01 June 2007

Fraud and trust litigation news - summer: Dishonest assistance

Abou-Rahmah v Abacha [2006] EWCA Civ 1492 (CA), (Pill LJ, Rix LJ, Arden LJ)

Facts of the case

The appellants were Mr Adnan Shaaban Abou-Rahmah, a practising lawyer in Kuwait, a client of his Khalid Al-Fulaij and Sons General Trading and Contracting Co, a Kuwaiti trading company.  In May 2001 Mr Abou-Rahmah was contacted by Mr Oumar Bello (the second defendant) on behalf of Mr Al-Haji Abacha (the first defendant) seeking Mr Abou-Rahmah's assistance in investing about US$65 million, the capital of a family trust, in an Arab country.  Mr Abou-Rahmah met Mr Abacha, Mr Bello, and a third man, Mr Aboubakar Maiga, the third defendant, to discuss the matter further.  In a series of meetings, the appellants agreed to identify suitable investments and to manage those investments on behalf of the trust.  In return the appellants were offered 40 per cent of the trust capital and 15 per cent of its income.  A formal agreement was entered into on 14 August 2001.

The fraudsters claimed that the trust money was in Benin and that bureaucratic conditions involving various payments had to be satisfied before it could be transferred out of that country.  Over a period of time the appellants were asked to contribute payments.  Between August 2001 and March 2002 the appellants paid a total of some US$1.375 million to this end.

The payments were paid, on the fraudsters' instructions, into the account of a Nigerian bank, City Express Bank, the fourth defendant (“the bank”), held at HSBC in London for onward transfer to a client of that bank, described as Trust International.  The bank transferred equivalent sums of money, in Naira, to its client's account held at its branch in Apapa, Nigeria.  The actual name of the client was Trusty (not Trust) International.  Its principals, who used the names Yusuf Ibrahim and Nasir Saminu, were accomplices in the fraud.

No trust money ever materialised.  The fraudsters disappeared.  Messrs Ibrahim and Saminu cleared the money out of their company's account almost as soon, if not before, it had reached it.

The appellants brought claims against the bank inter alia for knowing/dishonest assistance.

The trial Judge found that Mr Faronbi of City Express Bank was, at the time of opening Trusty International account, aware of widespread practices by which corrupt Nigerian politicians would seek to launder money by sending it out of Nigeria, was aware that Messrs Ibrahim and Saminu were involved in the bureau de change business and thus with international transactions and that such businesses were a common means of laundering money, and was also aware that a substantial number of Trusty International's clients were politicians.  On this basis the judge said that despite Mr Faronbi's denial of knowing Messrs Ibrahim and Saminu were aiding corrupt politicians at the time, a denial which he accepted, nevertheless.

“I have come to the conclusion that at the time … Mr Faronbi probably suspected, in a general way that Messrs Ibrahim and Saminu might be in the course of their business, from time to time assisting corrupt politicians to launder money”.

The trial judge held that there was nothing to show that Mr Faronbi had any particularly suspicions about the transactions which were the subject of this case.

The question for the court was thus whether Mr Faronbi's conduct and through him the City Express Bank's conduct amounted to dishonest assistance.

The decision

On the judges' finding of fact that there was no particular suspicion about the two transactions before the court, the question Lady Justice Arden held was “ … whether a bank with inter alia the general suspicions which the bank had … would be treated as having acted honestly according to normally accepted standards”.  She found that it had, thus supporting the findings of the trial judge – explaining that the lack of particular suspicions about the transactions in question diminished Mr Faronbi's general suspicions for the purpose of those transactions to an extent that it was no longer commercially unacceptable for the bank to implement the instructions that the bank had received – an explanation which is remarkable for the way in which it contrives to downgrade the general suspicions which the trial judge found that Mr Fabronbi held.

Lord Justice Rix was more realistic, in his judgment once Mr Faronbi suspected his client's directors of participating in money

laundering, on the basis of the judge's clear findings of what Mr Faronbi was aware of, the distinction which the judge then drew between Mr Faronbi's suspicions of the business in general and his ignorance about the particular transactions in question became a thin line whose value for the purposes of insulating Mr Faronbi and thus the bank from the necessary complicity was highly uncertain.  He distinguished between being negligent as against having good grounds for suspecting money laundering and then proceeding as though one did not.

However, Lord Justice Rix decided that in the absence of submissions from the City Express Bank (now in liquidation) it would not be right or possible to reverse the judge's findings so as to conclude that Mr Fabronbi or the bank was dishonest.

Points of interest

Applying the refinement promulgated by the Privy Council in Barlow-Clowes to the facts, Mr Faronbi was found by the trial to have general suspicions re the Trusty International account and to have implemented the instructions to transfer money to Trusty International's account at its branch in Apapa, Nigeria.  Was or wasn't this sufficient to satisfy the test it required :

“consciousness of those elements of the transaction which make the participation transgress ordinary standards of honest behaviour [but] … did not also require [Mr Faronbi] to have thought about what those standards were”.

Based on LJ Arden's logic, general suspicions (albeit diminished) were not sufficient for the Appellants to prove the dishonesty required to establish dishonest assistance; on L J Rix's view general suspicion would be sufficient.

It remains to be seen whether the courts will in future allow an individual and through that individual a bank to hide behind a lack of particular suspicion of the transaction in question while having general suspicions regarding its client and the account.  Meanwhile, banks would be well advised to be extremely cautious before implementing instructions on accounts in respect of which there are “general suspicions”.

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