It is hornbook banking law, and has been ever since 1848 (see Foley v Hill (1848) 2 HLC 28), that those lucky enough to have a credit balance with their bank have the benefit of a debt owed by the latter: nothing more, nothing less, and certainly no trust or other equitable interest in any funds in the institution. Any lingering doubts on the matter were dispelled by Space Investments v CIBC (Bahamas) Ltd  3 All E.R. 75.
Or so we thought, until Barling J put the cat among the pigeons in late 2017. The Court of Appeal has now, much to everyone’s relief, reversed his decision and restored orthodoxy in First City Monument Bank plc v Zumax Nigeria Ltd  EWCA Civ 294.
Cut away the intricacies of murky Nigerian financial transactions, and the background was this. Zumax, a Nigerian company servicing the oil industry in the shape of Shell and Chevron, banked in Nigeria with IMB. Like many Nigerian organisations, when it received dollar payments it ensured they were made offshore: here, into an account with Chase in the name of an Isle of Man nominee, Redsear. If and when monies were needed in Nigeria, Redsear would then transfer them into IMB’s account with Commerzbank; IMB in turn would credit Zumax in naira.
Between 2000 and 2002 several million dollars were transferred from the Redsear account to IMB, but allegedly never reached Zumax. Allegations of fraud were made against the person who organised these transfers, who had connections with both Redsear and IMB. Zumax alleged that in so far as these sums had reached IMB (whose obligations First City Monument had taken over), they had been held on trust for Zumax. We are not told in terms why Zumax did not simply sue to have its account credited, but this may have been due to the fact that Zumax was alleged to owe large sums of money to IMB under a previous facility, or some other reason connected with dubious dealings by IMB.
Barling J held that because the monies had been transferred to IMB via its Commerzbank account specifically for the benefit of Zumax, IMB had not been free to deal with them as its own, and there was in the circumstances no reason why a trust should not be inferred. The Court of Appeal saw this off in short order. It was of course possible for a bank to receive money as a trustee for its customer: but it was unlikely. The fact that monies were transferred to a bank for the benefit of the account of X was entirely consistent with a duty to credit the account and not to hold the monies on trust, and this applied as much to a transfer through a correspondent bank (i.e. Commerzbank) as to a direct transfer. The normal inference, indeed, was that a bank in such a case held the monies at its free disposal. For good measure there had been no mention of any need to segregate the monies — normally an important feature of a trust. (The court might have added that in so far as a “Quistclose trust” was alleged, it would still not get Zumax home, since the normal inference in such trusts is that unless and until put to its intended use the money is held not for the payee but for the payer — here Redsear).
Relief all round, one suspects, for the banking community. Banking law is complex enough without being regularly made more difficult by the use of trusts; this decision will make it that much more difficult for lawyers further to muddy turbid waters by lengthy pleadings alleging fiduciary duties, trust relationships and the like. In the view of this blog, this is quite right too.