Group Seven Ltd (a company incorporated under the laws of Malta) v Notable Services LLP
| Jurisdiction | England & Wales |
| Judge | Lord Justice Henderson,Lord Justice Peter Jackson,Lady Justice Asplin |
| Judgment Date | 11 April 2019 |
| Neutral Citation | [2019] EWCA Civ 614 |
| Docket Number | Case Nos: A3/2017/3205, 3194, 3190, 3189, 3183, A3/2018/0694, 0695 and A3/2017/3204, 3195, 3188, 3187, 3182, A3/2018/0692,0693 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 April 2019 |
[2019] EWCA Civ 614
Lord Justice Henderson
Lord Justice Peter Jackson
and
Lady Justice Asplin
Case Nos: A3/2017/3205, 3194, 3190, 3189, 3183, A3/2018/0694, 0695 and A3/2017/3204, 3195, 3188, 3187, 3182, A3/2018/0692,0693
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE BUSINESS & PROPERTY
COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
MORGAN J
Royal Courts of Justice
Strand, London, WC2A 2LL
Jeffrey Chapman QC, Simon Atrill and Simon Paul (instructed by Mishcon de Reya LLP) for Group Seven Limited, Rheingold Management Inc and Equity Trading Systems Ltd
William Flenley QC and Francis Bacon (instructed by Caytons Law) for Notable Services LLP
Sonia Tolaney QC and Michael Ryan (instructed by Pinsent Masons LLP) for LLB Verwaltung (Switzerland) AG
Aidan Casey QC and Emily Moore (instructed by FPG Solicitors) for Mr Louanjli
Philip Hackett QC and Faisal Saifee (instructed by Janes Solicitors) for Mr Landman
Hearing dates: 6 th–8 th and 11 th March 2019
Approved Judgment
Lord Justice Henderson, Lord Justice Peter Jackson and
This is the judgment of the court to which each of its members has contributed.
INTRODUCTION AND OVERVIEW
These appeals concern the scope of liability for dishonest assistance in a breach of trust and for vicarious liability in such circumstances. The parties are a range of professionals and organisations who in one way or another became secondary actors in a very substantial fraud.
The appeals are from the order of Morgan J dated 6 October 2017. He heard two actions which were tried together at a hearing lasting eight weeks. The citation for his meticulous judgment, which runs to 151 pages, is [2017] EWHC 2466 (Ch). The two actions are referred to in his order as the “Group Seven Proceedings” and the “ETS Proceedings” although in his judgment he referred to the latter as the “Larn” proceedings, Larn Ltd. being the former name of Equity Trading Systems Limited (“ETS”).
The backdrop for both sets of proceedings was a brazen fraud by which Allseas Group SA, a company registered in Switzerland, (“Allseas”) was defrauded of €100 million. The fraud was followed by an attempt to launder the proceeds using the client account of a London firm of solicitors Notable Services LLP (“Notable”). Notable was a multi-disciplinary partnership, whose members included Mr Martin Landman, an accountant, and Mr Francesco Meduri and Ms Cristina Ciserani, both solicitors. The money laundering was partly successful but as a result of police intervention €88 million was returned to Allseas. The present proceedings concern attempts to recover the unreturned balance from Notable and others, including from a bank employee (Mr Othman Louanjli), who dishonestly provided information to Notable in support of one of the main fraudsters, and from the bank that employed him, LLB Verwaltung (Switzerland) AG, formerly known as Liechtensteinische Landesbank (Switzerland) Ltd (“LLB” or “the Bank”).
The complex events that led up to the transfer of the €100 million to Notable's client account and the circumstances surrounding the payments from that account are set out in full detail in Morgan J's judgment and it will be necessary to pick out some of his more important factual findings when considering the issues to which they relate. At this stage an overview will suffice.
Allseas had formed a subsidiary company, Allseas Group Ltd in order to invest the sum of €100 million. That company changed its name to Group Seven Limited (“Group Seven”). Allseas transferred €100 million to Group Seven which transferred it to Allied Investment Corporation Ltd (“AIC”), a company which had been incorporated in Malta in October 2011 for the purpose of the fraud. AIC, which had promised Group Seven a huge return on its investment, in turn purported to lend the money to Larn Ltd (“Larn”), a company owned and directed by one of the fraudsters, Mr Louis Nobre (whose initials formed the company's name). It was AIC that transferred the monies to Notable's client account in November 2011, where it was held for the benefit of Larn. Mr Nobre then gave instructions to Notable to make some forty payments out of its client account. Acting on these instructions, Notable paid away some €15 million. One of the payments (number 42) was for £170,000 to Nisroy Investments Inc. (“Nisroy”), a Panamanian company. The Judge found that this company acted on Mr Landman's instructions and that the payment was Mr Landman's ‘personal fee’ (dishonestly concealed from other members of Notable) for helping Mr Nobre to use Notable's client account to make the other payments.
In November 2012, Group Seven assigned its causes of action in the Group Seven Proceedings to Rheingold Management Inc (“Rheingold”), but it is more convenient to refer to the claims as being made by Group Seven, as the Judge did.
As part of his scheme to persuade Notable to make the payments out of its client account, Mr Nobre enlisted Mr Louanjli to make false statements to Notable in November 2011 about Mr Nobre's good standing with LLB. LLB, which ceased its banking activities at the end of 2013, traded as a private bank, principally in Switzerland, but it also had a small representative office in Abu Dhabi. Mr Louanjli was employed in that office as a relationship manager, in which capacity he introduced Mr Nobre and Larn to LLB. It is a feature of the case that a number of Mr Louanjli's more senior colleagues smelled a rat and were not prepared to accept Mr Nobre or Larn as a client (albeit that an account was opened briefly in the name of Larn) and that the references provided by Mr Louanjli were given later and without the knowledge of anyone at the Bank. For these services to Mr Nobre, Mr Louanjli and a Mr Sebastien Elbied, who worked for Barclays Capital in Paris, received between them the sum of €1 million, that being the first of the payments made by Notable. It was paid to Mr Elbied's company Renaissance Ltd. (“Renaissance”) and Mr Louanjli's share (in the end €561,860) was paid on to his own company Bridge Ltd (“Bridge”).
Group Seven and Rheingold had brought earlier proceedings against various prime movers in the fraud. The Defendants in those proceedings were AIC, Mr Marek Rejniak, Mr Paul Sultana, Larn and Mr Nobre. The claim against Larn and Mr Nobre was compromised by a Tomlin order made on 4 April 2012 which provided for the repayment to Group Seven of certain sums. These payments were not made and Group Seven obtained judgment against Larn and Mr Nobre in the sum of €11,143,192.11. On Group Seven's application, an administration order was made in relation to Larn and it was placed in liquidation on 24 May 2013. As for Mr Nobre, in February 2016, he was convicted on six counts of money laundering and three counts in connection with the possession of fraudulent banking documents. The first two counts of money laundering related to the €100 million. He received a total sentence of 14 years' imprisonment.
The proceedings against the other Defendants, apart from Larn and Mr Nobre, were tried by Peter Smith J in 2014. At the trial the only active Defendant was Mr Sultana. The judge handed down his judgment in June 2014: [2014] EWHC 2046 (Ch). He held that AIC, Mr Rejniak and Mr Sultana had committed a fraud on Group Seven. He rescinded the loan agreement between Group Seven and AIC as being a sham and entered judgment in favour of Rheingold against AIC, Mr Rejniak and Mr Sultana for damages for fraud in the sum of €9,179,850.48. Mr Sultana appealed to the Court of Appeal but his appeal was dismissed on 25 June 2015: [2015] EWCA Civ 631.
The Group Seven proceedings with which the present appeal is concerned had two main strands:
(1) Against Notable, Mr Landman and Mr Meduri (but not Ms Ciserani, whose honesty has never been questioned) for compensation for dishonest assistance in relation to breaches of trust by Larn in relation to the €100 million in the Notable client account. It was alleged and accepted that Notable was vicariously liable to Group Seven for the actions of Mr Landman and Mr Meduri. Group Seven also claimed against Notable and Mr Landman for unconscionable receipt of trust monies, in the case of Notable, the fees that it had charged and in the case of Mr Landman the £170,000 bribe paid to Nisroy for his benefit.
(2) Against Mr Louanjli for deceit, for conspiracy with Mr Nobre to...
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