Goldspan Ltd v Patel

Dishonest assistance requires a trust, a breach of trust, assistance by the defendant and dishonesty. Dishonesty is assessed by reference to the defendant’s actual knowledge and circumstances, followed by an objective assessment of whether the conduct was dishonest by ordinary standards. A defendant who realises that a transaction may involve money laundering is not necessarily liable: the claimant must prove that the defendant knew, or shut his eyes to the fact, that the money was trust property transferred in breach of trust. On the facts, receipt of one payment was an honest repayment of a genuine loan, and dishonesty was not proved in relation to the balance.

Goldspan Ltd, acting through its liquidator, claimed £710,000 from Ambrish Jyotindra Patel for dishonest assistance in the diversion of company funds by Arvind Patel, and for knowing receipt of £100,000. Arvind had diverted money from Goldspan through transactions involving the sale and purchase of properties, and later directed payments to the defendant.

The defendant said that £100,000 represented repayment of a genuine loan made to Goldspan in 1996–1997. He denied knowing that the further £610,000 represented Goldspan’s money rather than Arvind’s money. The issues were whether the loan was genuine, whether the defendant had received the £100,000 dishonestly, and whether he had sufficient knowledge of Arvind’s fraud to be liable for dishonest assistance concerning the £610,000.

1. Applicable principles. Dishonest assistance required a trust, a breach of trust, assistance by the defendant and dishonesty. The relevant inquiry into dishonesty involved the circumstances known to the defendant, including his personal attributes and reasons for acting, followed by an objective assessment by ordinary standards. Knowledge could include suspicion combined with a conscious decision not to make enquiries. In a money-laundering situation, knowledge of the trust need not be shown where the defendant knew, or shut his eyes to the obvious fact, that he was assisting a fraudulent concealment. Otherwise, knowledge of the trust was required.
2. £100,000. The documentary evidence, including the loan documents, bounced cheques, correspondence and the instructions to solicitors, established that the defendant had lent Goldspan approximately £100,000 and had sought repayment. The £100,000 received in March 1999 was repayment of that loan. The receipt was therefore honest and the knowing-receipt claim in respect of that sum failed.
3. £610,000. The defendant ought to have realised that Arvind appeared to be engaged in some form of money-laundering exercise. That did not itself establish dishonesty. The decisive question was whether Goldspan had proved that the defendant knew, or shut his eyes to the fact, that the £610,000 was Goldspan’s money rather than Arvind’s. On the balance of probabilities, it had not. The defendant’s evidence that he believed the money was Arvind’s was accepted.
4. The later transactions involving Studentsdirectory and Redbourne did not establish dishonest assistance. The Redbourne transaction tended to show that the defendant himself had been defrauded by Arvind. The defendant’s admitted perjury required caution in assessing his evidence, but did not determine the issues.
5. The claim was dismissed. It was unnecessary to determine limitation or the issue concerning quantum.