The of Bank of Credit in the UK - Case Study Example

Bank of Credit and Commerce International (Overseas) LTD and International Credit Investment Company (Overseas) LTD v. Chief Labode Onadimaki Akindele: An Analysis This essay will analyze the case of Bank of Credit and Commerce International (Overseas) LTD and International Credit Investment Company (Overseas) LTD v. Chief Labode Onadimaki Akindele in relation to trusts and equitable remedies. Trusts in General In the sphere of Common Law systems, Trusts are common accord amongst parties where money or property is owned and administered by one person or organisation for the benefit and assistance of another. The trust is usually created by a settlor, who entrusts some or all of his property to persons of his choice known as the trustees. The trustees on the other hand are the legal owners of the property in trust; correspondingly, they are obliged to hold the property for the benefit of one or more persons or organisations herein referred to as the beneficiary which are commonly specified by the settlor. The Trust is governed by the terms of the trust document which are usually written and in a deed form. It can be said that trusts continues to play a significant contribution in all common law systems all over the world. In the United Kingdom, there are five main kinds of trust which come into being along side the transition with respect to laws and court cases. Among them are Interest in Possession trusts, the Accumulation and Maintenance trust, the Discretionary trust, the Bare trust and the Charitable trust. Amidst these transition and improvement of the legal system, in general, a trust necessitates for the following: There must be a clear intention to create a trust; the subject matter must be unmistakably identified; and the beneficiaries of the trust must be evidently identified or at least ascertainable. Aside from the foregoing, there are additional formality required in express trusts as provided for in the Wills Act of 1837 which provides that all testamentary trusts must be in writing, signed by the testator or by someone in his presence and by his direction and be attested by two witnesses. The Law of Property Act of 1925 provides that a declaration of trust regarding any land or any interest therein must be manifested and proved in writing signed by some person who is able to declare such trust or by his will and with respect to shares of stock, the Companies Act of 1985 in general states that a share transfer from must be executed and delivered with the share certificates followed by entry of the name of the new owner in the company books. Aside from the foregoing, it is also noteworthy to generally discuss the concept of Constructive trust. This type of trust is not created by an agreement as mentioned before. A constructive trust is made obligatory by the law as an equitable remedy. A Constructive trust takes place for the reason of some wrongdoing, where the wrong doer get hold of the legal title to property and cannot be allowed to stand benefited from it. It is essentially a legal fiction, which arises by operation of law as a rejoinder to certain occurrences. The Case of BCCI Overseas and ICIC Overseas v. Akindele (2000) In the case of Bank of Credit and Commerce International (Overseas) LTD (BCCI Overseas for brevity) and International Credit Investment Company (Overseas) LTD (ICIC Overseas for brevity) v. Chief Labode Onadimaki Akindele (Akindele for brevity) is a claim of liquidators under the knowing assistance and knowing receipts of a constructive trust. The main issue of the instant case is whether or not there is Akindele was liable to BCCI Overseas and ICIC Overseas for the amount of US $ 6,679,226.33 plus interest as a constructive trustee and alternatively by way of damages for conspiracy to defraud. The transaction has to do with an investment of Akindele of US$ 10 million through ICIC Overseas in the purchase of 250,000 shares of BCCI Holdings of the fully paid up value of US$10 each, made in 1985. Claimants BCCI and ICIC Overseas alleged that both the defendant Akindele and ICIC Overseas intended and knew that the aforesaid agreement was a sham, it is merely a device for ICIC Overseas to obtain the use of US$ 10 million for a minimum period of two years and for Akindele to obtain a fifteen per cent guaranteed return for his investment. Akindele's state of knowledge at the 1985 Agreement between him and ICIC Overseas, illustrates that there is no evidence which pointed out that there is a cloud of doubt on the part of the defendant as to the integrity of the management of BCCI. In adopting the ruling of the Judge, it is apparent that the defendant had no knowledge of the underlying frauds within the BCCI group, and the defendant basically perceive it as an arm's length business transaction, furthermore, he was not aware of the artificial nature of the transaction. The most important enquiry on this case is what type of knowledge is required to hold a person liable for his receipt. It is either a knowing assistance or knowing receipt, which will give rise to the personal liabilities for losses to trusts. The question of knowing receipt is carefully examined in the case. In line with this, it is noteworthy to examine the categories of knowledge as enunciated in the Baden Case (1993) to wit: (i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious; (iii) wilfully and recklessly failing to make such enquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which will put an honest and reasonable man on inquiry. Generally, the first three categories have been taken to represent actual knowledge or its equivalent and the last two refer to constructive knowledge. Knowing Assistance as settled in the case of Royal Brunei Airline Sdn Bhd v. Tan (1995) that dishonesty is amongst the requirement, to which dishonesty "means simply not acting as an honest person would in the circumstances" and adding that "knowingly" was better avoided as defining ingredient of the liability. As such, the framework stated in the Baden Case was elapsed. The case of Ajou v. Dollar Land Holdings Plc (1994), laid down the essential requisites of knowing receipts to wit: first, the plaintiff must show a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff and thirdly, knowledge on the part of the defendant that the assets received are traceable to a breach of fiduciary duty. Applying the foregoing to the BCCI case, it can be inferred that the first two requisites where present, in spite of this, the third requisite is lacking, this is because the defendant Akindele is not knowledgeable about that the sum he has received was traceable to the breaches of fiduciary duties of BCCI officers. In view of these, the court ruled that the recipient's conscience is sufficiently affected for it to be right to bind him by the obligations of a constructive trustee. All that is necessary is that the recipient's state of knowledge should be such as to make it unconscionable for him to retain the benefit of the receipt. The House of Lords after deliberation dismissed the claimants' appeal. Analysis Equitable remedies functions on the conscience of the defendant directed at a particular person, his knowledge, state of mind, and motives which are significant as to whether or not the remedy should be granted. It should be noted that a constructive trust is an equitable devise it itself. Per se it can be used in case where the claimant asserts that the property has been wrongly appropriated for them and correspondingly, the property has increased in value or the property has been transferred by the wrong doer to an innocent third party, and the original owner should be entitled to recover from the said innocent third party. Additionally, the defendant can raise all of the available equitable defences against it including the unclean hands which basically provide that the court will not assist a claimant who is himself in the wrong or acting for inappropriate motive. The case of BCCI is a precedent in itself. This is for the reason that the court was able to develop the law to an enhanced course with respect to knowing receipt. The determination as to whether or not it is conscionable for the person to retain the profit he received under the breach of trust was clearly explained from an objective point of view, a departure to previous rulings. In view of this, it can be said that a recipient is not likely be suspicious, unless being a reasonable man he would have realised that the money or the property was most likely to be in trust or misappropriated or misapplied for that matter. The objective viewpoint in the assessment of a breach of trust makes it simple and straightforward and correspondingly easier to resolve the issues. In connection with this, the equitable remedy of unjust enrichment can also be raised in cases of a knowing receipt. Either party in a constructive trust may invoke that no one shall be unjustly enriched at the expense of another. On the other hand, the cases mentioned referring to knowing assistance is well selected to address its differences with the knowing receipt. The rules pertaining to knowing assistance evolving so as to take in hand circumstances that may be applicable on a case to case basis. Indeed, there is no stopping the changes and the challenges posed to us by modernity and the changes in our society. What may be applicable before is different from today; the law on trusts is highly evolving since its inception to the common law system. Common law system is a proponent of equity and as such, the protection granted to by trusts acknowledged that there is always competing views on the matter and all have their strengths and weaknesses and as such it continuously progresses in time. These developments in trust laws provides a gateway for a honourable control over the trustees is a manifestation of an effective control of the courts of conscience which is in harmony with the equitable remedies provided for under the common law system. References Ajou v. Dollar Land Holdings Plc (1994) 1All ER 685 Baden v. Societe Generale pour Favoriser le Developpement du Commerce et de l'Industrie en France S.A. (1993) 1WLR 509 Bank of Credit and Commerce International (Overseas) LTD and International Credit Investment Company (Overseas) LTD v. Chief Labode Onadimaki Akindele. (2000). http://www.ucc.ie/law/restitution/archive/englcases/akindele.htm Gardner, Simon. (n.d.) Knowing Assistance and Knowing Receipts: Taking Stocks. Retrieved March 4, 2007 from http://www.kessler.co.uk/dtwt/articles/Gardner_Knowing_Assistance_ And_Knowing_Receipt_Taking_Stock.html Royal Brunei Airline Sdn Bhd v. Tan (1995) 2 AC 378 Read More