Summary
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.
Factual background
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.
Held
- 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.
- 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.
- 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.
- 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.
- Knowing receipt. Mere handling of money without beneficial receipt was insufficient. The claim against solicitors who had not beneficially received the funds therefore failed.
- 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.
- 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 court’s approach to earlier authorities
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Appellate history
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.
Appeal route
- This judgment [2007] EWHC 952 (Ch) High Court (Chancery Division)
- Appealed to[2008] EWCA Civ 754Outcomeappeal allowed; judgment set aside in part and claim remitted for trial
Key cases cited
14 authorities cited.
- Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37
- Dubai Aluminium Company Limited v. Salaam (Original Respondent and 2nd Cross-appellant) and others (Original Appellants and Cross-respondents) and Others and another (Original Respondent and 1st Cross-appellant) [2002] UKHL 48
- Kuwait Airways Corporation v Iraqi Airways Company and Other Kuwait Airways Corporation v Iraqi Airways Company and Other (Consolidated Appeals [2002] UKHL 19
- Cave v. Robinson Jarvis & Rolf (A Firm) [2002] UKHL 18
- Twinsectra Limited v Yardley and Others [2002] UKHL 12
- In re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563
- Rhesa Shipping Co SA v Edmunds (The Popi M) (Rhesa Shipping Co SA v Fenton Insurance Co Ltd) [1985] 1 WLR 948
- Abou-Rahmah & Anor v Al-Haji Abdul Kadir Abacha & Ors [2006] EWCA Civ 1492
- Gwembe Valley Development Co Ltd v Koshy (No. 3) [2004] 1 BCLC 131
- Kuwait Oil Tanker Co SAK v Al-Bader (No 3) [2000] 2 All ER (Comm) 271
- Grupo Torras SA v Al-Sabah (No 5) [1999] CLC 1469
- Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378
- El Ajou v Dollar Land Holdings Plc [1994] 1 All ER 685
- Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888
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Cases citing this case
13 later cases · 6 positive · 3 neutral · 3 caution · 1 negative
Most senior citing decisions:
- Skatteforvaltningen v Solo Capital Partners LLP & Ors [2024] EWHC 19 (Comm) mentioned
- Sixteenth Ocean GmbH & Co Kg v Société Générale [2018] EWHC 1731 (Comm) disapproved
- JSC BTA Bank v Ablyazov & Anor [2016] EWHC 3071 (Comm) followed
- Haysport Properties Ltd & Anor v Ackerman [2016] EWHC 393 (Ch)
- Blue Tropic Ltd & Anor v Chkhartishvili [2015] EWHC 3640 (Ch)
- NGM Sustainable Developments Ltd v Wallis & Ors [2015] EWHC 2089 (Ch)
- Emerald Supplies Ltd & Ors v British Airways Plc & Ors [2014] EWHC 3514 (Ch)
- Group Seven Ltd & Anor v Allied Investment Corporation Ltd & Ors [2014] EWHC 2046 (Ch)
- Hemsley & Anor v Graham & Ors [2013] EWHC 2232 (Ch)
- Mengiste & Anor v Endowment Fund for the Rehabilitation of Tigray & Ors [2013] EWHC 599 (Ch)
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