#6868 - Barros Mattos V. Mac Daniels - Restitution of Unjust Enrichment BCL

Barros Mattos v. MacDaniels

Facts

The litigation arises out of a large fraud perpetrated on a Brazilian bank, Banco Noroeste SA (the bank) in the mid-1990s. The perpetrators of the fraud were a group of individuals based largely in Nigeria. One of, or the leading light in that dishonest activity was a Chief Anajemba. He has since been murdered. The total loss inflicted on the bank was $US2425m, of which some $US1903m was transferred from the bank to third parties by means of electronic SWIFT transfers.

There are four defendants to this application. One is Chief Ezugo Dan Nwandu. The other three are companies of which he is the moving spirit. Those companies are an English company called MacDaniels Ltd (MacDaniels England), General Securities and Finance Co Ltd (General) and another company called MacDaniels Ltd which is incorporated in Nigeria (MacDaniels Nigeria). As Chief Nwandu explains in evidence he has filed, MacDaniels England was incorporated for the purpose of acting as an English 'adjunct' or nominee for General. Mr Michael Briggs QC who, with Miss Kathryn Purkis, appears for the claimants argues that, in substance, MacDaniels England is little more than a post box for General.

There is no dispute that that money is to be treated as stolen from the bank. The money was transferred to these defendants with a view to it being changed into Nigerian currency (naira). In fact the money was received by MacDaniels England and was then transferred as to $US4,228,68090 to General and as to $US1,720,032 to MacDaniels Nigeria and then distributed to Chief Anajemba's instructions.

The claim against the defendant companies is based on the allegation that they retained the proceeds of the fraud perpetrated on the Brazilian bank. The defendant companies argue that they are entitled to a change of position defence because they paid over the money to the Chief. The problem with this defence is however that the payment over to the chief was in contravention of Nigerian law.

Holding

The second basis upon which the victim may lose his right to force the recipient to return the value of the stolen money is where, in the light of his belief that the money was not tainted, the recipient changes his position to his detriment. That such a defence to a restitutionary claim exists was confirmed in the Lipkin Gorman case (see [1992] 4 All ER 512 at 532, [1991] 2 AC 548 at 578 per Lord Goff) and the reason was explained as follows ([1992] 4 All ER 512 at 533, [1991] 2 AC 548 at 579):

“In these circumstances, it is right that we should ask ourselves: why do we feel that it would be unjust to allow restitution in cases such as these? The answer must be that, where an innocent defendant's position is so changed that he will suffer an injustice if called upon to repay or to repay in full, the injustice of requiring him so to repay outweighs the injustice of denying the plaintiff restitution.”

Mr Briggs argues that this does not get the defendants home. He says that an innocent recipient cannot rely upon a plea of change of position where that change would be regarded by our courts as wrongful. This submission is based on the following passage in the speech of Lord Goff in the Lipkin Gorman case [1992] 4 All ER 512 at 534, [1991] 2 AC 548 at 580 (my emphasis):

“I am most anxious that, in recognising this defence to actions of restitution, nothing should be said at this stage to inhibit the development of the defence on a case by case basis, in the usual way. It is, of course, plain that the defence is not open to one who has changed his position in bad faith, as where the defend-ant has paid away the money with knowledge of the facts entitling the plaintiff to restitution; and it is commonly accepted that the defence should not be open to a wrongdoer. These are matters which can, in due course, be considered in depth in cases where they arise for consideration. They do not arise in the present case.”

Mr Briggs explains this brief passage in the Lipkin Gorman case as follows. A court will not allow a party to plead or rely on activity which it regards as illegal or wrongful. Thus, if the change of position is wrongful, the court will decline to allow the recipient to rely on it. If, as he submits, the transactions entered into by these defendants were illegal under Nigerian law, they would be treated as illegal here as well. To adopt the approach of Lord Goff set out at [19], above, on the one hand there is the injustice inflicted on the victim in having his money taken from him and against that is the position of the defendant who has engaged...