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What if third parties helped to hide the golden egg?

25 April 2019. Published by Davina Given, Partner and Emma West, Associate

A victim of fraud may bleat more loudly than a new born lamb if her efforts to recover the golden egg directly from the fraudster have failed. However, the hunt for the golden egg is not necessarily over if a bank or other third parties have joined in on the fraudster's side and assisted in hiding the golden egg.

If payments have been made out of the victim's bank account in the course of the fraudulent scheme, the victim's bank may be the place to (re)start the hunt. The bank may owe the victim, as its customer, the so-called Quincecare duty of care[1]. This means that the bank should refrain from executing its customer's order for payment if it has reasonable grounds for believing that it is an attempt to defraud the customer. If a Quincecare duty is breached, a customer may be able to recover the sums paid out of that account from the bank – a potentially eggs-cellent result. RPC is acting on just such a claim against JP Morgan for the Nigerian state.

As we explored in our blog on Wednesday [2], if a victim of fraud has a proprietary interest in the golden egg they may be able to trace its value into assets held by third parties and recover these assets directly. This is of limited use if the egg has been dissipated (or devoured over the Easter weekend). However, a third party may also be liable to compensate the victim for the value of the golden egg or hand over the profits which they have earned from it. For example, third parties can be liable if they:

  • Dishonestly assist the fraudster. It has recently been confirmed that the third party's dishonesty is to be judged objectively, according to the standards of ordinary decent people.[3]
  • Receive assets knowing that they were obtained as a result of a fraudulent scheme. The key question is whether, given the third party's knowledge, it would be unconscionable for them to retain the benefit of the asset.

It is no good if egg-hunters seek these equitable remedies from the court after they have been making chocolate nests for Easter (or acquiescing in the third party's conduct, for example) – in these circumstances they are unlikely to have "clean hands".

 

And after all those eggs-traordinary Easter-themed jokes, we come to the end of the greatest Easter egg hunt…that's all, yolks!

 

 

[1]  Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363

[2]  What to do if the golden egg hatches (or you need to trace into the fraudster's other assets)

[3]  Group Seven Ltd v Notable Services LLP [2019] EWCA Civ 614, following the test for dishonesty established in Ivey v Genting Casinos [2017] UKSC 67