UK Communications Ltd v Nahim & Anor

In a trial proceeding in the defendants’ absence, the claimant must still prove its case, although the court may ordinarily determine the claim on the pleadings and witness material. Deliberate blindness to circumstances indicating unlawful transactions may amount to dishonesty for the purposes of dishonest assistance where it satisfies the applicable standard. Strong warnings about fraud risks, failure to undertake advised due diligence, continued participation in suspicious transactions and a failure to answer the claim may support an inference of dishonesty. An unlawful-means conspiracy requires an agreement to engage in unlawful activity causing damage to the claimant.

The liquidator of UK Communications Limited claimed against Resolutions and its sole director, Mohammed Nahim. The claims arose from high-value mobile-phone transactions forming part of an alleged VAT carousel fraud. Payments which should have passed through Resolutions to UK Communications were instead diverted to third parties.

The defendants had ceased participating in the proceedings. The court therefore considered whether it should proceed in their absence, whether the claimant had proved dishonest assistance in breach of fiduciary duty, and, alternatively, whether the defendants had conspired with UK Communications’ director to divert the funds.

1. Trial in absence. Under CPR Part 39.3, and paragraph 2.2 of the relevant Practice Direction, the court could proceed despite the defendants’ non-attendance and strike out their defence. The claimant nevertheless had to prove its claim. On the materials before the court, oral evidence was unnecessary.
2. Dishonest assistance. The repeated HMRC warnings that payments to third parties indicated a high risk of MTIC fraud, the failure to undertake recommended due diligence, and the continuation of the transactions justified the inference that Resolutions and Mr Nahim were dishonestly involved in assisting the director’s breach of fiduciary duty. The court applied the approach in Twinsectra Limited v Yardley [2002] AC 164, as confirmed in Softwarecore Limited v Pathan [2005] EWHC 1845 (Ch), that deliberate blindness may found dishonesty where it amounts to dishonesty according to the relevant standard. Their failure to engage with the proceedings reinforced the inference, although the claim was proved on the evidential case already presented.
3. Conspiracy. Alternatively, the court applied the principle stated in Lonrho plc v Fayed [1992] 1 AC 448. An agreement between the defendants and the director to divert sums due to UK Communications, thereby causing damage, was inferred from the factual background and evidence.
4. The defence was struck out. Judgment was entered for UK Communications against Mr Nahim and Resolutions jointly and severally for equitable compensation of £93,699,309.84. The same sum was also recoverable on the alternative conspiracy claim.

First-instance judgment; no prior appellate decision is stated in the judgment.