Caught In The Tangled Web

This is a case in which the claimant alleged that a bank held money on constructive trust for her. The bank said that it was a bona fide purchaser for value, with no notice which would suggest the existence of a prior proprietary claim. The bank failed. However, the Privy Council's judgment acknowledges the difficulty of formulating the appropriate test for such cases, and may perhaps serve to make it rather easier to understand what that test is.

Factual background

The factual background to the issue before the court was complex, and what follows below is necessarily an abbreviated summary.

The architect of what the Privy Council described as a "fraudulent scheme" was Robin Symes, a dealer in art and antiquities. Mr Symes was the partner for many years of Christo Michailidis, whose parents had built up a collection of art deco furniture (the Collection). On the death of Mr Michailidis, and unknown to his family, Mr Symes sold the Collection for $15 million in spring 2000.

The proceeds of sale were paid to two Panamanian companies, and the greater part ($10.3 million) was then paid to an account at the Gibraltar branch of the defendant (the Bank) through a Liechtenstein foundation. It was then credited to the account of a company, Lombardi Corporation, incorporated in the BVI. The Bank's KYC documents recorded that Mr Symes was the beneficial owner of the money. The money in Lombardi's account was used as a guarantee for a loan advanced by the Bank's London branch to Robin Symes Limited (RSL), in order to repay an existing loan from Citibank.

These transactions took place in summer 2000. In 2001, Mr Michailidis' family came to know of the sale of the Collection, and first his mother and, after her death, his sister, made claims against the Bank. The judgment records that it was common ground that the proceeds of sale of the Collection were in the hands of the Bank, that Mrs Papadimitriou (Mr Michailidis' sister) could trace the proceeds of sale into the hands of the Bank, and that her claim would succeed unless the Bank could prove that it was a bona fide purchaser without notice.

Question before the Privy Council

At first instance, Mrs Papadimitriou failed to establish claims based on dishonest assistance and knowing receipt, and did not appeal those findings. She did, however, appeal the first instance judge's decision that the Bank was a bona fide purchaser without notice of the proceeds of sale of the Collection, and that this defeated her proprietary claim...

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