BANK OF IRELAND V PEXXNET LTD

[2010] EWHC 1872 (Comm), Queen's Bench Division, Commercial Court, Jonathan Hirst QC, sitting as Deputy High Court Judge, 22 July 2010

Banking - Fraud - Constructive trust - Law applicable to constructive trust

Pexxnet, an English company, was established in 2004, and beneficially owned by HB. Pexxnet opened sterling and euro accounts at the Bank of Ireland's branch in Finchley Road, London, HB being the sole authorised signatory. On 14 September 2006 HB presented two cheques and a banker's draft for payment into the account. The bank credited all three instruments, to the value of €2,400,000 to Pexxnet's account. Subsequently it was found that all three instruments had been forged. By that time, the sums had been transferred to accounts held by various third parties. The bank sought to recover that sum from Pexxnet and the third parties. The court ruled that all of the defendants had been involved in a dishonest conspiracy to defraud the bank, and that under English law the money transferred by the bank to Pexxnet's account was held by Pexxnet as constructive trustee. Further, under English conflict of laws rules, the constructive trust was governed by English law and any person receiving those funds with knowledge of the fraud was subject to the same constructive trust, so that English law applied.