How will the court approach tracing claims?

How will the court approach tracing claims?

What does the recent case of Relfo Ltd (in liq) v Varsani tell us about the court’s approach to tracing claims? Peter Shaw and Joseph Curl, barristers at 9 Stone Buildings who represented Relfo, consider the issues raised by the case.

Original news

Relfo Ltd (in liq) v Varsani [2014] EWCA Civ 360, [2014] All ER (D) 59 (Apr)

The liquidator of a company had successfully brought a tracing claim against the defendant in his recovery of money paid by the company. The judge had further found that the defendant had benefited through unjust enrichment. The Court of Appeal, Civil Division, upheld the judge’s decision and decided that, in order to trace money into substitutes, it was not necessary that the payments should occur in any particular order, let alone chronological order.

How did the issue arise?

A company, Relfo, had an outstanding tax liability and about £500,000 in its bank account. Its director, Mr Gorecia, had decided that rather than leave the funds available to pay towards the liability, he would use the funds to make recompense to business associates of the Varsani family for losses suffered in Ukraine and Russia on joint investments. He arranged for the sum to be paid via what can only be described as a group of money launderers and ended up in the account of the defendant, the son of Mr Varsani, who was Mr Gorecia’s principal business associate.

The funds ended up in Mr Varsani’s bank account the day later than Mirren, a BVI intermediary, had received it from the company’s account in England.

We didn’t know any of this at the outset. It wasn’t until some time quite later that the liquidator received an anonymous unsolicited letter, with attached documents, from an individual in Eastern Europe, which tipped the liquidator off that the funds had ended up in Mr Varsani’s bank account. Proceedings commenced on the basis that Mr Varsani had had the company’s money—all the delicate

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