Liquidators’ recovery of laundered monies through tracing

By Charles Pugh

In Relfo v Vasani [2014] EWCA Civ 360, it was held that where monies are improperly paid out of a company, they may be traced through various accounts to the end recipient, even if each of the stages in the laundering of the money cannot be identified. It is also likely to become a major authority on unjust enrichment deciding that indirect recipient of funds would be liable to give restitution where there is a sufficient degree of connection between the payment away and the receipt.

The judgment in the Court of Appeal concerned a liquidator’s ability to trace through various accounts in circumstances where they lack the evidence to show each transaction. Tracing is the process the court adopts to enable a party whose money has been misappropriated to claim back the money, or any asset for which it has been substituted, from a person who has knowingly received it. In the decision of the judge at first instance, it was held that the liquidator of Relfo was entitled to recover funds totalling $878,479.35 (£522,000) transferred out of the company by its former director. On the judge’s findings, that sum was substitute property for monies belonging to Relfo, which were misappropriated and paid to a company called Mirren. In short, the facts were that Mr G, who was a director of Relfo, had close links with the Vasani family…

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