Group Seven Ltd & Anor v Nasir & Ors

Dishonest assistance requires assistance of a breach of trust and dishonesty assessed by reference to the defendant’s actual knowledge and the ordinary standards of honest conduct. A defendant may be dishonest where there is a firmly grounded or clear suspicion of wrongdoing which is deliberately ignored. Mere incompetence or negligence is insufficient.

A solicitor’s client account must not be used as a banking facility. Breach of the applicable accounts rule does not itself establish dishonesty. Vicarious liability depends on the sufficiently close connection between the employee’s authorised field of activity and the wrongdoing, even where the employee acted dishonestly for personal benefit.

The proceedings arose from the fraud of Allseas Group SA and the movement of €100 million through Group Seven, AIC, Larn and Notable Services LLP’s client account. Group Seven and its assignee Rheingold claimed against alleged fraud participants and against persons said to have assisted the subsequent misapplication of the money.

The court also determined claims concerning unconscionable receipt, deceit, conspiracy, and LLB’s vicarious liability for the conduct of its relationship manager, Mr Louanjli. The claims were tried together with related claims by Larn. The central issues were whether the defendants had dishonestly assisted breaches of trust, whether receipts were unconscionable, and whether the relevant losses were attributable to the defendants’ conduct.

1. Dishonest assistance. The applicable question was whether the defendant’s conduct was dishonest by ordinary standards, assessed in light of what the defendant actually knew or suspected at the time. A clear, firmly grounded suspicion deliberately ignored may establish dishonesty. The court distinguished dishonesty from negligence, incompetence and mere failure to make adequate inquiries.
2. Notable defendants. Most payments from the client account breached Rule 14.5 of the SRA Accounts Rules 2011 because they were not connected with an underlying transaction or regulated legal service. Mr Landman knowingly misrepresented his knowledge of the underlying transactions and was dishonest. Mr Meduri was not dishonest: he sought advice, believed the funds belonged to Larn, and genuinely attempted to follow the advice received. The Notable defendants were therefore not liable for dishonest assistance of Group Seven’s trust.
3. Unconscionable receipt. Applying the unconscionability test, Mr Landman was liable for retaining £170,000 paid through Nisroy and £3,000 of the Savills reimbursement. Notable was not liable for retaining its fees because it lacked the necessary subjective knowledge and retention was not unconscionable on the facts.
4. Mr Louanjli and Mr Elbied. Mr Louanjli’s statements to Notable and his email were materially misleading and dishonest. They assisted the breach of trust and caused the loss. Mr Louanjli and Mr Elbied were liable for dishonest assistance and conspiracy to injure by unlawful means. Mr Louanjli was also liable for unconscionable receipt of €561,860, and Mr Elbied for €700,000. The deceit claims failed because Group Seven did not receive or rely on the representations.
5. Vicarious liability. The close-connection test applied to dishonest assistance and conspiracy. Mr Louanjli’s conduct was sufficiently connected with his employment as LLB’s relationship manager, notwithstanding that he acted for his own benefit and without authority. LLB was vicariously liable to Group Seven and Larn.
6. Disposition. Judgment was entered against Mr Nasir, Mr Yi, Mr Louanjli and Mr Elbied for €9,179,850.48, subject to the separate treatment of Larn’s claim. Further orders concerning contribution and possible tracing were reserved.

The judgment was a first-instance determination of two actions tried together. It referred to earlier proceedings in which judgment had been given by Peter Smith J, [2014] EWHC 2046 (Ch), and an appeal dismissed by the Court of Appeal, [2015] EWCA Civ 631.