Terna Energy Trading doo v Revolut Ltd [2024] EWHC 1419 (Comm)
Dispute Resolution analysis: A victim of an authorised push payment fraud can bring an unjust enrichment claim against the electronic money institution, Revolut and can argue at trial both that Revout was enriched by the payment and that such enrichment was at the expense of the victim.
What are the practical implications of this case?
This is an important judgment in relation to the scope to bring unjust enrichment claims against banks and electronic money institutions where a customer perpetrates an authorised push payment fraud against a victim. It is a facilitative judgment which confirms that the institution is enriched by the receipt of the payment, even where its receipt triggers a corresponding and equivalent liability to the customer. It also calls into question the logic of the decision of HHJ Bird in Tecnimont Arabia Ltd v National Westminster Bank Plc [2023] All ER Comm 57, where it was held that, where the relevant payment was made through an indirect sequence of transfers and not a direct payment to the institution, any enrichment was not at the expense of the victim. Whether as a question of agency or as a co-ordinated series of transactions, the proper analysis is that the enrichment occurs at the expense of the victim who can bring an unjust enrichment claim against the institution.
What was the background?
In April 2023, the Claimant, a Serbian company which sells energy on domestic and foreign markets, issued proceedings against the Defendant, Revolut, an electronic money institution (EMI) seeking restitution in the sum of 700,000 Euros. An EMI provides some services similar to a bank. In return for money paid by a third party to the EMI for one of its customers, the EMI provides "electronic money" to the customer which can be used to make payments or purchase services. Pursuant to an authorised push payment fraud, the Claimant made payment to a Revolut account held by Zdena Fashions Ltd. The credit was subsequently released to the account holder and was entirely dissipated. The Defendant applied for reverse summary judgment and/or the striking out of the claim on two alternative bases. First, that the Defendant has not been "enriched" for the purpose of an unjust enrichment claim. Second, that even if there has been enrichment it has not been at the expense of the Claimant. Revolut's account with Barclays was credited with the Claimant's payment. At the same time, Revolut credited Zdena's account with an equivalent sum in electronic money. The incoming credit was, therefore, balanced out by an obligation to its customer, Zdena. Accordingly, Revolut sought reverse summary judgment on these two alternative bases.
What did the court decide?
The application was dismissed. The question of whether Revolut was enriched fell to be determined at the trial. This was not a case in which funds were received into a trust account, such as when a solicitor receives funds into a client account. At the point of receipt, Revolut became the legal and beneficial owner of the funds transferred. An EMI has more assets afte the point of receipt than before and it can properly benefit from holding the money. If it insures the deposit, it can use the funds however it pleases. It also earned fees in the sum of £3,000 as a result of holding the deposit. Revolut relied upon the decision of HHJ Bird in Tecnimont Arabia Ltd v National Westminster Bank Plc [2023] All ER Comm 57, in support of the proposition that any enrichment in this case was not at the expense of the Claimant in circumstances where the payment was made via an indirect series of transfers. The Judge concluded that he could not accept the reasoning of HHJ Bird in Tecnimont and he was required instead to consider and analyse afresh the decision of the Supreme Court in Investment Trust Companies v HMRC [2018] A.C. 275. Having done so, the Judge concluded that whether on the basis of agency analysis or on the basis that there was a series of co-ordinated transactions, the enrichment was at the expense of the Claimant, notwithstanding the fact that there was no direct transfer of value.
Case details
- Court: London Circuit Commercial Court
- Judge: HHJ Paul Matthews (sitting as a High Court Judge)
- Date of judgment: 12 June 2024
Originally published by LexisNexis.
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