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Cite as: [2017] ScotCS CSOH_148, [2017] CSOH 148

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CA45/17

OUTER HOUSE, COURT OF SESSION

[2017] CSOH 148

OPINION OF LORD BANNATYNE

In the cause

MUHAMMAD ASAD IFTIKHAR

against

CIP PROPERTY (AIPT) LIMITED

Pursuer: McIlvride QC; Balfour + Manson LLP

Defender: Walker QC; Dentons UKMEA LLP

Pursuer

Defender

5 December 2017

Introduction

[1] In this action the pursuer sought declarator that he had entered into a binding

contract of sale and purchase with the defender for 35 Argyll Street, Glasgow (“the

subjects”), that the defender is still bound by said contract and the purported resiling from

said contract of 22 December 2016 was of no effect.

The Issues

[2] The issues in the case are two in number:

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1. Whether the defender has validly resiled from the contract? (“The

contractual defence.”)

2. Is the contract unenforceable on the ground of illegality? (“The illegality

defence.”)

Background

[3] On 8 December 2016 the pursuer agreed to purchase and the defender agreed to sell

the subjects at a price of £500,000.

[4] The terms of the contract between the parties are contained in the Articles of Roup

(including Minutes of preference and enactment), addendum to the catalogue, and

completed sale memorandum (JB 1-3).

[5] The deposit of £50,000 required in terms of condition 2.6.3 was paid on 8 December

2016. The deposit was paid by means of a cheque drawn on the account of Robinco (Scot)

Limited (JB 3).

[6] The material provisions of the Articles of Roup are:

(a) “2.6.3… if the purchaser fails to pay such a deposit the Vendor may treat such

dishonour of failure as a repudiation of the contract without prejudice to the

Vendor’s right to claim damages for repudiation of the contract against the

Purchaser. The Purchaser shall be obliged to provide to the Vendor’s

Solicitor the KYC information at that (sic) on or before 15 December 2016.

Further the Vendor shall be entitled at their sole discretion to deem that the

deposit has not been paid until such time as the Vendor’s Solicitor receives

the KYC information…”

(b) “1.9 ‘KYC information’ means such information as the Vendor and the

Vendor’s Solicitors require in relation to the identity of the Purchaser and the

source of funds utilised in respect of payment of the Balance of the Price

and/or the deposit including, but not limited to, the verification certificate,

and initial due diligence form aftermentioned.”

Purchaser or the Purchaser’s Solicitor supply to the Vendor or the Vendor’s

Solicitors the KYC information (with the applicable information and/or

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documentation specified in the initial due diligence form aftermentioned) to

the Vendor’s satisfaction no later than 15 December 2016. The purchaser

warrants the accuracy of the KYC information supplied by it, or on its behalf,

to the Vendor or the Vendor’s Solicitors.”

[7] On 12 December 2016 the defender’s solicitor emailed the pursuer’s solicitor and the

terms of said email are, so far as material, as follows:

“Please, as a matter of urgency, send to me (in the post) the following AML

documentation:

1. Certified true copy passport for Muhammad Asad Iftikhar – please ensure

that, when certifying the true copy, you also confirm that the photo is a true

likeness.

2. Certified true copy utility bill for Muhammad Asad Iftikhar.

3. Completed Initial Due Diligence form – form attached

4. Completed Verification Certificate – certificate attached.” (JB 6)

[8] On 15 December 2016 at 14.28 the pursuer’s solicitor emailed the defender’s solicitor.

The terms of this email are as follows:

“I attach for your information (and confirm signed copies are in the post to you

today);

 Certified ID

 Certified proof of address

 Completed due diligence form (if I am being completely honest I am not sure

if I have completed this correctly)

 Completed certificate

Let me know if you have any issues with the attachments.

My client may also purchase the property in the name of a nominee – would there be

any issue with this provided we go through the same checks? It’s likely to be a

Limited Company in which he would be the sole director and shareholder.” (JB 17)

[9] On 15 December 2016 the pursuer’s solicitor wrote to the defender’s solicitor in the

following terms:

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“We refer to the above and enclose as undernoted.

Yours faithfully

Enc Certified ID

Completed Verification certificate and due diligence form.” (JB 12)

[10] By 15 December neither the defender nor the defender’s solicitor had received a

certified true copy of (a) a passport for Muhammad Asad Iftikhar or (b) a utility bill for

Muhammad Asad Iftikhar. In addition the utility bill provided by 15 December (which was

not a certified true copy) was addressed to: “Mrs Shaista Ghafoor and Mr Mohammed

Iftikhar”.

[11] In an email on 19 December 2016 at 15:06, the defender’s solicitor advised the

pursuer’s solicitor as follows:

“I have taken instructions and our clients want to proceed with Mr Iftikhar as the

purchaser (as opposed to a nominee company). This is due to the delay which

would be caused in waiting for the new company to be incorporated, and then our

clients repeating the AML checks. I assume your client will be able to transfer title

on to the newly incorporated company, once he has finalised the purchase.

In order for our clients to complete their AML checks, could you provide a brief

explanation as to Mr Iftikhar’s source of wealth (how has he built up his funds to

make the purchase), source of income etc, all of which could be supported by bank

statements/annual accounts (if source of wealth is reflected in company accounts?) –

personal accounts if not?” (JB 19)

[12] On 19 December 2016 the pursuer’s solicitor, in an email, replied to the above in

these terms: “My client may be obtaining finance so I am not sure if (t)hat will be possible.

Let me check.” (JB 20)

[13] In an email to the pursuer’s solicitor at 11:43 on 21 December 2016 the defender’s

solicitor advised the pursuer’s solicitor that as: “the Articles of Roup were entered into by

(the pursuer) as an individual and do not allow for (the pursuer) to nominate a company for

the purposes of the disposition” and asked whether the pursuer’s solicitor had instructions

(JB 21).

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[14] On 22 December the defender’s solicitor wrote to the pursuer’s solicitor in the

following terms:

“We refer to the Articles of Roup pertaining to the auction of 35 Argyle Street,

Glasgow at London on 8 December 2016.

On behalf of our clients, CIP Property (AIPT) Limited, incorporated under the

Companies Act (Registered Number 02405153) ... we hereby GIVE YOU NOTICE

that, due to your failure to fulfil your obligations in terms of Condition 2.6.3 of the

said Articles of Roup, our clients have now exercised their right to resile from the

contract and will not be proceeding with the sale of the property.

This letter is written entirely without prejudice to our client’s whole rights and pleas

and may not be referred to or founded upon except at our client’s sole instance.”

(JB 22)

[15] On 22 December 2016 in a further email at 14:16, the defenders’ solicitor advised the

pursuer’s solicitors as follows:

“Per the Articles of Roup your client was to provide source of funds information (as

stated within the definition of KYC information) on or prior to 15 December 2016.

This has not been provided.

Furthermore, the Articles of Roup confirm that our clients can treat the deposit as

unpaid until such time as it has received the required KYC information. On this

basis, the deposit has not been paid, and our clients are fully entitled to rescind on

that basis.” (JB 25)

[16] The defender continues to refuse to proceed with a transaction.

[17] The deposit of £50,000 paid on 8 December 2016 has been reimbursed by the

defender.

Evidence

[18] It was agreed in a Joint Minute of Admission that the affidavits of Mr Goheer (as

revised), the affidavit of Mr Turok and that of Mr Ahmed should stand as their evidence in

the case. Mr Anthony Christie gave evidence and in the course of this adopted his two

affidavits. He was not cross-examined.

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[19] The only other witness was Mr Anthony Besford-Land who gave evidence on behalf

of the defender. He adopted his affidavit (No 6 in the Joint Bundle).

[20] He is presently employed as a Senior Financial Crime Analyst by Aviva Investors

Global Services Limited (“AIGSL”), being part of the Aviva Group. He is a member of the

Financial Crime Compliance Operations Team. This involves him in particular dealing with

Know Your Own Client (“KYC”) and Anti Money Laundering (“AML”) issues. The

defender is a Property Unit Trust (investment fund) for which AIGSL provides portfolio

management services.

[21] He described the purpose of the KYC/AML due diligence in the context of a property

transaction such as that in the present case as follows. Pursuant to the statutory scheme

(provided by the Money Laundering Regulations 2007, the Proceeds of Crime Act 2002 and

the Terrorism Act 2000), AIGSL is under a strict obligation to : (a) ensure that the business is

not entering into a transaction with any sanctioned body (individual or entity); (b) to

identify if any Politically Exposed Persons are involved in the transaction (which elevates

the risk level); (c) to identify any “Amber”, “Red” or “Black” jurisdictions within the

structure; (d) to identify who the counterparty is in order to ascertain requirements and a

related risk; (e) to establish the nature and purpose of the transaction; (f) to establish

whether this is a clear rationale for the transactions and structure; (g) to identify source of

funds and how wealth has been generated (for medium and high risk cases) to ensure that

funds are not illicit; and (h) to ascertain the likelihood of credit or reputational risk to the

business (in accordance with AIGSL’s risk-based approach).

[22] He had been in charge of the KYC/AML aspects in the present transaction. From

paragraphs 12 to 23 of his affidavit he set out the concerns from a KYC/AML due diligence

process that arose regarding the pursuer.

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“12. The Initial Consideration template stated that the prospective purchaser of

35 Argyle Street (“the Property”) was also the current tenant at the Property

Although I did not know this at the time, I subsequently became aware that

Clare Andrews and Harry Spooner had also been advised by the Auctioneers

which had dealt with the sale, Acuitus, that Mr Iftikhar was somehow

involved with the tenant at the Property. In this regard, I note that in the

Summons, at Article 4, the Pursuer states that: ‘the pursuer is, through

another company, the current occupier of the subjects.’ The first AML issue

that I needed to resolve therefore was the identity of the purchaser (ie was it

Mr Iftikhar or was it the current tenant, Wickton Limited.) As I describe at

paragraph 29 below, we have not yet managed to get comfortable with the

nature of the relationship between Mr Iftikhar and Wickton Limited. I had,

on 12 December 2017, carried out searches on Wickton Limited at Companies

House and ascertained that its sole director and shareholder was a Mr Ali

Sameer. It had its registered office at (“A”) and not at the property. I

therefore asked my Colleagues Clare Andrews and Harry Spooner on

12 December for confirmation of the identity of the purchaser.

13. On 14 December 2016, at 22:15, I received an email from Craig Turok of

Maclay Murray & Spens LLP (“MMS”) (See 7/10 of Process). MMS had been

instructed by AIGSL to act on its behalf in the sale of the property. I

understood from Craig’s email that the purchasing entity was to be Robinco

(Scot) Ltd (Company No: (SCS525903) having its registered office (also

at “A”). I was told that Mr Iftikhar was the sole director of Robinco (Scot) Ltd

(and I later learned that Robinco (Scot) Ltd, and not Mr Iftikhar, had paid the

deposit of £50,000). Craig indicated that he had requested the following

documents from the purchaser’s solicitors: (i) certified true copy passport for

Muhammad Asad Iftikhar; (ii) certified true copy utility bill for Muhammad

Asad Iftikhar; (iii) completed Initial Due Diligence Form; and (iv) completed

Verification Certificate. I responded to Craig, by email, on 15 December at

10:51 (see 7/14 of process) to advise that once I was in receipt of the

supporting documents, I would be in a position to submit the KYC. I copied

my email to my colleagues Clare Andrews and Harry Spooner. This is by no

means the final step in the KYC/AML due diligence process. Once in receipt

of the documents I requested, I would then review them and assess whether

there are any further AML/KYC issues which need to be addressed.

14. I was out of the office on Friday 16 December 2016. I received an email from

Craig Turok at MMS (copied to Clare Andrews and Harry Spooner) on 19

December, at 09:36, attaching a copy of the supporting documents which had

been sent to MMS by Mr Iftikhar’s solicitors, Austin Lafferty (see 7/12 of

Process). Copies of these documents are at 6/5, 6/7 and 6/8 of Process. Upon

reviewing the documents attached to Craig’s email, I saw that the letter from

Scottish Power provided (included at 6/8 of process) was addressed to

‘Mohammad Iftikhar’ and did not accord with the name on the Pursuer’s

passport, being ‘Muhammad Asad Iftikhar’. I also saw that the letter from

Scottish Power was dated 6 May 2016, being a date more than 7 months prior

to the date on which the documents was provided. Aviva requires that a

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document vouching a counterparty’s address is dated within 6 months of the

date on which it is provided. Craig also advised that – despite having

provided documents relating to Mr Iftikhar – Austin Lafferty had enquired

about the possibility of Mr Iftikhar using a newly incorporated company (of

which Mr Iftikhar would be the sole director and shareholder) – as the vehicle

for the purchase. This was an issue from an AML perspective as it

introduced the possibility of involvement by another entity which had not yet

even been incorporated. It goes without saying that it is only possible to

carry out KYC/AML due diligence in respect of an entity which actually

exists. It is also the case that persons engaged in money laundering will often

make (or seek to make) last minute changes to the parties involved in a

transaction. I was, in particular, concerned to know why it was that

Mr Iftikhar wanted to use an entirely new company, in circumstances where

he already had a corporate vehicle available (Robinco (Scot) Limited.)

15. In his email of 19 December 2016, at 09:36 (see 7/12 of Process), Craig Turok

advised that the sale contract (the Articles of Roup) did not entitle Mr Iftikhar

to nominate a corporate vehicle as the acquiring entity. A decision was

ultimately taken by AIGSL (Clare Andrews) on 19 December that it was only

prepared to sell to Mr Iftikhar and not a corporate nominee. The reasons

behind this decision were: (i) AIGSL was not contractually obliged to sell to a

third party; (ii) a change would cause delay to the completion of the

KYC/AML due diligence process (and possibly to the transaction generally);

and (iii) AIGSL was concerned as to the number of relevant parties involved

for the purposes of KYC/AML due diligence (and the relationships between

them) and did not want matters complicated still further.

16. It was imperative, for the purposes of carrying out KYC/AML due diligence,

for me to know the identity of the acquiring entity. Once it was confirmed

that the purchaser was Mr Iftikhar – having reviewed the documents at 6/5,

6/7 and 6/8 of Process – I reached the view that (because the purchaser was a

private individual) we also needed an explanation of Mr Iftikhar’s source of

wealth (ie how had he built up the funds necessary to make the purchase).

We would also need to see suitable vouching (eg personal bank statements or

annual accounts (if Mr Iftikhar’s source of wealth was reflected in Company

accounts rather than personal bank accounts)). This information and

vouching is required for all transactions, irrespective of whether the

purchaser is a private individual or a corporate entity. But, in respect of

corporate entities, it is often (but not always) possible to be satisfied as to a

purchaser’s source of wealth/source of funds from publically available

documents (eg accounts lodged at Companies House). This is obviously not

possible in relation to most private individuals. Until 19 December 2016, I

did not know whether I was dealing with a company or a private individual

as the purchaser. I had initially thought that the purchaser was to be Robinco

(Scot) Limited and that accounts would therefore be available on Companies

House in respect of this company. It was for this reason I did not explicitly

request sight of information pertaining Mr Iftikhar’s source of wealth and

source of funds prior to 15 December. Transactions involving private

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individuals are always graded at least medium risk. Source of wealth/source

of funds information and vouching are always required in respect of medium

and high risk transactions. Source of wealth/source of funds is very

important because AIGSL must be satisfied that a purchaser has a legitimate

source of funds which will be used in respect of a transaction (whether that is

accumulated capital or borrowed funds).

17. I am shown the documents at 6/5 (Initial Due Diligence Form), 6/7

(Verification Certificate) and 6/9 (copy material docquetted to the Verification

Certificate) of Process. I am asked whether these documents were sufficient

to allow the Defender to be satisfied as to the identity of the purchaser and

the source of the funds to be utilised in the transaction. I can confirm that

they were not. Specifically, no information was provided in relation to

Mr Iftikhar’s source of wealth/source of funds. The Initial Due Diligence

Form is always the starting point in the process. It is the platform which we

use for working out what else we need to know. The Verification Certificate

and accompanying vouching simply confirmed that Mr Iftikhar was the

person shown in the passport provided. There was, as I have explained more

fully at paragraph 14 above, a discrepancy in the name shown on the utility

bill. More information and supporting documentation was needed in respect

of Mr Iftikhar’s source of wealth/source of funds.

18. I am shown an email from Craig Turok at MMS to Omair Ahmed at Austin

Lafferty on 19 December 2016 and timed at 15:06 (7/3 of Process). I see that

Mr Turok writes: ‘in order for our client to complete their AML checks, could

you please provide a brief explanation as to Mr Iftikhar’s source of wealth

(how has he build up his funds to make the purchase), source of income etc,

all of which could be supported by bank statements/annual accounts (if

source of wealth is reflected in company accounts?) – personal accounts if

not?’ I can confirm that the form of words used by Craig in his email

reflected a form of words which I had prepared for him earlier that day. I am

shown a copy of Omair Ahmed’s email in response dated 19 December 2016

and timed at 15:16 (7/4 of Process). Mr Ahmed writes ‘[M]y client may be

obtaining finance so I’m not sure if hat [sic] will be possible. Let me check’.

This is a source of concern and a red flag from an AML perspective. It

suggests that information and supporting vouching was not available in

respect of Mr Iftikhar’s source of wealth/source of funds. I find this

surprising, since Mr Iftikhar had bid for the property at auction and I would

have expected him to have had the necessary funds in place at the time of

bidding. I would also have expected Mr Iftikhar’s solicitors to be aware of

this source of funds.

19. By 19 December, I had become sufficiently concerned about the

circumstances of this transaction to have recourse to a MLSB, Cherilyn Owen.

I talked her through the events to that point and her advice was that I was

correct to have cause for concern. She recommended that I carry out

‘screening checks’ in respect of all relevant parties. Those were: Muhammad

Asad Iftikhar; Ali Sameer; Wickton Limited; and Robinco (Scot) Limited. I

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duly carried out searches using the ‘Oracle Watch List’ system to which

AIGSL subscribes. These searches produced one adverse media entry in

respect of Ali Sameer – but I was able to negate this on the basis of the

information available to me (ie I was able to be satisfied that the Ali Sameer

described in the adverse media report was not the Ali Sameer with whom I

was concerned). The searches produced seven adverse media reports in

relation to ‘Muhammad Iftikhar’ (and various alternative spellings thereof).

(The nature of these are set out in the statement). I could not negate these

adverse media reports based upon the information available to me. (These

could not be negated for reasons set out in the statement).

20. On 21 December 2016, I remained very concerned about this transaction. No

information had been received by us in relation to Mr Iftkihar’s source of

funds/source of wealth. This – together with the adverse media reports – had

caused the transaction to be categorised as ‘high risk’. Consequently, it was

escalated to the GFCCT (second line). There was a series of consultations

between me, the MLSB (Cherilyn Owen) and AIGSLs MLRO (Steve

Hyndman) on or around 21 December 2016. The combination of no

information on source of funds and adverse media reports which we could

not negate led us to the conclusion that the transaction carried a significant

degree of risk.

21. On 22 December 2016 I updated Clare Andrews on the upshot of my

consultation with Cherilyn Owen and Steve Hyndman on 21 December.

Ultimately, it is for the business to take a decision on whether or not to proceed

with a transaction based upon the perceived level of risk. In light of the advice

provided by FCCOT (first line) and GFCCT (second line), to the effect that the

transaction involved a significant degree of risk, a decision was taken not to

proceed with the transaction on the basis that we were not contractually

obliged to do so in the circumstances, and in any event, we felt that AIGSL

could not proceed with the transaction, in light of its statutory duties.

Ultimately, the decision not to proceed was taken by Tony Christie, Senior

Director – Head of Retail, AIGSL. Clare Andrews reported to Mr Christie.

22. I am shown a copy of a latter from MMS to Mr Iftikhar (and copied to Austin

Lafferty) dated 22 December 2016 (6/11 of Process). I can confirm that this

letter was issued following a decision by the Defender not to proceed with

the transaction on the basis of the unsatisfactory outcome of the KYC/AML

due diligence process.

23. The Defender remains dissatisfied with the information and vouching which

it has been provided with regarding Mr Iftikhar’s identity and the source of

the funds to be utilised in the transaction.”

[23] Later in his affidavit Mr Besford-Land dealt with a later attempt by the pursuer to

provide satisfactory KYC/AML information and said this:

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“27. I am shown a copy of Austin Lafferty’s letter to MMS dated 31 March 2017

and the attachments thereto (6/18 of Process). I can confirm that this letter

(and the enclosures) did not satisfy the Defender’s KYC/AML concerns. The

concerns which the Defender continued to have are set out in the undernote

to MMS’ letter to Austin Lafferty of 7 April 2017 (6/19 Process). I can confirm

that I drafted the wording of the undernote to this letter (in conjunction with

my colleagues at AIGSL).”

Mr Besford-Land was cross-examined, however, as far as I can identify, he did not depart

from the terms of his affidavit. In submissions it was not suggested that he had departed

from his affidavit.

[24] The pursuer adopted his affidavit. In the course of his evidence only one matter of

any significance arose: In the pursuer’s pleadings at Article 4 this is observed:

“As hereinbefore condescended upon the pursuer is, through another company, the

current occupier of the subjects. He has a substantial business interest there and is

anxious to secure that interest because the licence is from month to month and

provides no security of tenure.”

In his affidavit he gave a wholly different account regarding this issue:

“Sameer Ali was occupying (the subjects) through his limited company Wickton

Limited on a short term month to month licence. They had the licence signed and

moved in on 3 December…” (see: para 4)

He accepted what was said in the pleadings at Article 4 was incorrect but gave no proper

explanation as to how this averment had come to be made or why it remained his position

on record when it was incorrect.

Submissions on Behalf of the Pursuer

[25] The first chapter of Mr McIlvride’s submissions dealt with the defenders’ contractual

defence.

[26] The first issue requiring determination was this: the proper construction of

Condition 1.9 of the Articles of Roup, and in particular the meaning of the expression “such

information as the vendor and the vendor’s solicitors require.” It was his position that the

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normal and ordinary meaning of the expression is that it refers to such information as the

vendor or its solicitors have required or insisted that the purchaser provides. He submitted,

that the foregoing construction is supported by consideration of Condition 1.9 in the context

of the contract as a whole. Condition 1.9 refers to “the verification certificate and initial due

diligence form aftermentioned.” Condition 2.39 then provides that the purchaser is obliged

to procure that his solicitor delivers to the vendor’s solicitor a completed verification

certificate, an initial due diligence form in the form of the drafts annexed to the Articles of

Roup duly executed by the purchaser’s solicitor on or prior to the settlement date.

[27] Thus the terms of the contract oblige the pursuer to complete and supply the KYC

information identified by the defender in those forms. The imposition of that obligation is

entirely consistent with the parties having contemplated that it was for the defender to

determine and intimate what KYC information it considered it necessary for the purchaser

to provide. He submitted that that position remains the case notwithstanding that the

combined effect of Conditions 1.9 and 2.6.3 is to oblige the purchaser to provide KYC

information required of it by the defender by 15 December 2016 whereas Condition 2.39

only imposes an obligation to do so by the settlement date.

[28] It was his position that the alternative construction advanced on behalf of the

defender is wrong in that it does not give effect to the natural and ordinary meaning of the

words employed in Condition 2.6.3. Had it been intended that the purchaser would be

required to provide by 15 December 2015 all information that the defender was under a legal

obligation to obtain it would have been easy to frame a stipulation to that effect, that was not

the way the stipulation was worded.

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[29] Secondly, the defenders’ construction is not how the expression would have been

understood by the reasonable man who was aware of the facts known or reasonably

available to the parties at the time they contracted.

[30] In elaboration of that position he argued: the reasonable bystander would have been

aware only that this was an arms-length transaction for the sale of a single heritable

property. He would not have understood there to be any money laundering obligations

incumbent upon the defender by reason of membership of an undisclosed corporate

structure or scheme, which as he understood it was the basis upon which it would be argued

by the defender that such money laundering obligations arose. In those circumstances he

would not have understood the words used in Condition 1.9 as meaning it was for the

purchaser to procure that he provided to the defender all information which the defender

was obliged in law to obtain by virtue of being part of such a corporate structure or scheme.

[31] Thirdly, the defender proposed construction is inconsistent with the terms of the

contract as a whole. If the pursuer was in fact under an obligation to work out what

information the defender required as a matter of law to obtain and thereafter to provide that

information to the defender by 15 December whether or not the defender had made any

request for it, there would have been no reason for the defender to prepare an Initial Due

Diligence Form and Verification Certificate identifying information it required the purchaser

to provide, and for it to be an express condition of the contract that the purchaser was to

procure that those forms were to be completed and executed by his solicitor and delivered to

the defender’s solicitor.

[32] On the basis that on their proper construction conditions 2.6.3 and 1.9 entitled the

defender to resile if the pursuer had not by 15 December provided such KYC information as

the defender had required of him, the defender purported exercise of its option to bring the

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contract to an end does not satisfy the conditions on which that power can be exercised. The

information requested prior to 15 December was the information to be provided by

completion of the defender’s due diligence form and verification certificate. That

information was provided to the defender’s solicitor by email on 15 December 2016. No

complaint has been made by the defender regarding that information.

[33] Insofar as the defender’s agents had in their email of 12 December also requested

vouching or evidence in support of the information to be provided (in the form of certified

copies of the pursuer’s passport and a utility bill), that evidence did not amount to “KYC

information” within the meaning of condition 1.19. A failure to provide those certified

copies by 15 December accordingly gave rise to no entitlement on the part of the defender to

resile although those certified copies were in fact provided by email on 15 December with

hard copies being posted to the defender’s agents on the same date. Both the expression

“KYC information” in itself and the definition in condition 1.9 “means such information as

the Vendor and the Vendor’s solicitors require” make it plain that the obligation incumbent

on the pursuer extended to information only and not to documentary evidence.

[34] The defender was entitled validly to resile from the contract only if there was strict

compliance with the contractual conditions for the exercise of that power. The right to resile,

and thus unilaterally bring the contract to an end, could be exercised only if the pursuer had

by 15 December 2016 failed to provide all KYC information required by the defender. It is

nothing to the point that the defender, through its agents, requested the pursuer in an email

dated 19 December 2016 to provide further “source of wealth information.” It is plainly

implicit in the terms of condition 2.6.3 that for the defender to resile on the ground that

information had not been provided by 15 December the information must have been

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required on or before 15 December. The defender’s purported rescission in terms of

condition 2.6.3 was of no effect.

[35] The further contractual provision now relied upon by the defender is condition 2.6.6

(set out in full in paragraph [6], above). He argued that the defender had no entitlement to

refuse to convey title to the property to the pursuer on the basis of that condition. Condition

2.6.6 makes settlement of the transaction conditional on the pursuer providing “the KYC

information (with the applicable information and/or documentation specified in the initial

due diligence form aftermentioned) to the defender’s satisfaction no later than 15 December

2016.”

[36] For the reasons set out above it is submitted that the pursuer did provide the KYC

information to the defender by that date. However, condition 2.6.6 also makes settlement

subject to the pursuer providing such documentation as was specified in the initial due

diligence form. The documentation specified in the initial due diligence form was a

“certified copy of passport (or similar identity document) and country of domicile”: [JB 13].

That documentation was provided to the defender’s agents by the pursuer’s agents with the

email and letter of 15 December as the pursuer’s agents provided certified copies of the

pursuer’s UK passport and of his driving licence containing details of his place of residence:

[JB 15].

[37] As condition 2.6.6 does not stipulate the form in which the documentation is to be

provided it is submitted that the delivery of the certified copy documents electronically was

sufficient to comply with the requirements of the condition. If, contrary to that submission,

only hard copies of the documents satisfied the requirements of condition 2.6.6 the defender

has no entitlement to refuse performance of the contract on that ground as (a) providing the

hard copy documents by 15 December was not of the essence; (b) it is a matter of agreement

Page 16 ⇓

that the hard copy documents were received by the defender’s agents on 19 December; and

19 December of the essence of the contract.

[38] Insofar as condition 2.6.6 stipulates that the relevant information and documentation

is to be supplied by the purchaser “to the Vendor’s satisfaction” the evidence establishes

that the defender clearly was satisfied. On 19 December 2016 at 15.06 hours Mr Turok of the

defender’s agents emailed the pursuer’s agent to say “I have taken instructions and our

clients want to proceed with Mr Iftikhar as the purchaser.” That the email confirming the

defender’s wish to proceed was subsequent to the receipt of the hard copy documents sent

by the pursuer’s agents can be inferred from the time of the email and from the fact that in

the same email Mr Turok said “In order for our clients to complete their AML checks, could

you provide a brief explanation as to Mr Iftikhar’s source of wealth…” [JB 19]. Mr Turok

also confirmed in evidence that the defender “was minded to proceed with the sale to [the

pursuer]” at that time; (see: paragraph 13 of Mr Turok’s affidavit (No 16 of process)).

[39] Subsequently, on 21 December Mr Turok sent a further email to Mr Ahmed in which

he stated that the Articles of Roup were entered into by Mr Iftikhar as an individual and did

not allow him to nominate a company for the purposes of the disposition. He then asked

“Do you have instructions?”, ie instructions to proceed with the transaction: see, Mr Turok’s

statement to that effect at paragraph 15 of his affidavit. In fact there was no obligation on

the pursuer or his agents to confirm that the pursuer intended to proceed with the

transaction on the basis title would be conveyed to the pursuer as an individual. The

pursuer was already contractually bound to do so. Nevertheless this email implicitly

confirms the defender’s willingness to proceed with the transaction having had sight of the

documents supplied by the pursuer.

Page 17 ⇓

[40] With respect to the illegality defence Mr McIlvride said this: the illegality defence as

he understood it was this: the transaction would be illegal as in doing so the defender

would, through failings on the part of the pursuer, be acting incompatibly with the duties

incumbent upon it under the Money Laundering Regulations 2007 (“the 2007 Regulations”).

Thereafter Mr McIlvride proceeded to take the court through what he submitted were the

relevant provisions in terms of the 2007 Regulations. He first referred to Regulation 11(1)

which provides as follows:

“(1) Where, in relation to any customer, a relevant person is unable to apply

customer due diligence measures in accordance with the provisions of this

Part, he-

(a) must not carry out a transaction with or for the customer through a

bank account;

(b) must not establish a business relationship or carry out an occasional

transaction with the customer;

(d) must consider whether he is required to make a disclosure by Part 7 of

the Proceeds of Crime Act 2002 or Part 3 of the Terrorism Act 2000.”

He submitted that the transaction in the instant case was in terms of this regulation an

occasional transaction.

[41] Thereafter Regulation 7(1) described when a relevant person must carry out

“customer due diligence measures”:

“(1) Subject to regulations 9, 10, 12, 13, 14, 16(4) and 17 a relevant person must

apply customer due diligence measures when he-

(a) establishes a business relationship;

(b) carries out an occasional transaction;

(d) doubts the veracity or adequacy of documents, data or information

previously obtained for the purposes of identification or verification.

Page 18 ⇓

(2) Subject to regulation 16(4), a relevant person must also apply customer due

diligence measures at other appropriate times to existing customers on a risk-

sensitive basis.”

[42] He went on to submit that in considering Regulation 7(1) it was material to consider

the terms of Regulation 17 which provides:

“(1) A relevant person may rely on a person who falls within paragraph (2) (or

who the relevant person has reasonable grounds to believe falls within

paragraph (2)) to apply any customer due diligence measures provided that-

(a) the other person consents to being relied on; and

(b) notwithstanding the relevant person’s reliance on the other person, the

relevant person remains liable for any failure to apply such measures.

(2) The persons are…

(i) an auditor, insolvency practitioner, external accountant, tax adviser or

independent legal professional; and

(ii) supervised for the purposes of these Regulations by one of the bodies

listed in Schedule 3…”

He drew to the court’s attention that relevant persons include “independent legal

professionals” (see: Regulation 3(1)(d)). It was not disputed that the pursuer’s solicitor was

such a legal professional.

[43] He then moved to the terms of Regulation 5 which provides:

“’Customer due diligence measures’ means-

(a) identifying the customer and verifying the customer’s identity on the basis of

documents, data or information obtained from a reliable and independent

source;

(b) identifying, where there is a beneficial owner who is not the customer, the

beneficial owner and taking adequate measures, on a risk-sensitive basis, to

verify his identity so that the relevant person is satisfied that he knows who

the beneficial owner is, including, in the case of a legal person, trust or similar

legal arrangement, measures to understand the ownership and control

structure of the person, trust or arrangement; and

Page 19 ⇓

relationship.”

Having reviewed the regulatory framework it was Mr McIlvride’s position that if the

defender implemented the contract this would not involve any illegality on its part.

[44] In support of that proposition Mr McIlvride advanced a series of arguments:



Firstly, the duty to carry out “customer due diligence measures” is imposed

upon those who are a “relevant person”. The defender is a Trust corporation

acting solely as a nominee for the property securities of the Aviva Investors

Property Trust and is a wholly-owned subsidiary of the Trustee of the Trust,

Citibank Europe Plc. Against that background it was his position that it does

not amount to a “relevant person” in terms of Regulations 3 and 4.



He emphasised that this argument did not mean that a limited company

which is a “relevant person” can evade its responsibilities under the

2007 Regulations by incorporating a subsidiary which transacts the parent

company’s business as a nominee. That is because if the subsidiary

undertakes the type of financial activity which makes the parent company a

“relevant person”, within the meaning of Regulation 3 the subsidiary will, by

undertaking that business, itself be a “relevant person”. The Regulations do

not impose “relevant person” status on nominees or subsidiaries regardless of

the activities they undertake. An example to illustrate this was an investment

company which is a “relevant person” may purchase a supermarket chain and

incorporate a nominee but that does not mean each transaction between the

subsidiary and the customer at the checkout is made subject to the

Regulations.

Page 20 ⇓



Secondly, the duty of customer due diligence is incumbent upon it only in

relation to a “customer”. That term is not defined in the Regulations but it is

submitted that in its normal and ordinary meaning “customer” is a person

who transacts with a supplier of goods or services. In any event, the pursuer

cannot sensibly be characterised as a “customer” of the defender simply by

reason of having entered into an arms-length transaction to purchase a single

heritable property. One would not describe an individual who is the

purchaser of a house as the “customer” of the individual who sells.



Thirdly, in any event the defender can proceed with the transaction without

illegality as it is in terms of Regulation 17 entitled to rely upon the pursuer’s

agents having applied customer due diligence measures. In the signed

verification certificate provided to the defender the pursuer’s agents certified

they had carried out client verification checks that comply with the UK

Regulations and that they had complied with the money laundering

obligations imposed by the UK Regulations. They did so in circumstances

where that certificate contained a provision that the defender considered it

was the responsibility of the pursuer and his agents, as his UK solicitors, to

ensure compliance, thus indicating by completing and submitting the

certificate that they consent to being relied upon: [JB 14].

It was his position that the defender is entitled to proceed with the sale without illegality in

circumstances where it can rely upon the pursuer’s agents who carried out the necessary

customer due diligence.

[45] Even if all of the preceding submissions were wrong he argued that the pursuer had

complied with Regulation 5.

Page 21 ⇓

[46] The first of those measures is identifying the customer on the basis of documents,

data or information obtained from a reliable and independent source. They have obtained

copies, certified by solicitors as true copies, of the pursuer’s passport and driving licence,

each of which has a photograph of the pursuer.

[47] The second of the measures specified in Regulation 5 is not of relevance here as it

applied only where the transaction involves a beneficial owner of an entity who is not the

“customer”.

[48] The third specified measure is obtaining information on the purpose and intended

nature of the business relationship. That measure is not necessary in the circumstances of

this case as the parties have never had or expected to have a “business relationship” as

defined in Regulation 2 but in any event the defender has already obtained the relevant

information as the contract the parties have concluded makes it clear that the purpose of the

relationship is the pursuer’s acquisition of the property at an agreed price and the intended

nature of the relationship is one of buyer and seller.

[49] The Regulations do not impose an obligation to obtain evidence of the “source of

funds” intended to be used in payment of the purchase price but in circumstances where the

evidence has made it clear that the pursuer has not yet obtained the funds which will be

used to make payment it is difficult to see how there could be any basis for a finding that this

issue gives rise to any illegality.

The Reply on Behalf of the Defender

The Contractual Defence

[50] Mr Walker first set out his position, assuming the pursuer’s construction regarding

the word “required” is correct. It was his position that this did not avail the pursuer at all.

Page 22 ⇓

[51] The pursuer founds on the definition of “KYC information” and contends that

properly interpreted this clause means that it is for the defender to “require”, in the sense of

“to demand”, specific KYC information from the pursuer.

[52] The pursuer contends that this means that a demand for specific information must be

made, information must then be provided and it is only where the defender is dissatisfied

with what has been provided that the defender can resile.

[53] He went on to submit that even if that construction is correct, the defender was on the

facts, entitled to resile.

[54] In development of this argument he began by referring to the email of the defenders’

solicitor of 12 December 2016, which is set out in full in this Opinion at paragraph [7]. This

required four items to be produced:

1. A certified true copy passport for Muhammad Asad Iftikhar.

2. A certified true copy utility bill for Muhammad Asad Iftikhar.

3. Completed Initial Due Diligence Form.

4. Completed Verification Certificate.

[55] In so far as it might not have been crystal clear that it required originals, not copy

documents, that “requirement” also made express reference to these documents being issued

“in the post”.

[56] Giving the email a fair reading, it is clear that the defender’s solicitor “required” all

four of these documents to be originals, not copies. Mr Turok’s agreed affidavit explains that

originals were indeed what he was looking for.

[57] This is most clearly seen in relation to the first 2 items which are expressly described

as “certified true copies”. This amounts to a very clear and express “requirement” for the

documents to be properly certified, not copy certified copy documents.

Page 23 ⇓

[58] That is how any reasonable reader would understand Mr Turok’s email. Were it

otherwise the words “in the post” would have no significance and the words “certified

copy” would mean something other than what those words would ordinarily be understood

to mean. In effect, “certified copy” would mean “copy certified copy” – which makes no

sense at all.

[59] However, it also applies to the Verification Certificate – which had to be signed by

the solicitor.

[60] It does not appear to be in dispute that the Articles of Roup required that the KYC

information was to be produced by close of business on 15 December 2016.

[61] Accordingly, he submitted that, if “require” means what the pursuer contends it

means, what was “required”, namely original certified copy passport, original certified copy

utility bill, original completed initial due diligence form and original completed certification

certificate were not produced in time.

[62] Furthermore, it is not in dispute that one of the items specifically required by

Mr Turok was not provided at all. That was the certified true copy utility bill for

“Muhammad Asad Iftikhar”. What was provided was a copy certified copy utility bill in a

different, albeit similar, name.

[63] So, even on the pursuer’s approach to construction of the Articles, his case is

fundamentally flawed. He did not produce what was “required” within the contractual

deadline of 15 December 2016.

[64] The second chapter of Mr Walker’s argument was to address the issue of the correct

meaning of “require” in Clause 1.9. It was his position that properly understood in its

context, “require” in that Clause means exactly what it says. It does not mean “demand” as

the pursuer contends.

Page 24 ⇓

[65] He submitted that in considering this question that the key clauses of the Articles of

Roup were (1) Clause 1.9, (2) Clause 2.3.3 and (3) Clause 2.3.6.

[66] He further submitted the word “require” had to be construed (as did the Articles of

Roup generally) in light of the clear common intention of the parties to align the contract

with the then current AML law, namely: the 2007 Regulations (see: the terms of Clause 1.9

of the contract and the blank verification certificate which is incorporated into the Articles of

Roup).

[67] He then submitted on the basis of the foregoing that read together, and in the context

of the 2007 Regulations, the three relevant clauses of the Articles of Roup provide the

defender with a complete, unfettered discretion in relation to whether or not whatever the

pursuer provides is enough to satisfy the defender from an AML perspective. The onus is on

the pursuer, not the defender, to produce evidence of his identity and source of funds. It is

not on the defender to list out specific items of evidence that it “requires”. Instead, whether

or not what the pursuer has produced is sufficient is to be judged, after the fact of it being

produced, at the sole discretion of the defender.

[68] It was his submission that such a construction made common sense. In addition

critically it accorded with the 2007 Regulations in that from the terms of Regulations 5 and 7,

in particular Regulation 7(3) it is clear that the Regulations provide discretion to the

“relevant person”.

[69] It is for the relevant person to determine the extent of customer due diligence that

should be applied to the transaction, based on a risk-sensitive assessment.

[70] Furthermore, in terms of Regulation 14(1), if he needs to adopt Enhanced Due

Diligence (“EDD”), it is for the relevant person to assess that EDD on a risk sensitive basis.

So, again, we see discretion being injected into the process.

Page 25 ⇓

[71] This all sits alongside Regulation 11 which imposes an obligation on the relevant

person not to carry out a transaction where the relevant person is unable to apply customer

due diligence. The level of appropriate customer due diligence that needs to be applied is

particular to each customer and is a matter for the relevant person to assess. As such, the

onus is on the relevant person to decide what is required to satisfy him that all is well and, if

he cannot obtain such satisfaction, he must not transact.

[72] This is also very clearly reflected in the applicable guidance issued by the Joint

Money Laundering Steering Group (“JMLSG”). It is noteworthy that that guidance is

expressly referred to in the draft Verification Certificate which is, in turn incorporated into

the Articles of Roup (JB 1, pp 18 & 20). So, the Articles of Roup must be interpreted in light

of the JMLSG Guide.

[73] Mr Walker also referred to Chapters 4 and 5 of the JMLSG Guide. These set out the

aims and approach to AML for an institution such as the members of the Scheme in this case.

In particular, the following paragraphs appear to be particularly relevant to this case: 4.4,

4.13, 4.15, 4.16, 4.29, 4.31, 4.45, 4.46, 5.3.1 – 5.3.4 (incl), 5.3.6, 5.3.29, 5.3.32, 5.3.33, 5.3.36, 5.3.38.

[74] The JMLSG Guidance envisages information being gathered and assessed. That

information will then generate a risk categorisation low/medium/high (para 4.16). If the

information or other information (such as screening checks) the relevant person obtains

result in him being unable to apply the level of CDD that the relevant person considers is

appropriate, he is obliged, by Regulation 11 not to transact (also see JMLSG Guide para 4.21).

[75] That is all duly reflected in the Articles of Roup which introduce discretion by the

terms of clause 2.6.6 and 2.6.3.

[76] Clause 2.6.6 expressly states that the AML documentation supplied must be “to the

Vendor’s satisfaction”. If satisfactory information is not supplied then, in terms of

Page 26 ⇓

clause 2.6.6, the Vendor, in its sole discretion, can treat the deposit as unpaid and repudiate

the contract.

[77] Thus he submitted for the provisions in the Article of Roup to work alongside the

Regulations and the guidance there is only one possible interpretation of “require” that

makes sense. That is the interpretation suggested by him, where the onus is on the pursuer

to put together a package of information and submit it, by 15 December 2016, and for the

defender to then assess that and decide, in its sole discretion, if it is satisfactory. If it is not

satisfactory, the defender can resile.

[78] He then turned to the pursuer’s suggested construction of “require” and made two

submissions: (a) it makes no commercial sense and (b) it does not accord with the

2007 Regulations and the applicable guidance.

[79] In expansion of this argument he said this:

[80] The pursuer contends that “require” means “demand”. He says that the defender

must demand whatever it needs before 15 December 2016. Then, on his analysis, the pursuer

can submit that information at any time up to the end of 15 December 2016. Thereafter,

again on his interpretation, the defender cannot ask for anything else and must transact if

whatever has been demanded has been produced unless there is something objectionable

about it, even if more information is required in order for the defender to be satisfied about

AML matters and even if the defender is in possession of adverse media hits which it cannot

negate (as is the case here).

[81] Critically, the pursuer says that the defender did not “require” any source of funds or

source of wealth evidence before 15 December 2016 and so, regardless of any concerns it may

have had, cannot complain that no source of funds or source of wealth information was

Page 27 ⇓

provided. Further, he contends that any further request for source of funds and source of

wealth information (as was made on 19 December) would come too late.

[82] If that interpretation were correct, it would make it impossible for the defender to

operate in accordance with the Regulations and the Guidance.

[83] The defender would have one shot at listing all the information it might need. The

pursuer could then produce that at 11.55pm on 15 December 2016 (on his argument by email

and containing spelling inconsistencies). There would be no opportunity for the defender to

refuse to proceed if, upon considering the information it decided that it should have required

something more of if the defender had obtained its own adverse screening hits which it

could not negate. The defender would be obliged to transact even though doing so would

put it in breach of Regulation 11.

[84] That is clearly not commercially sensible and fundamentally does not accord with the

clear aim of this contract – ie to permit the defender to obtemper its AML obligations under

the then current 2007 Regulations.

[85] Of course, the defender was not obliged to resile immediately on 15 December 2016.

Not only would that not accord with the contract, but it would also not accord with ‘the 2007

Regulations’. The defender had to have time to actually consider what was provided to it

(on the last day permitted). Having considered it, together with the circumstances in which

it was provided (ie along with an 11th hour request to change the Pursuer to a non-existent

corporate vehicle), the defender afforded a further opportunity to the pursuer to produce

more information. Despite the package of KYC information being inadequate on

15 December 2016, the pursuer sought more information on 19 December 2016. However,

the defender then obtained negative media results which it was unable to negate and so, on

22 December 2016, exercised its option to resile.

Page 28 ⇓

[86] The third detailed chapter of Mr Walker’s submissions, in terms of the contract

defence related to the issue of unsatisfactory information and proceeded first on the basis of

the defender’s construction of KYC information and secondly on the basis of the pursuer’s

construction. It was his position that on either basis the defender was entitled to resile. With

respect to the first part of his argument he developed his submission in this way.

[87] The Articles of Roup give the defender unfettered discretion to decide whether what

had been provided was satisfactory. The defender was not satisfied with the KYC

information provided. That is clear from the affidavit of Anthony Besford-Land and his oral

evidence in chief and in cross.

[88] He clearly explains why that was so. He cites inter alia: the discrepancy in the name

shown on the utility bill; the fact that the utility bill was out of date; the late attempt to

change the purchasing entity to a non-existent corporate vehicle; no evidence regarding

source of funds or source of wealth (affidavit paras 14 – 15 & 19). He also cites the adverse

media results which he could not negate (affidavit para 20). He maintained the position that

these factors all, individually and cumulatively, made him concerned in evidence despite

being vigorously tested on it. Mr Besford-Land also spoke to his more senior, second line,

colleagues and to the MLRO all sharing his concerns.

[89] Mr Christie’s unchallenged evidence is to the effect that he took the ultimate decision

to terminate the transaction based on the advice he and his colleagues had received from the

FCCO team (ie Mr Besford-Land).

[90] On that basis, the pursuer having failed to produce KYC information that satisfied

the defender by 15 December 2016, the defender was entitled to resile – which it did on

22 December 2016. This was even after giving the pursuer a further opportunity to produce

Page 29 ⇓

satisfactory information. The defender was not obliged to offer the pursuer that further

opportunity but did so.

[91] Turning to his second argument in terms of this chapter he argued that if the court

prefers the pursuer’s interpretation of “require” in clause 1.9, then it was his position that the

defender was, in any event, not satisfied with the documents that had been provided by

15 December 2016 and so was entitled to resile.

[92] There were a number of reasons for that. First, the utility bill was not in the correct

name. Second, the utility bill was not recent enough to satisfy the defender. Third, the

information was not contained on originals. Fourth, irrespective of the evidence received

from the pursuer, the defender had independently received adverse media hits which it

could not negate.

[93] However, for the reasons already set out above, properly construed, the Articles of

Roup give the defender complete discretion in relation to whether or not whatever it receives

is satisfactory. It does not need to explain itself or justify why it is dissatisfied. It merely has

to be dissatisfied (as it clearly was).

[94] Accordingly, even if the pursuer is correct and the Articles of Roup, properly

interpreted, only allow the defender to resile if it is not satisfied with what is produced in

response to a demand for specific information, that is the situation here. In short, the

defender was not satisfied by what was produced on 15 December 2016. That is, even

ignoring the absence of source of funds and source of wealth information.

[95] Mr Walker then moved on to the fourth chapter of his argument and to make a

further alternative argument. This argument turned on the necessity, if the court were not

with him on any of his earlier arguments, for a term to be implied into the contract. In

development of this argument he said this: if the Court accepts the pursuer’s interpretation

Page 30 ⇓

of the Articles of Roup, it would be necessary to imply a term into the Articles of Roup. An

implied term would only be required if the Court also concluded that the Articles of Roup,

properly interpreted, did not give the defender a complete discretion to terminate if it was

not satisfied with whatever KYC information had been provided.

[96] If the Court accepts the submission that, whatever ‘require’ might mean, clause 2.6.6

gives the defender an unfettered discretion to resile if it is not satisfied with whatever KYC

information is produced, then no term requires to be implied.

[97] However, on the hypothesis that the Court does not accept any of the earlier

submissions, for the reasons already explained, the Articles of Roup would not work in a

manner that (i) coincides with how the parties clearly intended the contract to work, namely

in a manner that corresponds with the 2007 Regulations or (ii) complies with the mandatory

provisions of the 2007 Regulations which (i) obliges a relevant person to apply customer due

diligence and (ii) precludes him from transacting if he is not able to do so. Instead, on the

pursuer’s interpretation, the Articles of Roup would oblige the defender to transact even

where it was unable to apply its own customer due diligence measures.

[98] He submitted this is a clear case of a term being necessary. If, after interpreting the

express terms, the Court comes to the conclusion that the parties have created such a contract

then the test for implication is met. The law on implication of terms has recently been

clarified in Marks & Spencer v BNP Paribas Securities Services Trust Co (Jersey) Ltd

[2016] AC 742.

[99] In the present case a term would be required which, allowed the Vendor, after receipt

of the KYC information, to require the Purchaser to produce such further AML evidence as

the Vendor, at their sole discretion, requires in order to satisfy itself in relation to the identity

Page 31 ⇓

of the Purchaser and the source of funds utilised in respect of payment of the Balance of the

Price and/or the deposit.

[100] In proposing the terms of the implied term he had sought to use language which is as

close as possible to the definition of KYC information in the formulation of the term that the

defender would seek to imply.

[101] Mr Walker then turned to deal with the issue of the illegality of the contract and

therefore its unenforceability. This argument was advanced on the basis that the court had

rejected all of the arguments which he had made in terms of his contractual defence to the

action.

[102] It was his position that, if the Court accepted the pursuer’s interpretation of the

Articles of Roup and refuses to imply a term as desiderated for, the Articles of Roup would

be unenforceable.

[103] If the agreement, properly construed, does not allow the defender to apply customer

due diligence as determined by it on a risk-sensitive basis and to resile if it is not able to

carry out that customer due diligence, then it was contrary to the old 2007 Regulations and it

is contrary to the current 2017 Regulations, being the Money Laundering, Terrorist Financing

and Transfer of Funds (Information on the Payer) Regulations 2017/692.

[104] I did not understand it to be a matter of contention that the old and new Regulations

matched up and that there was with respect to the arguments before the court no material

difference between the Regulations.

[105] Mr Walker submitted that the 2007 Regulations applied to the defender and that the

2017 Regulations applied now to the defender. If the court accepts those submissions then it

can conclude:

Page 32 ⇓



First, that the defender was required to terminate the transaction when it did

on 22 December 2016; and



Second, that it would be required not to enter into the transaction now.

That is because the defender was, and remains, dissatisfied on AML grounds and has been

unable to carry out its desired level of Customer Due Diligence.

[106] The defender’s witnesses (Besford-Land and Christie) have explained why, as matters

stood on 22 December 2016 and as they stand today, the defender has not been able to satisfy

itself in relation to various AML issues surrounding this transaction.

[107] The defender has still been unable to negate the adverse media results it has received.

It has been unable to verify the pursuer’s correct name (he used Mohammad in his pleadings

in this action until recently when he amended the Summons). It has been unable to verify

the legitimacy of the pursuer’s source of funds and source of wealth. The pursuer’s oral

evidence was wholly unconvincing in that regard. It has been unable to verify the legitimacy

of the pursuer’s relationship with Wickton.

[108] In this last respect it is noteworthy that the pursuer’s pleaded case still asserts “the

pursuer is, through another company, the current occupier of the subjects. He has a

substantial business interest there…” That averment seems completely at odds with what is

said in the pursuer’s affidavit. The pursuer seemed to accept that in his evidence.

Nonetheless, from an AML perspective, the defender is left in doubt. Clearly, the defender

cannot just accept whatever version the pursuer happens to choose to advance on a day by

day basis. If his pleaded position is correct then, standing that he clearly is neither a

shareholder or a director of Wickton, legitimate concerns clearly arise in relation to whether

his funds may be coming from undeclared income – ie the Proceeds of Crime.

Page 33 ⇓

[109] A contract which requires a breach of the Regulations and obliges a party to transact

in these circumstances would be contrary to public policy. Both the 2007 and 2017

Regulations create criminal offences which will be committed by a person who proceeds

with a transaction in a situation where he has been unable to complete his Customer Due

Diligence or, if applicable, Enhanced Customer Due Diligence. If he transacted and then it

were to transpire that he had received or dealt with the proceeds of crime, the person would

also be guilty of offences under the Proceeds of Crime Act 2002.

[110] In Jamieson v Watt’s Trs 1950 SC 265 Lord MacKay opined at page 274 that a claim by

a contractor who sought payment for work which had been carried out illegally was

irrelevant. He stated: “How can any Court lend itself to carry into force (whoever pleads it)

a contract, or an operation, which the law bans and calls illicit?”. Lord MacKay quoted with

approval the dicta of Lord Lindley: “No Court ought to enforce an illegal contract or allow

itself to be made the instrument of enforcing obligations alleged to arise out of a contract or

transaction which is illegal.” In the same case Lord Patrick (page 279), citing Gloag, draws a

distinction between “a statutory prohibition” and “contracts intended to secure the

commission of a crime …” Even in the former class of illegality Lord Patrick is clear that

such contracts cannot be enforced.

[111] Lastly, it was Mr Walker’s position that insofar as the submissions put forward by

Mr McIlvride were to the effect that the Regulations did not apply to this transaction the

court should exclude the submissions. The basis for this assertion was that there had been

no suggestion in the pursuer’s pleadings that there was to be a challenge to the applicability

of the Regulations. Moreover, in an earlier Note of Argument prepared for a Debate (which

did not take place), the pursuer’s position as there set out did not challenge the applicability

of the Regulations. In these circumstances he had not been given fair notice of this line of

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argument. He in fact described the position as really being one of an ambush. The court

should not allow this to happen.

[112] If the court were not with him in relation to this preliminary position he then

proceeded to argue as follows: Mr Christie’s supplementary affidavit confirms that

Mr Korek’s understanding of the Aviva Scheme and of the roles of the defender and AIGSL

is correct (Christie supp affidavit para 4).

[113] Mr Korek has set out his understanding of the Scheme and the respective roles in

paras 4.9, 4.10 & 4.24 of his report. Whilst the report ended up not being spoken to, he

submitted that its text can be referred to as it is referred to by Mr Christie in his unchallenged

affidavit.

[114] Paragraph 4.24 of the Korek report explains, under reference to Regulation 3(1)(b)

and 3(3) of the 2007 Regulations, which in turn refers to points 2-12, 14 and 15 of Annex 1 to

the Capital Requirements Directive which is in schedule 1 to the 2007 Regulations that

AIGSL carries out (i) portfolio management and advice (ii) safekeeping and administration

of securities and (iii) safe custody services.

[115] If one then looks at the MLTF one sees equivalent provisions in Regulations 8(2)(b),

10(2)(a), 10(4) and schedule 2.

[116] As Mr Christie’s evidence to the effect that Mr Korek’s understanding is correct was

unchallenged, the Court should accept that AIGSL is a “financial institution” for the

purposes of the 2017 Regulations and so caught by those regulations.

[117] Paragraphs 4.9 – 4.10 of the Korek report set out Mr Korek’s further detailed

understanding of the Scheme. Again, this was confirmed in Mr Christie’s unchallenged

affidavit. On the basis that there was no issue taken by the pursuer about the applicability of

the regulations, no further evidence was led on this issue. These passages in the Korek

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report make clear that AIGSL and the defender are constituent parts of the overall Scheme.

Again, that has not been challenged. The defender enters into transactions as nominee.

[118] So, it is submitted that the defender, as the operational arm of the Scheme, must

comply with the regulations which apply to AIGSL. Were it otherwise the rules on AML

would be worthless. Any regulated entity or scheme which was otherwise subject to the

regulations could elide them simply by transacting its business through a nominee company.

That would be ludicrous and would completely undermine the UK economy and open the

door to incalculable levels of money from criminal activity being routed through the UK

economy.

Discussion

The First Issue: the Contractual Defence

[119] I believe that the appropriate starting point with respect to this branch of the

argument is to assume that Mr McIlvride’s position with respect to the proper construction

of the word “require” in Clause 1.9 is correct.

[120] I am persuaded that Mr Walker’s submission is correct that the email of 12 December

2016 from the defender’s agent to the pursuer’s agent comprised a requirement as that term

was defined by Mr McIlvride. It, on a sound construction insisted or demanded that the

pursuer produce four items. Each of the items required, on a proper construction, related “to

the identity of the purchaser”, a matter in respect of which the defender was entitled in terms

of Clause 1.9 to require “information”. The issue therefore came to be this: was what was

required “information” in terms of Clause 1.9? Mr McIlvride submitted that it was not

“information”. His argument was a short one and was this: the expression “KYC

information” in itself and the definition in condition 1.9 make it plain that the obligation

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incumbent upon the pursuer extended to information only and not to documentary

evidence.

[121] In my view Mr McIlvride’s contention is misconceived and is not based on a sound

construction of Clause 1.9.

[122] On an ordinary and natural meaning information is knowledge or facts

communicated about a particular subject.

[123] The knowledge or fact required from the pursuer by the defender’s solicitor in the

said email with respect to the pursuer’s identity was:

“1. A certified true copy passport for Muhammad Asad Iftikhar...

2. A certified true copy utility bill for Muhammad Asad Iftikhar.”

[124] An essential part of the knowledge or fact required by the defender was that what

was provided is a certified true copy (not a copy of a certified true copy). This is emphasised

by reference in the email to the documents being sent “in the post”.

[125] Accordingly on an ordinary and natural construction of the word “information” the

requiring of the certified true copies forms part of the information required by the defender.

[126] The pursuer on the basis of his own construction of “require” envisages the defender

saying what it demands in relation to the issue of identity. Here the defender has demanded

particular documentary information with respect to the issue of identity. On a sound

construction of Clause 1.9 the requiring of the above clearly falls within the definition of

“information”.

[127] Documentary information is merely one form in which information can be presented.

It is not on a proper construction something other than information as contended for by

Mr McIlvride. That is far too narrow a definition of information. There is no restriction in

the Clause as to what form information can be required. If the parties had wished to exclude

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a particular form of information a stipulation to that effect could easily have been drafted.

That is not the course they followed.

[128] Support for the construction I have arrived at can be found within Clause 1.9 itself.

“KYC information” in part is defined as information required “in relation to the identity of

the purchaser”. That part of the clause clearly envisages documentary information being

produced. I find it very difficult to believe that parties intended information required in

relation to identity would exclude documentary information. A reasonable person having

the necessary background knowledge available to the parties would have understood

information to include documentary information.

[129] Support for the requiring of such documents falling within a sound construction of

information is also found in terms of Clause 2.6.6 which provides that KYC information

supplied must be to the “Vendor’s satisfaction”. This envisages the defender being able to

require information in whatever form satisfies it.

[130] Lastly, that information, includes information being in a documentary form and

being certified in a particular way, fits in with the context in which the contract was to take

place, namely: Anti Money Laundering Regulations.

[131] That this was the context of the contract and of the clauses being considered would

have been clear to the reasonable person with the background knowledge which would have

been available to parties for reasons which I will detail later in this Opinion.

[132] The approach of the pursuer to the construction of the word “information” renders

the clause meaningless and unworkable. If the defender cannot require that a particular

form of information is produced ie documentary information, then it is difficult to see that

the clause has any content. The defender has an absolute discretion as to when it is satisfied

and this suggests that information must be given a wide definition and not the narrow

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construction contended for by the pursuer. The pursuer’s construction does not make

commercial sense as it denies to the pursuer the ability to say the form of information which

it requires.

[133] I am clearly of the view that the pursuer’s construction of the word “information” is

not a sound construction and the defender’s position on this issue should be preferred.

[134] It was not a matter of dispute that as at 15 December the pursuer had not supplied

certified true copies of the above two documents. In addition the original completed due

diligence form and original completed verification certificate were not produced on time.

Thus the information required was not produced. Accordingly the pursuer was in breach of

contract and the defender was entitled to resile.

[135] Further the utility bill which was produced, as at 15 December, as well as not being a

certified true copy in accordance with the requirements in the email was further not in the

name of Muhammad Asad Iftikhar. It was therefore not in accordance with what was

required. The pursuer was for this further reason in breach of contract and the defender was

entitled to resile.

[136] The defender had a unilateral right to resile and on the pursuer’s construction of

“require” and on a proper construction of “information” the pursuer was required to

produce certain information by 15 December 2016. He did not do so. On exercising its right

to resile the defender fully complied with the conditions for its exercise. Such strict

compliance was required by Scrabster Harbour Trust v Mowlem Plc 2006 SC 469 at

paragraph 47; Ben Cleuch Ltd v Scottish Enterprise 2006 CSOH 35 at paragraphs 24 and 25;

and Batt Cables Plc v Spencer Business Parks Ltd 2010 SLT 860 at paragraphs 23 to 25. My

decision with respect to this issue decides the whole matter before the court, however, I was

addressed on a number of alternative arguments and it is appropriate that I deal with these.

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[137] Having assumed for the purposes of the first argument that the pursuer’s

construction of the word “require” is correct I turn to consider the issue of what is a sound

construction of the word “require”.

[138] In arriving at a proper interpretation of this word regard has to be had to Clauses 1.9,

2.3.3 and 2.3.6 of the Articles of Roup.

[139] First it is, I believe, clear that the Articles of Roup fall to be construed in light of the

2007 Regulations.

[140] Having regard to the terms of the above clauses and the terms of the blank

verification certificate which accompanied the Articles of Roup and which is incorporated

therein the clear intention of parties was to align their contract with the then current AML

law, namely: the 2007 Regulations.

[141] The terms of the above clauses, are I think difficult to understand, if that was not the

position. The clauses serve no real purpose if that was not the parties intention. Further the

blank verification certificate makes express reference to the Regulations in the verification

certificate itself and in the notes accompanying it. I believe, there is no merit in the pursuer’s

argument, that the reasonable bystander would not understand having regard to the above

that the contract was intended to be aligned with the money laundering obligations to which

the defender believed it was subject. That argument gives no meaning or purpose to the said

clauses of the contract and entirely fails to take account of the references in the verification

certificate to such obligations.

[142] So far as whether the Articles of Roup fall to be construed in terms of the

2007 Regulations I am persuaded that it does not matter whether the Regulations were in fact

applicable to the transaction. The relevant question was whether the reasonable bystander

would have understood that the intention was to align the contract with the

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2007 Regulations and it is, I consider, for the foregoing reasons, clear that this was parties

intent.

[143] In addition the contract falls to be interpreted in terms of the relevant guidance to the

2007 Regulations as referred to by Mr Walker. This guidance was expressly referred to at

note 3 in the blank verification certificate.

[144] Having regard to Regulations 5, 7, 11 and 14(1), to which I was directed by

Mr Walker and to the various parts of the guidance I am persuaded that they support the

defender’s construction.

[145] Reading the three clauses together and in the context of the provisions of the

2007 Regulations I am persuaded that the defender’s construction of “require” is the correct

one. In that context “require”, does not mean what the defender asserts namely: what is

demanded by the defender. Rather what it means is this: what the defender needs in order

to satisfy itself that it can comply with its obligations in terms of the 2007 Regulations. The

defender, on Mr Walker’s construction is given an absolute unfettered discretion with

respect to this issue. If information to its satisfaction is not provided then in its sole

discretion it can repudiate. That construction reflects the obligations incumbent upon it in

terms of the 2007 Regulations. It allows the defender to operate within the framework of the

obligations incumbent upon it in terms of the 2007 Regulations. I agree with Mr Walker’s

position: it is for the pursuer to produce such information as to satisfy the defender from an

AML perspective.

[146] That being the case, the onus is on the pursuer, not the defender, to produce evidence

of his identity and source of funds. It is not on the defender to list specific items of evidence

that it “requires”. Instead whether or not what the pursuer has produced is sufficient is to be

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judged after the fact of it being produced at the sole discretion of the defender. Only if the

defender can judge the position after the fact is the clause workable.

[147] Turning to the pursuer’s contended for construction it is argued that the defender’s

construction of the word “require” does not give effect to the intention of parties. It appears

to be suggested by Mr McIlvride that an argument against the defender’s construction is that

it would impose an obligation on the pursuer to work out what information the defender

required as a matter of law.

[148] I believe the answer to the above argument is this: the pursuer is in the best position

to provide information regarding his identity and his source of funds. In addition he is taken

to know the law and the 2007 Regulations are publicly available. Accordingly there is no

reason why the pursuer should find it difficult to provide the defender with the information

which it required in terms of AML.

[149] The preparation of the due diligence form and verification certificate identifies certain

information which the defender requires. However, this does not support the pursuer’s

construction. The defender has expressly provided that these forms are to be completed.

Beyond the above, at no point is it expressly provided that this is all the information it

requires.

[150] However, the main points against the pursuer’s proposed construction are these: (1)

it does not accord with the 2007 Regulations for the reasons above set out and (2) it does not

conform to commercial sense.

[151] With regard to commercial sense it follows from the pursuer’s contended

construction that the pursuer can produce such information as is demanded by the defender

prior to 15 December and can provide that information at the last minute on 15 December.

Assuming he produces what has been required/demanded and it is not objectionable then

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the defender must proceed with the contract. It must do so, as argued by Mr Walker, even if

it wished further information in light of what had been provided. On the pursuer’s

construction the defender would not be entitled to obtain this further information, in that it

had been provided with what had been demanded.

[152] On the pursuer’s construction the defender would be bound to proceed if the

demanded information were provided even if in doing so the action was to be in breach of

the statutory obligations incumbent upon it in terms of the 2007 Regulations.

[153] In the instant case this construction would have the following effect: it is the

pursuer’s position that the defender did not require any source of funds/source of wealth

evidence prior to 15 December thus regardless of concerns which it had with respect to these

matters it still must proceed. Any request post 15 December on this approach would come

too late. Thus the defender could not act in accordance with the 2007 Regulations.

[154] The above, would I believe, be an absurd result. The intention of parties was that the

contract did allow the defender to conform to the 2007 Regulations and guidance.

[155] For the foregoing reasons I preferred the construction of “require” as argued for by

Mr Walker.

[156] The next section of the argument turned on the issue of whether the KYC information

provided was “satisfactory”.

[157] Looking at this issue on the basis of the defenders’ construction of the word

“require”, which I have earlier accepted, there can be no doubt on the basis of the evidence of

Mr Besford-Land and Mr Anthony Christie that they had a number of significant concerns

about the information provided and were clearly not satisfied and thus the defender was

entitled to resile when it did, though it did in fact give the pursuer a further opportunity to

produce satisfactory information.

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[158] Approaching the issue on the basis of the pursuer’s interpretation of “require” the

defenders were once more not satisfied and were thus entitled to resile. It was not satisfied

for these reasons: the information provided was not certified as required and the utility bill

was not in the name of the person as required. The defender in particular was not satisfied

in that the utility bill was not in the name required. Accordingly on the basis of what had

been demanded the defender was not satisfied.

[159] I do not believe Mr Turok’s actings after 15 December show that the defender was

satisfied. The evidence of Mr Besford-Land is clear the defender was not satisfied. Given the

proper construction of the contract as I have above set out I am persuaded there was no need

for the defender to go through any form of ultimatum procedure. I further observe that on

the evidence as at the date of proof the defender remained unsatisfied.

[160] This next issue arose out of an alternative position advanced on behalf of the

defender on the basis that I was against the defender on all of the points that had been

advanced to this stage, by Mr Walker.

[161] Mr Walker’s position was that if the court did not accept his earlier arguments the

effect would be that the Articles of Roup would oblige the defender to transact even where it

was unable to apply its own due diligence measures. I am satisfied that in so contending he

is correct.

[162] He set out in his submissions the implied term for which he argued.

[163] The test for implication of a term is set out in Marks & Spencer Plc v BNP Paribas

Securities Services Trust Co (Jersey) Limited & another and is as follows:

“(i) that a term would be implied into a detailed commercial contract only if that

were necessary to give the contract business efficacy or so obvious that it went

without saying; that the implication of a term was not critically dependent on

proof of an actual intention of the parties when negotiating the contract but

was concerned with what notional reasonable people, in the position of the

parties at the time at which they had been contracting, would have agreed;

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and that it was a necessary but not sufficient condition for implying a term

that it appeared fair or that the court considered that the parties would have

agreed it if it had been suggested to them (post, paras 14-21, 57, 75, 77).”

[164] In my view in the circumstances here the test is met and if I had been against the

defender in relation to its earlier arguments I would have implied the term sought. The

contract would I believe be unworkable without such an implied term in that as argued by

Mr Walker it would force the defender to contract in circumstances where it could not apply

its own due diligence measures. A term of this type was accordingly required in order to

give the contract business efficacy. I believe notional reasonable parties would have agreed

on such a term.

[165] I am accordingly of the opinion that each of the bases for the defender’s contractual

defence is made out.

The Second Issue: the Illegality Defence

[166] Having dealt with the contractual defence I now turn to the illegality defence

advanced by Mr Walker on the basis that I was against him on the first issue.

[167] The first argument under his lead related to the applicability of the appropriate

regulations. There was a preliminary pleading point argued, by Mr Walker which I have

earlier set out in full.

[168] Mr McIlvride’s response to this argument was this: (a) the defender did not admit

that the Regulations applied in the circumstances of the case and such reference as there was

in the Summons to the Regulations was covered by a general denial; (b) he could not be held

to the terms of the Note of Argument prepared by another Counsel and which in fact was

not argued at any Debate and (c) he had taken over the case from another Counsel at a late

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stage and he had formed his own views on the matter and wished to argue the applicability

issue. It was no part of his intention to ambush Mr Walker.

[169] The pleadings on the issue of the Regulations and their applicability were on neither

side particularly developed. It is unfortunate that the detail of the dispute on applicability of

the Regulations has only become apparent at this late stage. However, I do not think that

Mr Walker to any extent was prejudiced by this. The issue was a legal one on which he was

able to make full submissions in response to the arguments put forward by Mr McIlvride. In

the circumstances I believe it appropriate to allow the arguments to be advanced. I would

wish to expressly state that Mr McIlvride had acted entirely properly in relation to this issue.

[170] The first issue in terms of this chapter was whether the defender is a relevant person.

[171] This point arose from the structure of the scheme of which the defender forms a part.

[172] Mr Christie in his supplementary affidavit at paragraphs 3 and 4 confirms the

analysis of that scheme as set out by Mr Korek. Mr Christie’s evidence was not challenged.

The analysis which he confirmed was set out in full in Mr Korek’s report at 4.21 to 4.23.

[173] These paragraphs were in the following terms:

“4.21.1 The Manager, AIFSL, (or its delegate) is responsible for the day-to-day

management of the Scheme including compliance with relevant AML

regulations;

4.21.2 The Trustee/Depositary, Citibank Europe Plc, is responsible, amongst

other matters, for the safekeeping of the Scheme property and

securities; and;

4.21.3 CIP, as wholly owned subsidiary of Citibank Europe Plc, is responsible

for acting as nominee for the property and securities of the Scheme;

4.21.4 As nominee, it is my understanding of CIP that property and securities

of the Scheme cannot be purchased or sold without the approval of the

Manager (or its delegate) and that the approval of the Manager (or its

delegate) will depend, amongst other things, on compliance with

relevant AML regulations. This is of course entirely as one would

expect as, were that not the case, any regulated entity could

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circumvent the rules and avoid the obligations which are intended to

defeat criminal and terrorist activity by acting through a nominee; and

4.21.5 AIFSL has delegated portfolio management and other ancillary

services to AIGSL under the New Investment Management

Agreement.

4.22 Based on the above analysis of the Prospectus, I believe that AIGSL (via the

New Investment Management Agreement) is responsible on behalf of the

Scheme for compliance with relevant AML regulations with respect of the

assets and securities within the Scheme.

4.23 In practice, this means that CIP, as the legal entity entering into transactions

as nominee for the Scheme, cannot complete a transaction on behalf of the

Scheme if AIGSL is unable to be satisfied that all AML requirements have

been met.”

[174] Given this structure I conclude that the defender is a relevant party in terms of

Regulation 3. The defender in terms of the structure is the operational arm and therefore is a

relevant party.

[175] Mr Walker is, I believe, correct in saying that if the foregoing is not correct and the

defender is not a relevant party then any regulated entity could circumvent the

2007 Regulations and avoid the obligations with respect to money laundering by simply

setting up a nominee. That cannot have been the intention of Parliament.

[176] I accept in the example used by Mr McIlvride the nominee is not a “relevant person”.

However, the situation in the present case is entirely different. To illustrate this difference I

would use the following example: If Mr McIlvride’s investment company, in his example,

had used a nominee to purchase the supermarket chain the transaction would have been

subject to the regulations. In the same way in the instant case given the type of business in

which the defender is involved and its place in the structure, it is a “relevant person”.

[177] Beyond that, on any view, AIGSL is “a relevant person”. Thus the court should not

force the defender to cause AIGSL to commit a criminal offence by directing the defender to

enter into the contract.

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[178] The next argument was to the effect that the defender was not obliged to carry out

due diligence as the relationship of the defender to the pursuer did not fall within

Regulation 7. In my opinion the transaction falls within Regulation 7(1)(b). The pursuer is

someone with whom the defender had no business relationship but with whom the defender

was carrying out an occasional transaction. The language of the Regulation 7(1)(a) and

7(1)(b) is clearly intended to cover a long term relationship (business relationship) and a

short term relationship. The pursuer clearly falls into the latter category. If a relationship

such as that between the pursuer and defender is not covered by Regulation 7(1)(b), once

more a coach and horses could be run through the 2007 Regulations and that again cannot

have been the intention of Parliament. The pursuer clearly falls within Regulation 7(1)(b).

The pursuer’s argument that the pursuer could not be said to be a customer is clearly

misconceived.

[179] Beyond that, on any view, AIGSL is “a relevant person”. Thus the court should not

force the defender to cause AIGSL to commit a criminal offence by directing the defender to

enter into the contract.

[180] The next argument was that the pursuer can proceed in reliance on the terms of

Regulation 17 without illegality. Regulation 17 gives the defender an option to rely. It is not

an obligation to rely. In terms of Regulation 17(2)(b) the relevant person would remain liable

for any failure to apply the due diligence measures. The defender cannot be made to go

down this route. It has decided, by its actings in this case, to carry out due diligence itself

and not in whole to rely on such due diligence as was carried out by the pursuer’s solicitors.

In particular it has decided to carry out enhanced due diligence. In these circumstances in

continuing to proceed where it was not satisfied on the basis of the due diligence which it

had carried out it would be acting illegally.

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[181] The last argument was to the effect that the pursuer had complied with the

obligations of Clause 5. He has not: the defender is not satisfied about the pursuer’s

identity: (1) the defender is not satisfied by the utility bill produced; and (2) the defender is

not satisfied with regard to the pursuer’s identity having regard to the matters spoken to by

Mr Besford-Land including adverse hits.

[182] In the whole circumstances it would, I believe, be illegal for the pursuer to proceed

with this matter.

Conclusion

[183] For the foregoing reasons I hold first that the defender was entitled to resile as at

22 December and secondly, that if they were not entitled to resile, for them to be forced to

continue with this transaction would be for them to act illegally, or for AIGSL to act illegally

Decision

[184] I have had the matter put out by order for a discussion regarding the precise terms of

the interlocutor I should pronounce and the issue of expenses.