Case No: 2001 Folio 123
Neutral Citation: [2003] EWHC 164 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: Friday 14th February 2003
Before :
HIS HONOUR JUDGE CHAMBERS QC
Sitting as a judge of the Queen’s Bench Division
- - - - - - - - - - - - - - - - - - - - -
Between :

	DESPINA PAPAMICHAEL	Claimant	
	- and -		
	NATIONAL WESTMINSTER BANK plc
(Formerly trading as NATWEST GLOBAL FINANCE MARKETS)	Defendant/Part 20 Claimant	
-and-
DIMITRIOS PAPAROUNIS                      Part 20 Defendant
- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Richard Spearman QC and Andrew Tabachnik (instructed by Shaw and Croft) for the Claimant
Elizabeth Gloster QC and Pushpinder Saini (instructed by Mishcon De Reya) for the Defendant/Part 20 Claimant
Richard Millett (instructed by Hill Taylor Dickinson) for the Part 20 Defendant
Hearing dates : 22-25, 30,31 July; 7,8,10,11 October and 20 November 2002
- - - - - - - - - - - - - - - - - - - - -

His Honour Judge Chambers QC  :
Introduction
1.	On 30 April 1999 the Bank of Cyprus caused 2 billion Greek drachmas to be paid to the National Bank of Greece (“the National Bank”) for the credit of the defendant bank (“NatWest”). The source of the money was a record win on the Greek Joker Lottery.
2.	The claimant, Despina (Nana) Papamichael (“Mrs Papamichael”) says that it was she who won the money and that it was paid to NatWest’s correspondent bank, the National Bank at her request and for her benefit. It is her case that the payment was made in order that the drachmas be converted into US dollars to be held by NatWest in a fixed term deposit account to mature when Greece joined the euro.
3.	NatWest accepts that the 2 billion drachmas were paid to the National Bank on 30 April 1999. However NatWest maintains that it was Mr Paparounis, the husband of Mrs Papamichael, who won the money on the lottery. It further maintains that, regardless of who was the winner, the money was lawfully turned into a US dollar account that stood as security for the operation of a foreign exchange (“forex”) margin account in the name of Mr Paparounis.
4.	It is Natwest’s case that Mrs Papamichael so conducted herself as to preclude any recovery from the bank even if she can demonstrate an interest in the money transferred to the National Bank. It further denies knowledge at any relevant time of any interest in the money that Mrs Papamichael may establish.
5.	In late 2000 Mrs Papamichael entered into correspondence with NatWest (now owned by the Royal Bank of Scotland) that was, on its face, concerned with arrangements that were to have effect when the account matured. At first, the bank had difficulty in understanding to what it was that Mrs Papamichael’s inquiry related. After a degree of clarification, the bank denied Mrs Papamichael’s entitlement to the money in question which by then had gone. On 5 February 2001 Mrs Papamichael started this action.
6.	In the event that its defence is unsuccessful, NatWest seeks an indemnity against Mr Paparounis. I am not presently concerned with that claim. However, the bank also counterclaims for declarations against Mr Paparounis (as well as Mrs Papamichael) in order that Mr Paparounis be bound by the outcome of this trial. Although he was not present, Mr Paparounis provided a witness statement and took an active part in these proceedings by his counsel and solicitors. He supports the claimant’s case.
7.	This short introduction covers a mass of fact and law to which I must now come. Before doing so, I must mention the able and constructive way in which the lawyers have approached a case in which there is plenty of scope for feelings to run high. It is particularly helpful that the parties are agreed that, provided that a point has been adequately aired in argument, no complaint will be made that it has not been pleaded.
The story
Background
8.	 Because of the length and complexity of the matters with which I must deal, I shall try to make my findings of fact as the account progresses. In order to do so it will sometimes be necessary to refer to later events.
9.	Mrs Papamichael was born in Thessaloniki in 1950. She came from a comfortably moneyed background and inherited property both from her grandmother and her father. Her means were sufficient to prevent the need for work. Her father told her that the best investments were “Cash, Gold and Property”. It is clear from the evidence and her jewellery that she has largely abided by those principles.
10.	Mrs Papamichael has been married three times. The first marriage was about thirty years ago and lasted for six months. A few years later she married Mr Papamichael, an actor who was and remains very well known in Greece. Mrs Papamichael left him in December 1989. At the time of her marriage Greek law required that she take her husband’s name.
11.	In 1990 Mrs Papamichael began living with Mr Paparounis. She married him in 1997. By then there was no legal requirement for a wife to adopt her husband’s name. Mrs Papamichael found it convenient to retain the social advantages connected with her second husband’s name and kept it.
12.	Mrs Papamichael has no children. Mr Paparounis has two adult sons, Constantinos and Spyros, by a previous marriage. They work in his business.
13.	The marriage between Mrs Papamichael and Mr Paparounis is presently the subject of desultory divorce proceedings that were started in June 2001 following a separation in January 2001. The present relationship between the couple was the subject of sensitive but firm questioning by Miss Elizabeth Gloster QC, leading counsel for NatWest. So far as Mrs Papamichael is concerned, the present position may be summarised as one of cautious intimacy. The couple live apart but spend the occasional night together. Despite her colourful description of her attitude given early in her evidence, her lengthy cross-examination indicated a potential for a deep sadness, depending upon my findings in this case. This is because it is her case that her husband has deceived her in a matter of total trust. The nature of that trust is central to the outcome of this dispute.
14.	As Mrs. Papamichael said in her statement, before the events now in question, she led a very leisured and pleasant life. Apart from helping to run a boutique many years ago, Mrs Papamichael has never worked. It was clear from her evidence that she has little interest in the dry technicalities surrounding financial matters. Her attempts to read a bank statement were remarkably ineffectual. Nevertheless, Mrs Papamichael is highly intelligent and articulate. She has a keen interest in matters of property and has pursued that interest by placing her trust in a small number of people. Such people collect her rents, sell her gold, advise upon whether to buy property and deal with any arrangements surrounding such matters. She is comfortable in the society of both men and women: attractive to the former and not threatening of the latter. However, subject to an important exception, it is men who appear mainly to have helped her in financial matters. Chief among those was Mr Paparounis.
15.	It was with Mr Paparounis that Mrs Papamichael discussed whether or not she should buy property. When she made a purchase he conducted the negotiations. Mr Paparounis would have been the person to whom she would have turned had she need of advice as to how to invest her lottery winnings: but were they her winnings?
16.	NatWest denies that Mrs Papamichael ever won the lottery. On this aspect of the case there is no halfway house. If the bank is right, Mrs Papamichael was telling a deliberate series of lies. Such an allegation holds no intrinsic surprise. Litigants do lie. What is slightly surprising is the bank’s stated position as to Mrs Papamichael’s evidence.
17.	Mrs Papamichael was cross-examined over three days. Miss Gloster was careful and fair. She observed my indication that she did not have to put all the minutiae of her case provided that the witnesses had a proper opportunity to deal with any aspect upon which it was right that they should have the chance to comment. Nevertheless, at the end of the cross-examination it was not always clear where it was being suggested by the bank that Mrs Papamichael was lying, where her evidence was not accepted and where it was accepted. At my request NatWest produced a written statement which set out its position. Although this was done relatively early in the case, I understand it still to do so.
18.	Given the usefulness of the document and the overall sense of co-operation in the case, one is reluctant to be too analytical of its contents; but on even the most benevolent of readings it contains an impossible contradiction. This arises from the fact that although the bank does not accept that Mrs Papamichael won the lottery and asserts that she is lying when she says that she did, the first sentence of the document reads:
“The Bank does not advance the case that the present claim by Mrs. Papamichael is made in execution of a conspiracy between Mrs. Papamichael and her husband, Mr. Paparounis, to defraud the Bank, or that she is making a fraudulent claim herself.”
19.	One may fairly ask how it is possible to reconcile the bank’s acceptance that Mrs Papamichael is honest in bringing her claim but dishonest in asserting that she won the lottery. 
20.	To me the conundrum is easily resolved because I am entirely satisfied that it was Mrs Papamichael who won the lottery and that the bank is correct in accepting that Mrs Papamichael does not act as the knowing instrument of Mr Paparounis. She brings these proceedings on her own account. 
21.	I shall now explain why I am satisfied that it was Mrs Papamichael who won the lottery.
The lottery win
22.	Mrs Papamichael gave her evidence in English. She used an interpreter to explain the occasional word but also displayed an excellent sense of language. 
23.	As I have explained, Mrs Papamichael likes cash. She likes to have it handy. In March 1999 Mrs Papamichael had various homes of which one was Mr Paparounis’ property in Ekali near Athens. On the way to central Athens, there is at Nea Erithrea a small agency that sells lottery tickets. At that time there were in Greece various lotteries. One was the Joker lottery. Mrs Papamichael told me that she liked playing the Joker lottery. She played other lotteries as well. She played the Joker regularly although not every week. If she had money available and could park in the area she would probably play.
24.	The Joker lottery is owned by OPAP AE of Athens. The majority of its shares are owned by the Greek government. During the course of the hearing the niceties of the Joker lottery proved a little elusive, but happily no definitive knowledge is required in order to decide who the relevant winner was.
25.	Each lottery ticket is divided into two sections of which each contains at least two sub-sections. The two sections are respectively designated A and B. The upper portion of each section contains a series of numbers running from 1 to 45 from which five numbers must be selected. The lower “Joker” section contains numbers running from 1 to 20. At least one such number must be chosen to complete a line with the potential for a top win. The player can choose up to the whole twenty Joker numbers, each providing a line that is based upon the original five numbers. The winning ticket with which I am concerned bore a number of lines based on respectively the A and B sections. The lines from the A and B sections were backed by Joker numbers running from 5 to 15. Thus the ticket bore at least 20 combinations of which each had the potential for a top win. Other winning numbers suggest further potential combinations but the above description is sufficient for present purposes. The ticket cost 2,200 drachmas. 
26.	In March 1999 the manager of the lottery office at Nea Erithrea was Ioannis Karabelas. He ran the office under the terms of an agreement with his ex-wife Maria Papalorenzou who owned it. Mr Karabelas gave evidence through an interpreter. He gave his evidence with total confidence. It was the confidence of the enthusiast. Particularly striking was the gentle amiability with which he dismissed some of the more extreme suggestions put to him. While it may fairly be said that he must have displayed the same attributes when he misled the media as to who won the lottery, I found him to be an honest witness. 
27.	Buyers of lottery tickets would give to Mr Karabelas a collection of numbers (as well as some letters) chosen for all that variety of reasons that govern these things. Mr Karabelas would then use a computer programme which “permed” those numbers in such a way as to provide the best chances of success for the amount that the player was prepared to pay. I say ‘chances’ because the lottery provided a great number of prizes for smaller winning numbers both with and without the winning Joker number. 
28.	In the circumstances Mr Karabelas played a part that went well beyond the simple selling of tickets.
29.	Mr Karabelas said that on 9 March 1999 he sold the winning ticket to Mrs Papamichael together with a remarkable number of other prize winning tickets. The numbers of the more material wins are set out in Mr Karabelas’ statement. A certificate from OPAP dated 21 December 1999 confirms the payment to Mrs Papamichael on 13 March 1999 of lottery winnings totalling 25,412,031 drachmas, a material sum.
30.	 Mr Karabelas said that Mrs Papamichael paid 152,000 drachmas for the tickets that she bought. The winning numbers were drawn on the evening of 10 March 1999. They were 20,29,41,43 and 44 with 13 (Mrs Papamichael’s favourite number) as the Joker number. The top prize was 2,601,166,933 drachmas after deductions by OPAP. It was a record win. There was only one winner.
31.	It is the bank’s case that it was Mr Paparounis who bought the record winning ticket. It does not accept that Mrs Papamichael ever had any winnings including those paid out on 13 March 1999. The bank is obviously in a difficult position because it lacks first hand evidence, but it has worked diligently to remedy the defect. In order to do this it used an inquiry agency which was then called Decision Strategies Fairfax International (UK) limited. Two men were used for the investigation and both gave evidence.
32.	In charge of the assignment was Mr Robert Sikellis. He is based in Boston, Massachusetts but was involved because he speaks Greek. The main evidence was given by him and confirmed by his associate Mr Dimitrios Ioannidis. The evidence was largely concerned with interviews with someone called Angelos who appears now to be living with Mrs Papalorenzou and said that he was working in the shop at the time when the ticket was sold. He maintained that he knew of the circumstances of the sale.
33.	In addition to relying upon the investigation, Miss Gloster attacked the evidence relating to the evening of the win and the subsequent events.
34.	Mrs Papamichael said that on the evening in question she was at home watching the television. There is ample evidence that Mr Paparounis was in Thessaloniki on business. He was there with a lawyer, Mr Stavropoulos who gave evidence at the trial. Mrs Papamichael says that, after the draw, Mr Karabelas telephoned to say that she had won. Miss Gloster says that this is unlikely and that Mrs Papamichael must have known how matters stood. I disagree. We are not talking about a horse race or a run of raffle tickets. If Mrs Papamichael is correct, she had a bundle of 192 tickets some 20cm thick, within which, at ticket 164, were buried the winning numbers. She says that the tickets had been left in “the pocket” (her bag) at the time of the draw.
35.	During the hearing there was much canvassing of who it was who spoke to whom and when. For immediate purposes I think it enough to say that there was nothing in the accounts given by of any of the witnesses that cast obvious doubt upon what they were saying as to the events of that night. Three central points are made by the claimant. The first is that she was notified of her win by Mr Karabelas. The second is that she told her husband what had happened. The third is that Mr Karabelas agreed to put out a story that would have the effect of hiding the identity of Mrs Papamichael as the winner of the lottery.
36.	Although Mr Karabelas asserted that, in any event, a lottery agent is forbidden to identify a winner, it is clear that a story was given that took any potential focus away from Mr Paparounis and his wife. Someone must have asked for this to be done. The bank suggests that, although Mr Paparounis was the winner, he asked for the subterfuge at his wife’s request, because she feared identification.
37.	The main disadvantage of Mrs Papamichael retaining the name of her second husband was that if anything unusual happened to her, the event was likely to gain considerable publicity. An example of this had occurred previously when her bag was snatched. Although the incident was reported to the police in an untoward way, it was splashed across the newspapers. The cuttings are in evidence. Clearly the gaining of a record lottery win by such a person carried with it an irresistibly newsworthy element. It was publicity that Mrs Papamichael says that she felt that she could do without.
38.	While it is possible that Mr Paparounis wished to indulge his wife, I think it more likely that the concern arose because it was Mrs Papamichael who was the winner.
39.	Mrs Papamichael says that she collected her additional winnings of 25 million drachmas from Mr Karabelas on 13 March 1999 and paid him a bonus of 10 million drachmas. It was at least in part a reward for throwing the media off the scent. Miss Gloster challenged this asking why the money should have been paid before the cheque for the main prize was handed over on 18 March. I cannot really see the logic of the query. While it is true that the passing of the cheque was the big moment, it was in no sense decisive of the matter. If Mr Karabelas had broken confidence a day or two later it could have been just as bad as doing so earlier. The fact is that Mr Karabelas had already successfully put out the false story. Mrs Papamichael trusted him and was right to do so.
40.	I also think that the bank is in some difficulty in respect of the subsidiary winnings. It has not been suggested that the OPAP certificate was false, so Mrs Papamichael was put forward as the holder of the winning tickets. Why should that have been, if this was not so? I do not see why, if Mr Paparounis bought those tickets, he should have put forward his wife as the winner. If Mrs Papamichael was the winner, it is conclusive of the fact that she bought a series of tickets from the agency on 9 March 1999.  
41.	Given their relationship at the time, I find nothing odd in the suggestion that Mrs Papamichael entrusted her husband with the collection of the winnings. Nor do I see anything odd in the fact that this was done by entrusting the ticket to Mr Paparounis who in turn gave a power of attorney to an official of the Bank of Cyprus, Mrs Kalamboki who collected the winning cheque. The proceeds of that cheque were paid into a  deposit account no. 1199046 in the sole name of Mr Paparounis. The deposit was for a fixed term that matured on 19 April 1999. When the deposit matured the proceeds were paid into an account no. 1153665 with the Bank of Cyprus in the joint names of Mrs Papamichael and Mr Paparounis (“the joint account”). It is now time to return to the private investigators.
42.	The investigators gave an account of what they had been told by Angelos.                       Although complaint was made as to the absence of contemporary notes, I am content to accept what was the pooled recollection of the two investigators as being essentially accurate. What I find to be inaccurate was the account that they were given.
43.	If that account is to be believed, on 9 March 1999 Mr Paparounis telephoned either Mrs Papalorenzou or Angelos at the shop. In the course of the conversation (and not for the first time) he secured the sale on credit of a series of lottery tickets. Such credit was of course extended in ignorance of what would happen at the draw. Furthermore it must have been the case that someone, but not Mr Karabelas, was asked to perform the computerised magic. 
44.	It is said that Mr Paparounis committed himself to paying 2 million drachmas (rather less than US$ 7,000). Any credit afforded to Mr Paparounis must have been intended to extend beyond the draw: a situation in which the risk of a loser not paying is obvious. Unlike a situation in which the creditor has only to carry the debt (however disagreeable that might be), there would come a time when the money to pay OPAP would have to be found. Although Mr Sikellis explained that in the lottery world of Greece much happened that was outside the requirements of the rules, I see no reason why one should not apply limits to this grand assertion. OPAP would want to be paid. Mr Karabelas and his ex-wife were in no position to extend credit on the scale suggested: their net annual income was 15 million drachmas. Furthermore, no explanation has been given as to why they should have chosen to extend that sort of credit. In addition to this there is the risk to the gambler of what may happen if there is a win, particularly a major one. It is to the bearer of the ticket that the win goes. No record is kept of the identity of the buyer. At the time of the draw Mr Paparounis was in Thessaloniki. No suggestion has been made as to how or when he might have got the winning ticket. He returned two days after the draw.
45.	In contrast with this account, Mr Karabelas said that he did know and continues to know Mr Paparounis. He said that he would come on Saturdays and play the football lottery. Only very rarely did he play the Joker lottery. He was a very good customer. Mr Paparounis would leave ‘vouchers’ at the agency for him to process but if Mr Paparounis did not pay him before the draw or its equivalent, the transactions would be cancelled.
46.	Mr Karabelas said that, if 2 million drachmas had been spent on the Joker, it would have resulted in a purchase of 1,000 tickets. Mr Ioannidis disputed this and said (I think correctly) that one could spend that sum on far fewer tickets because of the high number of combinations that a single ticket could produce. However, although in no sense conclusive, the winning ticket cost 2,200 drachmas and was one of 192 tickets. These known facts are not indicative of an expenditure of 2 million drachmas.
47.	Even without the benefit of Mr Richard Spearman QC’s skilful cross-examination on behalf of Mrs Papamichael, I find the account given by Angelos to be incredible. What that cross-examination did was to show that, however honest the investigators may have been, their approach was blinkered. It was an approach that operated on the assumption that it was not Mrs Papamichael who bought the winning ticket.
48.	Quite apart from all of the matters to which I have referred, I regard Mrs Papamichael’s investment in Yioula SA (“Yioula”), to which I shall come much later in this account, as a powerful indication that it was she who was the winner of the lottery. 
49.	I find the evidence clearly to the effect that it was Mrs Papamichael and not her husband who bought the winning lottery ticket, but that is only the start of this story.
The fate of the lottery money
50.	Once the lottery money had reached the joint account of Mrs Papamichael and Mr Paparounis, Greek law (just like English law) provided that money paid out of the account to a third party was to be treated as having been the property of the payer. Thus a joint holder of the account could clear it down and put every last drachma on whatever bet caught his or her fancy. Given that situation, although the finding that it was Mrs Papamichael who won the lottery is a vital key to determining what happened afterwards, it is not determinative of the case.
51.	Two important issues arose during the preparations for the trial. The first was the purpose of those withdrawals from the account which preceded and succeeded that with which I am concerned. The second issue concerned what it was that Mrs Papamichael knew of those withdrawals.
52.	By the start of the trial the first issue had effectively disappeared. It was clear that it was Mr Paparounis who had used the account for his own purposes. At no material time was any transaction referable to Mrs Papamichael other than the contentious transfer of 30 April 1999. Although such withdrawals amounted to a considerable sum, there was still left in the account on 30 April 1999 by far the greater part of the win.
53.	The issue of Mrs Papamichael’s knowledge is more difficult to resolve. Mrs Papamichael was not always a helpful witness. Nevertheless in this respect, as opposed to at least one other, I do not think that she was being untruthful. Her attempts to read the bank statement upon which the transactions appeared had the capacity to try the patience of all those present. This was because of Mrs Papamichael’s undoubted intelligence and interest in financial matters.  But I do not think that the episode was an ‘act’. I say this because the lengthy period of Mrs Papamichael’s cross-examination provided ample opportunity to assess her. In very large part the exchanges between herself and Miss Gloster were of a thoughtful and sensible character. Occasionally her evidence was engagingly spontaneous. One example was the way in which she explained how she kept her assets. More important was the way in which she dealt with an inspired question by Miss Gloster on the second morning of her cross-examination. At the close of evidence on the previous day Mrs Papamichael had been given the usual warning not to discuss the case or her evidence. The next day Miss Gloster asked the witness whether she had spoken to her husband the previous evening. She immediately said that she had. He had called her. Her account of the incident appeared to be both innocent and entirely free from prevarication. The same was true of the difficult passages of cross-examination in which Miss Gloster explored the recent period of the  relationship between Mrs Papamichael and her husband.
54.	 The conclusion that I have reached is that sometimes consciously and sometimes unconsciously, Mrs Papamichael decided to distance herself as far as possible from anything that might indicate that she either knew of or supported her husband’s activities in respect of the lottery winnings except where this was part of her case. Whatever her knowledge of the law, she is well aware that a central part of the bank’s case is that her conduct in respect of Mr Paparounis precludes her recovery of the money that she claims. I think that when Mrs Papamichael prevaricated it was because she was trying to avoid weakening what she fully believed to be the essential situation: namely that she had won the money, it was her money, she had sent the money to NatWest for her own purposes and she was entitled to have it back.
55.	 Her attitude creates considerable difficulties as to the degree of credibility that she should command. She is not, in any general sense, a dishonest witness but her evidence provides no clear lodestar.
56.	 By the end of her cross-examination Mrs Papamichael had accepted that she was aware of at least the possibility of Mr Paparounis using the money in the account regardless of from whom of them it had come. Apart from the 2 billion drachmas, she was content that this should be so, provided that the money was there when she wanted it. 
57.	The joint account was not opened for the purpose of receiving the lottery money. It had been opened in February 1999. The account had an overdraft facility of 500,000 drachmas. As Mrs Papamichael was used to having on her cash in excess of that figure it is clear that, for present purposes, the amount is of little significance. Mrs Papamichael gave no very obvious reason for opening it but one can see its potential usefulness for household purposes. Of much more significance is that Mrs Papamichael signed documents necessary to open the account, as she had probably done in respect of other accounts held by her. She accepted that she was aware of what was normally required to open an account.
58.	I think that shortly after Mrs Papamichael won the lottery she began to give thought to what she was going to do with the money. I have no doubt that her mind ran upon making some sort of investment or investments of the bulk of the funds. Although she had never had such a large sum of money at her disposal, that was the way that she habitually ran her life. She therefore consulted her husband on the matter.
59.	Quite what the precise timing of some of the events was I cannot say, but in general terms I have little doubt as to what happened.
60.	Mr Paparounis appears to have been and still to be a successful businessman. He runs a substantial road haulage business. Not having had the benefit of seeing him, I have to some extent to speculate about him but there is much evidence upon which to do so. That evidence includes records of taped conversations with an employee of NatWest called Mr Makris. However matters may now stand, I think that in the spring of 1999, his attitude to the matters relevant to this case was a mix of the honest and the dishonest. The latter was at its most marked in respect of Mrs Papamichael.
61.	Prior to March 1999, Mr Paparounis had been involved with investments outside the running of his business. I have no evidence to indicate the scale of those investments. Searches made of his business indicate that, although it was reasonably large, there was no good reason to suppose that it generated considerable sums of money that could be regarded as capital rather than providing for a comfortable living. I therefore conclude that any investments that it is suggested that Mr Paparounis made in stocks and shares are not likely to have been anything approaching the value of the lottery win. I think that there was in Mr Paparounis an ambition to make more money than he had done. He fixed upon forex margin trading as the means by which he could do this. 
62.	It is not apparent when Mr Paparounis first had the idea. It may well have been before the lottery win. Despite the submissions of Mr Spearman to the contrary, I think that Mr Paparounis first intended to use Alpha Bank in London for his purposes. However, by the end of April 1999 he had fallen in with a team of three men who encouraged him to enter into a margin trading arrangement with NatWest. The men were Nikolaos Papaioannou, Gheorghios Yannikopolous and Emmanuel Papadogiannakis known as Manos.
63.	By the end of Monday 26 April 1999 Mr Paparounis had determined to try to use the lottery win to create the security required to back a margin account with NatWest. In this he was successful.
64.	For present purposes the way in which the forex margin trading market operated may be described as follows. The client would open an account with a bank. The client would use the account for the purchase and sale of currency. In respect of each transaction the bank would act as counterparty. The client’s account with the bank would operate on credit provided by the bank but in addition to the value of the currency or currencies held to the credit of the account at any one time the bank would hold as security a sum of money sufficient to protect the bank against a limited amount of exposure to loss on the transactions effected through the account. The geared nature of the dealings carried with it the potential for tremendous profit or catastrophic loss. The bank’s protection against the latter was to have the ability to close out the account in the event that the client failed to provide security adequate to cover its exposure. The greater the amount of security provided in respect of the margin of exposure, the greater the overall value of the deals that the client could make. At a ratio of 20:1 a client could make deals to a value of US$ 100 million on the back of security of US$ 5 million; but adverse movement of 5 percent would wipe out the stake. The greater the ratio the smaller the freedom for error.  
65.	In its closing submissions NatWest contends that:
“10(b) … (Mrs Papamichael) had knowledge that Mr Paparounis had some form of currency dealing arrangement with the Bank and knew that he was sending this money from the joint account in connection with that purpose; …”
66.	Putting the matter slightly differently, was Mrs Papamichael complicit in the use of ‘her’ money for her husband’s purposes? 
67.	I think that the circumstances in which Mr Paparounis came to use the money are accurately set out in the statement of case filed on behalf of Mrs Papamichael on 6 June 2001 in connection with her divorce proceedings. The two relevant passages read as follows:
“A few months ago I became aware that my defendant husband had unbeknown to me become involved in personal matters of mine of a financial nature and due to his negligence I am in danger of sustaining a massive financial loss. It should be noted that I never interfered in his financial affairs and indeed have never asked him to give me details of his business affairs, since in any case he was and is an experienced businessman very active in Greece and abroad, occupied with international transport etc.
Whereas during the first three years of our marriage our relationship was harmonious, the aforementioned interference of my defendant husband in my financial affairs resulted in damage to our relationship. Specifically in April 1999 I was intending to invest a large sum in a Swiss bank but, following recommendations and exhortations from my defendant husband, I changed my mind and invested the money in a big English bank with which he was intending to work. ”
68.	I reject the evidence of Mrs Papamichael in which she denies that she told her divorce lawyer that Mr Paparounis was intending to work with an English bank. I can see no reason why her lawyer should either have been mistaken on the matter or fabricated it. Dealing as she was with a lawyer distinct from Shaw and Croft, who act for her in this case, I do not think that Mrs Papamichael ever imagined that the document would feature in these proceedings and she told the truth. 
69.	Nevertheless from what will follow, I think it apparent that Mr Paparounis never told his wife that her money was to be used in connection with his activities nor do I think that he saw any reason to tell her what those activities were. Seeing no reason to do so, he did not do so. What he suggested to his wife was that she should deposit most of her win with ‘the English bank’ and that the drachmas should be converted into dollars to await the entry of Greece into the euro. If that limited action had been taken the advice would have been sound. On 30 April 1999 307 drachmas could buy one US dollar. By 28 December 2000 the figure was 366 drachmas.
70.	Furthermore, it seems to me that Mrs Papamichael’s position is supported by several important factors. First, as I have found, it was she who won the lottery. In any ordinary sense, as between herself and her husband, the money was hers. Second, the sum of 2 billion drachmas that came to be involved constituted by far the greater part of those winnings. Third, it is not suggested by the bank that Mrs Papamichael was to have any benefit from the use by her husband of that money. The acceptance by the bank that Mrs Papamichael does not bring this action in fraudulent collusion with her husband rules out the suggestion  that the two agreed that, in effect, Mrs Papamichael was to own the dollar deposit while allowing her husband to use it as security for his margin trading. The consequence of this is that, if the bank is correct, Mrs Papamichael was to derive no benefit from most of her money for a period that has not been indicated but had the potential to be lengthy. I find intrinsically incredible the suggestion that Mrs Papamichael, with her keen appreciation of material wealth, should voluntarily have deprived herself of her major asset for an indefinite period and without the prospect of gain. One must now look at the week leading to the transfer on Friday 30 April 1999. 

 
26 to 30 April 1999
71.	The events described in this section are based largely upon tape recordings of conversations between Mr Stephanos Makris of NatWest and a variety of third parties as well as the documents to which I shall refer.
72.	At the time in question NatWest was a  major independent bank which provided those services that such banks provide. It had departments called respectively “Money Markets” and “Global Financial Markets” (“GFM”). I do not know the relationship between the two departments. Margin trading was carried on within the latter department. The Head of Margin Trading at GFM was called John Retter. Although Mr Paparounis was involved with other Natwest personnel, it is the involvement of Mr Makris that is central to this story.
73.	Mr Makris was employed by the bank between 1997 and February 2000. He worked in GFM as part of the European Sales team. He had particular responsibility for Greek forex clients and held the title of “manager”. The clients included large Greek corporates and high net worth individuals. In the spring of 1999 Mr Makris was a bumptious 26 year old whose job it was to promote margin trading on behalf of his employer. Mr Retter disliked him. It is easy to see why. In the face of the bank’s best efforts to get him to give evidence by video link from Athens, Mr Makris refused to do so. He sought to impose conditions with which it was obvious that the bank could not comply. Despite his physical absence, his presence emerges clearly from the tape recordings of his conversations. There is no suggestion by NatWest that anything that Mr Makris knew or did in connection with this case is not to be treated as the knowledge or action of the bank.
74.	In common with other dealing establishments, NatWest recorded conversations of those involved in its trading activities. Mr Makris was one of those personnel. The trial bundle contains transcripts of a number of recorded conversations that are relevant to this action. All or nearly all conversations were in Greek and the transcripts are translations. There is no outstanding issue on the accuracy of those translations. After considerable interlocutory inquiry as to the extent to which I have before me all that is relevant, I am satisfied that this is so. I certainly think it highly unlikely that anything of decisive relevance has been omitted. Therefore the situation is that, although the tapes do not tell the whole story, they do provide an incontrovertible account of its essence.
75.	The first relevant recording was made at 11:12 on Monday, 26 April. (Unless otherwise stated all times are London time. Greece was two hours ahead.) The conversation was between Mr Makris and Mr Papaioannou. 
76.	Mr Papaioannou was a freelance forex dealer who worked with Mr Yannikopoulos out of offices in Greece owned by Manos. He appears to have known Mr Paparounis for some time. The two speakers were already known to each other.
77.	Mr Papaioannou asked how someone who set up an account with US$ 5 million could be charged commission by Mr Papaioannou on each spot deal. It was agreed that what could be done would be to charge the client (whether buying or selling) in such a way that the price included the relevant commission without this being shown. Mr Makris said that the Bank of England required disclosure of the fact that commissions were paid but that this could be shown as a minimal amount. However, in the case of direct inquiry by the client, the actual commission on a trade would have to be disclosed. Mr Papaioannou said that he had no problem with that.
78.	As the conversation progressed Mr Makris said that he would have to meet the customer and would probably have to come to Greece to complete “money laundering, due diligence etc.,”. On the transcript there appears to be a confusion as to who was speaking to whom. Contrary to the text, it would seem that Mr Makris asked Mr Papaioannou how much money they were talking about and that the latter said “between $2-5m”.
79.	At that stage it was not clear that ‘the client’ was definitely going to supply Mr Papaioannou with the money. He said, “… I will present all the alternative scenarios and he may decide that he doesn’t like us, doesn’t like the office (-) nobody knows”.
80.	A further conversation between the two men that started at 18:09 contained the statement by Mr Papaioannou that they were talking of a  “minimum of $ 2m. equiv. (to GRD) but probably 1 ½ billion”. The money was to come from the Bank of Cyprus, Athens. Mr Papaioannou said that he had known the customer for many years and would vouch for him. He asked for the relevant documentation to be sent. The conversation ended with them agreeing to talk on the following day.
81.	Still on the Monday, at 18:23 Mr Makris began a conversation with Manos. The latter provided a rather chill contrast to the earlier laddish conversations. Manos had been known to NatWest since at least 1998. He does not appear to have been a trader but some sort of intermediary with a high degree of influence over Messrs Papaioannou and Yannikopoulos. The conversation reveals considerable concern by Manos as to possible arrangements with the bank behind his back. He wanted to know all about the commission arranged by the bank. Mr Makris explained the position. During the conversation Manos said “… because I wanted to be in control of what’s going on. I directed the whole deal towards NW, because I have Stephanos Makris on the inside, you understand what I am saying”. Later in the conversation Manos said “… I want some recognition for insisting that the client should come to you. I say to you very simply that I want to be in control”. Mr Makris replied, “ It will be so, it will be so. Let me say to you that you will be in control along with the others who will be formally involved and I will be open with all of you…”.
82.	The conversations suggest that it was only at this time that the trio were reasonably certain that Mr Paparounis would come in with them and that the account would be with Natwest. The view is confirmed by the fact that it was on that day that an agreement was signed by each of Mr Paparounis, Mr Papaioannou and Mr Yannikopoulos. It is headed “PRIVATE AGREEMENT”. The first two paragraphs read as follows:
“Today 26 April 1999 Mr Dimitrios Paparounis and Messrs Nikalaos Papaionnou and Gheorghios Yannikopoulos have agreed to enter into a joint contract with the Nat West Bank, London, for the purpose of trading in Currencies.
Mr Paparounis shall deposit with the Bank the corresponding sum of 2 billion drachmas in US dollars as a guarantee for the said dealings which will be transacted on his behalf, crediting and debiting his account, by Mr N. Papaioannou and Mr G. Yannikopoulos as his Financial Advisers.”
83.	The agreement further provided for the traders to be remunerated out of such profits as might be made.
84.	When, during the course of her cross-examination, Mrs Papamichael was asked to read the agreement she was visibly upset. Although she had been told something of its contents, she had not read it before.
85.	In a conversation that started at 09:30 on Tuesday, 27 April, some tension developed over the procedures that had to be adopted before the trading could start. Mr Papaioannou said, “Good grief. I haven’t experienced so much delay before, I am not willing to risk losing this customer. I’m going to take him to Refco”. Mr Makris responded by saying, “We would probably have no problem accepting his money as a deposit, provided we have his Bank ref and meanwhile (we are) preparing the contracts to send to you”. Mr Makris asked the name of the customer and Mr Papaioannou said, “Dimitrios Paparounis, he owns a haulage company”.
86.	At 09:57 the two men spoke again. Mr Makris said that it was okay to pay the commissions and that the bank would prepare the documents for the customer. He asked for a bank reference and a photocopy of the customer’s passport. Mr Papaioannou said that they also had a certificate of the origin of the money and Mr Makris said that this was all that was needed to set up the account for the “deposits”.                    
87.	Thus, despite the existence of the agreement, Mr Papaioannou was very anxious to get things moving. He had said that he did not want to lose the client. A good start to keeping the client was to accept his deposit. That acceptance depended upon a series of reasonably straightforward requirements. Those requirements did not depend upon the due diligence exercise that, later that morning, was fixed to take place on the following Tuesday, 4 May 1999.
88.	By 08:49 on Wednesday 28 April 1999 Mr Makris had faxed to Mr Papaioannou 33 pages of contractual documents. At 09:03 Mr Makris spoke to Mr Papaioannou and told him that the bank was on standby. It had opened an account and was waiting for the money that day. As the money was to be paid in drachmas it could be deposited in the NatWest account with the National Bank. Mr Makris again indicated what the bank would require before the deposit could be accepted. A further conversation between the two men started at 12:18. It was in the presence of Mr Paparounis and was of some length. Mr Makris was told that he would get the information that he wanted the following day. There was much explanation of the role of the National Bank. In the course of the conversation Mr Makris said that there would be an account with Natwest in London in the name of Mr Paparounis. Later in the conversation it was said that Mr Paparounis had the (draft) contract with the bank and that Mr Papaioannou had looked at it. (Mr Paparounis does not speak English.) The discussion progressed to knowledge of procedures and Mr Papaioannou said, “… he was ready to close with Alpha London and I can see here in front of me the passports, the photocopies, everything, with ALPHA BANK LONDON, I can see everything, he knows [the market] …”.  I am not asked to attach significance to the reference to passports in the plural. 
89.	In a conversation between Mr Makris and Mr Papaioannou that began at 14:42 there was the following exchange:
NP	… I am here with Mr Paparounis and I was saying “now I will call him on the telephone and I will be singing like a bird and he’ll think he’s done some magic on me”.	
SM	Ok.  Just now I have in front of me the file with the name Paparounis…	
NP	Good.  Now, listen to what…  We have a new development.  It complicates things a little for us.	
SM	Oops.	
NP	The account… no, there’s no oops. The account is a joint account with his wife.	
SM	Yes.	
NP	What happens in this case?	
SM	Do you mean the account from which the money will come?	
NP	The account from which the money will be withdrawn is a joint account with his wife.	
SM	Fine, there’s no problem	

90.	It was during this telephone call that Mr Paparounis first spoke with Mr Makris. The lengthy extracts that follow provide an important background to the events that occurred on the Friday of that week:
DP	… I hear about the National Bank (inaudible) simplify the procedure for us.  If you wish, I will open an account at the National, a joint account with my wife. Would that be our own account? Or do you have an account as a bank at the National, and we’ll deposit it in your own account?	
SM	Exactly.  We simply say this:  That this account belongs to our bank, the National Westminster Bank, the NatWest…	
DP	Yes.	
SM	...which has all our GRD mandates, because from what I know, the money is in GRD…	
DP	Precisely.	
	(Mr Makris explained the correspondent function of the National Bank.)	
DP	Fine, understood.  So, let’s say I deposit this 2 billion tomorrow in the account you indicate.	
SM	As soon as you instruct the Bank of Cyprus by saying “could you please transfer this money for me to this account at the National Bank, where the NatWest account is…”	
DP	Yes.	
SM	…we would automatically open an account here in London in your name er… for the margin trading which… we are evidently about to commence, which account can be in USD or GRD or whatever. But…	
DP	No, no.  We are already talking about USD. From the moment… in other words, let’s look into the procedure and agree about it now so as to avoid too many telephone calls.  Okay then, let’s say that tomorrow morning I …	
SM	So, tomorrow… it leaves tomorrow then… you go and……	
DP	Two billion in the account you will tell me.	
SM	Precisely.  And you deposit this money or give the order and this money leaves tomorrow in order to be deposited in the account at the National Bank.	
DP	Yes.	
SM	At the same time I would have this money converted into GRD and you would already have here…	
DP	You mean you would convert it from GRD into USD.	
	… …	
SM	Yes, yes, it would be converted from GRD into USD.	
DP	When will we know the exchange rate?  The rate at which you will convert it? This is what you were talking about with Nikolas previously.	
SM	The rate… What we have said is that the rate we will give you or rather that I will give you because I will be involved in this job, will be the best rate you can find anywhere in the world. …	
	(Mr Makris discussed the rate.)	
DP	Ok, fine, that’s understood.  In any event, we will see this after the…   Let’s look into the procedural part now.  Therefore, tomorrow we will deposit in your account at the National Bank, which you will specify to us… that’s at the central branch isn’t it?	
SM	Er… yes.	
DP	At the central branch. Regarding the account number, would you like to give it to me now or would… would Nikolas have it or would you like to send it by fax?	
SM	Yes, yes, it’s not a problem for me. I can give the instructions now.	
DP	So, from the moment we deposit this money in your name, you know what to do with it, don’t you?  Or should we leave instructions to put something else… to include something else.	
SM	Er… You shouldn’t include anything else in the mandate.  I have …	
DP	I am simply depositing, Dimitrios Paparounis and Despina Papamichael, we are depositing this money in your account.	
SM	Indeed.	
DP	It will be automatically deposited in our account in London, England, and you will give me the account number.	
SM	Yes.	
DP	Is that right?	
SM	Correct.	
DP	And it will go straight in as USD.  In other words, I will know by noon how many USD I have in this account and at what rate you have converted them.	
SM	Exactly, exactly, exactly.	
DP	Okay?	
SM	I should stipulate however that this account will be converted and will exist as a deposit account. In other words, in the days before we start our normal co-operation in respect of margin trading, you will earn some interest as a deposit. These USD which…	
DP	Yes, exactly, the market interest rate shall we say.	
SM	Exactly. Not the market interest rate.  I am telling you that we will give you the interbank rate …..	
	……..	
DP	Presumably, you have evaluated us as customers and we have a standing.	
SM	Exactly.  So, we will visit you on Tuesday in order to meet you in person because, after all, this is required of us by the Bank of England here…	
DP	I will be very pleased to meet you here at our office, to… so that you can form your own view, quite right.	
SM	Er.. and basically when we meet you in person and both sides sign the contract or er… the contracts will be like those we have sent you… Simply when you are generally accepted by the bank more formally, one week after our appointment, rather within the week, at the end of the week of our appointment, we’ll say to you “now we have given you 100 million USD” since, from what I gather, there will be about 5 million USD and we’ll give you lines for twenty…	
DP	Or, possibly, even more.	
SM	Exactly. That’s up to you. Anyway, we have said that for the equivalent of 5 million USD we can give 20 times the capital, which means 100 million USD. Once we have done this and have given you lines with us for 100 million USD and are able to engage in margin trading on a daily basis, this deposit account will be properly placed in the margin trading account.	
DP	And the game will begin… yes. If we’re not accepted, the worse that can happen is that we remain depositors, simple depositors, customers of the bank. Am I right?	
SM	Precisely. You will have a deposit with us but if we didn’t accept you, I would imagine that… (inaudible)	
DP	No, no, I am simply putting it in different words. In view of the fact that these days are tricky, I am eager to see this money going abroad and being converted into USD. I don’t want to have GRD here. Regardless of what happens later. I had a… you know something here…? Nikolas has changed my mind. I would not make a secret of the fact that a had a discussion with… Mr Dedes, you certainly know him. From Alpha Credit.	
SM	Did you say Mr Dedes?	
	(short discussion of Mr Dedes) 	
DP	Well, therefore, when am I going to know this account because tomorrow morning I will go to the Bank of Cyprus, I will make sure… I will get the reference letter you require, I will send you by fax our passport details, mine and my wife’s, in any event, and subsequently, I will deposit the money into the account number you will give me. 	
SM	Yes. Would the deposit be in GRD?	
DP	In GRD as we have said. It will probably be two billion.	
SM	Yes, yes, yes. The… what I would like to tell you is that as far as your account number here is concerned, it will be in your name. In other words, when we say account, don’t… I believe that we are some years ahead of other banks or at least in the Greek market. You don’t need to have, as required in Greece, a certain bank account which is zero, zero, dash, etc, etc…	
DP	Yes.	
SM	… the account will be in your name here. You will quote your name and that will be your account.	
DP	I see. I understand.	
SM	I believe it’s better.	
DP	Yes, okay.	
	… … … …	
DP	In this fax you should send me the number of your account at the National Bank so I can deposit the money.	
SM	Would you just notify me when you go please?	
DP	When I go.	
SM	Yes.	
DP	I won’t go. The Bank of Cyprus will make the transfer.	
SM	What I mean, which is what I have also said to Nikolas, is that before you make the deposit I would like you to… the bank should have here the photocopy of your passport and…	
DP	Before… but of course, yes, definitely. 	
SM	… and that reference from the bank of course. 	
DP	Yes. You will get these two first, you will give me the go ahead over the telephone and then I will go and make the deposit to the account number you will send me now.	
SM	Okay.	
DP	All right?	
SM	Yes, yes.	
DP	Well, it has been a pleasure.	
SM	Same here, take care.	
DP	Bye.	
91.	I have set out this conversation at some length because of its remarkable nature. As we shall see, NatWest complains that Mrs Papamichael’s case is based upon a single aberrant document that was created on Friday 30 April and which should not be considered as putting the bank on notice of any interest that Mrs Papamichael might have had in the money that was transferred that day to the National Bank. But in this conversation Mr Paparounis could hardly be clearer in saying that he and his wife were going to deposit a sum of money. He also said that he presumed that ‘we’ have been evaluated as customers and that if ‘we’ were not accepted (for margin trading) the worst that could happen would be that they would remain as simple (US dollar) depositors with the bank. In his turn Mr Makris appears to have manifested a total indifference to the rather strange status suggested for the proposed security and this in face of the fact that he must have been aware that, if Mr Paparounis was to be the margin trading client, only he and the bank could have an interest in the security that was to be provided. While it may fairly be said that in the conversation Mr Paparounis was not clear as to what he was proposing, I think that he was clearly indicating a potential involvement with the money by Mrs Papamichael even after that money had been received by NatWest.
92.	In a conversation with Mr Papaioannou that began at 14:00 Mr Makris read out a fax that he had just sent to Mr Papaioannou in which he set out the money laundering checks that needed to be met before the money could be sent. Mr Makris again explained the commission arrangements in which the client would not see the pips that were charged as commission. Later when apparently discussing another potential client, Mr Makris when referring to the investigations that NatWest would carry out said, “Such stupidities, questions about the … so-called due diligence …”
93.	The next conversation was at 09:59 on Thursday, 29 April. Mr Paparounis telephoned Mr Makris from the Bank of Cyprus. He said that he was there collecting a bank draft for 2 billion drachmas which he was going to bring to the National Bank. He said that he could not get the Bank of Cyprus to make a transfer that day, having failed to give adequate notice. Mr Makris said that he would like to have the copy of the passport and reference letter before the money was deposited. Mr Paparounis said that he would send them from where he was. Mr Paparounis handed Mr Makris over to Mrs Iossiphidou whom he described as “handling the matter”. She described herself as a corporate officer at the corporate banking division. The conversation continued with Mr Makris saying who he was and indicating the contents of the document that he required from the Bank of Cyprus if the deposit was to be made.
94.	At 13:00 (Athens time) the Bank of Cyprus faxed to NatWest in London a letter which read as follows:
“TO WHOM IT MAY CONCERN
We hereby certify that Dimitrios Paparounis with passport No M 950778 is customer of our Bank for two years and holds a personal account with us.
We are also in a position to certify from the documentation we have the legal origin of the amount deposited in the above-mentioned account.
We finally certify that Mr D. Paparounis has been prompt in meeting its obligations.
This certificate is given without any responsibility on our part for your strict personal use.”
95.	The letter was signed by Ms Th. Kalamboki and Ms K Iossiphidou. One assumes that it was accompanied by photocopies of the relevant passport pages.
96.	The two men next spoke at 13:47 (Athens time). By then Mr Paparounis was at the counter of a branch (not the central one) of the National Bank. It was almost closing time and the woman at the cashier’s desk was unhappy with the number of the account into which she was being asked to pay the money. Mr Makris said that he would call back in a moment and did so. He spoke to the cashier who then said that it was not the number that was the problem. Her concern was that the account was a convertible GRD account. Mr Makris asked whether, in any event, the drachmas could be paid into NatWest’s account. The cashier then raised the question of the value date. After an exchange as to the appropriate date, the cashier declined to put in any date at all as it was not her account but a central branch one. At this, Mr Paparounis gave up the attempt to bank the draft. In a further discussion with Mr Makris, he said that he would try to bank the draft early the next morning.
97.	On Friday, 30 April at 08:31 Mr Makris received a telephone call from Mrs Iossiphidou. After some opening exchanges Mrs Iossiphidou said, “… I simply wanted to confirm the following. There will be a transfer today …” There followed a discussion as to the destination of the transfer which Mr Makris stated as the National Bank. A little later there was the following exchange:
Mrs I	And as far as you are concerned, your account will be credited on behalf of Mr Paparounis. I think Mr Paparounis has an account with you?	
SM	He has an account.	
98.	Later on there was an exchange in the following terms:
SM	… we say okay, the money is coming in today (29 April). In the meantime… we had already credited this money in a certain account…	
Mrs I	I see… yes.	
SM	… we are… we are overdrawn in fact…	
Mrs I	Good Lord!!	
SM	… that we were short. And because of that we were annoyed at some stage yesterday…	
Mrs I	You were short by a large amount too…so large…	
SM	Well, not large, I would say the amount is rather small, it doesn’t bother us…	
Mrs I	Well, okay, one would say okay, compared with your volumes…	
SM	Yes, but we don’t like to be short and to have to pay for the bloody overdraft charges we pay…	
Mrs I	Of course, I understand.	
SM	That’s why.	
Mrs I	I understand.	
SM	That’s all. Which means, now we are expecting…	
Mrs I	Yes, now you are expecting the transfer.	
99.	Mrs Iossiphidou closed the conversation by saying that everything would be done that day.
100.	At 09:06 Mr Makris spoke to Mr Yannikopoulos. He mentioned that the money was coming. Then at 09:38 Mr Makris spoke to Mr Papaioannou. In the course of describing his contact that morning with the Bank of Cyprus he said:
SM	... Iossiphidou called me. These two were together, Kalamboki and Iossiphidou.	
NP	I see.	
SM	… from the Bank of Cyprus. She was contrite when she called me today. “Mr Makris…” You know, she used a very affected voice. “I am sorry to inconvenience you”, she said. Being  as cool as you like, I said to her “no, it’s a pleasure to listen to such beautiful voices first thing in the morning”. “Oh, thank you, thank you. I have called you to apologise for what happened yesterday and for (inaudible) etc.” (Inaudible) “… I simply called to ask why that happened”, I said, “and essentially you have caused us to be to billion short yesterday and I had to pay overdraft charges”. Well, that… wasn’t true obviously…	

101.	After discussion of  various matters the conversation continued as follows:
SM	As far as I am concerned, for a start, the customer has to notify me and give me the instruction and…	
NP	Yes.	
SM	The formal procedure is that he should call the Bank of Cyprus and notify them that upon putting the money in the account they should call me and notify me.	
NP	… to make a phone call, okay.	
SM	Er, if he doesn’t wish (to) be obliged again because he has already created a whole matter here with the Bank of Cyprus, it is not problem for me, although normally I shouldn’t, but is not a problem for me to lift the telephone and call the Bank of Cyprus again in order to check if they have actually put it in.	
NP	Good, okay.	
SM	Okay, that’s all. So, I will be expecting a phone call from you.	
NP	Yes, yes.	
SM	Thank you.	
NP	Done.	
102.	At 09:51 Mr Papaioannou telephoned Mr Makris and said:
“Okay, I have just spoken to Mr Paparounis. He has just left the bank. You should receive a fax within fifteen minutes or perhaps you have received it already. I mean, the confirmation…”	
103.	At a time that was probably rather before midday that Friday, Mrs Papamichael and her husband went to the Bank of Cyprus. While at the bank Mrs Papamichael signed an application for transfer form. The body of the form was filled out pursuant to information supplied by Mr Paparounis. 
104.	Relevant portions of the application form as translated, where necessary, read as follows:
  “CURRENCY  GRD          AMOUNT 2,000,000,000       VALUE 30/4/99
    BY ORDER OF                      A/C No. 1153665-5
                            DESP. PAPAMICHAEL
   INTERMEDIARY  BANK     NATIONAL BANK OF GREECE
   BENEFICIARY                     A/C No. 0409202455
                                                   (DESP. PAPAMICHAEL)
                                                 NATWEST GLOBAL FINANCIAL MARKET
                                                   ATTN: MR MAKRIS
      PAYMENT DETAILS         TRANSFER OF INVESTMENT FUNDS”
105.	Mrs Papamichael signed the form. I think that she read it. She certainly appears to have retained a copy.
106.	It seems to me that the transfer form is reasonably clear. Mrs Papamichael is transferring 2 billion drachmas from the joint account to the National Bank for the account of Natwest Global Financial Market, the beneficiary being Mrs Papamichael. The purpose is the transfer of investment funds. I shall come later to the evidence of the experts. For present purposes I am concerned with Mr Paparounis and Mrs Papamichael.
107.	Nowhere in the document is there any reference to Mr Paparounis either as the transferor or the transferee. The contrast with the previous day is total. Why events moved as they did is unclear. Mr Paparounis could have moved the funds on his own signature. There is no evidence to show that the Bank of Cyprus knew that Mrs Papamichael had any interest in the money (whether formal or informal) otherwise than as a joint account holder. Greek law is preclusive of any such legal interest.
108.	Mrs Papamichael told me that she had not known of the use of the banker’s draft the day before and gave an unsatisfactory account of how she had rejected a suggestion by her husband the previous day that he would move the money on his signature.
109.	There is no good evidence as to how it was that Mrs Papamichael came to sign the application form. However, I think that the reasoning advanced by Mr Spearman in his closing submissions provides the most appropriate inference. The inference is that the initiative for the transfer to be under the hand of Mrs Papamichael came from her. This is because it was always open to Mr Paparounis to transfer the money under his own hand with the consequence that, as far as third parties were concerned, it would lawfully be treated as his money. That was what he had tried to do the previous day. That was how he had treated the other money in the account. I discount as fanciful, any suggestion that Mr Paparounis was trying to muddy the waters for the future. NatWest makes no case that Mr Paparounis and Mrs Papamichael were acting in concert so as to mislead NatWest.
110.	I think that Mr Paparounis was fairly relaxed as to how the money might get to NatWest. Despite his references to Mrs Papamichael when talking to Mr Makris, the latter had not shown any concern at her involvement. What was essential was to make sure that Mrs Papamichael’s suspicions were not aroused. The couple must have discussed the investment of what was to Mrs Papamichael a uniquely considerable sum. It is not surprising that there should have been at least some discussion of the mechanics of the transfer. Mrs Papamichael having raised the matter and Mr Paparounis being anxious to start trading, I think that he simply decided to deceive his wife rather than Mr Makris. Mrs Papamichael wanted to make her investment and Mr Paparounis made the arrangements. It was the evidence of Mrs Papamichael that he made all the arrangements in respect of her investment. That is what the bank relies on.
111.	The situation was elegantly described by Mrs Papamichael during the following exchange with Miss Gloster:
“Q.  You were just acting in accordance with what your
      husband had asked you to do?
  A.  He did not ask me to do.  I wanted to send the money and
      he made the arrangements.  He gave the information to
      the bank so they can send my money to the bank, to the
      English bank.
      … … …
  MS GLOSTER: What you were doing, Mrs Papamichael, was
      carrying out your husband's instructions.
  A.  What do you mean, "carrying out my husband's
      instructions"?  That is what I do not understand.
  JUDGE CHAMBERS: Mr Interpreter --
  A.  My husband gave instructions to the bank.  In one way it
      was the instructions from my husband to the bank, but it
      was not instructions to me because I wanted to send the
      money.  I did not follow instructions as for my money,
      but we followed instructions as to how we send the
      money.  …”
112.	Once the form had been signed, someone at the Bank of Cyprus prepared a SWIFT MT 100. Because the latter message was received electronically, there is no precise correspondence between the document that I have that is entitled “OUTGOING SWIFT MESSAGE” (“the outgoing message”) and the print out of the message received by the bank in Manchester (“the Manchester MT 100”). For instance, the Manchester MT 100 bears a field 53A that gives the sender’s correspondent bank as “BANQUE DE GRECE” together with its address. The field does not appear in the outgoing message. Nevertheless although the prefix to the Manchester MT 100 reads “APPLICANT” and that to the outgoing message reads “Ordering Cust.”, each field reads, “ PAPAMICHAEL DESPINA  7, ALSOUS STREET, EKALI, ATHENS  GREECE”.  On each MT 100, field 59 which bears the prefix “Beneficiary” contains the entry:
“/040202455
NATWEST GLOBAL FINANCIAL MARKET
FOR FURTHER CREDIT MRS DESPINA PAPAMICHAEL”
113.	The prefix to field 70 for the outgoing message reads “Details of pay” and was filled in “ATTN. MR MAKRIS”. The Manchester MT 100 was filled in “000001153665” with under it “ATTN. MR MAKRIS”.
114.	Each MT 100 recited the Bank of Cyprus as the sending bank and the payment as 2,000,000,000.
115.	Crucially, the Manchester MT 100 recites its receipt at 10:33 local time with the input (Greek) time at 12:33. At much the same time an unidentified form of electronic communication (possibly an MT 202) must have been used to procure a credit to NatWest’s account with the National Bank and a corresponding debit on the joint account through the Bank of Greece as correspondent bank to the Bank of Cyprus.
116.	At 10:41 (London time) Mr Paparounis telephoned Mr Makris. At the beginning of the conversation there was the following exchange: 
DP	… Have you received the confirmation from the Bank of Cyprus?	
SM	I have received the confirmation… They called me first thing in the morning and I called them back, after speaking to Nikolas who said to me that everything was okay, and I asked them. She said to me that they gave the instruction for the money to go into our account at the National Bank of Greece and, particularly, that they had instructed to have the money in by 12…	
DP	Well, they have been done… All these things have been done because I was there too at midday.	
SM	Yes. And I spoke to Mrs Iossiphidou who had also called me early in the morning.	
DP	Yes, I know all that. They have sent you a confirmation of the transfer. From then on what do we do?	
SM	Well, they have not sent us the confirmation of the transfer to be honest. In any case, our fax has not received such a thing.	
DP	Well, I will take care of that. It is a fact though that… I am puzzled, I am puzzled by what you are saying. I will call them in any event. It’s a fact. From then on…	
117.	The conversation continued on the frustrations of the previous day, the instructions from Mr Paparounis to convert the drachmas into dollars and other matters.
118.	Immediately after the above conversation, at 10:44, the two men spoke again. Mr Paparounis asked whether Panos Ilikrinis worked with them. Mr Makris said that he did. Mr Paparounis then said, “He’s my nephew. I have married Mrs Papamichael who is his father’s sister”. It then became apparent that Panos’s parents were close friends of the parents of Mr Makris. The men discussed the arrangements for the following week. In the course of the conversation Mr Paparounis referred to “my money”.
119.	At 10:58 Mr Makris spoke to Mr Papaioannou. Towards the start of the conversation he said:
“I have received the money, I have received… they have just sent me the confirmation, that the money is indeed in. We have the money. We do have it …”	
120.	The two conversations suggest that the Bank of Cyprus faxed a confirmation of the transfer that came to Mr Makris between the end of the 10:44 conversation and the start of the 10:58 conversation. I find that the confirmation consisted of a copy of the MT 100. It is not suggested that a hard copy was prepared of the communication between the Bank of Cyprus and the Bank of Greece which effected the transfer of the funds to the National Bank for the account of NatWest. Although the document that Mr Makris received is not available, the fact that it was a fax leads me to suppose that it was a copy of the outgoing message that he received rather than a message in the precise form received by Manchester. I see no good reason to accept the bank’s suggestion that, although the likelihood is that Mr Makris did receive a faxed copy of the MT 100, this was only later in the afternoon. The document was not in evidence.
121.	Given the brief nature of the MT 100 and his statement that the money was ‘in’; Mr Makris must be taken to have looked at it. In his written statement he does not deny that he did. Although he and the bank were on clear notice of all its contents, I am not sure that at that moment Mr Makris actually registered what those contents were.
122.	During the conversation in which Mr Makris acknowledged the receipt of the money the two men discussed various matters. On the question of commission and the meeting with Mr Paparounis the following Tuesday they said: 
NP	So, listen to this. I said to (Mr Paparounis) “you must put some pressure on them in respect of certain points”. In other words, I know that we have the two pips.	
SM	Yes.	
NP	But I have told him five pips. Which means we start having a discussion there… That’s why I would like us to talk in advance…	
SM	Yes.	
NP	… so that… he will think that it was his own success.	
SM	My friend, would you like us to go… yes, okay, I will…	
NP	Do you understand? These are sale tactics.	
SM	Okay. And that’s precisely why we change the conversation and conduct it in Greek in order to avoid being understood by the English but that’s not the point. The point is that… are we meeting on Saturday? When would you like us to meet and go somewhere and eat something, just the two of us…?	
NP	Of course, certainly, definitely. I will be waiting for you to call me.	
SM	Done, yes.	
NP	All right? Because we have to discuss all these things, which would leave him with the impression that it was his own success.	
SM	Yes.	
NP	In the negotiation.	
123.	During conversations starting at respectively 11:19, 12:24 and 12:39 Mr Makris and Mr Papoiannou appear to have placed the whole 2 billion drachmas against US dollars. A dealing ticket was keyed in at 12:51. It recited the purchase by NWT (NatWest Treasury) of 2 billion drachmas in exchange for US$ 6,506,604.20 from a counterparty designated ZZZCO (“the forex deal”). The deal type was recorded as “1 Spot” and the value date as 4 May 1999. The deal would have been keyed in not much more than ten minutes after it was made. The ZZZCO mnemonic was a standard means of recording a deal where the counterparty was not known. Why this occurred in the present case when the counterparty was known, at least to Mr Makris, is something of a mystery. I do not think that it indicated concern on the part of Mr Makris at the form of the MT 100. 
124.	At 14:12 Mr Makris spoke to Mr Papaioannou. First he referred to the photocopies of Mr Paparounis’s passport and asked where he lived. A little later there was the following exchange:
SM  Also … because he had told me … just in case …      (inaudible) his wife’s name, what is it?
NP     (You want to know) what is his wife’s name?
SM    Yes, because I see here that his money came to us from     an account in the name of …
NP     Nana Papamichael
SM     Papamichael Despina
NP      Papamichael Despina, that’s it.
SM      I found it, I found it …”
125.	It is clear from the above conversation that Mr Makris was doing some paperwork in connection with Mr Paparounis. It is also clear that he had been looking at the MT 100 and had registered the fact that the drachmas had come from Mrs Papamichael. He was not entirely sure of the significance of the name because during his earlier conversation with Mr Paparounis she had been referred to as “Nana” which was how she was commonly known. The conversation therefore confirmed to Mr Makris that the money had come from the wife of Mr Paparounis. It is inconceivable that if he had read the document in sufficient detail to register the origin of the funds, he had not also seen that Mrs Papamichael was stated to be their beneficiary. 
126.	On Friday 30 April 1999 Mr Makris and Mr Retter both signed a form to show that the money laundering formalities had been satisfactorily completed. It may well have been that Mr Makris was completing this document when he spoke to Mr Papaioanou. On Wednesday 5 May 1999 the form was signed by Mr Ranns and Mr Standish.
Events down to the opening of the margin trading account
127.	The consequence of the failure of Mr Makris to designate Mr Paparounis as the counterparty to the forex deal was to cause a dislocation in the bank’s book keeping procedures that is not particularly relevant to this action but needs to be briefly addressed in order to put it in its proper place. Furthermore, the bank’s method of book keeping does have relevance to the outcome of this action.
128.	The use of a SWIFT MT 100 was unusual in the activities of GFM and played no integral part in its book keeping in respect of forex transactions. The normal function of an MT 100 was not actually to move money between banks but to notify the receiving bank of the account to which the transfer should be posted. However, instead of relying upon the express information conveyed by an MT 100, the bank kept its books on the basis of assumptions arising from a process of reconciliation that is generally employed in the banking world. At the heart of the process was a computer programme called AuRA.
129.	At the end of every working day, by means of SWIFT MT 950’s, there would be sent to GFM from each of its correspondent banks a list of the debits and credits for the account of NatWest during that day. AuRA would then attempt to match each amount shown against a list of transactions that had been fed into it at the NatWest end. To qualify for entry in the latter list a transaction had to have been completed according to the criteria used by Natwest and to be effective for the date in question. Once the match was made, the assumption would be that the entry listed by the correspondent bank was legitimately correspondent with the ‘home’ entry. The match resulted from a correspondence between currency,  amount and value date. Although, in theory, a reference could also be used, the evidence was that where the moneys were incoming, matching by reference rarely occurred.
130.	By the time that GFM opened for business on Tuesday 4 May, AuRA had been unable to reconcile with the GFM list the 2 billion drachmas that appeared upon the National Bank’s list. This was because, in the absence of an identifiable counterparty, the forex deal could not be entered upon the GFM list and because, in any event, the deal was for value 4 May 1999 and AuRA had been concerned with 30 April.
131.	After some rather leisurely toing and froing by e-mail, Mr Paparounis was finally established as the counterparty to the deal on Thursday, 6 May 1999 which became the value date of the transaction. The necessary reconciliation was effected. Mr Paparounis was credited with the dollars purchased by him the previous Friday. No interest was credited for the use by the bank of 2 billion drachmas from that day nor has it been suggested that its books recorded the money as being held for the account of any individual until the bank recorded it as payment for the dollars that it had supplied.
132.	 Quite apart from the problems of reconciliation, the Manchester MT 100 had been the subject of an investigation that took some little while to explain but carries this case no further. This is because, although Mr Spearman submits that the arrival of the MT 100 at Manchester gave the bank, and therefore GFM, notice of its contents, I do not have to resolve the point. Mr Makris had knowledge of the contents of the MT 100 at a time sufficiently close to that when Manchester received it to make no difference for the purposes of this case. The bank took diligent and ultimately effective steps to find its correct home. By that time the reconciliation that I have described had been effected. So far as the bank was concerned it had no further significance. 
133.	Meanwhile on Tuesday 4 May 1999 there had been a meeting at the offices of Mr Paparounis’ company, Hellas Transport, in order to carry out due diligence procedures. Mr Paparounis and his two sons were present. Mr Roskams and Mr Makris attended for the bank. Mr Papoiannou was also there. Mr Roskams made a note of the meeting. The note formed the basis of a credit risk memorandum dated 10 May 1999. This was also based upon a credit report dated 30 April that had been obtained from ICAP A.E. The contents of the various documents may be summarised as follows.
134.	Mr Paparounis held two thirds of the shares in the road haulage business. Turnover was substantial but the declared profits were unremarkable. The drawings by Mr Paparounis and his two sons were unknown but might have funded a comfortable life style. Although Mr Paparounis owned other assets there is nothing to indicate their value. There is nothing in any document to reveal a ready expectation that Mr Paparounis had US$ 6.5 million with which to speculate on his own account. If anything, the reverse was true.
135.	The meeting also established that Mr Paparounis had knowledge of trading in stocks and shares and of margin trading.
136.	NatWest’s main concern appears to have been that its own position was protected and it saw that position as being protected because it had US$ 6.5 million which it regarded as having been deposited with it by the client. If the client had deposited that sum, the bank considered that he must be good for that sum.
137.	In his evidence Mr Roskams said, “I could not say for sure that – if I had not been aware of the $6.5 million that had been deposited already I could not have said for sure following my meeting that he had $6.5 million in cash”.
138.	NatWest approved Mr Paparounis for a forex margin trading account. On 11 May Mr Paparounis signed the necessary documents. He warranted that the dollars that were to provide the security were his. In its English version, paragraph 14(i) of the Trading Agreement authorised NatWest to pay commission. There is a considerable dispute as to how the Greek version of the document reads. That version was supplied a little later.
139.	Mr Paparounis was in Thessaloniki when he received the documentation. With him was Mr Stavropoulos. During the hearing there was some dispute as to whether Mr Stravropoulos acted simply as a translator to Mr Paparounis or also advised him. The outcome of the cross-examination was that Mr Stavropoulos had given some but not comprehensive advice. For present purposes the relevance of the matter goes only to credibility. I have already found that Mr Stavropoulos was truthful in his account of the lottery win.
140.	Trading commenced.
Events concerning the margin account
141.	In August 1999 Mr Paparounis and his agents parted company. Arrangements were made for him to trade on his own account either using German, which he spoke, or English through his son Constantine.
142.	On 30 September 1999 a power of attorney was executed by Mr Paparounis in favour of Mrs Papamichael. It permitted her to operate the margin account. There is an issue as to the significance of this.
143.	Mrs Papamichael was not a party to the document. She denies knowledge of it. It seems to me that, without more, the best that the document can do from the bank’s point of view, is to show that Mrs Papamichael knew at that time that her husband was dealing in forex. It goes to her credibility but it does not show that she knew that he was using her money. 
144.	I think that the reality is that Mr Paparounis thought that the power of attorney might come in useful should the occasion arise. It has not been suggested that it did. I find that Mrs Papamichael had no knowledge of the document.
145.	By the end of 1999 the account was in difficulties. It was closed in January 2000. At this point Mr Paparounis made a series of grave allegations against NatWest in respect of the conduct of the account.
146.	In the period between the opening of the margin account and mid-February 2000, NatWest transferred a total of US$ 996,420.27 from the dollar account to the account of Mr Paparounis with Alpha Bank, London.
147.	Mr Makris left the bank in February 2000.
148.	By an agreement dated 17 November 2000 the bank (now the Royal Bank of Scotland) and Mr Paparounis compromised their differences. Without admission of liability, the bank paid Mr Paparounis US$ 2.5 million. Despite the subsequent assertion by Mr Paparounis that he deceived his wife when obtaining the use of her winnings, he has not overtly paid any part of settlement moneys to her. I say ‘overtly’ because it is possible that he used part of the money to provide the funds needed by Mrs Papamichael to make the investment to which I must next refer. Whether he did so is irrelevant to this action.
Mrs Papamichael’s investment
149.	The Voulgarakis family owns a successful glass manufacturing concern called Yioula. Mrs Papamichael is a very close friend of Mrs Voulgarakis. Mrs Papamichael says that the friendship resulted in an offer to her to invest in the company. She says that she discussed the matter with her husband. He was rather impressed that such an offer should have been made. The family and their business are respected. An invitation to invest in it was unusual. I can see force in the suggestion that the invitation was made to Mrs Papamichael because she would have regarded the matter purely as an investment without any wish to become involved in the politics of the business. How it came to be known that Mrs Papamichael had such a considerable resource at her command was not explored in the evidence. However, it is not difficult to imagine how Mrs Papamichael might have told her friend and confidante that she was looking for somewhere to put her money when her deposit matured.
150.	Although I do not think that NatWest has formally accepted that there was such an investment, there cannot be much doubt in the matter.
151.	 Mr Kyriakos Voulgarakis is a lawyer and cousin of the Mr Anastasios Voulgarakis who owns Yioula. He was admitted a solicitor of the Supreme Court in 1991 and admitted to the Athens Bar in 1997. He was called as a witness and cross-examined by Miss Gloster. He gave his evidence in a measured and thoughtful fashion. 
152.	He said that on behalf of his cousin he had produced a draft of the agreement that was to govern the arrangement for the purchase of shares in the company by Mrs Papamichael. It was dated 27 December 2000. The draft stated that 982,548 shares in the company were to be sold to Mrs Papamichael for 2,456,370,000 drachmas of which a deposit of 650,000 drachmas had already been paid. Completion was to take place on 24 January 2001. The balance of the purchase price was to be paid by instalments on respectively 23 and 24 January 2001. Non payment was to mean the forfeiture of the deposit.
153.	Although one may ask why the contract was not executed before the money was paid, the fact is that Mr Voulgarakis says that Mr Anastasios Voulgarakis  holds the deposit. There can be no mistake in the matter. Either Mr Voulgarakis is lying or he is telling the truth. It was not suggested to him that he was lying.
154.	 On 22 November 2000 Mrs Papamichael wrote to the Bank of Cyprus and asked it to open a US dollar account in her name. An account no. 2390165 was opened. A letter dated 18 February 2002 and sent by the Bank of Cyprus to Mrs Papamichael states:

“At your request,
we certify that by your instructions, we transferred on 28/12/2000 the amount of GRD 650,000,000, from your account No 2390165 (in USD) to the account of Mr Anastasios Voulgarakis.
We also certify that the account No. 2390165 was opened by your application, solely and exclusively in your name and that there are no co-beneficiaries into the account.”
155.	A customer receipt from the Bank of Cyprus supports a debit from the account of US$ 1,774,744.03.
Events before action
156.	The precise nature of the bank’s case as to this stage of events is unclear. It seems to be suggested that immediately after the settlement Mr Paparounis prompted Mrs Papamichael to seek the return of ‘her’ money from the bank in order to bring the total that it would have paid out to some US$ 10 million. The bank does not assert that Mrs Papamichael was or is a knowing party to the enterprise. 
157.	It will have been noted that the 650 million drachmas used to fund the dollar account equals the amount left from the main lottery win after deducting the 2 billion drachmas paid to NatWest. It will be recalled that the drift of Mrs Papamichael’s evidence was that Mr Paparounis could use her money in the joint account for his own purposes provided that when she wanted it, it would be available to her. She says that she did want the money in order to pay the first tranche of her investment and the money was there. It is her evidence that the balance of the investment was to be paid when her deposit with NatWest matured on Greece joining the euro on 1 January 2001. She was not asked neither has she said why the first tranche fell to be paid when it did, however not only was it paid but it would appear to have represented her free funds at that time. 
158.	I think it clear that not only was the conduct of Mrs Papamichael consistent with the investment opportunity described by her but that her conduct was driven by it. 
159.	On 19 December 2000 Mrs Papamichael wrote the following letter to the bank:
“To
NATWEST – GLOBAL FINANCIAL MARKETS
Dear Sirs,
Please arrange the remittance of the amount of usd 6.511.483.95 equivalent to drs. 2.000.000.000, which I deposited with you on 30.04.1999 to your account no. 0409202455 in National Bnak of Greece, Athens to my credit for investment producing interests, together with all the up to date interests to my account no. 2390165 in Bank of Cyprus, 171, Alexandras Ave., Athens.
The remittance must be effected on 02/01/2001 so that the interests till 31/12/2000 are calculated since they are the highest which are paid for blocked accounts for such a big period. The money must be definitely in Bank of Cyprus on 02/01/2001 since I have commitment with another Bank which offers me an interesting investment of my money.
Please send me your confirmation to the fax no 01/6229372 and let me know also the exact amount of interests produced from my capital investment from 30.04.1999 till 31.12.2000.
Thanking you in advance ,
Despina Papamichael
(address*)”

                       * The address is not the Ekali address
160.	The copy that was retained by Mrs Papamichael bore the manuscript annotation:
“Remind  22/12/00
Please let me know the exact amount of interests.”
161.	Why Mrs Papamichael chose to give an incorrect indication of what she wished to do with the money has not been particularly satisfactorily explained. That she was indicating a pressing need for the money is plain. I think she felt that she should give a reason for the urgency and did not want to give the real one. Not for the first time she was less than fastidious with the truth.
162.	Mr Retter received Mrs Papamichael’s letter and answered it on 27 December. He did not know what she was talking about. But on 28 December Mrs Papamichael sent copies of respectively the application form, the MT 100 and the Bank of Cyprus debit advice. The same day Mr Retter faxed a response saying that the nature of the bank’s investigation meant that no remittance could be made for value on 2 January 2001 and that the bank would contact her again in early January.
163.	On 3 January 2001 Mr Kyriakos Voulgarakis wrote to the Royal Bank of Scotland on behalf of Mrs Papamichael. It was a letter before action requiring payment of the sum demanded by 10 January 2001. Mr Voulgarakis is connected with Shaw and Croft. It is therefore not as surprising as it might be that a private Greek citizen issued proceedings in the Commercial Court in London on 5 February 2001.
164.	Before the start of the proceedings, on 4 January 2001 the bank responded to the letter of 3 January. The response was signed by Helen Cockroft, Head of Legal and Compliance. The letter posed some pertinent questions as to Mrs Papamichael’s knowledge of the precise dollar figure in which the NatWest account had opened and the number of the receiving account at the National Bank. (The probable answer to the question in respect of the dollar figure was that at some time Mr Paparounis had told her what it was. There was no reason why he should not have done so.) The letter concluded; “ 4. We understand your client is the wife of Mr Dimitris Paparounis, please would you confirm …”
165.	On 8 January Mr Voulgarakis wrote a short letter relying on the MT 100. On 10 January 2001 the bank responded through its solicitors Mishcon de Reya. In the letter the bank forcefully rejected the claim to the money and repeated in rather more detail the questions posed by Ms Cockroft. On 16 January 2001 Shaw and Croft responded by confirming that Mrs Papamichael was the wife of Mr Paparounis and intimating that unless the deposit was repaid by 24 January 2001, Mrs Papamichael would “suffer a loss of GRD 650 Million, arising from a share purchase transaction into which she has entered in reliance upon the return of her money …”. The response points up the fact that it would have been truly remarkable of  Mrs Papamichael to have risked the loss of  US$ 1.7 million of her own money by paying it against an agreement to purchase shares, had she not been confident that she was to receive from NatWest the balance required to complete the matter.
166.	By their reply of 17 January Mishcon de Reya maintained their position. On 24 January Mishcon de Reya notified Mr Paparounis of the situation. 
167.	The proceedings were started.
168.	I think it obvious that the remarkable speed with which this action was begun was occasioned by the fear that Mrs Papamichael had of losing the US$ 1.7 million and the bank’s stark refusal to pay the US$ 6.5 million required to complete her investment and save the first tranche. I have no doubt that Mr Paparounis has consistently encouraged his wife to look to the bank for payment. I also consider that, however the law may stand, Mrs Papamichael has always regarded herself as having paid the 2 billion drachmas to NatWest for her own account.
169.	Given the bank’s acceptance that Mrs Papamichael is not the knowing accomplice of Mr Paparounis in seeking the return of the money, the present relationship of the couple is not as significant as it might otherwise be. However the bank appears to suggest that the fact that Mrs Papamichael is being manoeuvred by her husband to seek redress against the bank has relevance to my findings. I do not see why that should be.
170.	At some stage in January 2001 Mrs Papamichael must have been alerted that matters were not as straightforward as she had supposed. Whether Mr Paparounis acted pre-emptively or his wife taxed him with the matter I do not know. I am sure that there was a tremendous row and at some stage she moved out. The divorce petition gives a good idea of how things stood, although the document seems confused as to when she left. Since then they have lived apart. Mr Paparounis has tried to make things up with his wife, whether from genuine affection or for his own ends I cannot say: probably a mix of the two. I am told that he has tried to explain what happened but Mrs Papamichael appears to have received no clear account of his position.
171.	At the start of her evidence, Mrs Papamichael gave as a reason for pursuing this case, her desire to find out what had really happened. Now she knows and she must decide what she will do. But that is another story.
The bank experts
172.	Mr Tattersall gave evidence for NatWest and Mr Rogers did so for Mrs Papamichael. Both experts were qualified for their task and provided a number of helpful insights with useful explanations of various technical matters. Mr Tattersall had more practical experience of the operation of SWIFT in the present context. Mr Rogers derived his experience from his position as an inspector of overseas branches of Barclays Bank.
173.	Mr Rogers suffered from the fact that his contribution to the joint report with Mr Tattersall might have been more cautiously expressed so giving rise to the impression during his evidence that he was seeking to resile from an earlier more generous rapprochement.
174.	Both the experts addressed matters that have little or no relevance to this case and appeared to treat my task as being to decide whether there had been a breach of a duty of care by NatWest.
175.	However, the relevant oral evidence of the two men can, I think, be shortly summarised and was largely to the same effect.
176.	Both witnesses thought the MT 100 to be poorly drafted. Although the word ‘ambiguous’ was used, the real sense of the matter was that the document was unclear, particularly as to the intended destination of the transfer. Taking the document by itself, each witness was of the view (whether expressly or by implication) that it was unsafe for the bank to use the funds in any way without further inquiry of the Bank of Cyprus. The wording in field 59 was such that the funds could neither be used to the exclusion of any interest of Mrs Papamichael nor for her exclusive benefit. Mr Tattersall was of the opinion that the circumstances known to the bank sufficiently clarified the situation for it to have been in conformity with acceptable (although not best) practice for the funds to have been used to meet the obligation of Mr Paparounis as counterparty to the forex deal. However, Mr Rogers thought that the obligation to make further inquiry remained.
177.	I shall later consider the tests to be applied in deciding whether and to what extent Mrs Papamichael is entitled to relief against the bank. Those tests involve the making of findings of fact against a consideration of the environment in which the parties were operating. The lengthy explanation that Mr Tattersall gave me as to why he thought Mr Makris to be free to ignore the reference upon the MT 100 to Mrs Papamichael as a beneficiary was a legitimate expression of opinion but not really a very expert one. It was a rehearsal of all those factors that it is said by the bank may legitimately lead to a conclusion that Mr Makris was justified in using the drachmas to pay for the dollars. It is my task to decide what weight one should give to those factors. In performing that task I have had regard to the fact that those NatWest personnel who were asked about the matter were of the view that there should have been some form of further inquiry. Mr Retter was very clear about the fact that he should have been informed of the situation and that, if that had been done, he would have made further inquiry.  
Mr Makris’s state of mind
178.	It is submitted on behalf of NatWest that the events of the week had put Mr Makris into a position in which by Friday morning he and the Bank of Cyprus were using as common coinage the expression ‘the payment’, by which each meant the payment of 2 billion drachmas that Mr Paparounis was attempting to make to the National Bank for the account of NatWest and thus of Mr Paparounis. I accept that that is so, but I do not accept that it carries NatWest to where it wants to go.
179.	To the extent that the knowledge of the Bank of Cyprus may be relevant, what it comprised was that Mr Paparounis wanted to make a payment out of the joint account and that the payment was to be to NatWest for the account of Mr Paparounis. NatWest says that it could not have been that the Bank of Cyprus thought that the payment that was actually made was anything other than ‘the payment’. There could not sensibly have been two payments under consideration each in the sum of 2 billion drachmas. Of course NatWest is correct but that is not the point. 
180.	As Mr Makris knew, but it is not suggested that the Bank of Cyprus knew, the payment was required for the creation of a US dollar security account to support margin trading in the name of Mr Paparounis. It was an account in which only Mr Paparounis and the bank could have an interest. But Mr Makris already knew from his conversation on Wednesday 28 April that in some inchoate way Mr Paparounis had been suggesting that his wife might have an interest in the payment, an interest inconsistent with the provision of security for the margin account that was being set up. Mr Makris had entirely failed to address this possibility. Had the events of Thursday worked out differently, his approach might well have been justified, but that did not mean that they erased the knowledge that he had gained the previous day. 
181.	From the point of view of Mr Makris, Friday started well. He was promised the payment. That payment could easily have come from and for Mr Paparounis. But it did not. The MT 100 said that it came from and for the benefit of Mrs Papamichael. It was a situation clearly inconsistent with what Mr Makris was trying to achieve: an account for the benefit of Mr Paparounis. Nothing in the events of Thursday or the earlier part of Friday could change the meaning of the words. If the wording was mistaken, it was a mistake that required to be resolved. Nothing known to Mr Makris at the time of receiving the faxed copy of the MT 100 could resolve the situation in favour of ignoring Mrs Papamichael as the stated beneficiary of the funds. These objective findings present no difficulty on the undisputed evidence. However, much of this case turns upon concepts of good faith, conscience and dishonesty which to a greater or lesser degree involve findings of a subjective nature.
182.	Although the matter is not free from doubt, I am not persuaded on a balance of probabilities that when Mr Makris received his copy of the MT 100 he read it in such a way as to absorb that Mrs Papamichael was the transferor of the money and its potential beneficiary. It is here that the submissions of the bank are at their most powerful. What Mr Makris had been led to expect was a transfer from and for the benefit of Mr Paparounis. What he got was something that purported to be that transfer. Minutes before he got the document he had a conversation that told him that Nana Papamichael was the wife of Mr Paparounis. If he had read the MT 100 with any degree of care when he received it, he must have appreciated the likelihood that Despina Papamichael was Nana Papamichael the wife of Mr Paparounis. However the conversation between Mr Makris and Mr Papaioannou which started at 14:12 (see paragraph 124) gives the impression that it was only then that it was borne in upon Mr Makris that the money had come from an account in Mrs Papamichael’s name. I think it was at this time that he must also have appreciated that she was also a potential beneficiary of the transfer. He had actual knowledge of how matters stood. Was he then dishonest?
183.	Paragraphs 15 and 16 of the statement of Mr Makris dated 16 January 2002 read as follows: 
“15. I am also aware that Mr Paparounis has alleged that I was somehow aware that the moneys transferred on 30 April belonged to his wife and that Mr Paparounis had discussed with me that these moneys were to be invested with the Bank on his wife’s behalf. As I previously told Alex Bouchier and Helen Cockroft of the Bank in July 2001, the allegation is simply untrue. At no time in my discussions with Mr Paparounis did he inform me of any interest of his wife in the moneys. Nor was there therefore any discussion of any investment opportunity for his wife. It was always the case in our discussions that the moneys which were transferred belonged to Mr Paparounis and were to be used as collateral for his trading activity, and not for any other purpose.
16. I have been shown a copy of the SWIFT advice dated 30 April 1999, which it has been alleged that I was referring to on the telephone at the time of the transfer on 30 April 1999. I do not recall having seen this document before although it is possible that I might have done. Doing the best I can now to recollect what happened, the reference to Mrs Papamichael would not have caused me any concern because I knew at the time that Mr Paparounis was using a joint account with his wife’s name on it to transfer his moneys to the Bank.”
184.	Earlier in his statement Mr Makris says that he has used the transcripts of the taped conversations to refresh his memory. It is surprising that, with the benefit of both the tapes and the MT 100, he completely fails to address (except to deny all knowledge of) the lengthy conversation with Mr Paparounis that I have set out and the reference in the MT 100 to Mrs Papamichael as a beneficiary of the funds. Mr Makris not only had an opportunity to explain his position but purported to take that opportunity by providing his statement.
185.	Although his recollection of the conversation with Mr Paparounis of  28 April may have been incomplete, I do not think that it can have entirely left his memory. Nowhere does he give any explanation of how he regarded the reference to Mrs Papamichael in the MT 100. I think the inference is clear. He read the reference and he deliberately decided to ignore it. He did so not because he weighed up whether Mrs Papamichael could indeed be the beneficiary of the money and, however negligently, decided that there was no such chance. He simply decided to suppress the matter. On any view such conduct was dishonest. If it was dishonest, it was lacking in good faith. 
186.	It has been correctly said that Mr Makris was well aware that his conversations were being taped but equally is it the case that those tapes provide the evidence against the submission that his conduct was innocent of deliberate wrongdoing. He crossed the line between the dubiously colourful and the culpable. 
187.	My view is strengthened by the complete failure of Mr Makris to raise the question of Mrs Papamichael’s involvement at any time during the due diligence exercise which occurred on 4 May 1999,  although there must have been ample opportunity to do so.  
188.	I further find that that initial dishonesty must infect the subsequent conduct of Mr Makris in using the dollar account as security for the margin account.
The forensic framework
189.	There now follows a series of findings to which I shall apply the law with which I shall deal in the next section. The findings of law are ones that I think to be largely uncontroversial: 
(a)	On Friday 30 April 1999 Mrs Papamichael caused to be paid out of the joint account 2 billion drachmas (“the drachmas”).
(b)	It was the intention of Mrs Papamichael that the drachmas be paid to NatWest to be held by it for her benefit.
(c)	It was the mistaken belief of Mrs Papamichael that the drachmas would be treated as set out above.
(d)	 Mrs Papamichael was under the mistaken belief that the drachmas would be converted into US dollars and held upon a fixed term deposit that expired on 31 December 2000.
(e)	Mrs Papamichael thought that her husband had made the arrangements necessary to procure the situation set out in the previous sub-paragraphs and had entrusted him with the authority to do so.
(f)	Mrs Papamichael no more clothed her husband in apparent ownership of the money in the joint account than was in fact the case under both Greek and English law.
(g)	The chose in action that represented the drachmas as received by the National Bank stood as a credit on its books for the benefit of the GRD account held with it by NatWest.
(h)	At no time did NatWest open an account in favour of Mrs Papamichael. It never accepted the drachmas upon such a basis nor (whether as a matter of Greek or English law) could it be deemed to have done so.
(i)	Despite the statements of Mr Makris to the contrary, at no time did NatWest open an account in which it held the drachmas as the debtor of Mr Paparounis. It simply appropriated the drachmas against the dollars that it paid to Mr Paparounis on 6 May 1999 in consequence of the forex deal entered into on Friday 30 April 1999.
(j)	Before the forex deal was made, NatWest by Mr Makris was on notice that the drachmas should either be posted upon its books for the benefit of Mrs Papamichael or that the MT 100 was mistakenly drawn insofar as it gave the impression that Mrs Papamichael was to be the beneficiary of the payment. 
(k)	After the forex deal had been made and before the drachmas were used by the bank to pay for the dollars, Mr Makris dishonestly formed the view that he would take no steps to investigate whether Mrs Papamichael had any interest in the drachmas although he knew that this could well be the case.
(l)	The dishonest failure of Mr Makris to investigate the position in respect of the drachmas means that he is deemed to have known that Mrs Papamichael paid the drachmas to the National Bank under the mistaken belief that they would be paid into an account for her exclusive benefit and /or would be used to purchase dollars that would be held in an account for her exclusive benefit.
(m)	Although I think it irrelevant as a matter of law, I do not think that any inquiry that NatWest might properly have made of the Bank of Cyprus could have improved the situation. That bank could only speak as the agent of its customer. It was Mrs Papamichael who had instructed it to make the transfer and it was only of her that inquiry could have been made. Any such inquiry would have received the response that she had instructed the transfer to be made for her exclusive benefit. I cannot see why the fact that such benefit involved the conversion of the drachmas into dollars could have helped the bank. The exchange was to be for her benefit and that is what she, and therefore the Bank of Cyprus, would have said.
(n)	Given the knowledge of Mr Makris, he knew that the use by Mr Paparounis of the drachmas to buy US dollars for use as security for margin trading was a violation of any beneficial right that Mrs Papamichael had in the drachmas.

The law and its application
English law
190.	Although I have been greatly assisted by the submissions on the law in this case, there has been missing a sense of the framework within which these illuminating discussions of detail have taken place. I feel a little like a traveller amply equipped with aids to survival going upon a journey that is only partly mapped. The first exercise must be to consider where we are going.
The drachmas and the dollar claims
191.	The claims in respect of respectively the drachmas and the dollars involve distinct, if overlapping, consideration.
192.	The claim to the drachmas has the potential to succeed as a personal claim for restitution. The bank’s ample assets mean that no further step is required for a successful recovery.
193.	The claim lies in mistake. Mrs Papamichael paid away her money under the mistaken impression that it was going to an account in her name to be converted into dollars that would be held in her name. Unless the bank changed its position in good faith in reliance upon the receipt, Mrs Papamichael is entitled to recover her drachmas or their equivalent in euros. But that claim is not as valuable to her as one for the US dollars which they became.
194.	In one sense the claim for the dollars is also a personal claim. The dollars are long gone from the security account. But, if Mrs Papamichael is to have a good claim against the bank in respect of the dollars, she must rely upon what are proprietary remedies. Mrs Papamichael must show that when the bank paid the dollars into the account of Mr Paparounis in exchange for the drachmas, they became held by him upon a constructive trust in her favour. She must show that, to the extent to which the bank took funds from the account to satisfy its claims against Mr Paparounis, it was in knowing receipt of those funds or that it knowingly assisted in a breach of trust. To the extent that the bank paid money out of the account to Mr Paparounis, Mrs Papamichael must show that the bank gave such knowing assistance. I shall now address the various elements in turn.
The claim for the drachmas
195.	It seems to me that the most obvious basis for the claim to the drachmas is as a claim in restitution for money paid under a mistake of fact.
196.	 In the 6th edition of Goff and Jones on Restitution the underlying law is summarised at para 4-001:
“…In our view the case law is authority for the simple proposition that the plaintiff will succeed if he can show that he would not have made the payment if he had not been mistaken.”
197.	Mrs Papamichael paid the drachmas to NatWest in the mistaken belief that they would be converted into dollars to be held for her account for a fixed term on the expiration of which they would be repaid with accrued interest. The only risks involved were a credit risk in respect of NatWest, a sovereign risk in respect of the United Kingdom and a risk of depreciation of the dollar against the drachma during the period of the deposit. The situation could hardly have been more different from that in which the bank and Mr Paparounis intended to employ it.
198.	There never was a bank account held by Mrs Papamichael with NatWest. An account, whether under English or Greek law involved some sort of acceptance by the bank that one was to exist. There was no such acceptance.
199.	If Mrs Papamichael had not been so mistaken, she would not have made the payment.
200.	Putting to one side for the present the defences raised by the bank that are based upon the conduct of Mr Paparounis, I regard it as established law that on the facts that I have found Mrs Papamichael is entitled to the return of the drachmas, unless the bank can show that it changed its position in reliance upon the mistake and without knowledge of it (Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at p 580).  It is the mistake that must be causative of the change of position (Scottish Equitable plc v Derby [2001] EWCA Civ 369, [2001] 3 All ER 818). The bank says that it did so change its position.
201.	The bank says that it entered into a contract with Mr Paparounis to supply dollars against drachmas without knowledge of the mistake and that in continued ignorance it did supply those dollars. I think that this defence must fail for two independent reasons.
202.	The first reason is that I do not consider that the bank ever had any right to use the drachmas for payment in respect of the dollars. The arrival of the drachmas in NatWest’s account with the National Bank did not mean that that bank was free to do whatever it liked with the money. The bank knew, as its own efforts reveal, that if the purpose of the transfer could not be established the money had to be sent back to where it came from. That purpose was not to be conclusively derived from the use of the AuRA system whether as automatically or manually employed. It is no doubt an exceptionally useful system of surprising accuracy, but it works on assumptions. It cannot create a legal relationship where none already exists. Furthermore there is no reason in law why a third party for whose conduct the paying party has no responsibility should be able to add to the situation, for instance by giving the bank a payment instruction, so as to create a legal relationship in respect of the money. This situation is reflected in the decision of the Court of Appeal of New South Wales Supreme Court in State Bank of New South Wales Ltd v Swiss Bank Corp [1996] 2 JIBL N-23 of which I have only a brief but to all appearances acceptable report.
203.	Shortly put, the position in the State Bank case was that pursuant to a fraud Swiss Bank Corp Zurich instructed its New York branch to pay US$ 20,004,583.33 to the account of State Bank Sydney’s Trade and Overseas (“TOS”) account at State Bank New York and this was done. Prior to the payment, State Bank New York had been informed that it was to receive US$ 20,004,588.33 for the account of a company called Essington with State Bank’s Sydney branch. Believing that the money that it had received was the money that it had been told to expect, State Bank New York credited the money to the TOS account which was an account used mainly for customer funds. Acting in the same belief it paid away most of the funds to the order of Essington. SBC claimed restitution of the moneys upon the basis that they had been paid under a mistake of fact. The expert evidence was that the CHIPS message under which the transfer had been made informed a competent banker that the intention of the sending bank was for the amount to be paid to State Bank Sydney and for the flow of funds to stop there. SBC succeeded in its claim. The money had been paid under a mistake of fact. The only available defence was to show that State Bank had changed its position having ‘acted to its detriment on the faith of the receipt’. By treating the funds as Essington’s funds, State Bank did not rely upon the receipt but on information supplied to it by its customer Essington. The defence therefore failed.
204.	Given the slim nature of the report, a certain degree of caution is required in its consideration. However I do not understand NatWest to criticise it but instead to say that that case is not this case: the difference being between the conduct of SBC and Mrs Papamichael. If SBC had put forward Essington as having authority to make the representation that it did, SBC would not have recovered. That may be right but, as will later appear, I do not accept that Mrs Papamichael put her husband into a position in which she can be held responsible for what he told NatWest. It seems to me that the State Bank case is no more than a useful confirmation of what can be readily derived from the application of first principles. It follows that on the findings that I have made there was no relevant change of position and Mrs Papamichael is entitled to recover the drachmas.
205.	The second reason is that the bank did not change its position in good faith.
206.	In Lipkin Gorman  Lord Goff of Chieveley says at p580:
“… It is, of course, plain that the defence (of change of position) is not open to one who has changed his position in bad faith, as where the defendant has paid away the money with knowledge of the facts entitling the plaintiff to restitution … ”

207.	Lord Goff was giving an instance of a situation in which the defence of change of position was not open to a defendant. As he observed at page 580; “… These are matters which can, in due course, be considered in depth in cases where they arise for consideration”.
208.	In respect of the defence of change of position, the question is whether a person’s position has so changed as to make it inequitable in all the circumstances to require him to make restitution (Lipkin Gorman at p580). Subject to what follows, I think that the correct approach to the matter is set out in the judgment of Moore-Bick J in Niru Battery Manufacturing Company v Milestone Trading Limited [2002] EWHC 1425 (Commercial). For present purposes it is unnecessary to look at the facts of this complex case. In the course of the judgment it became necessary to consider whether there was a good defence of change of position in respect of the proceeds of a letter of credit upon which payment had been made by mistake. In reaching his conclusions Moore-Bick J made an extended analysis of the authorities, including those dealing with the meaning of dishonesty in the context of knowing assistance to which I shall refer later. Relevant passages read as follows:  
“122. Mr. Bloch submitted that the only ground on which a recipient of money paid under a mistake will be deprived of the defence of change of position is bad faith and that bad faith in this context means dishonesty. He therefore drew my attention to several recent authorities in which the courts have considered what constitutes dishonesty in the context of ancillary liability for breach of trust. He submitted that, whether or not CAI acted negligently, it did not act dishonestly and is therefore entitled to rely on its change of position. 
123. It is necessary to begin by referring to the recent decision of the Privy Council in Dextra Bank & Trust Co Ltd v Bank of Jamaica [2002] 1 All E. R. (Comm) 193. In that case Dextra drew a US dollar cheque on its bankers in favour of the Bank of Jamaica which was delivered to that bank by an intermediary. The Bank of Jamaica negotiated the cheque to another bank which collected the sum in question from Dextra. Dextra and the Bank of Jamaica were deceived as to each other’s intentions by persons involved in a fraud: Dextra drew the cheque intending to lend the sum in question to the Bank of Jamaica, whereas the Bank of Jamaica intended to buy the sum in question from Dextra with Jamaican dollars. The Bank of Jamaica delivered the Jamaican dollars to the fraudsters whom it believed to be authorised to receive them on behalf of Dextra.
 124. Dextra sought to recover the value of the cheque from the Bank of Jamaica on a variety of grounds including mistake of fact giving rise to a right to restitution. The Bank of Jamaica relied on the defence of change of position. In response Dextra argued that in such cases it was necessary to balance the respective faults of the two parties in order to decide whether it would be inequitable to require the payee to make restitution and that in that case the Bank of Jamaica was the more blameworthy. In the event the claim in restitution failed because it was held that Dextra had not issued the cheque under any relevant mistake of fact. Nonetheless, the Privy Council went on to consider whether an assessment of the relative fault of the parties has a part to play in the defence of change of position. Having considered the position in other countries their Lordships declined to admit the concept of relative fault into this branch of the common law, considering that good faith on the part of the recipient was a sufficient criterion. They reached that decision partly on the grounds that since a claimant who makes a payment under a mistake of fact is not precluded by negligence from recovering in restitution, it would be anomalous if the defendant’s conduct were to be examined for negligence and even more anomalous if it were then necessary to examine the payer’s conduct to see which of them was more at fault.
125. The decision of the Privy Council in the Dextra Bank case is authority for the proposition that mere negligence on the part of the recipient is not sufficient to deprive him of the defence of change of position, but it leaves open the question of what exactly constitutes lack of good faith in this context. The Privy Council was not concerned with that question, any more than was the House of Lords in Lipkin Gorman v Karpnale.

(having considered the authorities on dishonest assistance in a breach of trust the judge continued)
131. Mr. Bloch submitted that lack of good faith is really the same as dishonesty and that the same test should apply in each case, whether one is dealing with an accessory to a breach of trust or with a recipient of a mistaken payment who seeks to rely on a change of position that he has himself brought about. In either case the defendant should not be liable unless he has acted in a way which he knows ordinary people would regard as dishonest.
132. Miss Andrews challenged the proposition that good faith in the context of the defence of change of position is to be equated with dishonesty. She did so by reference to the law relating to the position of an agent who receives payment on behalf of his principal. In such cases, she submitted, no question of dishonesty arises; the agent acts at his peril if he pays the money over to his principal after receiving notice of the claim for restitution. 
133. Although it has similarities with the modern defence of change of position, the defence available to an agent who has paid money over to his principal before receiving notice of the claim has been recognised for a long time. Nowadays it is not normally regarded as an example of a change of position of the kind contemplated by Lord Goff in Lipkin Gorman v Karpnale, but as a rule by which the correct defendant may be identified when payment is made to one who is known to be acting as an agent. …
                         … … …
Nonetheless, it is perhaps instructive that notice of the claim is said to be sufficient to deprive the agent of the benefit of this defence.
134. To answer the question raised by Mr. Bloch I think it is necessary to return to the principles stated by Lord Templeman and Lord Goff in Lipkin Gorman v Karpnale Ltd, namely, that unjust enrichment gives rise to an entitlement to restitution unless it would be inequitable in all the circumstances to require the recipient of the benefit to make restitution in full or in part. These are broad principles the details of which have yet to be developed. It was not necessary in that case for their Lordships to consider the range of circumstances which would prevent a recipient from relying on the defence of change of position and insofar as they dealt with that subject I do not understand either Lord Templeman or Lord Goff to have provided more than a broad indication of what they might be. It is, however, interesting to note that they contemplated that a change of position after the payee “receives notice of the victim’s claim for restitution” (per Lord Templeman at page 560) or “with knowledge of the facts entitling the claimant to restitution” (per Lord Goff in the passage at page 580 cited earlier) would not provide a defence.
135. In the light of these observations, and having regard to the nature of the principles underlying the right to restitution in the case of a mistaken payment and the defence of change of position, I do not think that dishonesty in the sense identified in Twinsectra Ltd v Yardley is the sole criterion of the right to invoke the defence of change of position. I do not think that it is desirable to attempt to define the limits of good faith; it is a broad concept, the definition of which, insofar as it is capable of definition at all, will have to be worked out through the cases. In my view it is capable of embracing a failure to act in a commercially acceptable way and sharp practice of a kind that falls short of outright dishonesty as well as dishonesty itself. The factors which will determine whether it is inequitable to allow the claimant to obtain restitution in a case of mistaken payment will vary from case to case, but where the payee has voluntarily parted with the money much is likely to depend on the circumstances in which he did so and the extent of his knowledge about how the payment came to be made. Where he knows that the payment he has received was made by mistake, the position is quite straightforward: he must return it. This applies as much to a banker who receives a payment for the account of his customer as to any other person: see, for example, the comment of Lord Mersey in Kerrison v Glyn, Mills, Currie & Co. (1912) 81 L.J.K.B. 465 (H.L.) at page 472. Greater difficulty may arise, however, in cases where the payee has grounds for believing that the payment may have been made by mistake, but cannot be sure. In such cases good faith may well dictate that an enquiry be made of the payer. The nature and extent of the enquiry called for will, of course, depend on the circumstances of the case, but I do not think that a person who has, or thinks he has, good reason to believe that the payment was made by mistake will often be found to have acted in good faith if he pays the money away without first making enquiries of the person from whom he received it.
138. ……The need to make enquiries of Bank Sepah is not a matter to be viewed in terms of a duty owed by one banker to another; it is a matter to be viewed in terms of a duty of good faith which a person who has received a payment that he has good reason to think was made under a mistake owes to the person who made it. If under those circumstances the payee fails to make enquiry of the payer before disposing of the money he  can properly be described as failing to act in good faith because he acts in the knowledge that he may be infringing the rights of another despite having the means of avoiding that consequence. In fact I think that the present case is even stronger than that because on the information available to him Mr. Francis had no real basis for thinking that Milestone was entitled to receive or retain the funds that had been remitted by Bank Sepah or that there was any proper basis for complying with Mr. Mahdavi’s instructions. Although Mr. Francis did not consciously act in disregard of the standards to be expected of an ordinary honest banker, he was willing in the circumstances to accept the risk that releasing the money might infringe Bank Sepah’s rights.” 
209.	It seems to me that it is implicit in the above analysis that the payee should have actual notice of the matters that go to his good faith: the negligently unopened letter is not enough. I am not sure that this is necessarily the case. Equity, if not good faith, might suppose that we should read our correspondence and the discussion of the position of a purchaser for value by Sir Robert Megarry V-C in In re Montagu’s Settlement Trusts [1987] 1 Ch 264 is supportive of the view that constructive notice of a mistake is enough to defeat the defence of change of position. However, for present purposes, I am content to proceed upon the basis of a requirement of actual knowledge where good faith is concerned. This would include wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make.
210.	If one applies the above criteria to the present case, the assumption must be that when the bank entered into the forex bargain it acted in good faith but that when on 6 May 1999 it appropriated the drachmas to the satisfaction of the forex bargain it was acting in bad faith. It has not been suggested to me by NatWest that this makes any difference in principle and I do not think that it does. The reason is that there is nothing to show that, once the bank knew of the mistake, it could not have sold the dollars that it had acquired against drachmas in an amount equal to or greater than the original price. In the event that there would have been a loss there is no reason why this should not be reflected in the amount recovered, the claim being for unjust enrichment.
211.	Subject therefore to the general defences to which I shall come, Mrs Papamichael is entitled to recover the 2 billion drachmas paid on 30 April 1999 as money paid under a mistake of fact.
The US dollars
212.	The US dollars that created the security account came from NatWest. For the bank to be liable in respect of them it is necessary to show that the funds were held upon a constructive trust in favour of Mrs Papamichael. That will be so if the drachmas received by the National Bank for the account of NatWest were subject to such a trust and equity regards the dollars as the proceeds of the drachmas or if the dollars became subject to a constructive trust as soon as they were credited to Mr Paparounis. It will be remembered that the dollars were credited to the account of Mr Paparounis on 6 May 1999 and only some days later did they become security for the margin account. Therefore the first question that one must address is whether the dollars became impressed with a constructive trust in favour of Mrs Papamichael.
213.	It seems to me that there are three potential routes by which it may be argued that when first the dollars appeared in the account of Mr Paparounis he held them upon a constructive trust in favour of Mrs Papamichael. They are that (i) Mr Paparounis, having held a fiduciary position in respect of  Mrs Papamichael, abused his trust so as to constitute himself a trustee of the profit made by him from that wrongdoing; (ii) the payment of the drachmas to NatWest involved circumstances that conferred upon Mrs Papamichael a proprietary remedy against the bank that permitted her to trace the proceeds of the drachmas into the dollar account and (iii) that the fraudulent conduct of Mr Paparounis procured a situation in which he held the dollars in trust for his wife.
214.	Although it appears to me that abuse of a fiduciary position is the most obvious candidate for consideration, it was upon the last of the three possibilities that the argument centred. It has to be said, that it seemed almost to be taken as a given that if I were to make the necessary factual findings, the law would find a constructive trust. The argument largely went to what was required to constitute good notice and to the general defences put forward by the bank. In the event, I have reached the conclusion that there was a constructive trust but by a rather less osmotic process than that of those before me. As the trust forms a vital element in the forensic chain I shall set out my reasons. Before doing so I think one should take as a general starting  point  a passage in the speech of Lord Millett in Foskett v McKeown [2001] 1 AC 102 at page 129 where  he says:
“The cause of action
As I have already pointed out, the plaintiffs seek to vindicate their property rights, not to reverse unjust enrichment. The correct classification of the plaintiffs’ cause of action may appear to be academic, but it has important consequences. The two causes of action have different requirements and may attract different defences.
A plaintiff who brings an action in unjust enrichment must show that the defendant has been enriched at the plaintiff’s expense, for he cannot have been unjustly enriched if he has not been enriched at all. But the plaintiff is not concerned to show that the defendant is in receipt of property belonging beneficially to the plaintiff or its traceable proceeds. The fact that the beneficial ownership of the property has passed to the defendant provides no defence; indeed, it is usually the very fact which founds the claim. Conversely, a plaintiff who brings an action like the present must show that the defendant is in receipt of property which belongs beneficially to him or its traceable proceeds, but he need not show that the defendant has been enriched by its receipt. He may, for example, have paid full value for the property, but he is still required to disgorge it if he received it with notice of the plaintiff’s interest.
Furthermore, a claim in unjust enrichment is subject to a change of position defence, which usually operates by reducing or extinguishing the element of enrichment. An action like the present is subject to the bona fide purchaser for value defence, which operates to clear the defendant’s title. ”
215.	The need to clarify the starting point in Foskett arose because trust moneys had been used to pay for some, but not all, of the premiums of a whole life policy that was paid out upon the death by suicide of the subject of the policy. The main issue was whether the beneficiaries’ relief was limited to the amount misappropriated for premiums or the pro rata element of the proceeds of the policy traced from those premiums. Once the underlying principle had been established the speech was largely devoted to the ensuing tracing exercise. The decision throws into relief the approach of the House of Lords to the problems previously encountered by it in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669.
216.	The main question before the House of Lords in Westdeutsche Bank was whether the bank was entitled to compound interest upon moneys recoverable from the defendant borough in consequence of their having been received under a void contract. The bank was entitled to succeed on a personal claim in restitution by reason of the void nature of the contract but that was not enough to give it a good claim for compound interest. The main route to such a right would have been if the making of the payments had led to a situation in which they were held in trust in favour of the bank by reason of their payment under a void contract or a mistake of law. It was held that there was no such trust. At page 705 Lord Browne–Wilkinson set out four principles of trust law that he regarded as being uncontroversial, albeit that the second required a degree of expansion. The principles are:
“(i) Equity operates upon the conscience of the owner of the legal interest. In the case of a trust, the conscience of the legal owner requires him to carry out the purpose for which the property was vested in him (express or implied trust) or which the law imposes on him by reason of his unconscionable conduct (constructive trust).
(ii)  Since the equitable jurisdiction to enforce trusts depends upon the conscience of the holder of the legal interest being affected, he cannot be a trustee of the property if and so long as he is ignorant of the facts alleged to affect his conscience, i.e. until he is aware that he is intended to hold the property for the benefit of others in the case of an express or implied trust, or, in the case of a constructive trust, of the factors which are alleged to affect his conscience.
(iii)  In order to establish a trust there must be identifiable trust property. The only apparent exception to this rule is a constructive trust imposed on a person who dishonestly assists in a breach of trust who may come under fiduciary duties even if he does not receive identifiable trust property.
(iv)  Once a trust is established, as from the date of its establishment the beneficiary has, in equity, a proprietary interest in the trust property, which proprietary interest will be enforceable in equity against any subsequent holder of the property (whether the original property or substituted property into which it can be traced) other than a purchaser for value of the legal interest without notice. ”
217.	 Having set out these general principles, I shall address the several possibilities.
Breach of fiduciary duty by Mr Paparounis
“A fiduciary who uses his position of trust to acquire a benefit for himself holds that benefit on constructive trust for his beneficiary.”
(Goff and Jones para 33-004)
     “The view supported by most authority is … that profits made by the agent in breach of his fiduciary obligations are regarded as held for the principal on a full (i.e. non-remedial) constructive trust with proprietary implications.” 
(Bowstead & Reynolds on Agency 17th ed. Art 45 at para 6-041)
“[A] fiduciary is someone who has undertaken to act on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or for the benefit of a third person without the informed consent of his principal.”
(Bristol and West Building Society v Mothew [1998] Ch 1, Millett LJ at p18) 
218.	In the present case Mr Paparounis was a fiduciary who made a profit out of his trust.
219.	The task entrusted to him by his wife was to arrange with NatWest for an account to be opened in her name into which she would pay 2 billion drachmas to be converted into dollars or to open an account in her name into which would be paid dollars paid for with her drachmas. Part of this task was to arrange the foreign exchange transaction. 
220.	Mr Paparounis procured that the drachmas be used to purchase dollars for his account. At the least, those dollars represented “a profit (made) out of his trust”. (In effect he was guilty of the conversion of the drachmas.) He was a constructive trustee of those dollars from the time that they were paid into his account. Except in the most rudimentary sense, such a finding eliminates the need to apply any form of tracing remedy. Most of the dollars were taken by the bank in purported enforcement of its security. Liability in respect of the remainder depends upon whether it knowingly assisted in its disposal. These are matters to which I shall come in a later section.
Mistake
221.	The concept of mistake giving rise to a proprietary remedy has a source in Chase Manhattan Bank N.A. v Israel-British Bank (London) Ltd [1981] Ch 105. But it is not a happy place. In his speech in Westdeutsche Bank at page 714 Lord Browne-Wilkinson analysed the position as follows:    
 “(B) Chase Manhattan Bank N.A. v Israel-British Bank (London) Ltd. [1981] Ch. 105
In that case Chase Manhattan, a New York bank, had by mistake paid the same sum twice to the credit of the defendant, a London bank. Shortly thereafter, the defendant bank went into insolvent liquidation. The question was whether Chase Manhattan had a claim in rem against the assets of the defendant bank to recover the second payment.
Goulding J. was asked to assume that the moneys paid under a mistake were capable of being traced in the assets of the recipient bank: he was only concerned with the question whether there was a proprietary base on which the tracing remedy could be founded: p. 116B. He held that where money was paid under a mistake, the receipt of such money without more constituted the recipient a trustee: he said that the payer “retains an equitable property in it and the conscience of [the recipient] is subjected to a fiduciary duty to respect his proprietary right: p. 119.
It will be apparent from what I have already said that I cannot agree with this reasoning. First, it is based on a concept of retaining an equitable property in money where, prior to the payment to the recipient bank there was no equitable interest. Further, I cannot understand how the recipient’s “conscience” can be affected at a time when he is not aware of any mistake. Finally, the judge found that the law of England and that of New York were in substance the same. I find this a surprising conclusion since the New York law of constructive trusts has for a long time been influenced by the concept of a remedial constructive trust, whereas hitherto English law has for the most part only recognised an institutional constructive trust: see Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. [1990] 1 QB 391, 478-480. In the present context, that distinction is of fundamental importance. Under the institutional constructive trust, the trust arises by operation of law as from the date of the circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past. The consequences that flow from such trust having arisen (including the possibly unfair consequences to third parties who in the interim have received the trust property) are also determined by rules of law, not under a discretion. A remedial constructive trust, as I understand it, is different. It is a judicial remedy giving rise to an enforceable equitable obligation: the extent to which it operates retrospectively to the prejudice of third parties lies in the discretion of the court. Thus for the law of New York to hold that there is a remedial constructive trust where a payment has been made under a void contract gives rise to different consequences from holding that an institutional constructive trust arises in English law.
However, although I do not accept the reasoning of Goulding J., Chase Manhattan may well have been rightly decided. The defendant bank knew of the mistake by the paying bank within two days of the receipt of the moneys: see p. 115A. the judge treated this fact as irrelevant (p. 114F) but in my judgment it may well provide a proper foundation for the decision. Although the mere receipt of the moneys, in ignorance of the mistake, gives rise to no trust, the retention of the moneys after the recipient bank learned of the mistake may well have given rise to a constructive trust: see Snell’s Equity, p. 193; Pettit, Equity and the Law of Trusts, 7th ed. (1993) p. 168; Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. [1990] 1 QB 391, 473-474.  ”
222.	Thus Lord Browne-Wilkinson was saying that English law precluded a form of umbilical connection between the money as originally held by Chase Manhattan and the money claimed to be subject to a trust. He also ruled out the operation of a judicial tidying up exercise by the imposition of a remedial trust. But he did consider that the knowledge of the mistake acquired by the Israel-British Bank might well have been a reason why the case was correctly decided. That knowledge, if relevant, would have imposed an institutional constructive trust. 
223.	At paragraphs 4-35 and 4-36 of Goff and Jones the learned editors express their disagreement with the view that Chase Manhattan may have been properly decided. Several reasons are advanced. Reservation is expressed as to the assumption that “it is unconscionable behaviour not to return money which you now know was paid under a mistake, behaviour so unconscionable that a court would impose a constructive trust”. Questions are raised as to the relevance of the timing of the discovery of the mistake and the identification of the fund. Finally, considerable concern is expressed as to the existence of funds that may have acquired a protected status in circumstances that are unknown to third parties.
224.	With all diffidence, I do not see why such reservations should preclude any proprietary remedy arising from mistake.
225.	The corollary of the assumption that it is unconscionable not to return money that you know to have been paid under a mistake is that it is conscionable to keep it. As the assumption is predicated by the further assumption that one has under one’s control at least some of the money so paid or its proceeds, this means that one is free to do what one likes with the money. Thus a solvent recipient, just as much as an insolvent recipient, can confine the mistaken payer to a personal claim in restitution. No doubt there is an element of moral philosophy involved but the use of conscience as a standard of value means that this must be so. Regardless of what they might actually do in practice, I fancy that most people who had been paid too much change would regard the excess as belonging to the mistaken payer. Similarly, where a bank accidentally credits an account with money not due to the account holder, (mild schadenfreude apart) most people would regard the credit as being that of the bank. But the recipient of the money only becomes a trustee when he knows of the mistake. That is because for a constructive trust to arise the situation must fall within the general principles listed by Lord Browne-Wilkinson and set out at paragraph 216 above.
226.	I cannot see why the timing of the discovery of the mistake should defeat the operation of the principle. Once there has been a mistaken payment there will be the potential for a trust. But the existence of a trust will depend upon several factors of which one must be the presence of a fund upon which it can operate. The later the acquisition of the knowledge the less the chance that a trust will arise.
227.	The identification of a fund upon which a trust can operate may well present problems but that does not mean that a trust can never arise. As Lord Millett explained in Foskett at page 128, tracing is a tool. 
“Tracing is neither a claim nor a remedy. It is merely the process by which a claimant demonstrates what has happened to his property, identifies its proceeds and the persons who have handled or received them, and justifies his claim that the proceeds can properly regarding as representing his property.”
228.	Used as a tool there is no reason why tracing should not be employed to see whether there remains an asset upon which a trust can operate where money has been paid under a mistake.
229.	Finally, I see no reason why the fear of ‘off-balance sheet’ liabilities should mean that in no circumstances can a trust arise where money has been paid by mistake. Whether or not the point was argued in Chase Manhattan, it is obvious that someone who pays money by mistake stands on a different footing from a supplier who knowingly takes the risk of non-payment and often obtains security against that danger. Perhaps more to the point, once one allows of the fact that assets may be subject to a constructive trust where acquired in breach of a fiduciary relationship, I cannot see a distinction in principle that would preclude a trust arising where they have been acquired in consequence of a mistake.
230.	The knowledge that is required is actual knowledge (see the second of Lord Browne-Wilkinson’s principles at paragraph 216 above and Sir Robert Megarry V-C in In re Montagu’s Settlement Trusts). The reason for this is that equity strikes a balance between the weight of the obligation that conscience may impose and the circumstances which may legitimately call for the imposition of  that burden. The severity of the obligations placed upon a trustee must be matched by a corresponding knowledge of the circumstances that impose that trust.
231.	In the present case the bank, by Mr Makris, knew of the mistake long before the bank took the drachmas in exchange for the dollars that it had agreed to provide. The chose in action upon the books of the National Bank was distinct and identifiable. Both banks were and have remained solvent. The drachmas having been taken by NatWest against the dollars, Mrs Papamichael may either trace or follow. She chooses to trace. On any view of the law, Mr Paparounis took the dollars with notice of her interest. He held them in trust for his wife. It remains to decide whether the bank is liable to Mrs Papamichael in respect of those dollars.
Fraud
“Although it is difficult to find clear authority for the proposition, when property is obtained by fraud equity imposes a constructive trust on the fraudulent recipient: the property is recoverable and traceable in equity. Thus, an infant who has obtained property by fraud is bound in equity to restore it: Stocks v. Wilson [1913] 2 K.B. 235, 244; R. Leslie Ltd. v. Sheill [1914] 3 K.B. 607. Moneys stolen from a bank account can be traced in equity: Bankers Trust Co. v. Shapira [1980] 1 W.L.R. 1274, 1282 C-E: see also McCormick v. Grogan 918690 L.R. 4 H.L. 82, 97.”
(Westdeutsche Bank Lord Browne-Wilkinson at p716)
232.	It may well have been the above dictum which led to so little debate before me as to whether there was a trust of which NatWest did or did not have notice or knowledge. If the position had been clear I should have been happy to follow that lead without more ado. Unfortunately I do not think that that is so. The detailed judgment of Ferris J in Box and others v Barclays Bank plc [1998] All ER (D) 108 suggests that the matter requires some thought.
233.	In Box a number of depositors in an illegal and later insolvent deposit–taking business asserted that, inter alia, the deposits were held on trust, having been procured by the fraud of the operator of the business. The submission under consideration was that “where money or other property is obtained by fraud the fraudsman is to be treated as constructive trustee for the person defrauded” (p15). The cases relied upon were Westdeutsche Bank, Neste Oy v Lloyds Bank plc [1993] 2 Lloyds Rep 658 and McCormick v Grogan.
234.	 Having set out the above dictum of Lord Browne-Wilkinson (“the dictum”) and referred to Neste Oy, a case on conscience and not fraud, Ferris J referred to the fact that in Neste Oy Bingham J had based himself upon the same passage in Story’s Equity as had Goulding J in Chase Manhattan. The consequence of Lord Browne-Wilkinson’s analysis of Chase Manhattan had similarly to apply to Neste Oy: no remedial constructive trust. I agree.
235.	The apparently general statement of the law by Lord Westbury in McCormick was specifically addressed by Peter Gibson LJ in Halifax Building Society v Thomas [1996] Ch 217 where he said that the statement had to be confined to its facts and not elevated to a general principle.
236.	Against those cases cited in support of the proposition, two were cited as precluding reliance on fraud in respect of a proprietary claim where the fraud had induced a contract: the contract being voidable and not void. The cases were Lonrho v Fayed (No 2) [1992] 1 WLR 1 at pp 11-12 and El Ajou v Dollar Land Holdings plc [1993] 3 ALL ER 717 at p 734. There was made the same point as was made in Halifax Building Society v Thomas at pp 227-228, that failure to set aside a contract was preclusive of a constructive trust giving rise to proprietary relief.
237.	In his judgment Ferris J also referred to the decision of the Privy Council in Re Goldcorp Exchange Ltd [1995] AC 74 at pp 101-103. The case concerned attempts to impress with trusts bullion in which purchasers claimed an interest arising from the circumstances of the purchases. Again the contractual framework was held to militate against relief and none was granted. Finally in dealing with this aspect of the law Ferris J said at p17 of the report:
 “To revert briefly to the authorities relied upon by the plaintiffs, the passages in Neste Oy and McCormick v Grogan are, in my judgment, unreliable for the reasons which I have endeavoured to state. The observation of Lord Browne-Wilkinson in the Westdeutsche case only assists the plaintiffs if it is to be treated as a general statement of the law applicable to all cases of fraud. In my view it would be wrong so to treat it. It was a general statement of certain underlying principles instanced by examples two of which concerned transactions which were void, not voidable, and the third of which comes from the field of secret trusts where “fraud” is referred to in no special sense. I do not think that Lord Browne-Wilkinson can be taken to have been laying down a principle applicable to all cases of fraud when he did not deal with the reasoning in the other cases which I have mentioned.”
238.	So Ferris J does not suggest that the observation can have no application, only that it cannot apply to a voidable contract induced by fraud. So can it apply to the present case? Before commenting I think that one must look at a passage in the judgment of  Millett J in El Ajou at p734  which reads:
“… Mr Murad was the plaintiff’s fiduciary, and he was bribed to purchase the shares. He committed a gross breach of his fiduciary obligations to the plaintiff, and that is sufficient to enable the plaintiff to invoke the assistance of equity. Other victims, however, were less fortunate. They employed no fiduciary. They were simply swindled. No breach of any fiduciary obligation was involved. It would, of course, be an intolerable reproach to our system of jurisprudence if the plaintiff were the only victim who could trace and recover his money. Neither party before me suggested that this is the case; and I agree with them. But if the other victims of the fraud can trace their money in equity it must be because, having been induced to purchase the shares by false and fraudulent misrepresentations, they are entitled to rescind the transaction and revest the equitable title to the purchase money in themselves, at least to the extent necessary to support an equitable tracing claim: Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 387-390 per Brennan J. There is thus no distinction between their case and the plaintiff’s. They can rescind the purchase for fraud, and he for the bribery of his agent; and each can then invoke the assistance of equity to follow property of which he is the equitable owner. But, if this is correct, as I think it is, then the trust which is operating in these cases is not some new model remedial trust, but an old-fashioned institutional resulting trust. This may be of relevance to the degree of knowledge required on the part of a subsequent recipient to make him liable.”
239.	Now this is all very well, but Lord Browne-Wilkinson was specific in saying that what was being imposed was an institutional constructive trust not a resulting trust. As the principles that govern the creation of each type of trust are markedly different there is no opportunity to use the comments of Millett J to bolster the observation of Lord Browne-Wilkinson except in one vital respect to which I shall come.
240.	Looking at the dictum one might be forgiven for thinking that the reference to Bankers Trust Co. v Shapiro would provide a clear starting point for the analysis. Money stolen from a bank account was traced in equity. But the decision of the Court of Appeal takes as granted that the funds can be traced in equity without any mention of why this should be so.
241.	In the end it seems to me that the answer comes from what can be readily inferred from the speech of Lord Browne-Wilkinson and the passage of Millett J. Equity imposes a constructive trust because (in the absence of a supervening barrier such as a contract) that is what justice requires where an asset has been obtained by fraud. The fraudster knows he has no right to the asset. He is in conscience bound to hold the asset for the transferor.
242.	In all of this I have not mentioned the unqualified acceptance of the dictum by Moore-Bick J in Niru at paras 54-56. The reason for this is that there is no indication of any challenge having been made to the applicability of the dictum to the case that was being tried. The judgment treats the observation as being of general application although the matter concerned a complicated contractual background which might have led to submissions of the kind accepted by Ferris J in Box.
243.	In the event, whatever limitations might apply where there is a contract, it seems to me that a bare transfer should not give rise to the same complications. But that is not the end of the matter.
244.	The drachmas were not transferred to Mr Paparounis. They were transferred to NatWest. They were not transferred to NatWest as a collecting bank but as a principal. Mrs Papamichael had no account with NatWest. But it was not the fraudulent conduct of NatWest that induced the transfer. It was the fraud of Mr Paparounis. So the initial question is what is the position where a third party, not then an accomplice, comes to hold property of which the transfer has been induced by the fraudulent conduct of someone else. By parity of reasoning with the position in respect of mistake, it seems to me that the position must depend upon knowledge. If the recipient knows of the fraud and has not previously acted in such a way as to preclude an equitable interest in the transferor, I do not see why the transferee should not hold the property on a constructive trust in favour of the transferor.
245.	However in the present case the traceable proceeds of the drachmas came under the control of Mr Paparounis. The forex deal that enabled this to happen is not the type of preclusive contract addressed in Box. Mrs Papamichael was not a party to it. The deal merely enabled the dollars to come to the fraudster Mr Paparounis. It is the dollar fund in which Mrs Papamichael claims her interest. It cannot be that the position is any different because Mrs Papamichael’s money made a detour before it arrived in the hands of Mr Paparounis rather than going to him direct. If he would have been a trustee in the latter case, he must have been one in the former. Thus I hold that Mr Paparounis, by reason of his fraud, became a constructive trustee of the dollars when they were credited to his account with NatWest.
Knowing receipt
246.	“The recipient’s state of knowledge (in a case of knowing receipt) must be such as to make it unconscionable for him to retain the benefit of the receipt” (BCCI (Overseas) Ltd v Akindele [2001] Ch 448 at p455). It is unconscionable for him to retain the benefit of the receipt where he has actual knowledge of circumstances which make the payment a misapplication (Criterion Properties Plc v Stratford Properties Plc & Ors [2002] EWHC 496 (Ch), Hart J at para 38). This would appear to be an indication of what is meant by knowledge in the judgment of Hoffmann LJ in the El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685 at page 700 where he said:
“For this purpose the plaintiff must show, first, a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty.”
247.	 Despite the elegant generalisation of the grounds for relief set out in Akindele, the application of the precept to the facts of that case seems to leave little room for manoeuvre. The case makes it clear that dishonesty is not necessary to a finding of knowing receipt. It also makes it pretty clear that the type of knowledge that is required is actual rather than constructive knowledge. Such a requirement does away with the suggestion of a balance having to be struck between the relative urgency of a transaction and the degree of notice required: if you know, you know. 
248.	Although I regard Mr Makris as having had actual knowledge of all that was necessary to constitute the bank a constructive trustee of the dollars, it may be said that the knowledge did not go so far as to show that the dollars were traceable to a breach of fiduciary duty. However, even if that were so, I think that the decision in Akindele must mean that the dishonest receipt of the funds in circumstances where they were in fact traceable to a breach of fiduciary duty makes it unconscionable for the recipient to retain the benefit of the receipt. 
Knowing assistance
249.	The bank will be liable for all the money in the dollar account, whether as received by it or paid to Mr Paparounis, if it assisted with knowledge in a dishonest and fraudulent design on the part of Mr Paprounis (Barnes v Addy (1874) LR 9 Ch App 244). The design was dishonest and fraudulent. The bank, by Mr Makris, assisted in it. For the bank to be liable, the assistance must have been dishonest.
250.	In Niru Moore-Bick J set out his understanding of  the definition of dishonesty as contained in the applicable authorities. The passage reads:
126. Mr. Bloch drew my attention to a number of cases in which the courts have considered what constitutes dishonesty in the context of liability as an accessory to a breach of trust. It is necessary to refer to only two of them, Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 A.C. 378 (P.C.) and Twinsectra Ltd v Yardley [2002] UKHL 12; [2002] 2 All E. R. 377.
127. In Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 A.C. 378 (P.C.) the court had to decide whether an accessory to a breach of trust could be liable even if the trustee himself had not acted dishonestly, and if so under what circumstances. The Privy Council held that he could, but only if he had acted dishonestly. Lord Nicholls said at page 389:
“Before considering this issue further it will be helpful to define the terms being used by looking more closely at what dishonesty means in this context. Whatever may be the position in some criminal or other contexts (see, for instance, Reg. v. Ghosh [1982] Q.B. 1053), in the context of the accessory liability principle acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another's property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour.”
128. Again, at page 390 Lord Nicholls said:
“The analysis of the position of the accessory, such as the solicitor who carries through the transaction for [the trustee], does not lead to such a simple, clear-cut answer in every case. He is required to act honestly; but what is required of an honest person in these circumstances? An honest person knows there is doubt. What does honesty require him to do? 
The only answer to these questions lies in keeping in mind that honesty is an objective standard. The individual is expected to attain the standard which would be observed by an honest person placed in those circumstances. It is impossible to be more specific. Knox J. captured the flavour of this, in a case with a commercial setting, when he referred to a person who is "guilty of commercially unacceptable conduct in the particular context involved:" see Cowan de Groot Properties Ltd. v. Eagle Trust Plc. [1992] 4 All E. R. 700, 761.”
129. These passages might be taken to suggest that in this context dishonesty is to be judged in objective terms, but in Twinsectra Ltd v Yardley the House of Lords held that that is not what Lord Nicholls meant. Lord Hoffmann dealt with the matter in this way:
“19. My noble and learned friend Lord Millett considers that the Court of Appeal was justified in taking this view because liability as an accessory to a breach of trust does not depend upon dishonesty in the normal sense of that expression. It is sufficient that the defendant knew all the facts which made it wrongful for him to participate in the way in which he did. In this case, Mr Leach knew the terms of the undertaking. He therefore knew all the facts which made it wrongful for him to deal with the money to the order of Mr Yardley without satisfying himself that it was for the acquisition of property.
20. I do not think that it is fairly open to your Lordships to take this view of the law without departing from the principles laid down by the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 A.C. 378. For the reasons given by my noble and learned friend Lord Hutton, I consider that those principles require more than knowledge of the facts which make the conduct wrongful. They require a dishonest state of mind, that is to say, consciousness that one is transgressing ordinary standards of honest behaviour. I also agree with Lord Hutton that the judge correctly applied this test and that the Court of Appeal was not entitled, on the basis of the written transcript, to make a finding of dishonesty which the judge who saw and heard Mr Leach did not.”
130. Lord Hutton, having analysed in some detail what Lord Nicholls said, concluded that Lord Nicholls had not intended to hold that in this context a person can be dishonest even if he does not know that his conduct would be regarded as dishonest by honest people. For his own part he considered that it would be wrong to allow a finding of dishonesty to be made against a person who did not know that what he was doing would ordinarily be regarded as dishonest. He said:
“35. There is, in my opinion, a further consideration which supports the view that for liability as an accessory to arise the defendant must himself appreciate that what he was doing was dishonest by the standards of honest and reasonable men. A finding by a judge that a defendant has been dishonest is a grave finding, and it is particularly grave against a professional man, such as a solicitor. Notwithstanding that the issue arises in equity law and not in a criminal context, I think that it would be less than just for the law to permit a finding that a defendant had been "dishonest" in assisting in a breach of trust where he knew of the facts which created the trust and its breach but had not been aware that what he was doing would be regarded by honest men as being dishonest.”

251.	By the application of the double test contained in the above passage Mr Makris was dishonest with the consequence that the bank must also be so held. The position is reinforced by the comments of Millett J in Agip (Africa) Ltd v Jackson [1990] 1 Ch 265 at page 295 where he says:
“(The constructive trustee) is not liable for failing to make inquiry, but for the misapplication of the plaintiff’s property. He is under no duty to make inquiry. His only duty is to act honestly. If he makes inquiry, he does so for his own protection. If he does not make inquiry, the loss is not caused by his failure to do so but by his participation in the misapplication of the plaintiff’s funds. He is liable only if he acted with knowledge; and this must be judged in the light of all the circumstances known to him and any explanation actually given to him. But it is not, in my view, to be judged by considering the hypothetical explanations which might have been given to him if he had sought them. If it were otherwise his liability would depend upon whether the fraudster would have been sufficiently inventive to supply a plausible explanation if asked for one…
In my judgment, the fact that a false but credible explanation would or might have been given is no defence to a party put on inquiry who makes none. Mr. Jackson and Mr. Griffin are not to be held liable for the misapplication of the plaintiff’s funds because they failed to make inquiries which would have discovered the fraud, but because they dishonestly assisted in the misapplication. Their failure to make the inquiries which honest men would have made to satisfy themselves that they were not engaged in furthering a fraud is merely the evidence from which that dishonesty is to be inferred. ”

NatWest’s general defences
252.	In addition to the many submissions that NatWest advanced in respect of the law and the facts, there were three defences that it put forward as answers to the claimant’s case. All of them depended upon the findings that I was invited to make as to the knowledge of the bank. The findings that I have made are fatal to each one of them. Nevertheless, each defence requires shortly to be addressed.
Bona fide purchaser for value
253.	The bank submits that it was a bona fide purchaser for value of the drachmas and therefore acquired good title to them. The other parties have submitted that as a matter of law this defence is not available. They are wrong. As was pointed out by Lord Millett in Foskett (paragraph 214 above) the defence is available where money is the subject of a proprietary claim. It is not available where the claim is a personal one for unjust enrichment. Thus the defence is available to the extent that any claim whether for dollars or drachmas involves title of the bank to the drachmas. Some of the routes to judgment that I have considered do involve the issue of title to the drachmas, but I have found that the claims for respectively the drachmas and the dollars can also succeed without the determination of that issue. In the case of the drachmas this is because the claim is a personal one in restitution. In the case of the dollars, because it was respectively a breach of fiduciary duty and fraud that rendered Mr Paparounis a constructive trustee of the dollars, regardless of the route by which they came to him. In any event, the findings that I have made preclude a finding that the bank was a bona fide purchaser.
Actual or apparent authority
254.	The bank submits that Mrs Papamichael “must bear the consequences of her husband’s fraud as her agent, either on the basis of actual authority or apparent ownership of the funds in issue which she allowed him to represent as being owned by him to third parties”.
255.	The bank’s submissions contain a lengthy series of instances in which it is said that Mr Paparounis treated the funds derived from the lottery win as his own with the knowledge and, I assume, the approval of Mrs Papamichael. I have already dealt with most of these instances and shall not revisit them. The others need not be addressed in order to decide whether the defence is a good one. Most of the instances in question, such as the use of the balance of the funds in the joint account, were not known to NatWest. As I understand it they are used to support the suggestion that Mr Paparounis had “actual authority to deal with the funds”: the submission being that the authority in question was to treat the 2 billion drachmas paid to the National Bank as his own. I have already found that Mr Paparounis had no actual authority from Mrs Papamichael to treat those moneys as his own. But Mr Paparounis did have the rights that his interest in the joint account gave him. It is worth noting that it was upon this admitted legal right that Mr Makris dwelt both in April 1999 and subsequently in his statement.
256.	So far as apparent authority is concerned, I have great difficulty in seeing how it could be said that Mrs Papamichael held out Mr Paparounis or knowingly permitted him to hold himself out to NatWest in a way that is relevant to this action. Except to the extent that Mrs Papamichael was exercising her legal rights and powers over the account in such a way as to preclude Mr Paparounis’s exercise of his own such rights and powers, Mrs Papamichael had to suffer the consequences of whatever Mr Paprounis did. The one thing this case is not concerned about is any suggestion that the moneys in the joint account were held in such a fashion as to give Mrs Papamichael some sort of legal interest in them that operated to the exclusion of Mr Paparounis. This case is not concerned with the origin of the 2 billion drachmas so much as their disposal. It is not a question of whether Mr Paparounis would have had apparent or actual authority from his wife to transfer the drachmas from the joint account for his own benefit: he had the free standing legal right of a joint account holder to do just that. To the extent that he purported to act on his own account down to the transfer of the drachmas there was nothing to suggest to the bank that he was acting other than in pursuance of his rights as the holder of a joint account. The point is that Mrs Papamichael had exactly the same rights as did her husband and it is upon the exercise of those rights that her case is based. The irony is, that to the extent that he did represent to Mr Makris that he was acting as his wife’s agent, Mr Paparounis was indicating that his wife was to have an interest in the funds after they had been transferred to NatWest, a representation that has contributed to the success of Mrs Papamichael’s claim.
257.	Miss Gloster has submitted that one must not dwell upon the transfer of the drachmas. It is the agreement by the bank to sell dollars for those drachmas that is the relevant transaction and Mr Paparounis was clothed with authority to make that transaction. Indeed he did have actual authority to make such a transaction but not that transaction. The authority was to arrange the conversion of the drachmas into dollars for the account of Mrs Papamichael. I have some difficulty in seeing how anyone can have apparent authority to use for his personal benefit money which the third party must be taken as knowing to belong to the purported principal. Either it was Mr Paparounis who was acting as principal in the matter or it was Mrs Papamichael. Quite apart from my more severe findings of knowledge, the bank was on clear notice that it was Mrs Papamichael rather than her husband who was to be treated as the beneficiary of the drachmas that had been transferred to the National Bank. The defence of authority must fail.
Apparent ownership
258.	Although this doctrine may operate as an independent defence, it cannot succeed in the event that the previous defence fails. It has also been cogently argued by Mr Millett and Mr Spearman that the defence is not open in the present case, it being confined to situations in which the owner of a chattel has clothed a third party with the indicia of ownership. I need not decide this interesting point: my findings on the defence of authority dispose of this defence as well.
Undue Influence
259.	In addition to the claims with which I have dealt, Mrs Papamichael makes a claim in undue influence. The impression that I have received is that, while strictly speaking the claim is not made in the alternative, it is only pressed in the event that I should find against Mrs Papamichael under her other heads of claim. As I have found in her favour, I do not propose to rule upon the matter.  
Greek law 
260.	It may be a surprise to those reading this judgment how little reference there has been to Greek law in a case where so much happened in that country. There were indeed reports by experts on Greek law. By common consent neither was called and by the end of the case the only difference between them was a disagreement as to the status of the security for which Mrs Papamichael’s money had been used. It was agreed that I should resolve the issue without oral evidence but my other findings remove the need to do so.
261.	The matters of Greek law upon which the experts are agreed do not impinge upon the chain of factual and legal findings that have resulted in my conclusions. This is because in respect of those matters that are relevant, such as the status of the joint account and whether Mrs Papamichael ever had an account with NatWest, there is in practice no difference between English and Greek law. The outcome of the case has therefore been determined in accordance with English law.
Conclusion
262.	For the reasons that I have set out I find that Mrs Papamichael is entitled to GRD 2 billion as money paid under a mistake of fact and to US$ 6,506,604.20 by reason of dishonest assistance in a breach of trust or, to the extent that such moneys were received by the bank, for knowing receipt. The claims are made in the alternative, with the primary claim being for the dollars. This will be reflected in the order that gives effect to this judgment.
263.	I will hear argument as to the nature of the declarations to be made against Mr Paparounis and on the question of interest.