which Zumax claims Mr Chinye transferred fraudulently from the Redsear account. The documents show that $410,000 (less bank charges) was transferred, and Zumax has withdrawn its claim for the balance. On the basis of the evidence submitted by Zumax I will admit the claim for $409,985.
Schedule 2: claims allowed
Part A: Sterling
Claimant Amount
1. | Anderson, Rovina | £1,211.60 |
2. | Barbour Property Services | £32,160 |
3. | Forsyth, Neil | £11,150 |
4. | Haberthur, Anton Franc | £9,990 |
5. | Heke, Ms Maria | £1,652.70 |
6. | Legal & General Assurance Society | £23,363.60 |
7. | Safar, Dr Fahim | £13,590 |
8. | Vine, Terence | £100,000 |
Part B: Dollars
Claimant Amount
1. | Alawmeh, Ahmad Talal | $9,975 |
2. | Baker, James D | $43,485 |
3. | Barbour, Sam | $8,821.80 |
4. | Barrus, Frank | $9,985 |
5. | Bell, G. Sam | $5,285 |
6. | Blair, Richard O. | $14,985 |
7. | Carter, Dan | $1,985 |
8. | Coggin Honda | $20,070.66 |
9. | Cohen, Annabelle & Morris | $20,000 |
10. | A. CUMIS Insurance Society, Inc B. WVU Employees Federal Credit Union | $8,000 $2,485 |
11. | De la Cruz, Henry and Victoria | $7,735 |
12. | Eurofruit Engineering & Supply Services Inc | $201,510.20 |
13. | F.E.M.S, Inc | $4,425 |
14. | Fair Oaks Manufacturing, Inc | $51,485 |
15. | HSBC Bank Canada | $84,930 |
16. | Han, Bui C | $3,985 |
17. | Hughes, Charles R | $892,485 |
18. | Hurvitz, Allan | $15,485 |
19. | Infections Control World Organisation | $5,685 |
20. | Iwashita, Choshu | $43,970 |
21. | A. Jones, Hal B. Citizens Union Bank | $19,985 $19,985 |
22. | Kim, Hee-Bok | $121,170 |
23. | Kinoshita, Shukuko | $95,129.26 |
24. | Kulka, Peter | $20,485 |
25. | Laws, Andrew | $8,821.80 |
26. | Leon A. Martin & Associates | $8,617 |
27. | Maner, Tony E. | $65,970 |
28. | Neshaaman Industries | $9,660 |
29. | Northern Enterprises Permit and Boat Storage, Inc | $189,390 |
30. | Pelley, Charles L. | $49,985 |
31. | Penner, Helmut | $63,985 |
32. | Saunders, Marie | $4,905 |
33. | Sawalha, Mohammed | $9,959 |
34. | Smith-Reubens, Brenda | $49,985 |
35. | Tom Gehl Exhaust Parts, Inc | $8,821.80 |
36. | Vierra, Frank | $199,955 |
37. | Wairere Ltd | $68,019 |
38. | Wampler Enterprises, Inc | $37,415 |
39. | Zumax Nigeria Limited | $409,985 |