The Gazette 1986

s e p t e m b e r 1986

g a z e t t e

"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." 30 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. 31 , 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

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