Establishing Dishonest Assistance and Vicarious Liability: Comprehensive Commentary on Group Seven Limited & Anor v. Notable Services LLP & Anor ([2019] EWCA Civ 614)

Introduction

The case of Group Seven Limited & Anor v. Notable Services LLP & Anor ([2019] EWCA Civ 614) before the England and Wales Court of Appeal (Civil Division) delves into the intricate realms of dishonest assistance in breaches of trust and vicarious liability. The appellants, including professional entities and individuals, found themselves embroiled as secondary actors in a substantial fraud orchestrated by Allseas Group SA. This case primarily revolves around the attempted recovery of funds defrauded from Allseas, amounting to £100 million, and the subsequent unraveling of complicity and negligence among various parties including Notable Services LLP, its employees, and the employing bank, LLB Verwaltung (Switzerland) AG.

Summary of the Judgment

The Court of Appeal examined two primary strands of proceedings: the Group Seven Proceedings and the ETS (Larn) Proceedings. The original High Court judgment by Morgan J found that while Mr. Landman had acted dishonestly in receiving a bribe, he and Notable Services LLP were not liable for dishonest assistance in breaches of trust due to a lack of "blind-eye knowledge" about the true ownership of the funds. However, the Court of Appeal overturned this decision, concluding that Mr. Landman's actions did indeed amount to dishonest assistance based on his knowledge and actions, thereby making Notable vicariously liable. The appeals concerning causation and the Bank's vicarious liability for Mr. Louanjli's actions were dismissed, upholding the High Court's original stance in those aspects.

Analysis

Precedents Cited

The judgment extensively references foundational cases and legal doctrines that shape the understanding of dishonest assistance and vicarious liability:

Royal Brunei Airlines v Tan [1995] 2 AC 378 (Tan): Established the objective test for dishonesty in accessory liability, moving away from the subjective "Ghosh" test.
Twinsectra Limited v Yardley [2002] UKHL 12 (Twinsectra): Initially introduced a combined subjective and objective test for dishonesty, which was later refined.
Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37 (Barlow Clowes): Clarified the extent of knowledge required for dishonesty, reinforcing the objective standard.
Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67 (Ivey): Rejected the "Ghosh" test in criminal law, further cementing the objective approach to dishonesty.
Lister v Hesley Hall Ltd [2002] 1 AC 215: Defined the "close connection" test for vicarious liability, emphasizing the link between employment and wrongful acts.
Mohamud v WM Morrison Supermarkets plc [2016] UKSC 677: Applied the "close connection" test in vicarious liability, aligning it with the broader policy objectives.

Legal Reasoning

The Court of Appeal's reasoning hinged on the evolution of the dishonesty test from a combined subjective-objective approach to a purely objective standard. Following the Supreme Court's decision in Ivey, the court affirmed that dishonesty is assessed objectively based on what an honest person would deem dishonest, independent of the defendant's personal belief. The court scrutinized Mr. Landman's knowledge and actions, determining that his receipt of the bribe and subsequent facilitation of unauthorized payments exhibited dishonesty under the objective standard.

Regarding vicarious liability, the court applied the "close connection" test from Lister and Mohamud, evaluating whether Mr. Louanjli's wrongful actions were sufficiently connected to his employment with LLB to hold the bank liable. The court concluded that Mr. Louanjli was acting within the scope of his employment, or in such a way that established a close connection, thus rendering LLB vicariously liable.

Impact

This judgment has significant implications for future cases involving dishonest assistance and vicarious liability:

Clarification of Dishonesty: Reinforces the objective standard for assessing dishonesty, aligning civil liability with the criminal law's approach post-Ivey.
Vicarious Liability Boundaries: Solidifies the "close connection" test applicability in complex commercial contexts, ensuring employers can be held liable for employees' dishonest acts closely related to their roles.
Implications for Employers and Professionals: Emphasizes the necessity for employers to implement robust compliance and oversight mechanisms to mitigate risks of employee misconduct.
Legal Precedent Strengthening: Strengthens case law on the necessity of bridging the knowledge gap between the defendant's awareness and the objective standard of dishonesty.

Complex Concepts Simplified

Dishonest Assistance

Dishonest assistance refers to situations where a third party assists in the breach of a trust or fiduciary duty. To establish liability, it must be proven that the assistant knew sufficiently about the breach and acted dishonestly. Post-Ivey, the dishonesty test is objective: the court evaluates whether an honest person in the assistant's position would have regarded their actions as dishonest.

Vicarious Liability

Vicarious liability is a legal doctrine where an employer is held responsible for the wrongful acts committed by an employee during the course of their employment. The key criterion is the "close connection" between the employee's role and the wrongful conduct. This ensures that employers maintain accountability for their employees' actions that arise from their job functions.

Blind-Eye Knowledge

Blind-eye knowledge implies that an individual either knew of the wrongdoing or deliberately chose not to inquire further despite having suspicions. This concept bridges the gap between actual knowledge and mere belief, holding individuals accountable when they consciously ignore signs of illicit activities.

Conclusion

The Court of Appeal's decision in Group Seven Limited & Anor v. Notable Services LLP & Anor underscores the judiciary's commitment to upholding the integrity of fiduciary relationships and the accountability of employers for their employees' misconduct. By affirming the objective standard for dishonesty and reinforcing the "close connection" test for vicarious liability, the court has provided clear guidance for future cases in this domain. Employers must now be more vigilant in ensuring their employees adhere to ethical standards, and individuals assisting in breaches of trust must recognize the legal ramifications of their actions. This judgment serves as a pivotal reference point in establishing the boundaries of dishonest assistance and the extent of an employer's liability, fostering a more accountable and transparent professional environment.