Terna Energy Trading doo v Revolut Ltd [2024] EWHC 1419 (Comm)

In 2022, Terna Energy Trading doo (“Terna”) fell victim to an “authorised push payment fraud”.  This resulted in it instructing its own bank to pay €700,000 to Zdena Fashions Ltd (“Zdena”), who held an account with Revolut.  While the funds were initially frozen by anti-money laundering software, once they were released they were entirely dissipated out of the Revolut account by the fraudsters within a matter of hours.

Terna made no claim against its own bank or Zdena.  However, it brought a claim in unjust enrichment against Revolut.  In short, it argued that by virtue of receiving the money into its account, Revolut obtained legal and beneficial title to the funds and was therefore enriched.  As required by the doctrine, it claimed Revolut’s enrichment was at its expense.

Revolut advanced two arguments in an application for reverse summary judgment or for striking out the claim.  First, it asserted it had not been enriched.  While it does in fact own any funds it receives, it argued that the asset created by receiving the funds was exactly offset by a simultaneous liability to Zdena, and it therefore received no net benefit.  Second, it argued that even if it had received a benefit, this was not at the expense of Terna.  This was because: (a) there was no direct flow of funds from Terna to it; (b) the funds were mixed with other funds in the international payment process; (c) Terna and Revolut did not deal with each other via agents; and (d) the funds were not traceable at common law. 

In respect of Revolut’s first argument, the court held it had been enriched by the transfer.  HHJ Matthews undertook a thorough analysis of the authorities[1] before holding that where an agent merely credits a principal (in this case, Zdena), without actually transferring funds to it, the agent remains liable to the claimant (Terna).  This was despite Revolut arguing that, because it was an Electronic Money Institution (“EMI”), and not a bank, it could not be enriched as any funds it received were held separately as a result of the Electronic Money Regulations 2011.  This argument cut no ice with the court as in its own defence, Revolut accepted it was the beneficial owner of the funds.  Therefore, even if they were in a separate account, Revolut was still enriched.  The court accordingly held that the position of an EMI is “in this respect the same as for an ordinary bank”.[2]

For Revolut’s second argument, that any enrichment was not at Terna's expense, HHJ Matthews considered Tecnimont Arabia Ltd v National Westminster Bank plc[3] before concluding that he was “convinced [that judgment] was wrong”.[4]  Simplifying matters significantly, this conclusion was reached on the basis that Tecnimont did not apply the Supreme Court’s decision in Investment Trust Companies v HMRC[5] correctly. Those prior decisions concerned an analysis of various indirect transfers (such as in this case, where the credits and debit representing the payment had passed through several banks) and whether they could be seen to form a single scheme or transaction or not. HHJ Matthews did not agree with the Techimont finding that (a) international interbank transfers should not be seen as a series of co-ordinated transactions; and (b) that there was no agency relationship in such transactions.

Following Tecnimont, banks and EMIs may have understandably considered they were immune from restitutionary claims following the receipt of fraudulently obtained funds.  Indeed, Revolut appear to have been sufficiently confident to bring summary judgment and strike out applications on this basis in this case.  While there is conflicting High Court precedent at present, Revolut has obtained permission to appeal in respect of both of its arguments,[6] so the position is likely to be settled in the near future.