The Gazette 1986

g a z e t t e

s e p t e m b e r 1986

"Knowledge in this context would include what

the bank ought to know on the basis of clear

information already available to it, but would not

of course include notice of a mere allegation by

the plaintiffs that Agromark's demand was

fraudulent; the bank is under no duty to investigate

such an allegation. . . "

As regards the relevant time for establishing the

bank's knowledge of the beneficiary's fraud, he said:

"It seems to us clear that, where payment has in

effect been made, the bank's knowledge that the

demand made by the beneficiary on the perfor-

mance bond was fraudulent must exist prior to the

actual payment to the beneficiary and that its

knowledge at that date must be proved. Accor-

dingly, if all a plaintiff can establish is such

knowledge after payment, then he has failed to

establish his cause of action."

As to the standard of proof of fraud, he said:

"The evidence of fraud must be clear, both as to

the fact of fraud and as to the bank's knowledge.

The mere assertion or allegation of fraud would

not be sufficient. We would expect the court to

require strong corroborative evidence of the

allegation, usually in the form of contemporary

documents, particularly those emanating from the

buyer. In general, for evidence of fraud to be

clear, we would also expect the buyer to have been

given an opportunity to answer the allegation and

to have failed to provide any, or any adequate

answer in circumstances where one could properly

be expected. If the court considers that on the

material before it the only realistic inference to

draw is that of fraud, then the seller would have

made out a sufficient case of fraud."

The Court of Appeal disagreed with Neill J. that the

"test to be applied by the courts is a standard of a

hypothetical banker in possession of all the relevant

facts" and that unless he can say "this is plainly

fraudulent; there cannot be any other explanation", the

courts cannot interfere. Ackner L.J. advanced a wider

standard:

"The corroborated evidence of a plaintiff and the

unexplained failure of a beneficiary to respond to

the attack, although given a fair and proper

opportunity, may well make the only realistic

inference that of fraud, although the possibility

that he may ultimately come forward with an

explanation cannot be ruled out."

As the claim before the court was a claim for an inter-

locutory judgment, the Court of Appeal, following the

principles laid down in

American Cyanamid

-v-

Ethicon

Ltd.

, held that on the evidence before the court, the

plaintiffs failed to establish that it was seriously

arguable that the only realistic inference was that

Agromark could not honestly have believed in the

validity of its demands on the performance bonds. The

'Our

Progressive

and

Professional

Team'

OUR PROFESS IONAL SERVICES

VALUATIONS

RENT REVIEWS

LEASE RENEWALS

ARBITRATIONS

CAPITAL GAINS AND

PROBATE VALUATION

RATING APPEALS AND

INSURANCE VALUATION

COMPULSORY PURCHASE

ORDERS

OUR VALUAT ION TEAM

Anthony M. Sherry

F.S.VA

, F.IAV.I

Gordon H. Gill

F.R.I.C.S.

Philip G. Sherry

A.R.I.C.S.

Sh e r r y

n t z Ge r a ld

& Partners

MERR ION ROW, DUBL IN 2

613755 • 765666