JSC Bank of Moscow v Kekhman and others

Commercial Court clarifies requirements for a valid plea of fraud

In a significant decision for commercial fraud practitioners, Mr Justice Flaux has held that, where a claimant seeks to draw an inference of fraud from primary facts, it does not have to plead facts which are only consistent with dishonesty.  The correct test is whether or not, on the basis of the primary facts pleaded, an inference of dishonesty is more likely than one of innocence or negligence.

This is a helpful clarification of Lord Millett’s well-known statement of principle in Three Rivers District Council v Bank of England [2001] UKHL 16.  Lord Millett held that a claimant who alleges dishonesty must plead the facts, matters and circumstances relied on to show that the defendant was dishonest and not merely negligent, and that facts, matters and circumstances which are consistent with negligence do not do so.  In Kekhman, Flaux J rejected the suggestion that this meant that there could be no proper plea of fraud unless the facts pleaded were only consistent with dishonesty.

The decision is to be welcomed by commercial fraud practitioners who may well not, at the pleading stage, be able to say whether the evidence at trial will or will not establish fraud.

The full judgment can be read here: http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/Comm/2015/3073.html&query=bank+and+of+and+moscow

Peter Head was part of the counsel team for the Bank of Moscow.