Equity

Constructive trust - fraud - bank's loan repayment under artificial agreement - whether requirement of proof of recipient's dishonestyBank of Credit and Commerce International (Overseas) Ltd and Another v Akindele: CA: Nourse, Ward and Sedley LJJ: 14 June 2000

The bank required funds to give a false impression that dummy loans were performing normally.

Thus, in 1985, it obtained $10 million.

from the defendant under an artificial loan agreement.

In 1985 repayment of US $16.79 was received by the defendant, a sum representing 15% interest.

The claimants, the banks' liquidators, sought recovery of $6.97m.

from the defendant as a constructive trustee under, among other things, the head of knowing receipt.

The judge dismissed the claim, the defendant's dishonesty not having been proved.

The claimants appealed.Richard Sheldon QC and Fidelis Oditah (instructed by Lovells) for the claimants; Gabriel Moss QC and David G M Marks (instructed by Finers Stephens Innocent) for the defendant.Held, dismissing the appeal but for different reasons, that under the 'knowing receipt' head of constructive trust proof of the recipient's dishonesty was not required; that a single test was to be applied, namely whether the recipient's state of knowledge was such as to make it unconscionable for him to retain the benefit of the receipt; and that the judge's findings were consistent only with the view that the defendant's state of knowledge concerning the agreement with the bank was not such as to make it unconscionable for him to retain the benefit of the receipt of $6.79 million.