Zambia v Meer Care & Desai (a firm) & Ors

A civil fraud claim is proved on the balance of probabilities, although serious allegations require strong and cogent evidence. In an unlawful-means conspiracy, the claimant must prove combination, unlawful means, intention to injure and loss; an express agreement is unnecessary, and participation may be tacit. A person who knowingly assists the misapplication of assets is liable where, having regard to what that person knew and the objective standards of honesty, the conduct was dishonest. The dishonesty test is essentially factual and does not permit an individual to set their own standards. Limitation may be postponed under Limitation Act 1980 section 32 where the claim is based on fraud or deliberate concealment.

The Attorney General of Zambia, on behalf of the Republic, claimed recovery of public money allegedly diverted through the Zamtrop account, through the MOFED property arrangement, and through the alleged BK arms-financing conspiracy. Claims were brought in conspiracy, breach of fiduciary duty, dishonest assistance and knowing receipt against Zambian officials, business persons and English solicitors and firms.

The trial involved extensive tracing evidence and evidence taken in London and Zambia. Several Zambian defendants did not participate, but the court continued to require proof against each defendant individually. The central issues were whether the alleged conspiracies and fiduciary breaches were established, whether the participating professionals were dishonest assistants or conspirators, whether partnership liability arose, and whether the claims were time-barred.

1. Zamtrop conspiracy. The court found that the Zamtrop account had been established and operated as an engine of fraud. The Finance Charter did not authorise theft or relieve the Director General of the obligation to act bona fide in the Republic’s interests. The primary conspiracy and breaches of fiduciary duty were established against the principal Zambian defendants.
2. Conspiracy. Applying Kuwait Oil Tanker Co SAK v Al Bader [2000] 2 All ER (Comm) 271, the court held that an express agreement was unnecessary. Participation could be active or passive, but the defendant had to be sufficiently aware of the surrounding circumstances and share the common object. A conspirator could be liable for acts within the scope of the common design without personally performing every act. The English professionals were liable only to the extent their own knowledge and conduct justified that conclusion.
3. Dishonest assistance. The court preferred the formulation reflected in Royal Brunei Airlines v Tan [1995] 2 AC 378 and Barlow Clowes International Ltd v Eurotrust International Ltd [2006] 1 WLR 1476. The question was whether the defendant’s conduct, assessed objectively but in the light of the defendant’s actual knowledge, experience, intelligence and reasons for acting, fell below ordinary standards of honesty. Deliberately failing to ask questions in the face of obvious irregularity could amount to blind-eye dishonesty.
4. Partnership liability. Applying Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366, the court held that dishonest conduct could be within the ordinary course of a firm’s business where it was closely connected with authorised professional activities. Innocence of the other partners did not prevent liability under section 10 of the Partnership Act 1890.
5. Knowing receipt. Mere handling of money without beneficial receipt was insufficient. The claim against solicitors who had not beneficially received the funds therefore failed.
6. Limitation. The claims in conspiracy and dishonest assistance were based on fraud for section 32 of the Limitation Act 1980. The Republic could not reasonably have discovered the fraud before the change of government in January 2002 because the fraud was concealed by those controlling the state. No defendant established a limitation defence.
7. Disposition. Liability was established against the defendants in the amounts specified in the judgment, subject to tracing adjustments, credits for recoveries and further submissions on quantum, interest, costs and ancillary relief. Claims against Francis Kaunda beyond knowing receipt, Irene Kabwe as pleaded, and the MOFED claim were dismissed. The counterclaim of Atan Shansonga was dismissed.

The judgment records earlier procedural appeals by the Zambian defendants concerning the English venue and trial arrangements. The Court of Appeal dismissed those appeals and accepted that the civil proceedings should take place in England. This judgment was a first-instance merits decision.