Terna Energy Trading doo v Revolut Ltd: A further legal development in the context of push payment fraud
Terna Energy Trading doo v Revolut Ltd [2024] EWHC 1419 (Comm)
The recent decision of HHJ Paul Matthews in Terna Energy Trading doo ("Terna") v Revolut Ltd ("Revolut") constitutes a notable legal development in the realm of push payment fraud, which typically involves victims being deceived into making bank transfers to accounts belonging to third parties posing as legitimate payees.
Factual background
This case concerned a reverse summary judgment/ strike out application made by Revolut. That application was made in the context of a claim issued by Terna against Revolut for unjust enrichment, by which Terna sought restitution of a €700,000 sum it had paid to a Revolut account belonging to a third party, Zdena Fashions Ltd ("Zdena"), under the misapprehension that it was satisfying a genuine invoice from an energy supplier. The funds in question were dissipated shortly after the payment was made.
Revolut sought reverse summary judgment/ strike out of the unjust enrichment claim on two grounds; namely that (i) it had not been enriched by the payment in question; and (ii) even if Revolut had been enriched, such enrichment was not at Terna's expense.
Relevant legal tests
Unjust enrichment
Generally speaking, and subject to any available defence, a claim for unjust enrichment will be made out where the claimant can prove (i) that the defendant has been enriched; (ii) that the enrichment was at the claimant’s expense; and (iii) that the enrichment at the claimant’s expense was unjust.1
Reverse summary judgment and strike-out
Summary judgment may be awarded pursuant to CPR 24.3 on the whole of a claim or on an issue if (i) the Court considers that the party has no real prospect of succeeding on the claim, defence or issue; and (ii) there is no other compelling reason why the case or issue should be disposed of at a trial. Strike out may be awarded pursuant to CPR 3.4(2) if it appears that (i) the statement of case discloses no reasonable grounds for bringing or defending the claim; (ii) the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or (iii) there has been a failure to comply with a rule, practice direction or court order.
The High Court's decision
Ultimately, Revolut's application for reverse summary judgment/ strike out of Terna's unjust enrichment claim was dismissed.
Was Revolut enriched?
Revolut contended that it could not have been enriched on the basis that the payment received by Revolut from Terna was negated by Revolut's obligation to pass on an equivalent amount to Zdena.
The High Court held, relying on previous authorities including Kerrison v Glyn, Mills, Currie & Co,2 that a bank (in this case, Revolut) becoming the debtor of a customer (in this case, Zdena) is not an answer to a claim in unjust enrichment, at least unless and until it is proved that the bank has paid away the money in accordance with the customer's instructions and without notice of the payer's (in this case, Terna's) claim. The Court noted that the fact that electronic money institutions ("EMIs"), such as Revolut, are governed by the Electronic Money Regulations 2011 (SI 2011/99) which circumscribe the ability of EMIs to make use of customer funds (as compared to ordinary banks which are not subject to such restrictions) does not mean that those EMIs cannot be enriched by receipt of said funds. Indeed, the fact of such enrichment in this case was evidenced by fees of approximately £3,000 which Revolut had earned in connection with currency conversions relating to the transaction at issue. As such, there was no meaningful distinction to be drawn between an ordinary bank and an EMI in this regard, and the question of whether Revolut was enriched fell to be determined at trial.
Was any enrichment of Revolut at Terna's expense?
As to whether any enrichment of Revolut was at Terna's expense, the High Court revisited the Supreme Court's holding in Investment Trust Companies v HMRC3 which divides cases on unjust enrichment into two broad categories: involving (i) direct transfers involving parties dealing directly with one another, or with another's property; and (ii) indirect transfers where parties are not dealing directly with one another, but where the defendant has nevertheless received a benefit from the claimant, and the claimant has incurred a loss through the provision of that benefit. The High Court agreed with Revolut's contention that this case did not involve any direct transfer (given that the funds had not flowed directly from Terna to Revolut, and had been mixed with other funds during the payment process), but disagreed with Revolut's contention that the case also did not involve any indirect transfer.
The High Court declined to follow the decision in Tecnimont Arabia Ltd v National Westminster Bank plc,4 in which it was held that where the relevant payment was made through an indirect sequence of transfers rather than via direct payment to the institution, any enrichment would not be deemed to be at the expense of the victim. Instead, the High Court concluded that, whether on the basis of agency analysis or on the basis that there was a series of co-ordinated transactions, and subject to questions of "unjustness" and any possible defences to be determined at trial, any enrichment of Revolut was at Terna's expense (notwithstanding the fact that there was no direct transfer of value).
Relevance
This decision unlocks the potential for future unjust enrichment claims to be brought against banks and payment services providers in the context of push payment fraud. We note, however, that Revolut has been granted permission to appeal this decision and welcome a decision from the Court of Appeal on this area of law which has, to date, been fraught with uncertainty.
1 Samsoondar v Capital Insurance Co Ltd [2020] UKPC 33; [2021] 2 All E.R. 1105.
2 (1911) 81 LJKB 465.
3 [2017] UKSC 29.
4 [2023] Bus LR 106, [2023] 1 All ER Comm 57.
