Group Seven Limited & Anor v Notable Services LLP & Anor

Factual and Procedural Background

This opinion concerns appeals arising from two related actions tried together, dealing with liability for dishonest assistance in breach of trust and vicarious liability in the context of a large-scale fraud involving the misappropriation of £100 million from Company A, a Swiss-registered company. The fraud involved the transfer of funds through a Maltese company incorporated for the purpose of the fraud and ultimately into the client account of a London law firm, Company B, whose members included professionals such as accountants and solicitors. The fraudsters used Company B’s client account to launder proceeds, with some funds recovered following police intervention.

The original proceedings were brought by Company A’s subsidiary, Group Seven Limited ("Group Seven"), and another company formerly known as Larn Ltd ("Larn"). The defendants included Company B, individual professionals associated with it, a bank employee, and the bank itself. The bank employee dishonestly provided information to Company B in support of the fraudsters. The bank had ceased operations by the time of trial.

Earlier proceedings established that the fraudsters and associated companies committed fraud against Group Seven, leading to judgments and liquidation of one company involved and criminal convictions of an individual fraudster. The appeals arise from a judgment by Morgan J following an eight-week trial in 2017, addressing claims of dishonest assistance, conspiracy, and vicarious liability.

Legal Issues Presented

1. Whether the trial judge erred in law and fact in concluding that certain defendants, including an individual professional and Company B, were not liable for dishonest assistance in breaches of trust and fiduciary duty.
2. Whether the fraudulent misrepresentations made by the bank employee caused or materially contributed to the losses suffered by Group Seven, or whether intervening conduct broke the chain of causation.
3. Whether the bank is vicariously liable for the dishonest conduct of its employee in assisting the breach of trust and conspiracy to injure Group Seven.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed legal and factual analysis focusing on three main issues: dishonest assistance, causation, and vicarious liability.

Regarding dishonest assistance, the court reviewed the essential elements: existence of a trust, breach by the trustee, assistance by the defendant, and dishonesty by the defendant. It accepted that the first three elements were established against the individual professional (Mr Landman) and Company B. The key issue was dishonesty.

The court analysed the applicable legal test for dishonesty, tracing its development through leading authorities, culminating in the Supreme Court’s decision in Ivey which confirmed that dishonesty is to be assessed objectively against the standards of ordinary decent people, but with regard to the defendant's actual knowledge or belief of the facts. The court rejected the subjective limb of the previously applied Ghosh test.

Applying these principles, the court found that while the trial judge had acquitted Mr Landman of dishonest assistance due to absence of actual or blind-eye knowledge that the money was not beneficially owned by Larn, this conclusion was flawed. The appellate court identified inconsistencies, particularly given the judge’s own findings that Mr Landman knowingly received a bribe of £170,000 linked to the fraudulent scheme, which objectively demonstrated dishonesty. The court concluded that Mr Landman must have had blind-eye knowledge of the true circumstances and that his conduct was objectively dishonest, thus liable for dishonest assistance.

On causation, the court upheld the trial judge’s findings that the bank employee’s fraudulent misrepresentations influenced Company B’s conduct in accepting and disbursing the funds, assisting in the breach of trust. The court rejected arguments that subsequent dishonest conduct by others broke the chain of causation, emphasizing that the assistance provided was more than minimal and that the loss flowed directly from the breach of trust.

Concerning vicarious liability, the court applied the "close connection" test established in Lister v Hesley Hall and refined in Dubai Aluminium and Mohamud. It considered the nature of the bank employee’s role as a relationship manager and found that the wrongful acts were sufficiently connected to his employment to render the bank vicariously liable. The employee was acting ostensibly on behalf of the bank, providing information central to the fraud, and the bank created the risk by employing him. The court rejected the argument that the employee was on a "frolic of his own" and that the bank’s liability was negated by internal limitations on the employee’s authority or the commercial context.

Holding and Implications

The court issued the following rulings:

• The appeals by Group Seven, Larn, and the Bank concerning the liability of Company B and the individual professional (Mr Landman) for dishonest assistance are allowed. This reverses the trial judge’s finding of no dishonest assistance by Mr Landman and Company B.
• The appeals by the bank employee and the bank regarding causation are dismissed. The court upheld the trial judge’s finding that the bank employee’s dishonest statements materially assisted in the breach of trust and caused loss.
• The appeal by the bank against vicarious liability for the employee’s wrongdoing is dismissed. The bank remains liable for the employee’s dishonest assistance and conspiracy.

These decisions result in the imposition of liability on the individual professional and Company B for dishonest assistance, and affirm the bank’s vicarious liability for its employee’s misconduct. The court did not set new legal precedent but applied and clarified existing principles on dishonest assistance, causation, and vicarious liability in the context of complex fraud. The outcome affects the parties directly by adjusting the scope of liability and potential recovery but does not alter the broader legal landscape beyond reaffirming the settled law.