IFTIKHAR, RECLAIMING MOTION AGAINST CIP PROPERTY (AIPT) LIMITED [2018] ScotCS CSIH

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> IFTIKHAR, RECLAIMING MOTION AGAINST CIP PROPERTY (AIPT) LIMITED [2018] ScotCS CSIH_44 (03 July 2018) URL: http://www.bailii.org/scot/cases/ScotCS/2018/[2018]_CSIH_44.html Cite as: 2018 GWD 24-301, [2018] CSIH 44, 2019 SCLR 118, [2018] ScotCS CSIH_44

Pursuer and Reclaimer: McIlvride QC; Balfour & Manson LLP (for Austin Lafferty, East Kilbride)

[1] This is a reclaiming motion against an interlocutor of the commercial judge

assoilzing the defenders from the conclusions of the summons. These sought: (1) a

declarator that the defenders were bound by a contract for the sale of subjects at 35 Argyle

Street, Glasgow and that the defenders’ purported rescission was of no effect; and (2) an

order for implement by delivering a disposition of the subjects in exchange for the price.

The essence of the dispute concerns the information, which the pursuer was required to, and

that which he did, produce in relation to his identity and the source of his funds. The

pursuer contended that the commercial judge erred in holding, as the defenders had

maintained, that the defenders were entitled to resile from the contract and that, even if they

had not been entitled to do so, to proceed with the contract would have been illegal because

[2] According to the affidavit of the defenders’ solicitor, the defenders are a subsidiary

of “Aviva” whom his firm represented. Information gleaned from a detailed statement from

the defenders’ expert (Julian Korek; incorporated into the unchallenged evidence of Antony

Christie, a senior director of Aviva Investors Global Services Ltd (AIGSL)) suggests that the

defenders are a subsidiary of Citibank Europe plc, part of the global Citigroup Inc, who are

the trustees of the Aviva Investors Property Trust (a unit trust scheme) established by

Citibank Europe and Aviva Investors UK Fund Services Ltd, part of Aviva plc. Aviva

Investors UK Fund Services Ltd were the managers of the scheme, although portfolio

management has been delegated to AIGSL. The defenders act as the nominees of the Trust

[3] The defenders own commercial property at 35 Argyle Street. It was auctioned in

London on 8 December 2016. The pursuer was the successful bidder at £500,000. The

subjects were sold according to, amongst other things, articles of roup. These provided:

“2.6.3 ... The purchaser ... shall ... pay a deposit representing 10% of the purchase

price ... if the purchaser fails to pay such a deposit the vendor may treat such ...

failure as a repudiation of the contract ... The purchaser shall be obliged to provide

to the vendor’s solicitor the KYC information at (sic) that on or before 15 December

2016. Further, the vendor shall be entitled at their sole discretion to deem that the

deposit has not been paid until such time as the vendor’s solicitor receives the KYC

2.6.6 Settlement shall be subject to the purchaser procuring that the purchaser ...

supply to the vendor ... the KYC information (with the applicable information and/or

documentation specified in the initial due diligence form aftermentioned) to the

The KYC (know your customer) information was earlier defined (clause 1.9) as:

“Such information as the vendor ... require[s] in relation to the identity of the

purchaser and the source of funds utilised in respect of payment of the balance of the

price and/or the deposit including, but not limited to, the verification certificate and

[4] Clause 2.39 provided that the purchaser was to deliver to the vendor a completed

verification certificate and an initial due diligence form, each of which was set out in drafts

annexed to the articles. The verification certificate was a document which was to be

completed by the buyer’s solicitor. The solicitor was required to certify that, in accordance

with the UK Money Laundering Regulations 2007, they have verified the identity of the

buyer. Notes attached to the certificate stated that the sellers were required, in terms of the

Regulations, to obtain satisfactory evidence to verify the buyer’s identity. The certificate

was said to be an assurance that the solicitors have complied with the Regulations “with

respect to” the buyer. The initial due diligence form contained a tick box form which, in

relation to a “private individual”, required “certified copy of passport ... and country of

[5] The deposit of £50,000 was paid by Robinco (Scot) Ltd; the balance being due at

[6] On 12 December 2016, the defenders’ solicitors emailed the pursuer’s solicitors

“1. Certified true copy passport for Muhammad Asad Iftikhar ...

4. Completed verification certificate – certificate attached”.

On 15 December, the pursuer’s solicitors replied by email and attaching:

The email stated that signed copies were in the post. The documents attached and enclosed

were a United Kingdom passport and a driving licence, both of which were in the pursuer’s

name and the latter specified his address. Each was certified by his solicitor as a “true copy

of original document”. The address on the driving licence corresponded to that in a copy

utility bill in the name of Mohammad Iftikhar and Mrs Shaista Chafoor, dated 6 May 2016.

The verification certificate was signed by the pursuer’s solicitors and confirmed that the

solicitors had verified the identity of the pursuer. The initial due diligence form confirmed

[7] On 19 December 2016, the defenders’ solicitors advised the pursuer’s solicitors that

the defenders wished to proceed with a sale to the pursuer, rather than a nominee, which

had been belatedly proposed by the pursuer. They also stated that, for the defenders to

complete their anti-money laundering checks, they requested that the pursuer’s solicitors:

“... provide a brief explanation as to [the pursuer’s] source of wealth (how has he

built up his funds to make the purchase), source of income etc. all of which could be

supported by bank statements/annual accounts (if source of wealth is reflected in

The pursuer’s solicitors replied, rather oddly, that the pursuer might be obtaining finance, so

they were not sure if this would be possible, but they would check.

[8] On 22 December 2016, the defenders’ solicitors wrote to the pursuer’s solicitors

“Due to your failure to fulfil your obligations in terms of condition 2.6.3 of the ...

articles of roup, our clients have now exercised their right to resile from the contract

“Per the articles of roup your client was to provide source of funds information (as

stated within the definition of KYC information) on or prior to 15 December 2016.

Furthermore, the articles of roup confirm that our clients can treat the deposit as

unpaid until such time as [they have] received the required KYC information. On

this basis the deposit has not been paid, and our clients are fully entitled to rescind

[9] Although this was not known to the pursuer, the defenders had meantime been

carrying out various checks on the pursuer’s name and had come up with certain “adverse

media reports” relating to individuals with the same or similar names. Anthony Besford-

Land, who was a senior financial crime analyst with Aviva, had carried out the “due

diligence measures” specified in the 2007 Regulations, which he considered to be mandatory

in relation to the sale. These included establishing the identity of the buyer and the purpose

of the transaction, discovering the source of funds, and, for “medium and high risk cases”,

how the wealth had been generated. A private individual was always at least a medium

[10] Once contacted by the defenders’ solicitors (on 14 December 2016) Mr Besford-Land

had said to them that he would be able to advise only when the documents requested by the

solicitors on 12 December (supra) were forthcoming. On receipt of the documents, he noted

what he regarded as an inconsistency between the spelling of the name “Muhammed” on

the passport and “Mohammed” on the utility bill, which was 7 months old. The prospect of

a nominee company becoming involved caused him concern, because last minute changes of

this nature were a common feature of money laundering transactions. Mr Besford-Land had

been concerned that it had been said (as it is in the summons) that the buyer was the current

occupier of the subjects, yet the defenders’ tenant was Wickton Ltd, whose sole director was

not the pursuer. It was Mr Besford-Land who, on 19 December, decided that an explanation

[11] The pursuer’s solicitors’ statement of uncertainty regarding the pursuer’s source of

wealth, in his email of 19 December 2016, had operated as a “red flag” to Mr Besford-Land

as it suggested that the relevant information and vouching was not available. The adverse

media reports about a person with the pursuer’s name (or a variant thereof) “could not be

negated”. Mr Besford-Land had reported to the defenders that the transaction carried a

“significant degree of risk”. The defenders determined that they should not proceed with it.

[12] On 17 February 2017 the pursuer’s solicitors wrote to the defenders’ solicitors stating

that the pursuer remained willing to perform, which failing he intended to take legal action.

By letter dated 24 March 2017 the defenders’ solicitors stated that the defenders were willing

to provide the pursuer with a further opportunity to furnish the “KYC information to [their]

satisfaction” within seven days. This included: (1) an explanation of why, if the pursuer was

to be the purchaser, the deposit had been paid by Robinco; (2) an account of the relationship

between the pursuer and Robinco’s former and current director; (3) clarification of

Wickton’s involvement; and (4) evidence of where the funds, which were required to meet

[13] On 31 March 2017 the pursuer’s solicitors explained, in a manner not readily

understandable, that Robinco was “our client’s trading company”. He was to share the

profits from Wickton with the then other director of Robinco, who remained its sole

shareholder. The pursuer had “an interest in both the property and Wickton”. A bridging

loan through Together Commercial Finance Ltd and a re-mortgage of the house owned by

the pursuer and his wife and a loan from his wife were to provide the balance, with any

shortfall coming from Robinco. Some vouching from Together and the Nationwide was

[14] By letter dated 7 April 2017, the defenders’ solicitors stated (in bold) that “The

contract is at an end” and, in any event, the pursuer had still failed to provide the

information as the defenders remained (again in bold) “dissatisfied with the KYC

information provided”. A detailed response to the letter of 31 March was provided. This

stated that the Together and Nationwide vouching was inadequate to support the existence

of a source of funds; the loan from the pursuer’s wife was not vouched; no adequate

vouching of Robinco’s finances was available; the suggestion that the pursuer was deriving

funds from Wickton lacked transparency; and the media results had not been negated (ie

that it had not been demonstrated that the pursuer was not a “person of interest”). The

[15] In terms of the Proceeds of Crime Act 2002, a person commits an offence if: (1) he

converts or transfers criminal property (s 327). Property is criminal property if it constitutes

a person’s benefit from criminal conduct, or represents such a benefit, and the alleged

offender knows or suspects that it constitutes or represents such a benefit (ibid s 340(3)); (2)

he enters into an arrangement which he knows or suspects facilitates (by whatever means)

the use or control of criminal property by or on behalf of another person (s 328); (3) he

[16] The Money Laundering Regulations 2007 (now repealed, but having continuing

effect) apply to “relevant persons” who are defined as, inter alios, financial institutions,

including lenders, financial lessors, insurance companies and independent legal

professionals, eg solicitors, acting in the course of their business (reg 3(1), (3), Sch 1 Annex

1). Relevant persons must “apply due diligence measures” when they “establish a business

relationship”, carry out an occasional transaction, suspect money laundering or doubt the

veracity of documents or information provided for the purposes of identification or

verification (reg 7). Customer due diligence measures include verifying the customer’s

identity on the basis of documents, data or reliable and independent information (reg 5).

The word “customer” is not generally defined, but it is elsewhere said to mean a “third

[17] Regulation 11 provides that if a relevant person is unable to apply customer due

diligence measures in relation to “any customer” he must: (a) not carry out a transaction

with the customer through a bank account; (b) not establish a business relationship or carry

out an occasional transaction with the customer; and (c) terminate any existing business

relationship with the customer. A relevant person is entitled to rely on an independent legal

professional to apply any customer due diligence measures (reg 17(1) and (2)). A person

who fails to comply with the regulations is guilty of an offence (reg 45).

[18] The commercial judge held, first, that it was not a matter of dispute that as at

15 December the pursuer had not supplied “certified true copies” of the passport or utility

bill. The original completed due diligence form and verification certificate had also not been

produced on time. These conclusions flowed from the fact that the documents had only

been emailed (and presumably posted) on 15 December 2016. On that basis the pursuer was

in breach of contract and the defenders had been entitled to resile. The utility bill was not in

the pursuer’s name and on this basis also there was a breach of contract entitling the

defenders to resile. That was sufficient to dispose of the “whole matter”, but the commercial

judge correctly went on to address a number of the other arguments which had been

[19] The commercial judge held that the articles of roup fell to be construed in light of the

2007 Regulations. It did not matter whether the regulations were applicable to the

transaction as a matter of law. The parties’ intention was that they should be. The word

“require” in Article 1.9 (supra) did not mean, as the pursuer maintained, demanded by the

“what the defender needs in order to satisfy itself that it can comply with its

obligations in terms of the 2007 Regulations. The defender ... is given an absolute

unfettered discretion with respect to this issue. If information to its satisfaction is not

provided then in its sole discretion it can repudiate ... [I]t is for the pursuer to

produce such information as to satisfy the defender from an [anti-money laundering]

The onus was on the pursuer to produce evidence of his identity and his source of funds. It

was not for the defenders to list the specific items that it required.

[20] The defenders had been entitled not to be satisfied with the KYC information

because it was not certified as required and the utility bill was not in the name of the buyer,

as required. There was no need for the defenders to go through any form of ultimatum

process. In any event, the defenders could not be obliged to transact with the pursuer when

they had been unable to apply their due diligence measures. A term ought to be implied

[21] The commercial judge held that the 2007 Regulations applied to the transaction.

Since the defenders were “relevant persons” and the transaction was an “occasional” one

within Regulation 7(1)(b), progression of the transaction would have been illegal and

therefore, for this reason also, the defenders were not obliged to proceed.

[22] The pursuer contended that the commercial judge erred in holding that the

transaction was subject to the 2007 Regulations. The defenders were not a relevant person

and the pursuer was not a customer. AIGSL’s internal procedures did not alter that. The

pursuer could not be classified as a customer of the defenders by entering into an arm’s

length transaction to buy property. The purchaser of heritable property cannot reasonably

be described as the customer of the seller. Even if the regulations did apply, the transaction

could have been proceeded with without illegality, since the defenders were entitled to rely

on the pursuer’s solicitors having applied the requisite due diligence measures (reg 17). In

any event, the defenders had done all that was required in terms of customer due diligence.

The measure was identifying the customer on the basis of information from a reliable and

independent source. The defenders had been provided with certified copies of the pursuer’s

passport and driving licence. The other measures were not applicable. The regulations did

not impose an obligation to obtain evidence of the source of funds.

[23] The commercial judge erred in holding that the defenders had validly resiled from

the contract. The proper construction of clause 1.9 was that the KYC information was that

which the defenders had requested the pursuer to provide. It extended only to facts or data

and not documentary evidence. By 15 December 2016 the pursuer had provided the

defenders with all the information which had been requested by the defenders’ solicitors,

including the completed verification certificate and an initial due diligence form. The clause

had to be construed in the context of the contract as a whole. If it had been intended that the

pursuer had to provide by 15 December all information that the defenders were under a

legal obligation to obtain, then a clause to that effect could have been framed. That is not

how the reasonable person would have understood the expression. It was for the defenders

to decide and to intimate what information they considered necessary. The commercial

judge erroneously excluded documentation in electronic form. Unless the information had

been required before 15 December, the defenders could not rely on any failure to provide it.

No dissatisfaction with what had been provided by them had been expressed. Mr Besford-

[24] There was no request for the source of wealth information before 15 December, and

no obligation to provide this, other than as contained in the due diligence form.

Alternatively, having made the request, rescission would only have been lawful if time was

made of the essence in relation to that request (East Dunbartonshire Council v Bett Homes

[2012] CSIH 1; cf Visionhire v Britel Fund Trs 1991 SLT 883 and Charisma Properties v Grayling

(1994) 1996 SC 556). This was an arm’s length, single transaction, for the purchase of

heritable property. There was nothing which would alert the purchaser to the defenders

being a relevant person in terms of the regulations. The defenders’ construction was

inconsistent with the terms of the contract as a whole. The commercial judge erred in

implying a term that the defenders could require further information. This was not

necessary for business efficacy (Marks & Spencer v BNP Paribas Securities Services Trust Co

[25] The defenders maintained that the 2007 Regulations applied to the transaction. The

defenders were bound by the regulations. There was unchallenged evidence that the

defenders were a financial institution; being part of AIGSL which had a £4.5 billion property

portfolio including the Aviva Investors Property Trust, who conducted their business

through nominees, namely the defenders. The group as a whole had to be considered;

otherwise compliance could be avoided through the use of nominees, which would be

absurd and hence a construction not to be preferred (Inland Revenue v Luke 1963 SC (HL) 65

at 80). The pursuer was a customer, in the ordinary and natural sense of that word. The

defenders could not absolve themselves from compliance by relying on the pursuer’s

solicitors. The commercial judge accepted that the defenders’ due diligence measures had

failed to satisfy them that the transaction was not being used to launder the proceeds of

crime. In these circumstances the defenders required to “cease transacting” (reg 11). To

continue to do so would have been to commit a criminal offence. In these circumstances the

defenders were entitled to resile (Jamieson v Watt’s Trs 1950 SC 265 at 274 and 279). Even if

the Regulations did not apply, the parties had intended that they should and the contract

had to be interpreted on that basis. The verification certificate stated that the vendor was

subject to the Regulations and the Joint Money Laundering Steering Group’s guidance.

[26] The word “require” did not mean demand. The onus was on the pursuer to produce

evidence of identity and source of funds. The defenders had an unfettered discretion on

whether they were satisfied with what the pursuer chose to provide. It was not for the

defenders to provide a list of requirements. This involved no hardship to a buyer, who

would be best placed to know where the funds were to come from and how he could prove

their legitimacy and his own identity. The pursuer was required to produce original

certification and not copy documents with copied certification. The defenders had been

entitled not to be satisfied about the information provided by the deadline of 15 December.

[27] The commercial judge had not said that a term should be implied. He had held that

none was required. However, if the contract was construed differently, such a term would

be needed (Marks & Spencer v BNP Paribas etc (supra)) to allow the seller to request further

KYC information once it had received the first instalment. The defenders had still been

dissatisfied at the date of the proof, which was when the matter fell to be tested.

[28] The central issue is the proper interpretation of the articles of roup (auction) which, it

is not disputed, governed the transaction. The court must ascertain the intention of the

parties in agreeing to the articles by, put shortly, determining what a reasonable person,

having the background knowledge of the parties, would have understood from the

language used in the articles (Midlothian Council v Bracewell Stirling Architects [2018] CSIH

21, LP (Carloway) at para [19], following Arnold v Britton [2015] AC 1619, Lord Neuberger at

[29] The critical words are those in Article 2.6.3 which require the buyer to provide the

“KYC information … on or before 15 December 2016”; that being “Such information as the

vendor… require[s] in relation to the identity of the purchaser and the source of funds …

including … the verification certificate and initial due diligence form”. The reasonable man,

with the parties’ background knowledge, would interpret those words to mean what they

say; that the buyer has to supply the seller with such information in relation to the stipulated

matters as the seller requires. In order for this article to operate, the seller has to make the

requirement by stipulating what he wants. Although the buyer may be able to make an

educated guess about what the seller may require, he cannot know what that might be.

Contrary to the commercial judge’s view, the buyer cannot be expected to do this in

circumstances in which, for the purposes of the contract as distinct from those of the seller’s

or those of their agents, it is a matter for the seller to decide what type of information is

[30] Subject to overall considerations of reasonableness in the timing of any request, had

the defenders required certain information prior to 15 December and had that information

not been provided by then, it may have been open to the defenders to resile from the

bargain. That may be so because it was expressly provided that a failure to pay the deposit

amounted to a repudiation of contract and the defenders were entitled to deem that the

deposit had not been paid until they had received the information. Failure to provide the

information by a stipulated date allowed the sellers to treat this as a repudiation and thus

may have allowed them to resile. However, it is not necessary to decide this point.

Although rescission may have been an option open to the defenders, it was not one that they

were bound to adopt. The bargain did not come to an end automatically because of any

failure to produce certain documents or to do so by a particular date.

[31] Apart from the completed forms, what the defenders had requested were copies of

the pursuer’s passport and a utility bill; the latter presumably intended to constitute proof of

domicile. The request would be expected to have involved the production of an original

certification by the pursuer’s solicitor of these copy documents, having been duly compared

by him with the original passport and bill, together with completed due diligence form and

verification certificate. Not unreasonably, the defenders’ solicitors did not complain about

the fact that all that they had received on 15 December were emailed versions; given that

they had been assured by the pursuer’s solicitors that the originals had been posted. After

all, there was no reason not to rely on the pursuer’s solicitors when they said that they were

emailing copies of the true (copy) documents and not forged materials. The originals were,

presumably, received in early course. In the absence of objection being taken to what was

provided at the time, the commercial judge’s decision, which is essentially based on the

[32] Similar considerations apply to the faults, which were later said to exist, in relation to

the pursuer’s name on the utility bill and its date. Whatever AIGSL may have thought,

these apparently minor faults did not render the provision of the requested bill disconform

in substance to what had been requested. The pursuer had produced additional proof of

both his identity and his domicile (address) in the form of his driving licence. In these

circumstances, the discrepancy in the pursuer’s name on the utility bill was de minimis and

the date limit was a matter internal to AIGSL and not one contained in the request made

under the contract. In short, therefore, as at 15 December 2016 the pursuer had complied

with the defenders’ requirement for KYC information. The defenders had made no

complaint about what had been provided to them. They had not elected to resile on this

[33] What did happen was that the defenders sought further information. Looking at the

contract terms as a whole, this was a legitimate request which could be made within the

confines of the existing articles. No additional term required to be implied. Since, on any

view, in terms of clause 2.6.6 settlement on 13 January 2017 remained dependent upon the

KYC information having been provided, it was open to the defenders to seek more

information, having first studied, and not been satisfied with, that initially supplied. The

pursuer’s contention to the contrary, and his argument that the clause did not permit a

request for the production of vouching materials, falls to be rejected. The defenders did

request further information in the email of 19 December 2016, having confirmed that they

wished to proceed with the bargain (and hence not to resile on account of what had been

provided to date), but needed “a brief explanation as to [the pursuer’s] source of wealth …

[34] As a generality, given the money laundering requirements imposed upon solicitors

by both statute and non-statutory guidance, a request of this nature cannot have been

regarded as unexpected or unusual. This is especially so given the terms of clause 1.9,

although it is confined to proof of the source of the purchase price and not the pursuer’s

wealth. A sellers’ solicitors, conscience of their own position, might reasonably expect a

buyer’s solicitors to be aware already of not only the true identity of their client, as the

pursuer’s solicitors appeared to be, but also the method by which the client intended to fund

the purchase of a £500,000 property. The pursuer’s solicitors’ response in their email of

19 December, that they might not be able to do this, may well have raised legitimate

concerns. In that set of circumstances, the defenders would have been entitled to fix a

reasonable deadline for the production of the relevant information. That deadline could

have been relatively short. That, however, was not what was done. The defenders had

sought “a brief explanation”, but imposed no ultimatum in relation to when it had to be

produced. They did not make the time for the production of the brief explanation (which

was all that was asked for) an essential element in the bargain (see generally East

Dunbartonshire Council v Bett Homes [2012] CSIH 1, LP (Gill) at para 27 et seq). In these

circumstances, they were not entitled to rescind the bargain suddenly and without warning

only three days later. Doing so without warning and on the stated basis, which concerned

only the absence of the source of funds information, amounted to an unlawful repudiation

of the contract. That would, in normal circumstances entitle the pursuers to decree in terms

of the first conclusion; that is a declarator that the defenders are still bound by the contract

and the purported rescission of 22 December was of no effect. The additional feature which

arises is the issue of whether a decree for implement on payment of the price is appropriate

[35] It was not suggested that the agreement for the sale of the subjects under the articles

of roup was itself illegal. When the defenders’ pleadings are examined, there is no plea-in-

law raising the issue of illegality. The matter appears, and then only by way of brief

averment, as an esto position, on the hypothesis that the articles are construed in favour of

“2.9 … such a construction would inevitably require the defender to proceed with a

contract which they knew to be illegal, in that they had been unable to satisfy their

obligations in terms of AML legislation. Any subsisting contract would therefore be

Exactly what provision of the legislation was not specified. In due course, it was not

suggested during argument that, were they to proceed with the bargain, the defenders

would be in breach of the primary legislation (Proceeds of Crime Act 2002 (supra)), by, for

example, suspecting that the purchase price was criminal property. Rather, the contention

was limited to a potential breach of the Money Laundering Regulations 2007.

[36] Whether or not the Regulations were in some way incorporated into the bargain is

not relevant to the question of illegality. That could only arise if they actually did apply to

the performance of the bargain. Although the matter did not pose a difficulty for the

commercial judge, it is by no means clear why the defenders, as a nominee company

holding property for a unit trust, should be regarded as a financial institution carrying out

one of the defined activities referred to in Regulation 3. It is even less clear how the pursuer

falls within the description of a “customer” of the defenders or the unit trust. They were

[37] The Regulations are designed to apply to persons who are the customers of, inter

alios, financial institutions, accountants, solicitors and other similar persons. They are

designed to strike at persons investing, or otherwise dealing as (using a similar term) clients

of these institutions. The pursuer is neither a customer nor a client of the nominee company

(the defenders) or their principals (the unit trust). He is simply an arms-length purchaser of

[38] In any event, even if the defenders were a relevant person and the pursuer was a

customer, the parties had already entered into a bargain for the sale and purchase of the

subjects, which was not itself said to be illegal. The defenders were content to proceed with

that bargain, provided that they could be satisfied with the KYC information, including the

pursuer’s explanation of his source of funds. It is only if the relevant person is unable to

apply customer due diligence measures to the customer that he must “terminate any

existing business relationship” (reg 11). The defenders were able to carry out “customer due

diligence”, as defined in regulation 5, by verifying the pursuer’s identity on the basis of

documents and information obtained from a reliable and independent source. They

required to do no more than that. They had copies of the pursuer’s passport and driving

licence duly certified by a solicitor as true copies. They were entitled to rely on the

solicitor’s representation (reg 17). In these circumstances, proceeding with this transaction

would not have amounted to a breach of the regulations and hence be deemed illegal. In

short, the contract does not force the defenders to act unlawfully and the court is not

[39] The effect of this is that the pursuer is entitled to decree in terms of the first

conclusion. It does not follow that he is entitled to decree ordering the defenders to

implement the contract simply by delivering a disposition in exchange for the purchase

price (the deposit having been returned). The decree could only be for implement: (1) on

production of such KYC information as has been, and may be, requested by the defenders

and in the event of the defenders’ reasonable satisfaction in that regard; and (2) in exchange

for payment of the price. Although it was a matter of concession at the proof that the

defenders were entitled to be dissatisfied with the information produced as at the date of the

purported rescission, and it was established that they remained dissatisfied by that

produced after that date, the pursuer must, in light of the court’s determination, be afforded

a reasonable time in which to provide it now, in the current circumstances in which that

rescission has been deemed unlawful. Whether the information is satisfactory may be a

matter for the defenders’ initial assessment, but it must also be subject to overall

considerations of objective reasonableness. If the pursuer produces information which

meets the request, and any subsequent questions, it will not be open to the defenders to

resile, based on an unreasonable assessment of what has been provided.

[40] The court should accordingly: recall the interlocutors of the commercial judge dated

7 December 2017; repel the defenders’ first plea-in-law and their third plea-in-law in so far

as relating to the first conclusion; sustain the pursuer’s second plea-in-law; and pronounce

decree in terms of the first conclusion. The court will remit the cause to the commercial

judge to proceed as accords; that will, in effect, be to await the outcome of the provision and

consideration of the further KYC information. Whether decree ought hereafter to be granted

in terms of the second conclusion will be a matter for further consideration by the

commercial judge after such procedure as is thought appropriate.

Scottish Court of Session Decisions