Under English law it is now clear that, in order to trace monies through bank accounts, it is not necessary that payments should occur in any specific order.
The liquidator (the "Liquidator") of Relfo Limited ("Relfo") applied to court for an order for the restoration of funds (the "Funds") that the shareholder-director had caused Relfo to pay, via numerous foreign entities and their bank accounts, to one of his business associates (the "Recipient") prior to entering liquidation. At first instance, the judge found in the Liquidator's favour. The recipient appealed.
The judge at first instance had been entitled to draw the inference that the monies paid out of Relfo were the source of the monies paid to the Recipient, notwithstanding the numerous bank accounts through which they had passed and that the timing of the payments were not chronological, and the Liquidator was therefore allowed to trace the Funds into the bank account of the Recipient.
In the alternate, the Court would have allowed the Liquidator to recover the Funds on the basis of unjust enrichment, notwithstanding the Recipient did not receive the Funds directly from Relfo.
The decision should be welcomed by insolvency practitioners as facilitating the recovery of illegitimate payments; it is now clear that, in order to trace monies through bank accounts, it is not necessary that payments should occur in any specific order. Further, the decision in Relfo moves the law closer to recognising a general principle that a claim for unjust enrichment will not be frustrated where the defendant was not the direct recipient of funds.
Relfo Limited (In Liquidation) v Varsani  EWCA Civ 360