Terna Energy Trading DOO v Revolut Ltd

Factual and Procedural Background

This opinion concerns an application brought by the Defendant against the Plaintiff for reverse summary judgment or, alternatively, for an order to strike out the claim. The Plaintiff's claim is for unjust enrichment to recover €700,000 from the Defendant. The Defendant contends that the claim must fail on the basis that it has not been "enriched" and, even if it has, the enrichment was not "at the expense of the Plaintiff" for the purposes of unjust enrichment. The claim form was issued in April 2023, with the Defendant’s defence and Plaintiff’s reply filed in June and August 2023 respectively. The Defendant’s application was issued in December 2023 and supported by witness statements from solicitors for both parties. The matter involves limited factual dispute at this summary stage.

The Plaintiff is a Serbian company engaged in energy sales domestically and internationally. The Defendant is a financial services company authorised as an Electronic Money Institution (EMI) under the Electronic Money Regulations 2011. On 4 February 2022, the Plaintiff instructed its bank to pay €700,000 to an account with the Defendant held by a third party company. The payment was initially frozen but later released and dissipated by a series of payments. The Plaintiff’s instruction was induced by an authorised push payment fraud involving fraudulent emails purporting to amend payment details to the Defendant’s account. The Defendant admits the email descriptions but denies the particulars of the fraud and the nature of any qualifying mistake.

The payment was effected through a series of interbank transactions involving correspondent banks and the SWIFT messaging system. The Defendant, as an EMI, was required to safeguard the funds received by segregating them in a mixed euro account at a bank in Frankfurt. The funds were also converted and managed in sterling accounts in batches for treasury purposes. The Plaintiff did not bring claims against its own bank or the third party company that held the account with the Defendant.

Legal Issues Presented

1. Whether the Defendant has been "enriched" for the purposes of the doctrine of unjust enrichment.
2. Whether any such enrichment was "at the expense of the Plaintiff" within the meaning of unjust enrichment law.
3. Whether the Defendant’s receipt of the funds was subject to a defence such as ministerial receipt or good faith change of position (not decided at this stage).
4. Whether the claim should be struck out or summary judgment granted based on the above legal points.

Arguments of the Parties

Defendant's Arguments

• The Defendant denies enrichment, asserting that the funds received were exactly offset by a corresponding liability to its customer, resulting in no net benefit.
• The Defendant acted as an agent for its customer and held the funds ministerially, with a duty to account to the customer, who alone was enriched.
• The funds were segregated according to regulatory obligations and could not lawfully be used by the Defendant for its own purposes.
• Any interest or return on safeguarded funds is legally irrelevant, and the funds were dissipated within a day, making any such return de minimis.
• The Defendant denies the enrichment was at the Plaintiff’s expense, arguing there was no direct or indirect transfer of value from the Plaintiff to the Defendant, and the payment mechanism involved multiple parties and mixed funds.
• The Defendant relies on the absence of a direct agency relationship between the Plaintiff and itself and denies the applicability of tracing or coordinated transaction doctrines.

Plaintiff's Arguments

• The Plaintiff contends the Defendant was enriched by receipt of the funds, obtaining legal and beneficial title and the ability to use the funds to obtain returns or fees.
• The Defendant’s regulatory obligations limited but did not eliminate its ability to benefit from the funds, including fees retained and possible investment returns.
• The Plaintiff asserts the enrichment was at its expense, relying on the agency principle whereby the payment passed through a series of agents (UniCredit Serbia, UniCredit S.p.A, Barclays) culminating in the Defendant’s receipt.
• The Plaintiff denies the need to rely on common law tracing, asserting the agency and coordinated transactions exceptions apply.
• The Plaintiff disputes the Defendant’s characterization of the payment as indirect or mixed, emphasizing the legal equivalence of the agency chain to a direct transfer.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by setting out the legal framework governing summary judgment and strike out applications, emphasizing that the Defendant must show no real prospect of success on the claim or defence and that there is no compelling reason for trial. The court noted the limited factual dispute at this stage and that the application raised primarily points of law.

On the first issue of enrichment, the court recognized that "enrichment" is a technical legal term. The Defendant argued that any credit to its account was matched by a corresponding liability to its customer, resulting in no net enrichment. The Plaintiff argued that the Defendant, as beneficial owner of the funds, was enriched by receipt and use of the funds, including fees earned.

The court reviewed binding authorities from the Court of Appeal and House of Lords, which establish that banks are enriched by receipt of mistaken payments even if matched by liabilities to customers, unless the bank has paid out the funds to the customer without notice of the payer’s claim. The court found these older authorities binding and preferred them over more recent obiter statements suggesting otherwise.

The court rejected the Defendant’s submission that its position as an EMI, subject to safeguarding obligations, distinguished it from a bank. Although the funds were segregated and could not be used freely, the Defendant remained the beneficial owner and could profit from fees and potential returns. Therefore, the Defendant was enriched in the technical sense.

Turning to the second issue—whether enrichment was "at the expense of" the Plaintiff—the court applied the structured approach from the Supreme Court in Investment Trust Companies v HMRC. The court acknowledged that the payment was not a direct transfer from Plaintiff to Defendant but occurred through a series of interbank transactions involving correspondent banks.

The Plaintiff relied on two exceptions where indirect transfers may be treated as direct for unjust enrichment purposes: (1) agency and (2) coordinated transactions forming a single scheme. The Defendant relied on a recent first instance decision (Tecnimont) rejecting these exceptions in a similar context.

The court critically analyzed Tecnimont, distinguishing its facts and reasoning. The court concluded that the agency principle applies because the Plaintiff instructed its bank to pay the Defendant’s account, and the intermediary banks acted as agents in effecting that payment. The court also found the series of transactions to be coordinated and forming a single scheme, as the failure of any step would prevent the ultimate credit to the Defendant.

The court rejected the Defendant’s argument that the mechanism of SWIFT or correspondent banking negates agency or coordination, holding that legal treatment should not differ from domestic payment systems using similar account debiting and crediting mechanisms.

Accordingly, the court held there was a real prospect that the Defendant’s enrichment was at the Plaintiff’s expense through indirect transfer, satisfying the requirements of unjust enrichment subject to trial on unjustness and defences.

Finally, the court addressed precedent, acknowledging that it was not strictly bound by the Tecnimont decision but should follow it as a matter of comity unless convinced it was wrong. The court stated it was convinced Tecnimont was wrong in its legal analysis and declined to follow it.

The court concluded that the Defendant had a real prospect of success only if it could establish a defence, which was not to be decided at this summary stage. Therefore, the application for reverse summary judgment or strike out was dismissed.

Holding and Implications

The court DISMISSED the Defendant’s application for reverse summary judgment or strike out of the Plaintiff’s claim.

The direct effect of this decision is that the Plaintiff’s claim for unjust enrichment proceeds to trial. The court found that the Defendant has been enriched and that such enrichment was at the Plaintiff’s expense in a legally sufficient manner to survive summary disposal. The court did not resolve the issues of unjustness or any defences, which remain for trial. No new precedent was established; rather, the court reaffirmed existing binding authorities and preferred them over recent obiter statements and first instance decisions.