#6860 - Neste Oy V. Lloyd's Bank - Restitution of Unjust Enrichment BCL

Neste Oy v. Lloyd’s Bank

Facts

The plaintiffs in this action are a shipowning company incorporated in Finland. At the material time they owned three vessels named Tiiskeri, Nestegas and Enskeri. As agents in the United Kingdom the plaintiffs from time to time employed a company named Peckston Shipping Ltd. ("PSL"). When the plaintiffs' vessels put into United Kingdom ports and incurred liabilities in respect of jetty and river dues, pilotage, towage, berth fees and similar expenses, or when the masters of the vessels required cash, the plaintiffs transferred funds to PSL to discharge these liabilities and make advances of cash or sometimes perhaps to reimburse PSL for having done so. They also paid PSL an agency fee. Unfortunately PSL and the group to which it belonged found themselves in financial difficulties, and a time came when a receiver was appointed and Lloyds Bank plc. ("the bank"), bankers to PSL and other group companies, exercised a right of set-off between PSL's accounts which were in credit and those which were in debit.

The plaintiffs and other owners in a like position challenged the right of the bank to set-off against PSL's debt to the bank sums held by PSL for onward payment to United Kingdom creditors of the owners. The owners contended, putting the matter very shortly at this stage, that these funds were not available for set-off because they were held by PSL on trust to apply in a specified way and no other. The bank was said to have notice of the position.

Issues

1. Were all or any of the funds transferred by the plaintiffs to the account of PSL between Jan. 14 and Feb. 22, 1980, subject to a trust to pay the same to creditors of the plaintiffs in respect of expenses incurred by the plaintiffs' vessels?

2. If so, did the bank have such notice that the funds were so held as to preclude it from exercising any right of set-off in respect of those funds?

Holding

Was there a constructive trust?

It was argued for the respondents that agents owe their principals duties of a fiduciary character but urged that agents funded by their principals do not necessarily hold the funds as trustees: whether in a particular case an agent is a trustee depends on all the circumstances including the intention of the parties, express or to be inferred.

The importance of a separate account as reflecting the terms upon which money was paid was underlined further in such cases as In re Nanwa Gold Mines Ltd., [1955] 1 W.L.R. 1080; Quistclose, sup.; and In re Kayford Ltd., [1975] 1 W.L.R. 279. The Wilsons and Furness-Leyland Line Ltd. v. The British and Continental Shipping Co. Ltd. and Others, (1907) 23 T.L.R. 397, showed that where money was with the consent of the principal paid by agents into a general account containing their own funds the proper inference was that the relationship was one of debtor and creditor, not trustee and beneficiary.

First five payments: I shall begin by considering the first five payments because different considerations are said to apply to the last. It seems safe to infer, although there is really no evidence, that PSL were paid sometimes in advance and sometimes in arrears…. It is, however, apparent from the documents that only one of the first five payments (the fifth) was made on a date earlier than the estimated date of arrival of the vessel at the port in question (although the second payment was made on the same date)…. If this is so (and in the absence of evidence I am necessarily in a realm of speculation to a large extent) the natural thing would be for PSL to treat themselves as reimbursed pro tanto when the expected funds were received. The inference that PSL might do this, and might be entitled to do it, however, radically undermines the plaintiffs' argument which involved the holding on a resulting trust for the plaintiffs of any money which PSL could not apply to the plaintiffs' specified purposes; it would certainly be improper (on the plaintiffs' argument) for PSL to treat any of these sums as reimbursement of themselves, certainly without explicit instructions from the plaintiffs.

The unlikelihood of this conclusion (speculative though it is) representing the intention or understanding of commercial parties in the real world makes me doubt the correctness of the plaintiffs' argument.

Court relied in particular on the following facts:

(1) The plaintiffs made their payments to an account of PSL which gave no indication whatever that it was a trust or owners' account. It may well be that in the past the plaintiffs had made payments in arrears to the same account.

(2) There is no evidence that the plaintiffs expected or intended any of the sums remitted on these first five occasions to be kept in any way separate.

(3) In seeking these payments PSL gave no indication that the funds would be held on the plaintiffs' behalf or to their account or to their order.

(5)...