Jason Neyers
Associate Professor of Law
Faculty of Law
Western University
N6A 3K7
(519) 661-2111 x. 88435 

Dear all,

The English Court of Appeal, in striking out an action in Maqsood v Mahmood and another [2012] EWCA Civ 251, did not have very promising things to say about Lord Browne-Wilkinson's suggestion in Westdeutsche that Chase Manhattan could be explained on the basis that where a payee is aware that a payment is being made by mistake he will hold that payment on trust for the payor.

Maqsood concerned a dispute over a sale of a lease by the first defendant to the claimant. The claimant sued the defendants, alleging a failure of consideration and that the defendants utilised monies from the deal to buy property.

The claim was struck out at first instance for a number of reasons, including the view that, on the barren facts pleaded in the statement of case, there was no plausible cause of action against the second defendant (the first defendant's wife) because it was not alleged that she was a party to the sale or owed any fiduciary duty to the claimant. On appeal, the claimant sought to salvage its position by constructing a creative argument that the sale by the first defendant having suffered a failure of consideration, of which the first defendant was aware, the first defendant held any sums paid by the claimant thereunder on trust for the claimant, and the claimant could trace those sums into the hands of the second defendant.

This argument depended on that part of Lord Browne-Wilkinson's speech in Westdeutsche dealing with Chase Manhattan, which, according to Ward LJ in Maqsood (at [37]), was "no part of the ratio of the Westdeutsche Landesbank case, and it was in any event tentative ("may well have given rise to a constructive trust")". Ward LJ rejected the claimant's argument, saying (at [38]) that it seemed "inconsistent with the policy recognised by the House of Lords, that it is not as a general rule desirable to introduce equitable proprietary remedies into the realm of commercial contracts, and thereby to give the counterparty under the particular contract the additional security and priority of a proprietary remedy", and the claimant's argument was "far from clear as a matter of law" (at [40]).

The appeal was therefore dismissed (and the claim struck out) on this and a number of other procedural grounds.

Kind regards,  

Colin