BANQUE CANTONALE DE GENÈVE v POLEVENT LIMITED

This is the determination of a preliminary issue, namely, the law which governs a claim for restitution based upon unjust enrichment. Determination of that issue requires the court to apply the Rome II Regulation.

The facts alleged to have given rise to the claim are these. The Claimant (“BCGE”) is a bank in Geneva. On 24 March 2104 a man calling himself Mr. Dumas telephoned BCGE and asked to speak to Yvan Nicolet of the accounting department. He was not in the office and so the call was taken by Jacqueline Konrad-Bertherin. Mr. Dumas asked her to send a confidential message to what he said was the private mail address of Eric Bourgeaux, the deputy CEO of BCGE. She did so and received a reply from someone claiming to be Mr. Bourgeaux instructing her to pay Euro 6,870,058 from BCGE to the Natwest Bank in London in favour of Polevent Limited. She did so. She believed she had been instructed to do so by Mr. Bourgeaux; but she had not been. The fraud was discovered and repayment was requested later that day.

Shortly before the fraud Natwest had been advised of a freezing order against Polevent in favour of an Italian company Enoi SpA (“Enoi”). The funds were therefore frozen in Polevent’s account with Natwest.

BCGE has claimed damages from Polevent for deceit. BCGE accepts that that claim is governed by the law of Geneva. It has also advanced a claim against Polevent in restitution on the basis that the sum was paid by mistake. It claims that since Polevent must have realised that the sum was paid by mistake the conscience of Polevent was affected such that a constructive trust arises thereby providing BCGE with a proprietary claim in respect of the frozen funds. BCGE says that this claim is governed by English law.

Enoi is another creditor of Polevent. Enoi maintains that BCGE’s claim for restitution, in common with the claim is in deceit, is governed by the law of Geneva which does not recognise a proprietary claim. The resulting dispute is therefore between two creditors of Polevent. That company is in liquidation and has taken no part in this dispute.

The preliminary issue which has been ordered to be tried is in these terms:

“On the basis of the facts as pleaded in the Amended Particulars of Claim and on the basis that the claim set out at paragraph 13 of the Amended particulars of Claim is governed by the law of Geneva, are the claims set out at paragraph 15 of the Amended particulars of Claim governed by English law or by the law of Geneva ? ”

The determination of the law governing the claim in restitution depends upon the Rome II Regulation. It is necessary to set out parts of Articles 4 and 10.

Article 4 General rule

1.

Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.

2.

However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.

3.

Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraph 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.

Article 10 Unjust enrichment

1.

If a non-contractual obligation arising out of unjust enrichment, including payment of amounts wrongly received, concerns a relationship existing between the parties, such as one arising out of a contract or a tort/delict, that is closely connected with that unjust enrichment, it shall be governed by the law that governs that relationship.

2.

Where the law applicable cannot be determined on the basis of paragraph 1 and the parties have their habitual residence in the same country when the event giving rise to unjust enrichment occurs, the law of that country shall apply.

3.

Where the law applicable cannot be determined on the basis of paragraphs 1 or 2, it shall be the law of the country in which the unjust enrichment took place.

4.

Where it is clear from all the circumstances of the case that the non-contractual obligation arising out of unjust enrichment is manifestly more closely connected with a country other than that indicated in paragraphs 1, 2 and 3, the law of that other country shall apply.

The submission of counsel for BCGE is that the law governing the claim in restitution is English law by reason of Article 10(3) of Rome II. England is the country in which the unjust enrichment took place.

The submission of counsel for Enoi is that the law governing the claim in restitution is the law of Geneva by reason of Article 4(1) of Rome II. The claim arises out of the tort/delict of fraud and so the governing law is that of the place in which the damage occurred, namely, Geneva. Alternatively, the governing law is the law of Geneva pursuant to Article 10(1) on the grounds that the unjust enrichment concerns a relationship arising out of a tort/delict such that the governing law is that which governs that relationship, namely, the law of Geneva. In the further alternative the governing law is the law of Geneva pursuant to Article 10(4) on the grounds that the obligation arising out of the unjust enrichment is manifestly more closely connected with Geneva.

There is a body of legal literature on this question which is discussed in Dicey, The Conflict of Laws at paragraphs 36-005 – 36-056. I was referred to certain of the articles and textbooks mentioned in Dicey (including Dickinson, The Rome II Regulation at chapter 10, Calliess, Rome Regulations at pp.658-671 and Rushworth and Scott, Rome II: Choice of law for non-contractual obligations [2008] LMCLQ 274) but not to any decision on the question. Counsel accepted that the commentators are not in agreement. In considering the question I have borne in mind that the concepts mentioned in the Regulation are to be given an autonomous meaning rather than an exclusively English law meaning; see paragraphs 6 and 11 of the preamble to the Regulation. I was not however referred to any materials which suggested what those autonomous meanings were; and Dickinson suggests at paragraph 10.15 that there is little by way of firm guidance as to the autonomous meaning of unjust enrichment. In the circumstances it seemed to me that I should seek to construe and apply Articles 4 and 10 in as simple and as uncomplicated manner as possible. Although “the exact contours of the law of restitution are a matter of debate” in English law (see Dicey at paragraph 36-012) it is not, I think, appropriate or necessary to discuss them in this judgment.

Counsel for Enoi began with the pleadings and submitted that the only cause of action alleged was fraud and that the proprietary remedy sought was a remedy for that fraud. If that were so it followed that Article 4(1) applied and that the governing law was that of Geneva. Counsel for BCGE did not accept that the only course of action alleged was fraud. He said that he had pleaded fraud and had then pleaded a further or alternative claim in restitution.

My reading of the pleading is that two causes of action are pleaded. The facts are alleged in paragraphs 1-12. Paragraph 13 alleges the tort of deceit and paragraph 14 claims damages for that tort. Paragraph 15 begins with the time honoured phrase “further or alternatively” which usually heralds the introduction of a further cause of action. It is in these terms:

“Further or alternatively, the payment was made by the Claimant as a result of fraud and/or a mistake induced by fraud. In the premises:

(a)

The Claimant retains title to the sum of Euro 6,870,058 paid by it to Natwest or its traceable proceeds and is entitled to assert its proprietary rights thereto and therefore to an order for return of its property from whichever of the Defendants currently holds it or any part of it. Further or alternatively, Polevent was aware from the moment that it received the sum of Euro 6,870,058 that it was not entitled to that sum and should restore it to the Claimant. In the premises, Polevant has at all material times held the Euro 6,870,058 or its traceable proceeds on constructive trust for the Claimant and the Claimant is entitled to an order for the return of its property on that basis.

(b)

Further or alternatively the Claimant is entitled to restitution from Polevent as recipients of the sums paid by the Claimant or the traceable proceeds in the amount of Euro 6,870,058 or such other amount as the court shall think fit.

Paragraph 15 is wide enough to include not only a proprietary remedy as an incident of the claim in deceit (as a result of the imposition of a constructive trust) but also a proprietary claim as an incident of a claim in restitution for money paid by mistake, a classic form of unjust enrichment. It is true that the words “unjust enrichment” are not used in the pleading but the necessary underlying facts are alleged. Since a claim for restitution based upon money paid by mistake is a separate cause of action from a claim for deceit (at least in the sense that deceit is not a necessary averment where a claim for restitution based upon money paid by mistake is advanced) I do not consider that it falls within Article 4 as “a non-contractual obligation arising out of a tort/delict”. I accept that the deceit which has been alleged explains why the payment was made in this case but the deceit is not a necessary ingredient of the cause of action. I am conscious that this might be said to be an unduly English law view. However, the discussion in Dicey at paragraph 36-016 suggests that the laws of other member states also recognise a claim in restitution not dependent upon fault, though the law of unjust enrichment is more developed in some countries than in others (see Dickinson at paragraph 10.10).

Counsel for Enoi also placed reliance on (i) article 15 of Rome II which states that the applicable law shall govern not only the basis and extent of liability but also the remedy claimed and (ii) the passage in Dicey at paragraph 36-053 which suggests that where the obligation to make restitution arises exclusively by reason of the victim’s right to waive a tort and recover the benefit obtained at his expense the applicable law will be determined in accordance with article 4(1). These arguments do not appear to me to assist Enoi where the claim for restitution is made both in tort and in unjust enrichment.

So article 4, which deals with torts/delicts, does not assist in this case and one must then turn to Article 10 which deals expressly with unjust enrichment. Article 10(1) provides that where an obligation arising out of unjust enrichment concerns a relationship existing between the parties then the obligation is to be governed by the law applicable to that relationship. The aim and object of this provision appears to be that where there is a relationship existing between the parties the law which governs that relationship should also govern a claim in unjust enrichment which arises out of that relationship. A contractual relationship is an obvious example of such a relationship.

Article 10(1) gives another example; a relationship “arising out of a tort/delict”. This is an odd notion, at least to an English lawyer. Dickinson describes the intention behind the tort/delict example as “less clear” at paragraph 10.25. The tort in the present case is the tort of deceit. There is certainly no relationship between BCGE and the tortfeasor before the tort of deceit is committed. After the tort is committed one is the victim and the other is the tortfeasor and it could be said that that is a “relationship” with legal consequences. In that context Rushworth and Scott have suggested (at p.286) that it is appropriate that a single law applies to all obligations concerning that relationship, whether those obligations arise out of a tort or an unjust enrichment. However, if that “relationship” were enough then article 10(1) would add nothing to article 4(1) in the context of the tort of deceit. Article 4(1) already provides that where the obligation to provide restitution arises out of the tort, the law of the tort will govern that obligation. I therefore consider that article 10(1) is not intended to refer to the mere “relationship” of wrongdoer and victim created by the commission of the tort.

Article 10(1) refers to a relationship “existing between the parties”. The natural meaning of such a relationship in the context of article 10(1) is, it seems to me, one that is in existence before the facts which give rise to the claim have occurred; I note that the editors of Dicey have reached the same conclusion; see paragraph 36-031. In the present case there was no relationship in existence between BCGE and Polevent before the events which led to money being mistakenly paid into the latter’s account in London. Article 10(1) therefore does not apply.

It is not suggested that Article 10(2) applies. It follows that Article 10(3) must then apply and that the governing law (subject to article 10(4)) will be the law of the country in which the unjust enrichment took place. There is no dispute that the unjust enrichment took place in England.

It was submitted that English law was displaced pursuant to article 10(4) on the grounds that the obligation arising out of the unjust enrichment is “manifestly more closely connected” with Geneva. There is a clear connection with Geneva; that is where the instructions to make the payment were given. But there is also a clear connection with England; that is where Polevent received the payment and was unjustly enriched. I am unable to say that the obligation arising out of the unjust enrichment is “manifestly more closely connected” with Geneva. English law is therefore not displaced.

For these reasons I have concluded that the answer to the preliminary issue is English law.