Dear Colleagues,

 

In a judgment delivered today on an appeal from Jersey, the Privy Council has recognised the availability of backwards tracing, which will be of interest to members of this list (The Federal Republic of Brazil v Durant International Corporation [2015] UKCPC) 35 https://www.jcpc.uk/cases/docs/jcpc-2013-0069-judgment.pdf). The case concerned bribes paid to a public official and a related series of payments and a web of companies. In holding for the Board that the claimants were able to trace in respect of the relevant payments, regardless of the particular sequence, Lord Toulson concludes with the following:

 

“38.              The development of increasingly sophisticated and elaborate methods of money laundering, often involving a web of credits and debits between intermediaries, makes it particularly important that a court should not allow a camouflage of interconnected transactions to obscure its vision of their true overall purpose and effect. If the court is satisfied that the various steps are part of a coordinated scheme, it should not matter that, either as a deliberate part of the choreography or possibly because of the incidents of the banking system, a debit appears in the bank account of an intermediary before a reciprocal credit entry. The Board agrees with Sir Richard Scott V-C’s observation in Foskett v McKeown that the availability of equitable remedies ought to depend on the substance of the transaction in question and not upon the strict order in which associated events occur.

 

39.              Similarly, in a case such as Agricultural Credit Corpn of Saskatchewan v Pettyjohn, the Board does not consider that it should matter whether the account used for the purpose of providing bridging finance was in credit or in overdraft at the time. An account may be used as a conduit for the transfer of funds, whether the account holder is operating the account in credit or within an overdraft facility.

 

40.              The Board therefore rejects the argument that there can never be backward tracing, or that the court can never trace the value of an asset whose proceeds are paid into an overdrawn account. But the claimant has to establish a coordination between the depletion of the trust fund and the acquisition of the asset which is the subject of the tracing claim, looking at the whole transaction, such as to warrant the court attributing the value of the interest acquired to the misuse of the trust fund. This is likely to depend on inference from the proved facts, particularly since in many cases the testimony of the trustee, if available, will be of little value.

 

41.              The Board does not doubt the correctness of the decisions in James Roscoe (Bolton) Ltd v Winder and In re Goldcorp Exchange Ltd, but in neither case was there evidence of an overall transaction embracing the coordinated outward and inward movement of assets.”

 

(My emphasis)

 

Best wishes,

James

 

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James Lee

Senior Lecturer in Private Law

Director of UG Admissions and Scholarships

The Dickson Poon School of Law

Somerset House East Wing
King's College London
Strand
London WC2R 2LS

 

E-mail: james.lee@kcl.ac.uk

 

Tel: +44 (0)20 7848 2363

 

Profile: http://www.kcl.ac.uk/law/people/academic/j-lee.aspx

 

Forthcoming: Jamie Glister and James Lee (eds), Hanbury & Martin: Modern Equity (20^th edition), Sweet & Maxwell, August 2015 https://www.sweetandmaxwell.co.uk/downloads/academic_catalogue.pdf