ROYAL COURT
(Samedi Division)
19 October 1999
Before: Sir Peter Crill, KBE, Commissioner, and
Jurats Le Ruez and Le Brocq
In re a bank account in the name of
Hamptonne International Ltd held with the
Royal Bank of Scotland International Ltd
Between:The Royal Bank of Scotland LtdRepresentor
And:Kenny M KhanFirst Party Joined
And:Hamptonne International, LtdSecond Party Joined
Application by the Representor for such Order as the Court thinks fit in relation to:
(1)monies now held in the account;
(2)the granting of indemnities in favour of the Representor for any claim against it arising out of this matter.
Advocate W Grace for the Representor
Advocate N Benest for the First Party Joined
The Second Party Joined did not appear and was not represented
JUDGMENT
THE COMMISSIONER: Hamptonne International Limited ("Hamptonne") is a company incorporated in the British Virgin Islands, with an address in those Islands. Alderney International Limited is a company incorporated in Alderney with its registered office at St. Anne’s. It engages in trust and company management services.
Hamptonne is owned by Mr Okomah, who is as one may infer from his name, a Nigerian national and the Court has no doubt that it is a bogus company in the sense that it is part of the Nigerian ‘scam’ - to use a word which is well known - which has been operating round the world duping people from time to time.
In this case, Mr Khan known as Kenny M Khan, who appears to be a citizen of the United States, fell for the scam and as a result paid money into an account of Hamptonne with the Royal Bank of Scotland International Limited in Jersey. It is not necessary to go into the details of how he came to be caught up in this web. However, it is not unfair of us to describe him as a greedy dupe. It seems to us incredible that someone should be tempted in the first letter with 30% of £21 million, in respect of what was clearly a bogus contract, for supplying pipes for laying in Nigeria, and when that was reduced to 10%, not to smell a rat.
The bank, when it became aware that there was a possible fraud alerted the police and froze the account. In that account were moneys paid in by other parties with whom we are not concerned and it is therefore a ‘mixed’ account. The first question which we have to decide is whether, on the balance of probabilities, Mr. Khan was party to the fraud. Secondly, whether that fraud was civil or criminal. I answer the second question first. After a long investigation the police reached the conclusion that there had not been a criminal fraud but that it was civil - although they left the file open - as there appeared to be insufficient evidence; and the Attorney General seemed to share that view because he was made a party to the original representation. As regards the first question, by using the words ‘greedy dupe’ it will be apparent to the parties, the bank and Mr. Khan who both appeared, and Hamptonne which did not, that the Court takes the view that Mr Khan was not a party to the civil fraud, as undoubtedly it was. We have established that he was not a party to the fraud, but that he was greedy and was duped. I shall say something about that when I come to decide on the costs.
The Court recognises that it has the power in its equitable jurisdiction to remedy the kind of fraud with which we have been presented today. That is quite clear from the decision in West -v- Lazard Brothers & Ors [1993] JLR 165 and as a corollary to that judgment which we are following in this case, the Court has recognised a tracing action. There are two further cases to which I need refer to in this respect. The first is the case of the Representation of the Viscount in the matter of PKT Consultants (Jersey) Limited (1st August, 1991) Jersey Unreported; (1991) JLR N.5 and the later case of David John Stilwell en désastre and in the matter of D & S Services Limited en désastre (Act of Court of 24th March, 1999). We recognise that if this were a tracing action in the sense that Mr. Khan was claiming the money from the Bank by way of an action brought claiming the money as opposed to arguing on the representation of the Bank this morning - then there might be some problem as to whether it was a common law tracing or an equitable tracing. In our view the distinction in this jurisdiction should not prevent us from finding that there has been an equitable fraud and that accordingly the Court proposes to follow the principle enunciated by Millett J., in El Ajou -v- Dollar Land Holdings Plc & Anor [1993] 3 All ER 717, although that case was over-ruled on another point. For the purposes of the Court’s decision I read the relevant passage:
"The victims of a fraud can follow their money in equity through bank accounts where it has been mixed with other moneys (and I interpose here to add that the money as I have said has been clearly mixed) because equity treats the money in such accounts as charged with the repayment of their money. If the money in an account subject to such a charge is afterwards paid out of the account and into a number of different accounts, the victim can claim a similar charge over each of the recipient accounts. They are not bound to choose between them. Whatever may be the position as between the victims inter se, as against the wrongdoer his victims are not required to appropriate debits to credits in order to identify the particular account into which their money has been paid."
The Court is satisfied that Mr. Khan is entitled to trace his money, as he has, into the account of Hamptonne’s with the Bank. Furthermore, it is interesting to note that in the case of equitable tracing as regards payments made by mistake, Brindle and Cox’s "Law of Bank Payments" refers to the remarks of Goulding J in the case of Chase Manhattan Bank NA -v- Israel-British Bank (London) Limited [1981] 1 Ch. 105 and says this:
"… the plaintiff bank made two payments to the defendant bank through the New York clearing system. The second payment was made by mistake as a result of a clerical error by the plaintiff. There was, therefore, no fiduciary relationship before the mistaken payment was made. (That really is theposition here).However, Goulding J held that the plaintiff could recover the money in equity since he held that the receipt of the money constituted the recipient (including a recipient who had no knowledge of the mistake) a trustee. He explained that the payer retained an equitable property in the money and the conscience of the recipient was subject to a fiduciary duty to respect that property."
It seems to the Court that the facts of this case do not prevent Mr Khan: (a) from tracing his money (which he has) and (b) from claiming it back. Accordingly the Court rules that Mr Khan is entitled to the sum of approximately $90,000 which can and has been shown to the satisfaction of the Court to be derived from Mr. Khan even though it was as a result of his being duped.
As regards costs, so far as the bank is concerned, they shall have their indemnity costs as requested. They have acted quite properly throughout and there is no reason why they should be deprived of their full costs. As regards Mr Khan, he shall have his costs on the standard basis.
Authorities
West -v- Lazard Brothers & Ors. [1993] JLR 165.
Representation of the Viscount in the matter of PKT Consultants (Jersey) Limited (1st August, 1991) Jersey Unreported; (1991) JLR N.5.
El Ajou -v- Dollar Land Holdings Plc & Anor [1993] 3 All ER 717.
Chase Manhattan Bank NA -v- Israel-British Bank (London) Limited [1981] 1 Ch. 105.
Brindle & Cox: "Law of Payments" p.124.