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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Zambia v Meer Care & Desai (a firm) & Ors [2007] EWHC 952 (Ch) (04 May 2007)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2007/952.html
Cite as: [2007] EWHC 952 (Ch)
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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| Attorney General of Zambia for and on behalf of the Republic of Zambia |
Claimant |
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| - and - |
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| Meer Care & Desai (a firm) & Ors |
Defendants |
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Mr Head and Mr Kramer (instructed by Reynolds Porter Chamberlain) for Mr Iqbal Meer a partner in the First Defendant
Mr Croxford QC and Ms Stanley (instructed by Barlow Lyde & Gilbert) for the Second and Eighth Defendants
Mr Veen (instructed by Direct Public Access) for Mr Naynesh Desai a partner in the First Defendant
Mr Bourne (instructed by Bray Walker) for the Fifth Defendant
Mr Fenwick QC and Ms Day (instructed by Barlow Lyde & Gilbert) for the partner in the Second Defendant
Hearing dates: 31 October 2006 – 22 November 2006, 29 November 2006 – 14 December 2006 (sitting as Special Examiner at the High Court Lusaka), 11 January 2007 – 27 February 2007
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Crown Copyright ©
- In this action the Attorney General of Zambia ("AGZ") for and on behalf of the Republic of Zambia claims to recover sums which were transferred by the Ministry of Finance ("MOF") between 1995 and 2001. The money in question was transferred on the basis that it was required to pay debts owed by the Government. It is acknowledged by the Claimant ("AGZ") that some money was used in that way but most of it was not. It is alleged that very large sums were diverted away for private purposes for various of the Defendants and he seeks to recover these sums from the Defendants.
- The case falls into 3 distinct parts. The first arises out of the transfer of about $52,000,000 from Zambia to a bank account operated, it is alleged, outside ordinary governmental processes called the Zamtrop Account held at Zambia National Commercial Bank Limited ("ZANACO") in London. This has been called throughout the proceedings "The Zamtrop Conspiracy". The second claim relates to a UK registered property company called MOFED Ltd owned by the Zambian Government. This has been known as the "MOFED Claim" and relates solely to the Fifth Defendant Atan Shansonga ("AS"). It is a claim for breach of fiduciary duty on the basis that a consultancy agreement was improperly obtained by him in relation to the letting of the property owned by MOFED which provided for him to receive £100,000 per annum. The third related to payments of about $20,000,000 made by Zambia pursuant to an alleged arms deal with Bulgaria and paid into accounts in Belgium and Switzerland at least some of which funds found their way to London. This claim has been known throughout the litigation as "the BK Conspiracy".
- At the front of this judgment is a list of the Defendants with a brief description of their status and the abbreviated explanation applicable for each such party. In addition there is a similar exercise in respect of important non-Defendants and a list of the key bank accounts the subject matter of the claims brought.
- The claims which I shall deal with in more detail further in this judgment range from $25,754,316 to as little as $4,000 depending on the nature of the findings against any relevant Defendant.
- AGZ has made substantial recoveries and the current schedule of the recoveries is released with this judgement. Some assets have been sold, some have not been sold and some are still used by the Defendants. Dr Chiluba ("FJT") (the former President and so referred after the monogram on the clothing recovered by AGZ) still resides in a property, which is said to have been acquired using misappropriated funds for example. As the closing submissions developed it was clear that it would not be possible in the event of primary findings of liability to determine the ultimate figure for liability without more submissions relating to the realisations and the effect those realisations have on any relevant liability. This judgment therefore will not attempt to address any final amounts. That will arise after judgment.
- AGZ's primary claim is aimed at three former Officers of Zamia namely the former President FJT, the former Director General of the Zambian Security and Intelligence Services ("ZSIS") Mr XF Chungu ("XFC"), and a Mrs Stella Chibanda ("SC") a senior Officer at the MOF. It is alleged that they were at the centre of the frauds and the claims against them are framed in conspiracy and breach of fiduciary duty. The fraud alleged involves the transfer of MOF money to the Zamtrop account and from the Zamtrop account (inter alia) to the accounts of Access Financial Services Ltd a company providing financial services incorporated in Zambia ("AFSL"). The main controlling officers of AFSL were Mr Faustin Kabwe ("FK") Mr Aaron Chungu (no relation to XFC) ("AC") and Mr Francis Kaunda (no relation to the first President of the Republic Kenneth Kaunda) ("Francis K"). The other Defendants as I will set out in this judgment had differing roles and had differing participation in the proceedings.
- The Zambian based Defendants set out above have participated in the proceedings but took no part in the trial. The UK based Defendants namely Meer Care & Desai ("MCD") (and the partners in that firm Mr Meer and Mr Desai) ("IM" and "ND") Mr Thaker junior ("BT") and Mr Thaker senior ("BBT") and the firm which they were alleged to be partners in Cave Malik ("CM") and Atan Shansonga ("AS") have participated in the action throughout including the trial.
- The remaining Defendants Boutique Basile ("Basile") Nebraska Services Ltd ("Nebraska"), MISSL Associates Ltd ("MISSL"), and Hearnville Estates Ltd ("Hearnville"), have not participated in the proceedings at all. Raphael Soriano ("Soriano") participated in the proceedings until November 2005 and thereafter ceased participation.
- Three further Defendants Jarban SA ("Jarban"), Roland Cracco ("Cracco") and Robert Standaert ("Standaert") and Belsquare Residence NV participated in these proceedings in respect of claims brought against them as to the ownership of an apartment hotel complex in Belgium. Those proceedings were heard by me in August 2005 and ultimately settled, when the Defendants in question effectively capitulated before the evidence was finished. That has led to a substantial realisation by AGZ for which credit will be given in due course.
- Part of the evidence in that section of the claims involves the Defendants in this trial so reference will be made to it in the course of this judgment.
- The proceedings were commenced in the Chancery Division in London by the issue of a claim form on 6th October 2004. That has undergone a number of amendments including one in respect of a claim called "the Picture Claim" in the closing submissions before me.
- AGZ applied for and obtained a freezing order before me on 24th November 2004. Subsequent further freezing orders were made in early 2005.
- The claims against the Belgian Defendants (i.e. those referred to in paragraph 9 above) proceeded as I said in August 2005 and were stayed under the terms of a consent order dated 30th August 2005.
- The other Defendants to the action were not involved in that part. The consideration of the remainder of the claims was first raised at a Case Management Conference on 10th October 2005.
- AGZ considered it appropriate for these proceedings to be brought in the High Court in London for a number of reasons. First it is alleged that significant Defendants namely MCD, CM and AS were based in London and large amounts of the allegedly stolen monies were passed through accounts held by them onward to other destinations both in Europe and elsewhere. Accordingly AGZ concluded that the claims he brought were centred in London. The correctness of that belief and its success is demonstrated by virtue of the Belgian recoveries which provided a complete justification for this course of action.
- As Defendants are both Zambian based and UK based a decision would have to be made as how to deal with that. Given the close nexus with London and the advantage of having orders that could be enforced because they are made in an English Court rather than a Zambian Court AGZ also determined that it was appropriate that the proceedings should be London based for that reason.
- That could be seen to create an immediate difficulty as regards the Zambian based Defendants. They are all charged with criminal offences arising out of the same subject matter of this action. They have not yet been brought to trial in Zambia. They are however all on bail the terms of which require them to surrender their passports. They could not attend a trial in London as AGZ was (quite understandably) not willing to lift the bail restrictions to enable them to attend such a trial. It should be pointed out that XFC fled Zambia and his whereabouts are not known precisely but he is currently believed to be in the Republic of Congo. That provides clear support for AGZ's view that it would not be appropriate to risk permitting any of the Zambian Defendants to leave Zambia to attend. The Republic however permitted FJT to go to South Africa for medical treatment.
- That would then mean the trial if held in London could not be attended by the Zambian Defendants in person.
- Accordingly FJT, SC, AC, FK and Francis K all issued applications challenging the decision of AGZ to commence the proceedings in the English Court. It is worthy of note that they did not do so on the basis that the proceedings had not been properly brought in the High Court in London. Their challenge was based on two factors. First it was said that they had a right to attend their trial in person and were not being given that opportunity because they would not be allowed to attend in London. Second it was contended that the civil proceedings should be adjourned until after the criminal proceedings were heard. The justification for this was that they would be required to give evidence in the civil proceedings and thereby reveal matters which they would deploy or not in the criminal case. Thus their right to silence would be infringed and the prosecution would be given advance warning of what they would say or might say.
- I heard their application and I rejected it. In so rejecting it I addressed their two concerns in the following way. First I indicated that I would be willing to go to Zambia as a Special Examiner so I could hear their evidence live in a court in Zambia. The rest of the proceedings would take place via a live video link to Zambia. In addition they would be provided with daily transcripts at the initial expense of AGZ. I accepted that was not the best solution as the best solution would be for them to be at their trial all the time. However that could not happen for the reasons set out above. Nor would it be appropriate to have trial proceedings simultaneously against Zambian Defendants in Zambia and London based Defendants in London arising out of the same dispute. Nobody argued against that point.
- In respect of their privilege against self incrimination issues I directed that the proceedings be ring fenced. By that I directed that the material deployed in the trial before me and the evidence given and the arguments arising out of it would not be disclosed to any other person or used by AGZ for any purpose in the criminal or other proceedings without my permission.
- To aid that AGZ gave undertakings and waived any immunity that he might have in respect of enforcement of those undertakings and unconditionally submitted to the jurisdiction of this court for enforcement of any breach of the undertakings. In addition he undertook to assist me as a Special Examiner in procuring witnesses that the Zambian Defendants might wish to come to court. This was to deflect an argument that AGZ would "hide" witnesses from the Defendants.
- The Zambian Defendants appealed that decision to the Court of Appeal which dismissed their appeal. In so dismissing the appeal the Court of Appeal noted "[the Defendants] …. accept that there is no question of the civil proceedings taking place wholly in Zambia and it follows that they accept, in my judgment properly and correctly, that the civil proceedings should take place in England".
- That is an important point to note for this reason. The Zambian Defendants have in the press in Zambia intimated that in some way the proceedings before me and my sitting as a Special Examiner in Zambia are unconstitutional as regards Zambia, an infringement of Zambia's sovereign rights and an attempt by the former colonial power to impose its will upon the Zambians.
- In addition (somewhat belatedly) on 16th June 2006 they petitioned the High Court of Zambia seeking a stay of the proceedings before me (by means of inter alia injunction against AGZ). This course of action was taken over 20 months after the proceedings had been initially commenced, after they had served Defences in this action, had challenged various procedural matters in this court unsuccessfully and in the Court of Appeal and after several Case Management Conferences had taken place to address the trial in London.
- The petition was adjourned on 9th October 2006 by Mr Justice Mwanamwamba who gave directions for filing of submissions and indicated he would give his decision on 31st January 2007. That hearing did not take place and a hearing in November 2007 has now been fixed. It is now of academic relevance as my judgment will have been delivered before the hearing.
- The statement of the Zambian Defendants to the public in Zambia is one of the many instances of them misleading the public in Zambia for their own purposes. As I have set out above when they challenged my decision to make the ring fencing order it was never suggested that the proceedings were inappropriately brought in London. Nor has it ever been suggested when they were participating in these proceedings that it was inappropriate for me to sit as a Special Examiner in Zambia. Indeed the Zambian Law Society has confirmed that it is appropriate for me so to act and that it has occurred in a number of cases previously.
- Special arrangements were made for video links to be set up to enable them to hear all procedural applications until trial. The Zambian Defendants attended the first of those but the video link failed. For reasons which baffle me they decided that they would not go to the British High Commission where a back up video link was set up. Thereafter in June 2006 (coincidental with their petition) they wrote to me saying they had "discontinued participation" in this action. There is of course no power on the part of a Defendant to "discontinue participation" in proceedings. The facilities in Zambia were nevertheless made available for them but they chose not to attend for no- justified reason.
- They were provided with all the documents for the trial in advance of the trial. They were provided with daily transcripts up to a certain date. Finally arrangements were put in place for a property that was under restraint in Zambia to be realised to enable them to pay their lawyers. Despite being afforded that opportunity they took no steps to realise the property in question (Serioes Farm). The reason for this was that they had made a decision not to play any role in the proceedings once their attempt to remove themselves had failed. The fact that funds could be made available is well demonstrated by the orders I made during the course of the trial in favour of AS to permit him to arrange for the sale by De Garnier Holdings Limited of shares it oened in a Zambian Hydro Electrical company and for Mr Shansonga to have access to those funds not only to defend himself but to pay his living expenses. Such a course of action was open to all the other Zambian based Defendants but they chose not to avail themselves of it. They could have applied for public funding (as AS did) but they chose not to do so.
- When the trial commenced FJT broke the terms of the ring fencing order which was created (inter alia) for his benefit by issuing a press release with large numbers of documents the subject of the ring fencing order attached to it. Similarly the Zambian based Defendants gave statements to various newspapers in Zambia alluding to such material. Such delivery was in a selective way and was once again a breach of the ring fencing order which was put in place for their protection. Accordingly I removed their right to transcripts unless they attended court in Zambia personally on a daily basis to collect the transcript and signed a confidentiality agreement. After that requirement none of the Zambian based Defendants attended to obtain the documents. Unfortunately towards the end of the hearing in Zambia a member of the AGZ's chambers released some transcripts to a representative of the Zambian based Defendants and those transcripts were then promptly published in a selective way in the press again.
- The actions of the Zambian Defendants in this regard and their statements to the Zambian people have been deliberately designed to raise irrelevant matters and to avoid dealing with the claims against them on the merits. I am quite satisfied that they have had the fullest opportunity to present a case against the claims brought against them but they have chosen for their own reasons not to do so. As this judgment develops it will be seen self evidently why they have chosen not to participate. It has nothing to do with the supposed reasons put forward by them which as I have said earlier in this judgment were not reasons put forward when they were represented in the courts in England. It is I regret to say a further deception on the people of Zambia perpetrated by these Defendants.
- In addition to the recovery as against Jarban, Belsquare, Cracco and Standaert on the opening of the trial I ordered that MCD pay to AGZ a sum of approximately $900,000 which they were holding in their client account credited to the name of Harptree Holdings Ltd. The only other potential claimant for the control of Harptree was FK and he made no claim. These monies came from the BK account held at KBC Belgium. The Harptree ledger at MCD recorded receipt of $1,000,000 from the KBC account on 22nd December 2000 and 23rd March 2001.
- No credible reason has been put forward by the other non Zambian non participating Defendants as to why they have played no part in these proceedings.
- As I have said above there are extant criminal proceedings against all the Zambian Defendants. There is also the outstanding petition. In addition there were arbitration proceedings and a set of proceedings brought in the Commercial Court ("the Donegal Proceedings") which has just resulted in a judgment from Mr Justice Andrew Smith. None of these proceedings has any impact on the trial before me.
- All the Zambian based Defendants served Defences in addition to making various statements to the press. That is the only material put forward by them upon which I can form any judgment as to whether or not the matters they raise amount to a Defence to all or part of the claims against them.
- They will have the benefit of arguments raised by the participating Defendants who have challenged AGZ's case that there is any primary conspiracy or breach of fiduciary duty by the Zambian based Defendants.
- Dr Kalyalya (a Deputy Governor (operations) at the Bank of Zambia) gave evidence before me about Zambia generally. It has a population of about 11,000,000 people. Its GDP per capita from the 1970's until around 2000 was $250-$300. Its position has slightly improved since then. The poverty index shows that in 2002 about 73% of Zambians could not afford to spend more than $1 per day on meals: "most Zambians cannot afford …… 3 meals a day". In addition Zambia has also been afflicted by the HIV/Aids pandemic. The life expectancy for most Zambians is at best currently in the early 40's.
- Zambia obtained independence in 1964. The first President was Kenneth Kaunda and he ruled until 1991 when FJT became elected President for the first time.
- During the period of Kenneth Kaunda's presidency Zambia was assailed by a number of misfortunes. At the time of its independence it was one of the wealthiest countries in Africa. A measure of its wealth is to be seen from the fact that its GDP was similar to that of Ghana which obtained independence about the same time and that of Malaya which also obtained independence at about the same time.
- Zambia suffered a number of factors which ruined its economy. First the UDI of what was then called Southern Rhodesia had a serious impact on it. Its main wealth was (and largely still remains) the export of copper. The route for the export passed through Southern Rhodesia. Zambia was faced with the dilemma of submitting to the Smith based regime in Southern Rhodesia and thereby alienating itself from all the other African countries but saving its economy or not submitting and ruining its economy. It chose the latter course. Exports of copper became very difficult. The situation was exacerbated in later years by the conflicts in other potential export routes namely Angola and Mozambique. Further in the 1970's commodity prices fell and Zambia's exports in real terms therefore fell. This was coupled with the huge rise in oil prices following the Yom Kippur war. The impact of that on the western world is well known but the impact on Zambia was equally catastrophic as it has no indigenous oil resources. It has large amounts of coal but they tend to be used solely for the processing of copper. Coal is not widely used other than for that process. This still affects Zambia today. When I went to Zambia I was surprised to see that the price of petrol in Zambia did not differ much from that of the price in the UK. This is an example of the high cost of living which ordinary Zambians suffer.
- FJT was elected on an "anti corruption ticket". It was perceived that towards the end of the Kaunda period there was widespread corruption. This case shows that FJT and his associates after a short period allegedly succumbed to corruption themselves. Mr Dipak Patel in his evidence before me stated "from the early 90's there were repeated allegations of corruptions of senior officials and ministers in government from the very beginning of the Chiluba tenure of office". This was supported by the evidence of the Editor of the Post Mr Fred M'Membe who has proven to be a redoubtable thorn in the side of all governments of all persuasions in Zambia. In so doing he himself was arrested and imprisoned without trial for a period of time.
- Despite the financial traumas suffered by the Zambian people I found them universally friendly and anxious to please when I visited. The people obviously wish to develop their country but are handicapped by the difficulties which have befallen Zambia since independence.
- Another regrettable feature is corruption. There is a public perception that "corruption grew dramatically under the Chiluba Government" (US Department of State, Bureau of African Affairs, background note: Zambia September 1996). This corruption undermined the economic stability and pervaded Zambia from the top down ranging from senior Government Officials abusing the privatisation process to local policemen committing extortion (US Commercial Department "Doing Business in Zambia: A Company Commercial Guide for US Companies" 2005).
- This case reinforces that view. In addition as a substantial body of evidence which was unchallenged put before me shows there is a climate of fear operating in the public service. It is difficult in a western world to perceive how intimidatory those in power can be in a country like Zambia. The threat of losing one's job in the public service is a strong deterrent against questioning matters. There is no residual back up system of a welfare state approaching anything like that in western countries. To lose one's job is to force one's family into starvation and potential homelessness. Thus that is a powerful weapon without any need to issue threats of violence. It is quite clear from the evidence that those in power and those associated with those in power were not questioned. What they said went unchallenged because of the fear. I would find it difficult to criticise lower level civil servants who took a decision not to challenge what was going on. In fact many did try to stem the tide as the evidence showed but were blocked from above and sometimes penalised for trying to challenge what was going on.
- It is because of that lack of effective checks that the matters the subject of this claim were able to take place.
- I have set out above the low level of income enjoyed by ordinary Zambians. The country will of course like any country have a small cadre of wealthy people at the top. It is generally the case in most countries that public servants are not to the fore in the terms of high salary. According to the evidence of Mr Kalabo and Mr Goma which I accept FJT from November 1991 to March 2002 (10 years) earned K157,340,505.12. On a rough and ready basis that was approximately $10,000 per annum. There was a dispute as to whether or not FJT had access to other funds for expenses but I reject the suggestion that in real terms he had access to any other governmental funds and I accept the evidence of Mr Kalabo and Mr Goma who were respectively the Permanent Secretary in charge of the Administration in the Cabinet Office and the Accountant General at the Office of the Accountant General (part of the Ministry of Finance and Planning). Of course I accept that where Zambian Government Officials are required to carry out duties or incur expenditure abroad the low level in comparative terms of Zambia's income is not a relevant factor. However what is striking in this case is the level of alleged frauds in the context of the available income of the publicly employed Zambian Defendants. I will set out below in this judgment the sums allegedly spent by the Zambian Defendants for their own benefit. They dwarf any level of income or other assets they could reasonably have expected to have from legitimate means. Take but one example. FJT demanded and obtained £30,000 in cash from BT. Assuming a generous exchange rate of $1.5 equals £1 that represents nearly half of his presidential salary for 10 years.
- His career does not show any opportunity to amass private wealth. Between 1967 and 1991 he was an Assistant Accountant and Credit Manager for Atlas Copco (Z) Ltd during which time he held positions in the Trade Union movement. His affidavit of means sworn in these proceedings on 31st May 2005 revealed assets limited to a negligible balance in a bank account, two properties in Ndola given a value of $250,000 and two cars of negligible value.
- The relatively modest level of incomes enjoyed by people in Zambia including Public Officials in my judgment formed a useful yardstick to measure against substantial expenditure of a lifestyle of the nature allegedly incurred by the Zambian based Defendants. Such do assist in determining whether such expenditure has a legitimate purpose and could have been funded from private resources.
- The trial lasted some 51 days. In order to achieve a realistic trial very tight Case Management timetables were imposed. They have been mostly met. I have been greatly assisted by the response of the lawyers of all parties to the timetable that was imposed upon them. It meant that this action was brought to trial in less than 2 years.
- The logistics of the move to Zambia were very demanding. The trial bundles extended to 110 lever arch files. They had to be transported to Zambia (including my own and my own notes). That worked mostly satisfactorily. The video links were not the best. Whilst they inhibited cross-examination the main witnesses who were cross examined were either in the AGZ's case brought from Zambia or were the Defendants themselves. The Zambian based Defendants chose not to avail themselves of the expensive procedures that were put in place solely for their benefit. That is a matter of regret. However as I said to them on numerous occasions in correspondence it was up to them to decide whether or not they appeared. I can say however that in my view there was no justified reason for them not to appear. The reasons they portrayed to the press in Zambia are in my opinion bogus. This was their opportunity to put their case openly and without fear. They chose not to do so.
- Finally in the context of the logistical exercise the organisation of the movement of my papers and the security aspects put a heavy workload on my Clerk Miss Supriya Saleem and she too contributed significantly to the success of bringing this case to trial.
- With all this assistance I was able to overcome the general apparent inability of Judges to case manage cases (see the comments attributed to David Gray of DLA in The Lawyer 9th October 2006).
- The trial opened in London on 31st October 2006. I sat as a Special Examiner in Zambia from 29th November 2006 to 15th December 2006 and resumed the trial in London from 11th January 2007 to 27th February 2007.
- I heard 47 witnesses of fact from the Claimants. The participating Defendants gave evidence but called nobody else to support their case. In addition Grant Thornton ("GT") were retained by AGZ and CM as a joint expert to advise on tracing of monies from MOF into the Zamtrop account and its subsequent disbursement. That exercise was extremely complicated and difficult. I am grateful for the results because it shortened what was undoubtedly an area which could have taken an incredible amount of time. It meant that there has been substantial acceptance of the result of that exercise so that unusually in a case like this there is no serious dispute over figures. The limited nature of the retainer should be noted. They were not retained by the other parties. Nor were they retained (for example) beyond the Zamtrop conspiracy. They did not investigate either the OOP payments or the Permase General Account. Their report establishes that the bulk of the monies received into the Zamtrop account can be traced back to MOF. They have also substantially traced the funds out of the Zamtrop Account. AGZ's concession limiting their claim to traced amounts also extends to sums which he can establish are Government monies. Whilst his argument on a statutory right has failed ( see paragraph 160 below) he has persuaded me that on the balance of probabilities some sums which were paid into the Zamtrop Account are Government monies although they have not been successfully traced back to MOF in the GT Report (see paragraph 274 below).
- The writing of this judgment has taken longer than I had hoped but the detail of the case and the submissions required careful consideration. I had to beware rushing to judgment in case that attracted criticism whether valid or not see Baigent & Leigh v Random House [2007] EWCA Civ 247.
- When I attended Zambia there was considerable interest unsurprisingly. As the hearing was in camera I issued a press release setting out the goal behind the hearing. As I have referred to above the Zambian Defendants broke the ring fencing order which was put in place for their own benefit. As the evidence has developed it has become clear to me given the extent of the participation of those Defendants in the trial that there is no reason why this judgment should not be released immediately. There are good reasons why it should be made public in Zambia as soon as possible. The record needs to be set out fully so that the people in Zambia can see what has gone on in the past in relation to the governance of their country and the custodianship of assets that the Government has to apply for the benefit of its people. This case has shown a quite cynical abuse of office by senior officials in the former Zambian Government namely FJT and XFC. The corruption extended to other officials as this judgment will show.
- The most serious revelation in this case is the cynical and unjustified misappropriation of funds for the private purposes of Government officials. I set out below the types of expenditure to which I am referring. Not all the Defendants were aware of these purchases save FJT, XFC and FK but in one way or another they have participated in some of the acquisitions. I set out next in tabular form some examples.
- The above items are not exhaustive. I have chosen those because of the nature of the items in some cases and the size of the items. One sees a similar pattern of unusual expenditure in respect of disbursements made by XFC in the following table.
- The President (unlike the Emperor) needs to be clothed. FJT was known to be a stylish dresser "His suits speak of affluence, yet he presides over a country with millions barely scraping a living… But President Chiluba's suits are understood to be tailored by top designers in France and Italy… How much is spent on these clothes is a closely guarded secret. But many ordinary Zambians speculate that the figure has to be a mind-blowing one… It is not clear how many suits he has. But few people, even his closest aides, can remember seeing Mr Chiluba in the same suit, or shirt, twice". (BBC Programme)
- I saw some of the clothing at court. The expenditure with Basile amounts to $1,029,400 of which Basile attributed 99% to FJT. The items seized by the Task Force were considerable. First there were 349 shirts. A large number of these bore the FJT monogram on them and they were from virtually every designer outlet. Second there were 206 jackets and suits. A large number of these were from Basile bearing the FJT monogram. Third there were 72 pairs of shoes. A large number of these were hand made by Basile with the FJT logo. All were for FJT's unique personal specification (high heels). Many of them were in their original shoe covers and had not been used. There were a large number of other items. The full list can be found in bundle 17.2 page 217 et seq.
- After the actions in respect of the Zamtrop account were revealed in mid 2002 the current President made a statement to Parliament on 11th July 2002 setting out what he then understood to be the extent and nature of the allegations against the Defendants (and others). This is not of course evidence and will not be treated as such by me. AGZ has recognised this throughout the trial. The case has been decided on the evidence put before me.
- The receipt of the clothing by FJT plainly required an explanation. If one is generous and assumes that FJT received goods from Basile only (and I use that word in the context of this case) to the dollar equivalent of $557,803 it calls out for an immediate explanation by him. It reflected as I have said over 5 times the totality of his salary when he was in office for 10 years. I have already commented that there is nothing from his pre Presidential lifestyle to suggest he had wealth and there appears to be nothing in his post Presidential lifestyle to suggest he has wealth. As the former President of a country as poor as Zambia the people were entitled to an explanation.
- This trial was the place where FJT could have vindicated himself. He has totally absented himself from the trial.
- I have had to discern what he said about this allegation. On 14th July 2002 FJT issued a press statement in response to President Mwanawasa SC address. In the President's address (after referring to payments to various of FJT's children and the former Chief Justice Ngulube) he made reference to the payments of $1,100,000 to Basile describing them as "the former President's tailors".
- The response does not even deal with this clothing issue. FJT asserts that the Zamtrop account was operated under a document called the Finance Charter. This is correct as it will appear in this judgment. He went on to say that the account shows large numbers of gifts being credited to the account (which is incorrect).
- None of these payments can be attributed to any gifts even if there were such gifts. Grant Thornton has traced $879,400 of the $1,029,400 paid to Basile (H4/13 of their report). The balance is due to a difference of methodology. The larger figure is traced back to MOF accounts. The relevant figure therefore exceeds the identified value of the clothing received by FJT. His statement in his press release insofar as it suggests the clothing was received via the Zamtrop account fed by gifts is a blatant lie.
- He had a further opportunity to make the position clear when he was interviewed by the Task Force on 30th July 2003. This interview took place after the revelation in respect of the Zamtrop account in the local newspaper "The Seer" (March 3-9 2003) under the byeline "A Twisted Tale". This was a less detailed analysis of the claims. The more detailed analysis was in the Post on 25th June 2002 under the heading "Analysis of Chiluba's Matrix of Plunder" this detailed the large amounts of money (including the clothing payment) received by FJT and his family.
- He was questioned about the Basile payments:-
- The people of Zambia deserve better from their former President. His failure to explain himself is shameful. They should take heed of my observation in paragraph 467 below.
- There are other payments. I have already referred to the Picture Payments. I have already referred to the £30,000 cash payment he obtained from BT. I have already referred to the $179,000 paid from the Zamtrop account to churches in America.
- The final payment of relevance at this part of the judgment is $660,000 transferred in July – September 1996 from the Zamtrop account to Standaert. The disbursement of this money is quite extraordinary. GT have only been able to trace the $300,000 paid on 31st July 1996 (GT5) to MOF sources. There is no evidence suggesting any other source of the balance of the funds. All the payments came out of the Zamtrop account direct to Standaert.
- Standaert provided a witness statement dated 27th July 2005 iin the part of the proceedings brought against him. In that witness statement he dealt (inter alia) with the disbursement of these monies (annex 80 to the Re Re Re Amended Particulars of Claim) ("RRAPOC"). First he incurred $652,968 on purchases for FJT's second election campaign. These are items such as T-shirts, baseball caps and the like.
- Standaert received a further payment amounting to $65,000 between 26th August 1999 and 30th March 2001. Of this figure GT trace $35,000 via Standaert's wife Ms Williams. The first $30,000 was used to acquire 1200 bottles of Denis Baillet Millennium 2000 champagne (document E1 43.21). He presumed they were for use in official celebrations but there is no evidence to show that that was the case. The balance of the monies was used in travel expenses by XFC and clothing purchases by him.
- On 5th September 2000 Standaert received $15,000 which he spent on buying a fish skinning machine for XFC. He apparently received this in cash although his witness statement acknowledges he received it from MCD. According to their record on 5th and 6th September XFC sent instructions to remit $15,000 to Standaert but the method of transfer was by payment into an XFC account at a bank in Brussels. Those monies were transferred that way. They are to be found in the MCD ledger no 2535 with the description "Frank Chungu" (this is XFC). That money derived from GT traces 36 – 38. It follows that on this analysis XFC spent $15,000 of government money buying a fish skinning machine.
- All of these cried out for an explanation. We have had none from XFC because he has not participated anywhere in the proceedings and indeed as I have said has fled Zambia. FJT did not deal with the matters that I have referred to above in any of his statements.
- Before he "discontinued" participation in these proceedings FJT served a Defence dated 13th February 2006. Significantly that document is irregular because it does not have a Statement of Truth. I can well understand why such a statement is missing. He generally denies all of the allegations and in paragraphs 11 and 12 refers to the Zamtrop account as follows:-
- In paragraph 13 he lists (A11) the allegations that he says are made against him.
- He did not plead to item C (the cash payment of £30,000 from BT). The Picture Payments allegation is simply answered on the basis that the Zamtrop account had private monies in it. He asserts he had personal money and the Zamtrop account was administered for the purpose of disbursement of that personal money. I note the following. There is no evidence which shows FJT remitted any such sums (just under $200,000). He adduces no evidence to show he had such wealth. In that context his affidavit of means is illuminating. Insofar as the payments can be identified as from 3rd party sources the receipt of such monies is and the failure to declare them is plainly a breach of the duties FJT owed to the Republic of Zambia. I will deal with this further in the section dealing with the specific allegation against him.
- He merely puts AGZ to proof of the transfer of $179,000 from the Zamtrop account to churches in America. This is extraordinary as the evidence shows he directed the payments. He denies receiving any benefit in respect of clothing via Basile (allegation J). He "asked the Claimant to prove that I had anything to do with the allegations it has made". That is quite breathtaking. He has received clothing to the value of at least $500,000. That clothing was clearly personal to him as can be seen from an examination of the recoveries by the Task Force. It cries out for an explanation from FJT as to how he had the wealth to spend such an extraordinary amount on clothing. This was his opportunity when he was participating in the proceedings and the failure to deal with it, is dishonest.
- His reply in respect of election expenditure (allegation K) is "Mr Standaert has not said that I instructed him to carry out this contract and I in fact did not authorise it and had no knowledge of how it was awarded". One wonders where he thought all the T-shirts and baseball caps came from. This too is not believable.
- I set these extraordinary activities out at this stage because they show that the Zambian based Defendants clearly had very serious allegations made against them which required an answer. Despite having a full opportunity to participate in this action they chose for no honest reason not to participate. The inevitable conclusion is that they have not participated because they have no answer to these transactions. That is important because the transactions themselves and the silence from the relevant Defendants that is strong evidence in support of AGZ's claims. In addition given the nature of his office and his professions of honesty and integrity FJT had to answer them. His excuses are not acceptable and the people of Zambia should be aware of that.
- The second reason why these transactions are relevant is that it provides the motivation for the setting up of the Zamtrop account as I will set out further in this judgment. I am satisfied that the Zamtrop account was set up primarily to steal Government money. It is not that the Zamtrop account was set up legitimately and then used partially for illegitimate purposes.
- I remind myself however that I must be careful in how I deal with evidence in the case and the absence of Defendants. I have made clear to the parties that I must not allow evidence against other Defendants when there is nothing to suggest they participated in or were aware of the transactions in question, to be used against them. It is essential that the role of all Defendants in the allegations is looked at individually and their actions assessed in the light of their knowledge. I have been conscious of the need to be discriminating in that respect, especially bearing in mind the serious nature of the allegations. This is a point that is particularly important for the participating Defendants.
- Also in this context I am alive to the fact that the case must be proven against the Zambian Defendants. The evidence led by AGZ has been subject to thorough testing both by the participating Defendants and me. As a result of that as will be seen further in this judgment the participating Defendants have raised matters which might amount to a total Defence on the part of all Defendants to the claims brought by AGZ. They have also raised matters which have reduced the amount of the claims AGZ seek to maintain. Thus for example the case was opened on the basis that the Claimant was seeking all of the sums identified in the witness statement of the main witness Mr Hamunjele. He identified as claims sums in excess of the sums that can be traced by GT back to MOF or other Governmental sources. By the time of their closing AGZ accepted that the ceiling for any claim was those sums traced by GT. If the liability is limited to the individual claims against individual Defendants the relevant sums are identified in volume H4 of the GT's report (as varied in the light of the evidence of Ms Pincott given when she was recalled and the further calculation she provided after giving that evidence).
- The headline figures are approximately $63,000,000 alleged to have been transferred from MOF to bank accounts abroad namely in London, Belgium and Switzerland. In each case the transfers were "allegedly" made under the cover of state security and the MOF officials were persuaded to authorise the transfers on that basis that the purpose was a legitimate purpose concerned with state security.
- In respect of the Zamtrop account approximately $43,000,000 was paid in and only $17,500,000 of that is accepted by AGZ as being paid to legitimate contracting parties. In respect of the BK conspiracy the total amounts in Belgium and Switzerland (total approximately $20,000,000) were diverted. AGZ contends that all Defendants are liable to pay these headline figures as being parties to the two conspiracies to defraud the Republic.
- AGZ submits that FJT and XFC were the prime creators of the conspiracy and they were assisted by SC formerly a senior officer in MOF. It is contended that they were at the centre of the frauds but were assisted in transferring and disposing of the money in Lusaka by AFSL and its three main Controlling Officers FK, AC and Francis K.
- None of these Defendants participated in the trial. It is submitted by AGZ (correctly in my view) that if they had a proper explanation to give they would have participated in the trial and given it. They had every opportunity to do so it is submitted. A Restriction Notice was lifted in Zambia to enable Serioes Farm to be sold by FK for the purpose of paying legal costs. In addition there was the possibility of them obtaining public funding in the UK. In this context AS had public funding for a significant period of time. However they never made any such application. Finally in this context I made special arrangements to sit as a Special Examiner to hear evidence to enable them to attend and to ensure a full access to all witnesses both in Lusaka and via video link. I also ensured that their right to silence in respect to the criminal case was preserved.
- I have set out above their lack of positive response to all the special arrangements that were made for them. I agree with AGZ's conclusion. The Zambian based Defendants have had a full and complete opportunity to present a case had they wished so to do. The fact that they have not done so provides in my judgment corroborative evidence to support AGZ's evidence as to the allegations against them. It can of course only be corroborative; the burden still remains on AGZ to prove his case against all the Defendants.
- These proceedings are civil proceedings and therefore the standard of proof even though the allegations are fraud is the balance of probabilities. Nevertheless in view of the allegations it is clear that I require strong and cogent evidence before finding there has been any fraud or dishonesty. I accept the requirements summarised by Lord Nicholls in In re H (sexual abuse: standard of proof) [1996] AC 563 at 586:-
- I equally take on board that where Defendants are professionals and of good character a finding of dishonesty is a grave finding and that too requires me to be careful in assessing the evidence against such a person before finding them guilty of dishonesty.
- Against that the civil standard still remains the requisite standard and I bear in mind that primary fraudsters are only successful in activities like this if secondary people are willing to assist them. Of course the assistance may be honest; but negligent or misguided; it is not inconceivable that particular individuals are chosen because they may be of an unquestioning (but honest) nature or in some other way may be reluctant to ask questions and thereby be incompetent and failing in their professional duties but not be dishonest. It is a question of degree. In respect of the UK based Defendants who are all alleged to be assisters it will be necessary to view the evidence against them and their evidence and come to the appropriate conclusion after that review of the extent of their role in assisting the primary fraudsters or being fellow conspirators with them.
- The claim against the Defendants 1 – 12 as a whole is that they all participated in a conspiracy. The conspiracy is defined in paragraph 3 of the RRRAPOC as follows:-
- Thus the conspiracy is a conspiracy by unlawful means to defraud the Claimant by fraudulent misappropriation of its monies in breach of trust and to conceal such fraud.
- In addition it is alleged that FJT, XFC, SC and AS by reasons of the posts they held in the Government namely President, Director of ZSIS, Director of Department of Loans and Investment in MOF and Zambian Ambassador to the USA and/or agent for the Republic owed fiduciary duties to act in good faith, to act in accordance with the powers and authority vested in them, not to place them in a position of conflict, not to make any secret profit or receive any secret payment and have a duty to account. These duties arise under the general law as AGZ's Zambian law expert Dr Patrick Matibini set out in his Experts Report. They are familiar duties and none of the Defendants disputed such duties. FJT clearly owed those duties when he carried out the functions that are vested in him by virtue of Article 44 of the Constitution.
- In addition to the claims in conspiracy against MCD, CM and BT (the balance of the participating Defendants) it is alleged that they provided dishonest assistance in the alternative to the Zambian Defendants to facilitate their breach of duties. That equally applies to the other Defendants who did not participate but were not based in Zambia i.e. Irene Kabwe, Basile, Hearnville and Nebraska. The separate claims against Jarban, Belsquare, Cracco and Standaert have been dealt with elsewhere.
- By the time of the closing AGZ had limited the dishonest assistance claims against individual Defendants to the amounts that GT have shown in their traces to have been respectively received by them and other monies that they establish as being Government monies.
- AGZ says that it arose following the collapse of the bank in Zambia Meridien BIAO Bank of Zambia Limited ("Meridien"); its parent was Meridien International Bank Limited (a Bahamas registered company) and the ultimate parent was ITM International SA (a Luxemburg registered company). IM was General Counsel for ITM in London, FK worked for Meridien's Leasing Operation between 1987 and 1990. AC worked for the same operation from 1992. Also from 1990-1995 FK was based in New York running the Investment Banking Division of Meridien International Bank Limited.
- Apparently confidence in the Meridien Group appears to have evaporated in early 1995 leaving the Zambian subsidiary highly exposed to collapse. On 19th May 1995 the then Minister of Finance Mr Ronald Penza announced that the Bank of Zambia ("BOZ") would seize the Zambian subsidiary under powers in Section 94 of the Banks and Financial Services Act. Receivers we appointed on 5th June 1995 and compulsory liquidation was subsequently ordered. The Governor of the Central Bank was dismissed.
- There was an investigation into the collapse by KPMG who reported on 2nd November 1995. No proceedings were brought against anybody arising out of the collapse.
- AGZ's case is that preparations were made for the conspiracy as early as 14th April 1995 when XFC wrote to Mr Penza seeking financial assistance for the ZSIS for unspecified projects. Funding was sought on the basis that debts left behind by the former regime had to be met. In the letter XFC said "I wish to recommend that these debts be treated as part of the national debt. The amounts involved are quite modest and can, therefore, be accommodated within the external debt service budget without drawing the attention of the IMF and the donor community. I stand ready, Hon. Minister, to work with your Permanent Secretary and the Director of Budget and Loans Investments (i.e. SC) in order to come up a repayment program".
- This is shortly before the Meridien collapse. At about the same time SC was Deputy Director of Loans and Investments in MOF. It is plain she was a powerful figure within MOF. I refer to the extensive evidence led by AGZ.
- There is no doubt that within Government circles FJT, XFC and SC operated in a way that led to no official having the courage to challenge anything they said. This was achieved in two ways. First anything concerned with ZSIS was simply not questioned. Anyone who tried to question it met with vigorous challenges by SC. No violence was perpetrated on anybody. Although Mr Penza was murdered in 1998 no evidence has been adduced as to why and by whom he was murdered.
- Nevertheless mindful of Thomas More's warning to Thomas Cromwell "learn to threaten like a Chancellor" physical violence simply was not necessary. People in public service could not afford to lose their employment in Zambia. That was plainly a compelling threat which needed no violence to support it. I am quite satisfied on the evidence that was deployed before me that it was simply not realistic to expect any public official to challenge XFC and SC when questions ought to have arisen. This meant as will be seen in this judgment that checks that should have prevented the payments being made via MOF to Zamtrop did not operate.
- It is true to say that as the trial developed it became clear that the statutory regime under which ZSIS operated was very different from the general regime. However it is clear that the challenges were not made either because the matter was "secret" or because of the heavy influence of XFC and SC. FJT was in the background and it was known that SC had connections with him. Enquiry was therefore not healthy.
- An example is in the evidence of Mr Mungulube "but no one could challenge Madam Stella Chibanda because through Madam Chibanda, it is like seeing the President, through Madam Stella Chibanda [it] is like seeing the head of General Intelligence. And we were all scared of our jobs, I suppose, including myself. [T9/29]. There are many other examples summarised in AGZ's closing.
- On 16th May 1995 SC met XFC when he was in hospital. On the same day a payment of $2,000,000 was authorised by Mr Penza to Wilbain Technology Inc ("Wilbain"). A further sum of $400,000 was authorised on 21st May 1995.
- On 31st May 1995 XFC wrote to a Mr GA Ruskosky. He was the President of System Innovations Inc ("Systems") a company incorporated in Virginia. On the same day he wrote to Jim Wills of Wilbain Technology Inc and Samanco International Inc. Wilbain and Samanco are Delaware companies. AGZ in his closing (paragraph 49 fn44) attributes the date of incorporation 5/12/95 to the wrong Samanco company.
- The letters are in identical terms and are extraordinary. The letters state that the Office of the President Special Division (i.e. ZSIS) within XFC's authority will provide the company with funds to be utilised for selected projects. XFC will then from time to time give the company instructions as to the disbursements which may be amended. The company is assured that they will not be asked to disburse funds for unlawful activities "although you are relieved from making enquiry about, and will often be unable to know, the use and application of funds after you have disbursed them". Each company is enabled to rely upon instructions given whether written or unwritten. Finally XFC gives each company immunity from any claims by others or any successor Government Officials.
- The earliest recovered document in respect of the arrangements was a contract between Zambia and Systems dated 17th March 1994 with a value of $4,350,000. No contract with Wilbain has been discovered.
- Shortly thereafter 2 documents headed "Memorandum of Understanding" ("MOU") were signed on 6th June 1995 (one for each company). SC and Yotam Wilson Zulu a senior ZSIS officer and a Mrs Bridget Mwanakaoma (Treasury Counsel) were apparently sent to the USA by XFC.
- Each MOU purports to record amounts owed by Zambia to the company concerned and sets out agreed payment schedules for further amounts. Mr Wills has stated in an interview dated 3rd December 2003 in the presence of Assistant United States Attorney General Wingate Grant, FBI Special Agent Brad Gregor accompanied by Mr Mutembo Nchito (a Zambian Government lawyer) and Mr Hamunjele that the MOU was "deliberately inaccurate". He said that SC was part of the transaction. He bought her a bottle of champagne when the MOU was signed. He said that XFC wanted Wills to buy a $50,000 gold Rolex for him and to cut money out for SC. I should say that there is evidence to show that SC received $50,000 from Wilbain paid into a bank account (see below in respect of the allegations against her). That payment was effected on 14th June 1995 into an account that was opened at ZANACO on the name of S Mumba (Ms Chibanda's maiden name), as summarised in AGZ's closing paragraph 495 fn 512.
- The statement also refers to XFC telling Wills that people can be "whacked". It records that Mr Penza "hit us up for a $30,000 bribe". Wills refused and Penza was assassinated.
- I approach this statement with caution. There are a number of difficulties about it. First the document I have is not signed and is described as a draft. Second the notes were prepared by the US representatives. Neither Mr Hamunjele nor Mr Nchito took their own notes. They did not receive the documents for consideration until later. At best this statement can be used to support other primary evidence and no more.
- The two MOU's are both dated 6th June 1995. The first in favour of Systems contains in paragraph 1 a statement that it has contracted with the Republic of Zambia to do certain work for the OOP (Special Division) and Zambia has a total obligation to pay $4,350,000 of which $600,000 has been paid. Clause 2 provides that Zambia shall pay Systems 5 instalments of $340,000 per month beginning on 6th July 1995.
- The MOU with Wilbain is the same except that it is stated that Zambia owes Wilbain $8,268,000 of which $2,400,000 has been paid and that Zambia will pay Wilbain $5,868,000 in 12 equal monthly instalments of $489,000 each.
- On 6th June 1995 another payment was made to Wilbain in the sum of $2,400,000 and $600,000 was paid to Systems direct from a MOF account. On 14th June 1995 XFC requested Mr Ruskosky to transfer $300,000 to Wilbain. It was stated that this was for contracted goods and services.
- Between August and November 1995 substantial transfers were made from MOF:- $978,000 to Wilbain 10/8/95, $680,000 to Systems on the same date, $978,000 to Wilbain 4/10/95, $680,000 directly to Systems on the same date, $840,000 directly to Systems 22/11/95 and $978,000 to Wilbain on the same date. Thus Systems received $2,200,000 and Wilbain received $2,934,000. By December 1995 therefore Systems had received $2,800,000 under its MOU and Wilbain had received $5,334,000 under its MOU. Thus as at that date Systems and Wilbain were still owed $1,550,000 and $2,934,000 respectively. These figures are significant when one looks at the subsequent payments made to Systems and Wilbain out of the Zamtrop account. There is no other purported justification for any other payments to either company.
- AGZ contends that during 1995 XFC, FK, AS, BT, and IM were involved in various meetings in both London and Lusaka. Those meetings apparently took place in the Autumn and December 1995. They thus follow the payments that have already been made and the setting up of the MOUs but are shortly before the substantial payment method which was created in December 1995. I will consider whether meetings took place as alleged by AGZ when I deal with the claims against the individual Defendants under the conspiracy. In addition it is noted by AGZ that Redcliffe was incorporated on 23rd June 1995. IM acknowledges that there was a meeting between him and XFC and FK. AS also acknowledges that there was a meeting between him and XFC. BT denies he took part in any meetings.
- AGZ contends that the circumstance in which AFSL was set up hard on the heels of Meridien's collapse is surprising. FK asserted that he was encouraged by the Minister of Finance to venture into the business of finance (interview notes 19.3/214). Its application for a licence was apparently made in July 1995 and ultimately granted towards the end of October 1995. On 9th October 1995 BOZ wrote with notification that Mr Penza had authorised a Financial Services Licence to be granted with immediate effect. Under the regulatory statute the Registrar, as defined, "in consultation with the Minister" (section 10 BAFS Act 1994) grants the licence. AGZ contends Mr Penza issued the licence without any proper evaluation by BOZ. This seems to me to be correct.
- AFSL was licensed as a non bank financial institution. It was authorised to conduct financial but not banking services. FK's involvement it is contended with Meridien should have prohibited a licence being granted to AFSL without BOZ's approval (section 31 (3) BAFS Act (CAP387)). The evidence is not clear on this but again it is of use only of a secondary nature. AFSL commenced operations in December 1995. On 28th December 1995 FK wrote to his daughter stating that there was tremendous interest in from senior Government officials who can facilitate matters greatly and "even my Meridien past did not appear to be a handicap" [19.3/44]. This suggests that FK's re-emergence in the financial market had its way smoothed by the powers that be at that time.
- In December 1995 payments were initially made to MCD in London of $250,000 transferred by ZANACO "by order of XFC". An MCD ledger was opened for the payment showing the client as "Faustin M Kabwe". I will deal with the ledgers further when I deal with the claims against MCD.
- Prior to December 1995 ZSIS had an account since 1963 with ZANACO in London which was more or less dormant. On 8th December 1995 the then High Commissioner in London wrote to FM Siame who was then Zambia's Auditor General in Lusaka. He referred to a meeting which had also been attended by the Director General (i.e. XFC) and to a minute of that day regarding the special account (which has been lost). He confirmed that the account was to be closed. In a statement provided by the High Commissioner to the Task Force it is suggested that FJT was also in London at the time and met with XFC and Mr Siame.
- On the same day account number 58C/40/070185/01 ("the Zamtrop Account") was opened. Mr Mandona's (the then Finance Director of ZSIS) evidence was that he was not told about the account. In his witness statement he stated that he was unaware of the new Zamtrop account until early October 2002 when the court ordered disclosure of statements of account in the criminal libel proceedings brought against the Post newspaper. However after that evidence had been given I ordered AGZ to disclose interview statements that it had obtained from all relevant witnesses concerning the dispute in this action. As a result of that a statement made by Mr Mandona in June 2002 was disclosed. That statement referred to the fact that in 2000 he was requested to remit some money to Officers who had overstayed in London and he attempted to make the payment to the Zamtrop account i.e. the old account but he was told that the account number was changed. It was put to him by Mr Head for IM that he therefore knew 2 years earlier that there was a new Zamtrop account with a new account number. He was told that the number had been changed by Mr Zulu. He acknowledged later in the cross examination that his witness statement was wrong in that he knew of the new Zamtrop account earlier than 2002. He acknowledged that but said he received no statements. His evidence was confusing which is hardly surprising because he gave evidence in November and was then recalled without warning at the end of February. By agreement between the parties he was not told the purpose of the recall. Ultimately it seems to me and this I find the true picture was that he was told that the old account was given a new account number but he was not told that in fact the new number was for a new account. I accept his evidence that he did not know of the existence of the new Zamtrop account. I should say in passing that he was recalled for other matters in respect of a payment of $400,000 made to CM out of another ZSIS account 677 but I will deal with that when I deal again with the individual claims against Defendants.
- On 21st December 1995 XFC wrote to Mr Penza requesting that he consider channelling the payments to Systems and Wilbain through the Zamtrop account. The purpose for the request was stated "in order to control the payments in relation to the progress of the project. It would also forestall any possible withdrawal from contract by the contractor before the desired completion of the same".
- It will be remembered that XFC had written to him on 14th April 1995 suggesting these proposals be hidden from the IMF and donor community. On 22nd December 1995 Mr Penza approved that suggestion. The letter was copied to the then Director of Loans and Investments Wally Musonda. He passed the letter on to his Deputy (SC) suggesting that in view of the methodology of debt service being used it might be possible to channel payments through ZANACO and therefore she should explore the possibility. She sent him a note on 8th January 1996 which followed his written instruction and a verbal discussion on 5th January 1995 (sic). She stated that she issued payment instructions to BOZ and had provided a copy of XFC's minute to Mr Penza and that she "drew the attention of the Deputy Governor to the classification of the correspondence". By this she meant that it was expressly drawn to their attention that the matter was "secret". This put others on notice that investigation was not to be expected. She stated this was the only way out. Following this exchange a series of payments were made to System and Wilbain. The first arranged payments were on 8th January 1996 in the sum of $798,000 paid to the Zamtrop account to cover payments of $498,000 to Wilbain and $300,000 to Systems. That authorisation was signed by Mr Musonda and SC. The classification of the attached minute (secret) was expressly drawn to the Deputy Governors attention as SC confirmed. I am satisfied that the use of the word "secret" was designed to inhibit enquiry by anyone. I do not accept the purpose was legitimate.
- The account became operational on 29th December 1995 on receipt of the opening account documents. The relevant form is Form 49 and it was signed by XFC alone. According to the evidence of Mrs Inonge Grace Muyunda the head of Internal Audit Compliance and Control at ZANACO this was irregular. She gave evidence of further irregularities namely that the name of the account was not indicated, that it was not authorised and stamped by the Ministry of Planning and Finance and that this was the only Form 49 that she found at the London Office despite that each account is required to be renewed annually. She expressed a view that Beauty Kaluba who was the head General Manager at the London branch of ZANACO should not have permitted the account to be opened but should have required the form to be completed properly.
- Further she pointed out that the account card (which had 2 initial signatories namely XFC and D Nyangulu First Secretary in London) should not have been allowed to be opened on the basis that either of the signatories could sign. On 2nd August 1996 XFC wrote to the Branch Manager advising that Mr Nyangulu was no longer a signatory and that in the meantime XFC should sign as sole signatory. This also was said to be irregular. Neither Mr Regis Phiri nor Mrs Muyunda was aware of any other Government account with sole signatory arrangements. A second signatory Ruben Sakala was appointed but once again either was allowed to sign. By a letter dated 22nd July 1999 XFC advised the General Manager of ZANACO that he would be the sole signatory until further notice.
- In practice XFC controlled the Zamtrop account. That was the factual evidence led by AGZ showing how the Zamtrop account was opened at the start of the trial. However he also led evidence showing how generally Government accounts were controlled and audited.
- However as the trial progressed two documents were produced which showed the Zamtrop account operated under a quite different regime which had not been previously disclosed or referred to in the action at all by AGZ but it had been adverted to by FJT.
- This was one of the unexplained failures on the part of AGZ which is unsatisfactory.
- The first of these is a letter dated 17th January 1996 from FJT to the Auditor General. The copy produced was obtained from the Auditor General's office but the evidence of the current Auditor General Mrs Chifungula was that this letter was not found when she did an initial search in 2004 (although her remit there was extremely limited and somewhat surprising). She said it was found by chance in December 2006 when she did a fresh search. Although there was a file headed "Correspondence from His Excellency The President" it was not in there. She found it in another file marked "Appointment of Ministers and Cabinet Ministers and Elected Ministers" (D22 pages 15 and 21). There was no copy found with any ZSIS papers. Indeed AGZ's case is that ZSIS had no papers at all relating to the Zamtrop account. I will deal with this further again when I consider the substantial criticisms of AGZ's evidence made by the Defendants.
- The letter is addressed to the then Auditor General Mr Siame who had received the earlier correspondence in December 1995 it says as follows:-
- This letter is hugely significant. The failure to disclose it initially is greatly to be deplored. It changed the whole basis upon which AGZ brought his case. Further in my view it is an important key in the alleged conspiracy.
- The timeline in my view is important. First there is the need for finance and the suggestion from XFC that the payments can be hidden from the IMF. There are then large payments directly out of MOF after the MOU's were signed. There is then the closing of the Zamtrop account. I was provided with no rational explanation as to why the Zamtrop account that had been in existence since 1965 needed to be closed. I find there was no legitimate purpose for this action. If there was a genuine secrecy there was no reason that account could not have continued.
- What happened was the new Zamtrop account was opened on an irregular basis and operated on an irregular basis by XFC with the connivance of Mr Penza and the knowledge of Mr Siame. I have not heard from Mr Siame.
- His successor Mrs Chifungula clearly had high regard for him. She gave evidence of awards made to Mr Siame when he retired. I have not been given any reason as to why he was not called. The plain fact however is that Mr Siame was complicit in the opening of this account as was Mr Penza. Both of them would know it was irregularly opened. An indication of Mr Siame's failure to act is the fact that he was unquestioningly involved in the closure of the account on 8th December 1995 and had the benefit of a letter dated 6th March 1999 from XFC to him certifying the destruction of the Zamtrop account documents dated up to 31st December 1998. This was found by Mrs Chifungula. This is an extraordinary document. Mr Phiri told me that the file "DG Pers" (the reference on the letter) was not found at the ZSIS premises. There is therefore no copy of this document with the ZSIS files.
- Mr Phiri was aware of the Zamtrop account when the handover occurred from XFC in 2002 but apart from that his evidence showed there were no other documents relating to the Zamtrop account and any of the payments made out of the Zamtrop account. He was cross examined extensively about his searches by the Defendants. Having seen him give evidence I accept his evidence. I do not believe that he has come to court and told lies about the existence of documents. I do not have to decide the level of culpability of Mr Siame. I am satisfied however that at the very least he failed properly to exercise his duties as Auditor General or alternatively chose not to exercise the duties required of him probably because of the intimidatory nature of XFC and Mr Siame's unwillingness to challenge him and thus FJT. I draw this conclusion from the fact that his actions in 1995 and the 6th March 1999 letter are so extraordinary that they cannot be explained on any other basis.
- FJT had alluded to this in his press statement referred to above. He did not refer to it in his Defence but it seemed to me plain that it was something that ought to have been considered by AGZ. When the letter of 17th January 1996 was disclosed this consideration became a certainty. This was contrary to AGZ's opening and the way the case had been run before this revelation i.e. that no special procedures were alleged to apply to the Zamtrop account. The letter completely changed that and it would not be possible either for the Defendants or myself for that matter to understand fully how the Zamtrop account operated without reference to this document. I so intimated during the trial. The response of AGZ's representatives was somewhat surprising. Production of the document was resisted. An attempt to claim that it was a secret document and should not be produced was made. I ordered production. Instead of the document being produced a typed copy (with errors in it) was produced without certification. It was then suggested that I alone should look at it (an impossible suggestion to a trial Judge). It was then suggested that there might be one copy left in court. Ultimately (bearing in mind the ring fencing provisions) genuine copies were made available to the parties.
- I could not understand the reluctance of AGZ to produce the document. The only explanation that seemed to me to have any kind of credibility was the "traditional" view of secret service organisations that everything they do (down to the ordering of the light bulbs) is a secret.
- The Finance Charter is important because it is the platform for FJT's justification for receiving sums that he was alleged to have received.
- In my view there is nothing in the Finance Charter that justified this reluctance and none was seriously put forward. It is simply the case that it is the document which governs the financing of ZSIS. The Director General is made responsible to the President or to a Minister or any other Officers specially designated by the President for the budget. ZSIS is to have its own accounting unit and make its own bank reconciliations and the Director General is responsible for preparing internal audit estimates in a form prescribed for other Government departments for approval by the President or the Minister. The estimates are to be classified as top secret and personal and will be accessible only by the President and the Minister. The warrant authorising the budget allocation is to be signed by the President. The classified document will be accessible only to the Director General, the President and the Auditor General. There are provisions for the issue of certificates to the Auditor General on a quarterly basis. I observe that there were indications of audit approvals in the early 1990's but none has been discovered for the period the subject matter of this action (doubtless destroyed as the result of the letter 6th March 1999). The Director General is given power to allocate funds from the budget to officials in ZSIS and authorise them to approve and incur expenditure "in the same manner as is applicable to the handling of public funds generally". He is not required to obtain certificates where it is against the interest of the service so to do but in each case he will obtain from the paying officer a certificate of payment which sets out the details of the payment.
- What this document shows is that the Director General (i.e. XFC) is given wide ranging powers to expend money in ZSIS operations. The powers however are not untrammelled. There has to be a budget and there has to be a proper system of verification. Those procedures are subject to review in effect by the Auditor General (Mr Siame throughout the period) and FJT. It is not suggested by any of the Defendants that this gives the Director General a licence to steal. Any powers he exercised must be exercised bona fide in the interest of the Republic. I do not accept that it relieves the ZSIS accounts from the general requirements as identified in the evidence before me. The overall analysis of the Finance Charter shows that not to be the case. In my view the only significant difference is that the procedures are under the direct control of the Director General, the Auditor General and the President.
- Even if I was wrong on that and it had its own separate regime it is accepted by all as I have said that the Finance Charter does not authorise improper expenditure.
- The significance in my view is that this is the final key of a decision made to set up a system of payments which would be operated under the cloak of secrecy of ZSIS operations. These actions consisted of the opening of the Zamtrop account (with no apparent purpose) the control of that account in effect by XFC (and thus the removal of scrutiny from anybody other than the Auditor General and/or FJT). Third there is the reinforcing of the fact that all of these payments and contracts are under this secret regime and that therefore challenge or enquiry will not be tolerated. Fourth there is the fact that the payments out of the Zamtrop account themselves are not to be monitored or queried for the same reason. Fifth, there is the apparent wholesale destruction of documents arranged by XFC and notified to Mr Siame. I cannot conceive of any lawful basis upon which the Auditor General would participate in the destruction of documents (for example) that came into existence as recently as 3 months earlier than the letter authorising destruction.
- It is clear that FJT, XFC and SC are all involved in this.
- FJT alluded to the Finance Charter no doubt believing that it would not be produced at the trial. There is some support from this in articles that were published in the Guardian Weekly towards the end of my period in Zambia which suggested that the hearing before me was fatally flawed because access to that document was not provided. Mr Penza as I have said above and Mr Siame were either participators or compliant.
- The justification for making extra payments is the MOU documents which do not actually in reality provide any justification. Nor am I convinced that there was any genuine secrecy in respect of these two contracts. There are suggestions that there were camera installations but large parts of the contract apparently relate to fencing at Lusaka airport and the High Court and the Presidential Palace. Apart from the Security Service's general obsession for secrecy (which the Defendants deploy with some justification see the performance over the Finance Charter) there is no other overriding secrecy.
- Finally in accordance with XFC's letter of 14th May 1995 the Systems and Wilbain contracts found their way in to the national budget but were hidden away. No express detail was provided. There is some evidence which suggests when the IMF representatives reviewed the budget they raised questions about them but they were successfully batted away. I do not propose to set out the detail of this because AGZ accepts the budgets were approved. His case however is that the budgets were fraudulent because the overwhelming bulk of the monies allocated in the budgets were simply stolen.
- I accept that it is theoretically possible for the operation that I have set out above to have had an innocent explanation namely the desire to cloak genuine ZSIS operations in secrecy. However my firm conclusion is that in reality this whole operation was created to be used as an engine of fraud at the expense of the Republic. In so concluding I bear in mind as the participating Defendants have said that the Zambian Defendants who could have provided explanations are not before me. However given their ability to participate in this trial as fully and fairly as possible their failure so to do in my view shows that they have nothing to say in their Defence. Their absence does require caution but the evidence in my view is overwhelming.
- I am satisfied on the basis of the evidence led by AGZ that there was a primary conspiracy created by the Zambian based Defendants to steal money from the Republic. I am satisfied that the method was by fraudulent contracts in favour of Wilbain and Systems and fraudulent payments made from MOF under the approved budget in to the Zamtrop account for the purpose of stealing as much money as possible thereby paid in to the Zamtrop account. The method of opening and operating of the Zamtrop account in my view admits of no other explanation of a credible nature. FJT, XFC and SC are all involved at that stage. In this context I reject any criticism of AGZ's witnesses of fact as regards the operation of the payments out of MOF into Zamtrop and a lack of challenge to any of those payments. There are some legitimate criticisms of other aspects of AGZ's evidence but in respect of the main thrust of the conspiracy I unhesitatingly accept all of the evidence of all of these witnesses. The cloak of secrecy was maintained by the climate of fear created by the triumvirate within Government circles of FJT, XFC and their willing assistant SC who received large sums of money in a Zambian context. I have already alluded to the $50,000 she received shortly after the MOU's came into being. In addition the GT Report attributes a further receipt of $37,103 by her (H4/13). This includes payments to her under the name of PC Mumba and a $10,000 payment to her son by MCD. There is a further traced payment to the name of PC Mumba of $50,000 on 14th March 1997 (GT7). In addition AS's Barclays Bank account shows payments to her or her family of some $33,120.80 (see AGZ's closing para 526 – 538).
- One has to put those payments which are in excess of $150,000 in their context. SC was a Government employee at all material times. Upon her appointment to Permanent Secretary at MOF on 14th December 1999 her annual contractual remuneration was K9,832,680 (about $2,500). The payments she therefore received are the equivalent of approximately 60 years salary. Her affidavit of means disclosed negligible assets except a surprising $10,252 in an account in Standard Bank in the Isle of Man.
- Before she "discontinued participation" she served a Defence dated 13th February 2002 incorporating a Statement of Truth. The only place where she dealt with the receipt of monies is paragraph 44 where she stated she had no recollection of receiving monies and that AGZ has demonstrated no proof. The proof is in the evidence adduced by AGZ as traced by GT. SC has had provided to her all of the documentation in the trial. Her failure to make a showing is the final indication of her full participation in the conspiracy alongside FJT and XFC.
- It follows also that the breaches of fiduciary duty alleged against those Defendants are also made out.
- Somewhat surprisingly Wilbain made the first payment to the Zamtrop account of $528,982 on 29th December 1995. On 2nd January 1996 a credit of $520,000 was credited to the Zamtrop account from MOF but there is no reference to System/Wilbain in the authorisation and it has not been GT traced. On 16th January 1996 Wilbain transferred a further $114,982 to the Zamtrop account.
- The first request for payment was by letter dated 8th January 1996 was made by Wally Musonda and SC. The request was for a transfer of $798,00 to the Zamtrop account and the justification was instalment number 7 $498,000 to Wilbain and $300,000 to Systems due January 6th 1996. The classification was notified namely "secret".
- Between 1991 and 2001 $52,152,361.19 was transferred to the Zamtrop account. GT has traced $43,000,000 as coming direct from MOF accounts. In addition GT has traced $1,410,977 as having been paid direct from MOF accounts to Systems and $4,356,000 direct to Wilbain from MOF. GT has traced transactions from the Zamtrop account to the Defendants. AGZ has limited his claim to traced items only. GT in addition has traced $17,170,500 as having been paid to Systems from MOF funds flowing through the Zamtrop account. A similar exercise in respect of Wilbain produces a figure of $355,000. These figures are not challenged by anybody.
- The payments made to Systems vastly exceed its apparent contractual entitlement. Conversely, the payments made to Wilbain are less than the sums apparently due to it under its MOU. AGZ however does not challenge the genuineness of these payments. That does not in my view mean that he necessarily accepts that the payments are genuine; it is merely that he cannot prove that they are not genuine. Nevertheless I find it surprising that given the allegations about the Systems and Wilbain payments these companies were not in one way or another pursued. This does not matter as regards these Defendants as no part of those payments is claimed against them. However those payments were used by these Defendants to show that the Zamtrop account had a prima facie legitimate purpose. I do not accept that for the reasons that I have already set out above. Some of the monies paid out have been returned as set out above.
- Approximately $10,000,000 further was paid in to the Zamtrop account from various sources (AGZ's closing paragraph 103). The significant ones are as follows. First there is $743,819.60 from the Office of the President. Second Wilbain paid $643,966.96. Third MCD paid $323,968. Fourth $449,995.48 was transferred from a Jersey account reference "O/O Cave Malik "[1.2 65]. Fifth Citibank Switzerland paid a total of $1,230,000. Finally a firm of Chartered Accountants Lubbock Fine paid a total of $599,982.
- AGZ contends that these 3rd party remittances are deemed to be Government monies by virtue of Section 7 of the Finance Control and Management Act CAP 347 which provides any money received into a Government account is deemed to be Government money. I reject that submission for two reasons. First it seems to me as a matter of construction Section 7 is designed to apply to lawfully opened accounts. I do not see it can be used by AGZ when the whole of AGZ's case is that this was not a lawfully operated Government account. Second the relevant bank account is in London. On the authority of Libyan Arab Foreign Bank v Bankers Trust Co [1989] QB 728 the bank account is governed by the law of the place of the branch that holds the account. Further Dr Matibini confirmed in his oral evidence that Zambia does not legislate extra territorially. (D19 page 96). There is no such deeming provision in English law where the relationship between banker and customer is that of debtor/creditor.
- Authorisation was obtained for transfers of Government money to the Zamtrop account for the purpose of discharging debts said to be due to Systems and Wilbain. No other purpose ever received an express or implied authorisation. $30,586,521 was claimed from MOF and paid in to the Zamtrop account as payments to Systems of which only $14,170,500 was paid on to that company leaving a difference between the amount claimed and the amount paid of $13,416,021. The amount claimed referable to Wilbain was $12,158,985 of which only $355,000 was paid on to that company leaving a claimed but unpaid balance of $11,783,985.
- The total amount authorised for payment but not paid is therefore $25,754,316 taking into account the GT variations in their supplemental report.
- In addition a total of $5,334,000 was remitted directly to Wilbain from MOF. Mr Wills in his statement in interview with the FBI and the US Justice Department said the total value of work done by Wilbain for ZSIS was between $1,000,000 and $2,000,000. This contrasts starkly with the MOU. There is evidence also that Wilbain ceased trading in about June 1997 and ceased to exist in 1998 when its bank account was closed.
- Extensive evidence was led by AGZ setting out the procedures for authorising payments within MOF via the internal department of External Resource Mobilisation ("ERM"). In January 1993 SC was appointed Assistant Director (Loans and Investments) in MOF and in December 1997 she was appointed Director – ERM. In December 1999 she was appointed Permanent Secretary of MOF.
- Up until September 1998 the procedure by which monies were transferred from the MOF account was that MOF would send a letter of instruction to BOZ to effect the specified payment. The letter would be signed by 2 people. In practice Zambia's payments to Systems and Wilbain were effectively left to SC to administer. Subsequent to the opening of the Zamtrop account letters of instruction for payments to Systems and Wilbain were signed by SC as set out in the following table and associated footnotes. These are the payments claimed from MOF and paid into the Zamtrop account. They are not the payments actually made to Systems and Wilbain out of the Zamtrop account which were the figures set out in paragraph 157 above.
- There are a number of curious features about these payment instructions. For example the letter of instruction 28/06/1996 records this as the "final payment" due to Wilbain. The payment 6/11/1997 was described as the 9th and final instalment but thereafter two 10th instalments were made and 11th, 12th and 13th instalments. The 10th instalment was actually paid four times and the 11th and 13th instalments were paid 3 times each. All of this was easy to discern when the approval records went through. None was effectively challenged.
- From September 1998 a different procedure was introduced by Jeffrey Mwenda which introduced a form of Payment Authorisation ("PA"). The payments made under this system are in the following table.
- SC signed each PA.
- In respect of all of these payments as AGZ's evidence shows SC brooked no interference and there was no verification at all as the evidence called by AGZ showed.
- The actual funding of the payments was nearly always made using BOZ's bridging loan facility. Both XFC and FJT on occasions became personally involved in respect of the issue of payment (see the evidence of Dr Kalyalya and Elizabeth Lsumambo and the other evidence identified in AGZ's closing paragraphs 235 and 236).
- I am quite satisfied that the appropriate procedures were simply ignored because of the climate of fear which affected anybody in Public Office who might possibly cross FJT or XFC. It follows that millions were removed from MOF and paid into the Zamtrop account purportedly to satisfy contractual obligations to Systems and Wilbain far in excess of the sums which appeared due to those companies under such contractual documentation that exists and far in excess of the sums which were actually paid to them. In this context I accept the evidence highlighted in the Claimants closing paragraphs 237 and following. Ironically on the figures Wilbain was apparently paid less than it was entitled to under its MOU.
- On 15th January 2007 Mr Croxford QC on behalf of CM raised a point of law on whether there could actually be a conspiracy as alleged by AGZ if the Wilbain and Systems payments had been authorised by Parliament. This is on the basis that those sums having been budgeted for and included in the Appropriation Acts approved by the Zambian Parliament "the court should not be invited to investigate the payments". On 17th January 2007 an application for wide disclosure including the underlying budget documents was made. I dealt with it on the 18th January 2007 by dismissing it. The reason I dismissed it was the apparent acceptance by AGZ that the Systems and Wilbain claims were included in the budget. That was on the basis of paragraph 7 and 9 of Mr Malambo's witness statement where he said that under the budget heading "other" were to be found (no doubt carefully hidden away in accordance with XFC's letter of 14th April 1995) the Systems and Wilbain budgets. There was also evidence to show that the IMF queries were evaded. There might be two reasons for this. First it is possible that the Government knew they were in budgetary difficulties and wished to hide this legitimate expenditure. In fact in my view it was a device to hide illegitimate expenditure created pursuant to the conspiracy to defraud the Government. The Republic could not have funded these large payments except by the use of overseas funding. The conspiracy therefore perpetrated a deception on the IMF.
- AGZ later on in the trial appeared to retreat from the acceptance that the Systems/Wilbain payments were included in a budget that was approved. This continued in paragraph 219 of his closing. When pressed on this Mr Blair QC for AGZ accepted that the case was to be determined on the assumption that the System/Wilbain payments were included in the budget as set out in Mr Malambo's witness statement. I do not see how AGZ could have proceeded in any other way.
- The argument was made by Mr Croxford QC, for CM and BT. Unsurprisingly, it was supported by the other Defendants. It was not adverted to in their opening statement. However in fairness it can be said that the issue of the budget was by no means clear at this stage. This was one of the many instances when given the length of the trial I was unwilling to allow initial stances to be regarded as final stances so long as a change did not prejudice or affect any other party. All parties benefited from this approach during the course of the trial. It led to everybody being able (I hope) to accept that every conceivable argument within reason was deployed fully on behalf of their respective clients. Thus Mr Croxford QC was allowed to deploy these arguments although they were raised late in the day in the trial.
- AGZ's case is that there was (to use Mr Croxford QC's words) an over arching conspiracy to steal Government monies and that the medium used was the Zamtrop account. That is to be contrasted with a possible conspiracy which involves monies being lawfully paid into the Zamtrop account and then unlawfully misappropriated. Now this might be at first sight an argument about form rather than substance. However it is important from the participating Defendants point of view because it is a platform that they can use for submitting that even if it is established that they are conspirators the conspiracy in question is one which involves unlawful removal from the Zamtrop account and not unlawful paying into the Zamtrop account. The figures make a large difference to these Defendants' liabilities. In effect any conspiracy they would submit on this basis would be limited to the amount that they are alleged to have become involved in. It would mean that there would be in effect a whole series of sub conspiracies involving the stealing of particular funds from the Zamtrop account. As regards each Defendant therefore the liability would be limited to the role in respect of each such stolen item thus in effect the measure of damages under the conspiracy on that basis would be the same as the claim for dishonest assistance.
- AGZ has not pleaded any conspiracy that way; his plea is limited to an over arching global conspiracy. However no party (save AS) objected on a pleading basis to AGZ succeeding on the basis of conspiracy (if any) analysed by the Defendants.
- The second potential consequence of this is that it would possibly inure for the benefit of the Zambian Defendants. That is certainly true in respect of this legal argument.
- The argument can be summarised by an extract from Dicey, Morris and Collins on The Conflict of Laws (14th Edition) paragraph 5-044 which says :-
- Further at paragraph 5-05 it is said:-
- This principle, it was said, was not a variety of "acts of state" but one of "judicial restraint or abstention" which was not one of discretion but was "inherent in the very nature of judicial process"….
- Thus the Defendants say it is not open to AGZ to undermine the budget which was approved by Parliament as the English court is not competent so to do.
- This area of law was considered extensively by Lord Wilberforce in Buttes Gas v Hammer [1982] AC 888. There were many issues in the case. However one of the questions to be decided was if Occidental acquired any rights to oil concessions how was it deprived of those rights. The answer Lord Wilberforce gave (page 937 E) was that it was deprived of them directly by the act of sovereign states. Consideration of those involves examination of a series of interstate transactions and further Occidental, if it were to succeed, it would be necessary for it to show that those actions were brought about by necessarily a finding of fraudulent conspiracy between Buttes and the Government of Sharjah and an enquiry into the motives of the then ruler of Sharjah making a decree and back dating it. He then went on (page 938):-
- That decision has received consideration in the Court of Appeal and House of Lords decision of Kuwait Airways Corporation v Iraqi Airways Corporation (nos 4 and 5) [2002] 2 AC 883.
- It will be seen from Brook LJ's analysis (in the Court of Appeal) that the rule was not considered to be absolute but admitted of exceptions:-
- The Court of Appeal concluded that they could investigate the validity of the resolution which purported to seize the aeroplanes which belonged to the Claimant and transfer title them to the Defendant see paragraph 334 as follows:-
- The case went to the House of Lords. The appeal was dismissed. Lord Nicholls of Birkenhead dealt with the Buttes Gas point as follows (page 108):-
- Lord Steyn also distinguished Buttes in paragraph 113 (page 1101) as follows:-
- Lord Hoffman did not deal with the point. Lord Hope of Craighead dealt with it at paragraph 135 (page 118) as follows:-
- Lord Scott delivered a dissenting judgment.
- The Defendants refer to the Privy Council decision in Hoani Te Heuheu Tukino v Aotea District Maori Land Board [1941] AC 308 at page 322 where Viscount Simon giving the opinion of the Board said :-
- That observation should not be taken too far. Whilst the decision of the Board might be correct it is clearly not correct that the principle is stated in such rigid terms. The House of Lords in Kuwait clearly indicated that the rule was not an absolute one. The Hoani case was not referred to either in the Kuwait case or the earlier Buttes Gas case. I do not think it assists in the evaluation of this argument.
- The next case relied upon by the Defendants is Pickin v British Railways Board [1974] AC 765. It was cited to the House of Lords in Buttes but not referred to. It did not achieve that status even in Kuwait Airways.
- I do not regard these decisions as being authority for an application for principle of non- interference as contended for by the Defendants in this case. I am not being asked to reconsider the decision of Parliament to approve the budget. I am not being asked to consider the effectiveness of internal procedures of the High Court of Parliament or whether any of those procedures were effectively followed. I am not being asked to strike down any law of Zambia. The decision in the earlier Hoani case involved the attack upon the actual legislation itself. I simply do not see that the claims brought by AGZ that authorisation was obtained from Parliament for the budget which included matters where the officers of the then Government fraudulently concealed within the budget monies which were subsequently to be stolen by them involves a challenge to the supremacy of the laws of Zambia or the procedure of the Zambian Parliament.
- In the context of the principles as set out in the Buttes and Kuwait cases it would be absurd in my view if the courts could not adjudicate in the present claim because the budget was approved by Parliament in ignorance of the fact that the President and the Head of Security were to use this obtaining of funds for a dishonest purpose. The major difference between the cases cited to me is the fact that by AGZ the Government in question is a party to the proceedings. No case has been cited to me (and I am told Counsel could not find one) where this principle was applied to preclude a sovereign state which was bringing a claim. Given the principles as to why the rule occurs I can well understand that to be the case. There can be no problem of diplomacy or international sovereign embarrassment when the sovereign state whose law is in question is actually a party to the court proceedings in question and accepts the court can investigate it.
- If I am wrong in that then as the Kuwait case shows (see the judgment of Lord Hope especially) there are public policy exceptions. The list is not confined to the actual case adjudicated upon in the Kuwait case. It is a question in each case as to whether or not public policy would prevent the rigid application of this rule operating. AGZ's case is that its principal officers at the time have defrauded the Republic. Part of that defrauding operation was their presentation of false budgets to Parliament and the procurement of the approval without Parliament discovering that fraud. The Defendants' arguments if correct would prevent AGZ on behalf of the Republic being able to bring proceedings in respect of this fraudulent conspiracy even in its own jurisdiction. The Hoani and Pickin cases show that. In this context I assume the law in Zambia is the same as that in England and Wales. I cannot conceive of such a result.
- I do not believe that when the sovereign state wishes to impugn the legislative acts (if that is the case) that public policy which is designed to prevent the courts "embarrassing it" would be used against that sovereign state. I can see no reason why this case calls for "judicial restraint" and overwhelming reasons why I should investigate these matters. This is plainly a public policy exception. Any other decision would be absurd
- I therefore reject the Defendants contentions on non- justiciability.
- In case I am wrong I consider the matter further. I would be precluded from determining that there was a conspiracy based on a budget approved by Parliament even though that approval was obtained fraudulently. However the budget approval merely enables MOF to draw down the funds. Parliament approved those funds to be used for the Systems/Wilbain contract and no other purpose. If there is a subsequent appropriation of those funds fraudulently and dishonestly for private gain or for another purpose by the Zambian based Defendants that is a conspiracy to defraud by unlawful means. The difference is that the conspiracy is to steal the money when it is wrongfully applied out of the Zamtrop account the Defendants would contend. I am not convinced that is the case. The over arching conspiracy is the creation of the Zamtrop account for the purposes of stealing the money. All the decision based on the Buttes case would do is make it not possible to challenge the allocation to MOF. It can have no impact on the application to MOF for dishonest and fraudulent funds.
- Therefore there is no difference in result in my judgment. There is still an over arching conspiracy certainly as regards the Zambian Defendants.
- It can also equally be in my view possible that the participating other Defendants can be parties to that conspiracy if I find they were conspirators. I will deal with the individual liability in respect of that conspiracy when I come to deal with them individually.
- I do not exclude however the residual possibility of a whole series of conspiracies as identified by Mr Croxford QC. It is possible for there to be a conspiracy as between the Zambian Defendants on the over arching basis. In my view that is plainly the case. I have already indicated earlier in this judgment factors which I rely upon. The purposes for which large amounts of the monies were applied out of the Zamtrop account (see below) is also compelling evidence supporting AGZ's claim against the Zambian Defendants for conspiracy.
- Nevertheless it is quite possible that there might be sub conspiracies which only involve the participating Defendants to the extent that they achieved or participated in actual acts of defrauding. That too is not pleaded by AGZ but no point is taken against that lack of pleading by any Defendant.
- In conclusion therefore if my understanding of the law is wrong I do not believe it has any impact on the liability of the Zambian based Defendants but may when I examine the evidence as against the individual Defendants have a different result in respect of the conspiracy claim against them.
- The Zamtrop bank statements show as I have said that a total of $17,170,500 was transferred to Systems and $375,000 was transferred to Wilbain. That is to be contrasted with the $43,279,816 credits to the Zamtrop account which have been identified by GT as having come from MOF. It follows therefore that there is a significant over claiming for payments allegedly due to Systems and Wilbain.
- This is the only lawful purpose for which these monies can be used. It must be appreciated that even if the monies were utilised for some other lawful ZSIS or other Government purpose the money has not been authorised for such expenditure. Against that it seems difficult for me to award a level of damages for conspiracy that includes an alleged misappropriation of monies which have been used by the Defendants to acquire assets or provide services which have accrued a benefit to the Republic. The same point can be made as regards realisations. AGZ concedes as a matter of principle that credit in some way should be given for realisations. The most significant example of that is the Jarban aspect of the litigation where the recoveries substantially exceed the misappropriations.
- The same principle ought to apply to damages for breach of fiduciary duty and damages for knowing receipt and dishonest assistance. This aspect was considered by me in the context of a breach of fiduciary duty by a director in Crown Dilmun & Anr v Sutton & Anr [2004] 1 BCLC 468. The question for consideration is the extent to which a fraudulent fiduciary can claim the benefit of realisations and compensation for the time and trouble expended in acquiring or enhancing the benefit taken for himself but of which he has to account. The law in this area when applied to fiduciaries and their duties to account is by no means clear see paragraphs 211 – 212 of the judgment. I have not had a full argument on this (because of the deferral of the realisations issue). It seems to me that I require further submissions on how the question of how realisations and improper acquisitions which achieved a benefit are dealt with.
- One thing is nevertheless clear to me. The legal burden of proving that the money has been stolen and improperly applied lies firmly on AGZ throughout. That legal burden never shifts and has to be proven taking into account the warnings in the cases referred to earlier in this judgment. Nevertheless the evidential burden can shift. There are two examples in my view to show how this operates. First where the AGZ has prima facie established that the payments made to the Zamtrop account save those that were paid to Systems and Wilbain have been dishonestly applied to non Government purposes. The burden is then on the Defendants depending on their role to show what has become of those misappropriated payments. If the claim is in conspiracy if a Defendant wishes to reduce that prima facie amount the evidential burden has shifted to that Defendant to show the payments have achieved a legitimate purpose (albeit not authorised) or have been used to acquire an asset which has been recovered by AGZ. That would be applicable to all Defendants in so far as it established that they are joint and several participators in the conspiracy. It would equally be the same as regards a Defendant who is found to have acted in breach of fiduciary duty.
- In the case of a liability based on dishonest assistance in the context of this case AGZ's claim is limited to the amount each relevant Defendant is shown to have assisted in the wrongful misappropriation. AGZ has limited his claim to the amounts traceable to each Defendant under that head. That means that each such receipt is traced back into the Zamtrop account and into MOF. It follows therefore that in each of the amounts so limited AGZ has established by evidence that the relevant monies against the relevant Defendant have been stolen and misappropriated fraudulently. If any such recipient Defendant therefore wishes to reduce that amount in my view the evidential burden has shifted to that Defendant and the burden will then be on that Defendant to show that monies which have been fraudulently removed from MOF by virtue of the use of the Zamtrop account have actually either been used for an unauthorised purpose which accrues a benefit for the Republic or has been used to acquire an asset which has been recovered for the benefit of the Republic.
- The counterpart is also true. A sum in excess of $4,000,000 has been traced out of the Zamtrop account into another ZSIS account the Permase General account. That is of course a Government account. It seems to me that the establishment of the return of that sum in excess of $4,000,000 into a Government account shifts the evidential burden in respect of those payments back on AGZ to show nevertheless those sums in whole or in part were stolen or wrongfully misapplied. In so far as he is unable to show that they have been misapplied then his claim is correspondingly reduced because the Defendants have established that the monies came back into the control of the Republic. I cannot make inferences that the monies were subsequently stolen. The inference is that the monies were back in the Government coffers. I cannot assume a wrongful payment once AGZ concedes that some payments out of the Zamtrop account were for a legitimate purpose.
- The traced amounts are set out in H4 of the GT report as modified. They are as follows ($):-
- The monies transferred to MCD were credited to its US $ client account at NatWest Bank in London between 21st May 1996 and 4th April 2001. Once received in the client account the funds were credited to various ledgers mixed with other money and transferred to various individual companies or other firms (such as CM). All this was allegedly done at the direction of FK.
- The monies received by CM were credited to its US $ account at Habib Bank in London. The first sum received was $100,000 on 19th March 1996 (the account then in the name of Kehimkar & Co); $800,000 on 7th October 1998, and $455,218 on 31st January 2001. Once received into the client account the money was credited to ledger number 1156 and then transferred onto various individuals, companies or others as recorded on the relevant ledger and bank statements.
- The monies appropriated to AS were transferred either to accounts held by him or paid to him in cash. These payments range between $250,000 paid in cash on 30th January 1997 and $10,000 transferred on 24th January 2001.
- The monies transferred to an account of AS's company Redcliffe at ZANACO were transferred between 2nd January 1996 and 24th September 1998. The surprising thing about those payments is the status of Redcliffe. It was incorporated in England on 23rd June 1995 but was struck off and dissolved in August 1997. Valerie Edwards (a former sales person in John Lewis) was appointed Director on 7th August 1995. There is more on this in the section below dealing with the direct claims against AS.
- A further sum of $100,000 was transferred to AS's company Nebraska Services Ltd which was incorporated in BVI. I have already referred to the $1,029,400 transferred to Basile and the figure of $287,236 transferred to Vittorio Lembo which is apparently a shop in Geneva. In addition there are the jewellery payments to Fine Jewellers, the cash payments made to Nkumbula and $733,073 paid out to Mr Yotam Zulu one of ZSIS's Executive Directors in charge of Administration and Finance. This is another item in my view given the fact that Mr Zulu is alive and there is no reason why he cannot give evidence where AGZ must show that the money was then subsequently misapplied. Finally there are the benefits made to FJT and his family, transfers to the Churches in the United States and Chief Justice Ngulube. The next two items are $4,024,000 to the Permase account (see my comment above), and $2,591,989 in respect of cars and boats. These too are areas where in my view AGZ is required to show they were illegitimate purchases. I have the same observation in respect of the $1,150,000 transferred to Chanobi Resources Ltd. Finally Bob Standaert and his family received $725,000 between 31st July 1996 and 30th March 2001. No lawful purpose for these payments exists. They were disbursed so far as I can see as set out above.
- On 4th May 2001 FJT made a radio and television address disclosing that the ruling political party would float another Presidential candidate for the forthcoming Presidential election. On 16th May 2001 Mr Dipak Patel was reported in the Post as declaring that FJT's Government was a Government led by a crook, for crooks and by the crooks. He was reported as saying that FJT's Government was plagued with continued scams and scandals and questioned how senior Government officers like the then Director of External Resource Mobilisation and the Permanent Secretary at MOF who were named in irregular procurement and payments had no disciplinary action taken against them.
- As part of this XFC consulted BT about libel proceedings. On 12th July 2001 $200,000 was transferred direct from the Office of the President to CM's client account. This was only a few days before all activities ceased on the Zamtrop account on 19th July 2001. More allegations were made against FJT in the press in later articles. In the Post on 16th July 2001 Dipak Patel accused FJT of being a thief. In August 2001 the state brought highly publicised criminal libel proceedings against Mr Patel, Mr Fred M'Membe (the editor of the Post), Mr Bevan Saluseki (a Post newspaper journalist) and Mrs Edith Nawakwi (a former Minister of Finance in FJT's Government).
- By June 2001 Systems was pressing Mr Mtonga for payment of claimed arrears. Questions then began to be asked about the discrepancy between payments that had been allegedly claimed on behalf of Systems as opposed to those passed on to it. XFC wrote to Mr Mtonga on 23rd October 2001. He revealed payments having been made through a special account but stated that he regretted that Mr Mtonga dealt with the matter on paper instead of verbally. He reiterated that this account was a special account and it was sensitive and in the circumstances debate and disclosure "would unnecessarily open a Pandora's box and the effect would be very difficult to deal with". Mr Mtonga understood the reference to Pandora's box to be an implicit threat to himself. He nevertheless on 1st November 2001 commented on the conflict in the records in relation to payments to Systems and Wilbain. XFC instructed CM to study the matter and investigate as XFC set out in correspondence to Systems. BT opened a file in the name of the Office of the President on 5th November 2001 and he faxed a copy of CM's retainer letter dated 20th October 2001 to XFC. At the same time the Office of the President transferred a further sum of $399,995 direct to CM's client account in London. This was credited to the AFSL ledger. This receipt led Habib Bank to make an NCIS report on CM.
- On 8th November 2001 The Prohibition and Prevention of Money Laundering Bill received an assent in the Zambian Parliament. Less than five days later BT met FJT in London and made arrangements to withdraw £30,000 in cash which he delivered to him on 13th November.
- There is no doubt that the Office of the President monies are Government monies. It was identified as the ordering customer on the SWIFT payment. I can see no other entitlement.
- A few days later XFC transferred $99,995 from Eural Bank in Brussels into CM's US $ ledger account and FK transferred $54,995 from the same institution. Both transfers were credited to AFSL's ledger at CM. As can be seen from the subsequent disbursements not only was the box opened the money was taken as well.
- After an abortive attempt to amend the Constitution to enable him to run for a third term elections were held on 27th December 2001. These were won by FJT's successor as leader of the Movement for Multi-Party Democracy ("MMD") Mr Levy Mwanawasa SC who was sworn in on 2nd January 2002. FJT naively believed that Mr Mwanasasa was going to be a puppet dancing to his tune but that proved to be a disastrous appraisal from FJT's point of view.
- There were press reports about a proposal to give a retirement package to FJT said to include the property 12B Serval Road an S class Mercedes and armed security. The article suggested the property had been bought through AFSL. A copy of this article was faxed from AFSL to BT at London marked "BT" on 28th February 2002.
- XFC retired in February 2002 and was succeeded by Mr Regis Phiri. Despite all of the matters taking place BT continued to make payments to FJT's children, (including large amounts for their cars in London). He had previously made the £30,000 cash payment to FJT and there is a curious fax from BT to FK dated 15th January 2002 stating "I should be grateful if you would confirm that you have spoken to Bob regarding the issue relating to your friend". AGZ contends that the "friend" was XFC. He makes a similar contention in respect of BT's fax of 1st March 1999 to FK. There is no evidence on this and neither letter was put to BT to make this assertion. The fax of 15th January 2002 is stated to be significant because some nine days later $50,000 was credited to AFSL's ledger at CM from Bob Standaert. I do not accept AGZ has clearly identified the friend. What is significant in this context is the continuity of payments made by BT (see below) to FJT, his children and others despite the allegations in the press.
- There are further letters that refer to a mutual friend (7.4/47, 52, 54, 55). It is fair to say that they look like a reference to XFC (the correspondence is between BT and FK) but I am not sufficiently convinced. The point was not put to BT. Nor is it in any of his witness statements. The connection seems to me to be unproven in this respect.
- The significance again is the continued disbursement of monies by BT despite the allegations being made. In early 2002 Dipak Patel received some bank statements on one account (correcting paragraph 12 of his witness statement). It was a ZANACO account. He attempted to place these on 5th March 2002 in Parliament but was not permitted by the Speaker. In May 2002 further statements of the same account (correcting paragraph 16 of his witness statement) were provided in the ubiquitous brown envelope. There was some confusion as to the actual statements. It transpired in cross examination of Mr Patel that he had not noticed (nor had the lawyers who assembled the exhibits) that two different sections of the bank statements had been put together. The second part was dated 20th December 2002 and these plainly could not have been the actual statements Mr Patel was referring to as they are dated six months after he claimed to have seen them. Part of them is dated 13th June 2002 and as I say this is really an error in compilation of the exhibit rather than a criticism of the veracity of Mr Patel's evidence. At about the same time the Post ran the article entitled "Matrix of Plunder". As a result of these revelations the state abandoned the criminal prosecution against the Defendants.
- Therefore one sees that over a period of a year material was being drip fed into the press which revealed the subject matter of the present action. The "Matrix of Plunder" article of 25th June 2002 is remarkably comprehensive in the areas it covers. It correctly identifies the Zamtrop account, the payments in, the payments out and the large number of unusual recipients. It implicates FJT, XFC, and FK. In addition MCD and CM are identified as recipients and disbursers of funds. The only error was to attribute CM's receipts as being transferred to Habib Bank in Geneva. Habib Bank London is of course CM's client account.
- Despite this wide ranging publicity the Defendants did very little to challenge the Press stories which were very damaging to everybody mentioned in them if true. Somewhat surprisingly they continued to distribute payments in particular from MCD's and CM's client accounts. Thus BT on 29th October 2002 transferred $40,000 to IK and MCD on 12th November 2002 transferred $75,000 to CM. He used those funds (amongst other things) to pay FJT's children's school fees.
- All these extensive payments had an impact on Zambia's economy. It was heavily dependant on support of the IMF. These actual transactions were concealed from the IMF. And the payments put a strain on Zambia's currency reserves.
- Throughout the trial the Defendants (CM and BT in particular) extensively criticised the way AGZ presented the case against them and deployed the evidence. They also made extensive criticism of the Task Force's apparent failure to trace through some of the transactions.
- A particularly graphic example was the failure to follow up the $4,000,000 paid into the Permase General account until prodded into an attempt during the course of trial. This is significant because for example it exceeds the amount claimed against CM (disregarding the overall conspiracy claim). As CM and BT pointed out in their skeleton argument Mr Blair QC on behalf of AGZ promised a full and candid picture of the events in question.
- There were two reasons for this necessary approach.
- First bearing in mind the stance of the non participating Defendants it was essential that all evidence involving them was deployed and subject to scrutiny by the participating Defendants and myself. Failure to do that would give the Zambian based Defendants an opportunity in the event of an adverse finding against them to portray the position of one of inadequately presented evidence in a foreign tribunal. An indication of this likely stance was shown by the article in the Guardian Weekly (December 16-22 2006) page 16 "Judge Smith leaves Zambia without seeing FJT". In the article it was pointed out correctly that FJT and the other Zambian Defendants had not attended the court in Zambia. It set out also the erroneous arguments put up by those Defendants as to why they could not participate in the proceedings. The article also complained that I came to Zambia but heard witnesses from Zambia in England. The reason for that was the participating Defendants desire to cross examine certain witnesses face to face. That was an essential process in my opinion. In any event had the Zambian based Defendants participated they could have repeated the exercise in court with the witnesses live but they chose not to do so. Finally the article pointed out that I did not have the benefit of the crucial document the Finance Charter. The article once again erroneously gave the impression that it would "clarify for him the role that ZSIS played and gives guidelines on how intelligence funds are disbursed. Since it is Government's contention that former Intelligence Chief XFC misappropriated money from the OOP Smith would have been better informed if he had access to the Charter which would have given him an unbiased look at how ZSIS operated…" Unknown to the author of the article steps were already in train to secure that document and it was secured and it is of no great significance as contended for by FJT or as hinted at in this article.
- Second the participating Defendants suggested that the absence of the Zambian Defendants hindered their Defence. That would only be true if there was any realistic possibility of the Zambian based Defendants providing any evidence that might negative AGZ's claims. The reality is that the Zambian Defendants have not participated not because of any flaw in the process but rather because in reality they have nothing to say against AGZ's claim of any worth. Their presence at the trial would therefore harden the conspiracy evidence in my view as against them and might actually have led to further evidence being available against the participating Defendants.
- There was severe criticism of the disclosure of documents. For example the late disclosure of FJT's letter of 17th January 1996 and the Finance Charter was quite unacceptable. However one must not lose sight of the fact that the potential loser out of that was AGZ not any of the Defendants. The FJT letter in particular provided a clear linkage of him with the conspiracy in my view.
- The documents obtained from ZANACO were only extracted in a piecemeal way. The contrast between the single hand written sheet of paper produced by Mr Hamunjele and the more detailed information provided by Mrs Muyunda was stark. Yet both of them were claiming to have handed over the relevant documents at one meeting. This too is unsatisfactory. Light could have been shown by the Third Man but he did not give evidence. At the end of the day this harms AGZ and no one else. I indicated on a number of occasions that it was up to AGZ to prove his case and if the inadequacies of the documentation did not support particular tracing claims AGZ would be the loser not the Defendants.
- There was equally substantial criticism over the failure to follow legitimate lines of enquiry. A number of these are self evident. First there was no proper investigation in to Wilbain and Systems. There was only one interview with the officers conducted by the FBI. I have already commented that the record of those interviews is inadequate. What is surprising given the large amounts that were paid over in excess of the few contractual documents that were found is that no attempt was made to investigate this let alone commence proceedings.
- Second I have already commented on the Permase General issue. The Defendants (AS in particular) contend that significant purchases were made for motor vehicles. The documentary evidence shows this yet no attempt was made to follow up monies paid to perfectly respectable organisations such as BMW or Mercedes. No attempt was made to investigate AS's contention that Mr Phiri himself was driving around in a 540I BMW which he (AS) it is alleged purchased for XFC. If that was the case it would have been the easiest thing in the world for AGZ to obtain documentary evidence showing how Mr Phiri's BMW was purchased.
- Third the Task Force interviewed a large number of other witnesses and in addition took statements of some witnesses who were called. None of this was disclosed until I made an order requiring disclosure. This too is unsatisfactory. Some witnesses had given evidence for AGZ in proceedings brought in Zambia but were not deployed before me. Mrs Muyunda was not going to be called at all. She was called late and the Defendants faced the unacceptable situation of evidence and documents being produced in Zambia only immediately before she was tendered as a witness. The Defendants were in the UK for this evidence not Zambia with the difficult video link as the method of cross examination. I have no doubt that had she been properly led as a witness they would have required her to attend in the United Kingdom. The Defendants nevertheless did succeed in cross examining her but it was (due to the technical problems) a difficult and tiring process both for them and her.
- A similar criticism was made about the evidence of Mrs Chifungula the Auditor General. Despite the clear role of the Auditor General's office she was never contemplated as a witness. Her witness statement was not prepared until late November well into the trial. It transpired during her evidence that she was never asked to conduct a proper search in respect of the issues in this action. She was seen by the Task Force in 2004 but was not asked to prepare a more general search until 1st December 2006. Even then no computer searches were effected even though it was possible that there would be computer records. When pressed on this after an adjournment of several days she revealed that the computers had been vandalised. One is always sceptical in cases like this when a large number of computers appear to be vandalised or otherwise disappear. AGZ's claim involved these computers being damaged and the computer records of the Permase General accounts being corrupted and then the records affected by the usual "stock taking" flood.
- From this point of time it is impossible for me to form a clear view as to the destruction or absence of documents. The Task Force point to the actions of the Defendants in the destruction of documents at the end of FJT's regime. The only evidence of that is the letter of 6th March 1999 from XFC to Mr Siame the Auditor General coupled with the apparent total absence of documents at ZSIS and the Auditor General's office.
- I am not persuaded having seen AGZ's witnesses that there was any deliberate suppression or destruction of documents on their part. One has to remember that even for this jurisdiction this case is a very complicated one. The chase spreads over many many documents and many jurisdictions. In my view it is plain that full searches were not effected by the time of the trial. In this context further searches during the trial appeared to be inadequate. I am not persuaded that Regis Phiri's searches at ZSIS were effective. He did not effect the search himself and there was no clear evidence of the subordinates who were asked to search their various departments. I do not believe that the instructions to his subordinates clearly set out what and where they should search. To do that requires an understanding of the claims which they might have. I am always concerned when the lay people conduct searches because they are not necessarily fully aware of their overriding obligations on disclosure. The most significant failing in this area is the lay person's reluctance to disclose documents which harm the case. In this context the Task Force and ZSIS officers are lay persons. They cannot be expected to have a comprehensive understanding of the obligations of disclosure in the English courts.
- I am not persuaded the searches were effectively carried out. However I am not persuaded that the searches would have revealed anything which would have assisted me in this case. A good example of that is the evidence of Brigadier General Muchopa. CM and BT in their closing describe his evidence as "the almost farcical unwillingness of Brigadier General Muchopa to reveal anything concerning investigations into what equipment had been inspected/received by the Zambian Armed Forces". I agree with that analysis of his evidence. He was one of the worst witnesses before me. However I do not believe he was lying. By that I do not believe that in fact equipment was acquired by the Republic under the BK facility. It is plain that he broke standard military practice by not writing down instructions to his subordinates. His report was ludicrously thin. I gained the impression that it was a solemn farce to pay lip service to the search obligations.
- Equally Mr Regis Phiri could have provided a lot more in my view. He however displayed the traditional security secret obsessiveness of that displayed by XFC. In the case of Mr Phiri I do not believe there was any dishonesty on his part. Having seen him I thought he was an honest witness but he was obsessed with secrecy. The obsession is well demonstrated by the performance over the production of the Finance Charter. There was absolutely no reason as I have said for it not to be disclosed and the failure to disclose it would have fatally flawed AGZ's claim under the Zamtrop conspiracy. I would have been forced to rule that without that document being produced there would be no justified reason for finding the conspiracy. It was the central tool for the conspiracy because it provided the cloak of secrecy to enable the conspirators to pretend to comply with the law whilst simultaneously stealing large amounts of money. Given the case and its importance AGZ's reluctance to produce it was bizarre.
- Mr Hamunjele was AGZ's principal witness. At the start of the trial large amounts of his witness statement were struck out because they contained tendentious and opinion evidence when he was not called as an expert. It also included large amounts of comments, conclusions and arguments. It was plainly a bad witness statement for those purposes. Mr Hamunjele's usefulness as a witness of fact was extremely limited. The reason for that is that he was not there at the time the events occurred. He arrived on the scene as a member of the Task Force to investigate things after the event.
- The task he faced was enormous. I do not believe that Mr Hamunjele was fully equipped to deal with the enormity of the task. He did not in my view have the training and the background. Nevertheless he stuck to his task manfully and it was plain by his large number of weary answers that he was aware of his own inadequacies and was embarrassed.
- I accept that he told me a number of lies. First he lied about the time he had to meet Beauty Kaluba (day 8 page 12 lines 18 and 19). Second I believe he lied when he said he was not aware of the Finance Charter until January 2007. That was simply not credible. It was referred to in documentation which would have come into his knowledge (FJT's statement for example). Third I accept that he misled me as to the circumstances of how he acquired the Caversham documents and I suspect they were deployed in breach of undertakings given to Barclays. I accept that Mr Hamunjele lost objectivity. There were two reasons for this in my view. First I do not think he was properly trained for the task and the requirement for him to present documents fully and dispassionately. Second I suspect Mr Hamunjele became very angry about what he found. Were I a Zambian I would be extremely angry too. However one has to put that anger aside if one is not to fall into the same traps of behaviour as the wrongdoers. I think Mr Hamunjele lost objectivity in some of his efforts. This revealed itself in his repeated failure properly to answer questions and his lies that I have set out above.
- CM and BT (closing paragraph 59) submit I ought to conclude that he is an unreliable witness and his evidence should not be accepted unless clearly and compellingly supported by documents which he produced or referred to.
- I remind myself of the need to assess each individual witness's performance as a whole. Of course if it is established that a witness lies one takes that into account. How that is taken into account involves an evaluation of the witness's performance as a whole see my decision in EPI Environmental Technologies Inc v Symphony Plastic Technologies Inc [2005] 1 WLR 3456, [2004] EWHC 2945 (affirmed CA without commenting on this [2006] 1 WLR 495, [2006] EWCA Civ 3).
- I think CM and BT's contention is too high but it does not matter in any event. Mr Hamunjele's evidence is in reality simply a clothes horse on which to hang documents. His live testimony contributed nothing to the overall understanding of the case.
- As regards the other failings it seems to me necessary to examine how those failings impact on the case. First if AGZ has not made proper enquiries then his case will suffer a corresponding reduction in the level of claim. Given the other documentary evidence which has been produced I do not see that the failings can lead to a conclusion that AGZ's case as put forward against the Zambian based Defendants is faulty. Second the failures appertain in reality to the methods by which the Zambian Defendants extracted their monies. Most of it goes towards showing that a lot of people knew what was going on. There is no doubt about that. The reasons why nothing was done have been set out earlier in this judgment. The evidence against the Zambian based Defendants as to the creation and operation of the conspiracy is in my view overwhelming on a documentary basis. If it was not, the Zambian Defendants would have participated and they would be making the noises about full disclosure. Their silence is deafening and compelling in my view.
- I ask myself whether the failings have any impact on the participating Defendants. It might have an impact on quantum but I will err on their side. As regards liability in my view these failings have no impact whatsoever. The stealing of the money and its processing is largely well documented and unchallenged. Each Defendant knows the size of the claim against him and in each case given the current stance of AGZ limiting claims to traced claims (excluding the over arching conspiracy point) is traced through the Defendants hands and onward to transactions that took place at the instigation of the Zambian based Defendants.
- The participating Defendants do not dispute this. What is in dispute is the legitimacy of the transactions and the state of mind of the participating Defendants when they carried out these transactions. That largely turns on their evidence alone together with their own documents and the result of their cross examination. The failures of AGZ do not have any impact on the way in which the case has to be proven against the participating Defendants and the way in which they have to defend it.
- I am therefore mindful of the failures on the part of AGZ and the right of the participating Defendants to press AGZ about these failings. However at the end of the day the failings have no significant role in my view in my determination as to the liability of all Defendants in this case.
- As against the Zambian based Defendants the conspiracy and breach of fiduciary duty allegations are proven in the manner in which I have set out above. If there was anything in any authority or legitimate case that could have been raised I would have expected the Zambian based Defendants to attend.
- The case against the participating Defendants and the other non participating Defendants will depend entirely on documents (in the case of the latter) and documents plus witness performance (in the case of the former). None of this is affected by the alleged absence of evidence.
- Take the simple example I have already given. Brigadier General Muchopa was an unreliable witness. However I do not believe there is one shred of evidence which shows that the Republic actually acquired the weapons. There is significant evidence which shows that it did not. The most significant of those is the fact that full payments were not made. Even in the arms world it is unusual to deliver goods without payment. Further as the case will show on the BK conspiracy none of the monies ever reached the supposed sellers. It was diverted away. Therefore Brigadier General Muchopa's evidence was an illuminating insight into the workings of the military in secret matters and a classic exercise in evasion but did not have any significant impact on that part of AGZ's claim. He will establish the case on other material. Brigadier General Muchopa contributed nothing to the case. Nor does his evidence assist the Defendants in rebutting that conspiracy. Equally the failure to pursue Systems/Wilbain with any vigour does not affect the claims against the Participating Defendants. It is difficult to see how that avenue would do anything other than worsen the position of Defendants.
- As a general rule if a witness is not called and no explanation is offered as to his non call I would draw an inference that that person is not willing to give evidence because he does not support the relevant party's case.
- In an ideal world there are some witnesses that it might have been interesting to hear. Mr Siame the former Auditor General is an example.
- It was plain during the course of the trial that he like some other witnesses, was not called because AGZ had doubts about their probity and reliability of their evidence. There are questions about his role I accept. I do not and cannot come to any conclusion about his role. The interview statements that were produced do not help. There is a suggestion (but no elaboration) that he might have received £3,000 in cash. His statements show him trying to distance himself from the affairs. If he had given evidence what might it have shown? It might have shown that he too was a dishonest participator in the conspiracy. It might have shown that he was unaware of the documents and what was going on. It might have shown (like many other of AGZ's witnesses) that he knew what was going on but either for self interest or self preservation did nothing about it. What his evidence would not have done in my view is to have shown that there was no conspiracy. Therefore his absence although regrettable is not fatal. The fact for example that he might have been a well respected person in the audit community does not help.
- It is not necessary to make any definite adverse finding against the late Mr Penza. The failure to call Wally Musonda equally is not in my view significant for the same reason.
- The reason why none of this is significant is because there is no doubt as I have set out in this judgment that innocent parties were aware of what was going on but failed to intervene. The knowledge of the fraud went right up to and inside FJT's door but he did nothing because he was involved. The question is whether or not the conspiracy is established on the basis of the evidence which has been led and I am satisfied that that is the case.
- AGZ in his closing (paragraph 163) criticised the attack on the Task Force against corruption from the non participating Defendants. It is true there has been a sustained policy of denigration of the Task Force in the press. It achieves nothing in respect of this litigation. If the non participating Defendants had something to say they should have said so in these proceedings not the Press. They chose not to do so. For reasons which will be self evident further in this judgment the failure of the Zambian based Defendants to attend the trial has counted against them but has not counted against the participating Defendants
- AGZ in the same paragraph criticises the participating Defendants for taking a similar stance. It suggested that the participating Defendants' activities from first to last have done much to make the matters investigated deliberately impenetrable. In my view this criticism is unjustified. It is true that throughout the whole of the proceedings the participating Defendants lawyers have been vigorous on behalf of their clients. Sometimes (particularly in the pre trial skirmishes) I formed a clear view that the activities were oppressive and unnecessary. Too much time was spent in arguing things and taking untenable stances in correspondence. I refer for example to the whole performance of CM and BT's Part 24 application which to my mind was nothing more than a distraction and an unnecessary one. It was devoid of merit and was in my view designed to delay the trial (like some other stances taken). Ultimately their bluff was called when they chose not to make a fresh application to me following their failure to obtain permission to appeal my decision in front of Sedley LJ. It has certainly continued thereafter. The correspondence approached blizzard like proportions on occasions. However ultimately the tactic failed; the trial took place.
- However one cannot avoid the fact that a lot of this was justified because of the way in which AGZ deployed his case with the obvious inadequacies which the Defendants sought to exploit. The Re Re Re APOC is a huge document. I ordered a summary. That itself went to 91 pages. The bundles for the trial were dauntingly huge. I ordered the production of a Core Bundle (3 volumes as it appeared). It rested unloved and unlooked at throughout the whole of the trial. This is because AGZ chose to deploy his case through the vast array of documents. This has led to an over concentration of minutiae and blind alleys. Once the Claimant goes down that road all the other parties follow. It is not unnatural for a Defendant to approach a case on the basis of "ordo ab chao" Defendants regularly hope to make as much trouble as possible in the hope of either persuading the Claimant to give up or create such confusion that the tribunal cannot really understand what has gone on. There was a significant element of the Defendants' approach to this. The closing of CM & BT for example takes up 30 pages (out of 160) on an attack of AGZ's witnesses.
- I have accepted that some criticisms were justified but in the overall pattern of affairs the failings have had no impact save in the question of quantum and the level of criticism was not justified.
- I have had to balance carefully therefore the inadequacies of AGZ's claim, the criticism of it by the Defendants in the overall picture of the claim. In many cases this could have created great difficulties but in fairness to all parties I have had great assistance in the written and oral submissions and the preparation generally. I have at the end of the day felt well able to assess the evidence as it was taking into account possible evidence that might have been there but was not.
- I believe on an analysis only AGZ will suffer from any failings in his evidence. As will be seen further in this judgment it would be wrong to assume that the Defendants are blemish free in this area. One example suffices at the moment. There is an issue as to whether CM was operated as a sole trader by BT or was a partnership between BT and BBT. The most useful piece of evidence on that issue could have been CM's accountants. They did not give evidence nor were their working papers produced. Equally BT's evidence as to the writing up of the ledgers could have been assisted by the bookkeeper who wrote the ledgers being produced. Further the accountant who prepared some of the accounts was a relative of BT but he has not given evidence. Neither explained the absence of such evidence.
- I am satisfied however that I am able to come to the necessary conclusions on the evidence that has been deployed and that all parties have had a full opportunity to deploy all necessary evidence and arguments.
- There is no difficulty in determining the MOF traced funds are Government monies. However significant funds from other sources were transferred to the Zamtrop account. None of these could have happened without XFC's knowledge and approval as he was the sole effective controller of the account.
- I accept that it is most unlikely that FJT, XFC and SC had any legitimate access to significant sums of money or assets as shown in this trial for private resources.
- There is evidence which shows that at the time of an attempt to open an account with XFC and Mr Tampiyappa that XFC had apparently great personal wealth. This evidence is sketchy. I cannot take it at its face value and it looks to me more like an attempt to overstate his assets for the purpose of perpetrating a deception on Citibank. I cannot believe that the figures ($500,000,000) is reflecting any significant contribution by XFC. My conclusion is either XFC did not have funds (and therefore that any injection would come through from Mr Tampiyappa in reality) or if he was going to inject funds these statements were designed to cover up the fact that any such funds would be misappropriated funds from the Zambian Government. Also I do not see this evidence carrying any weight to enable the Defendants to submit that XFC had substantial private funds which were also injected into the Zamtrop account.
- Not only is there no evidence to show he had such "Croesus" like wealth (in the context of Zambia) but I can see no reason why XFC would have a legitimate honest reason to mix his own private funds in what is alleged to be an authorised Government account. An honest public servant simply would not conceive of doing that.
- It follows that there are significant credits to the Zamtrop account which the inevitable conclusion is that they too represent Government monies. This applies to the following payments:-
- On the material before me I conclude on the balance of probabilities that these represented transfers of Government monies. I have had no explanation or evidence to show any other conclusion. No one would mix their own private monies with State monies in a State Bank Account. This means that the Defendants in my view will be liable for more than the GT traced account but less than the total receipts identified as coming into their hands. I have had no guidance as to how that figure should be calculated. I stress that is not intended as a criticism. My provisional view is that the amount against each Defendant should be increased pro rata as between the Defendants beyond the GT traced amount by the amounts referred to in paragraph 274 above. As this has not been argued the parties should either agree it before the hearing or argue before me on hand down as to how this should be dealt with.
- I have had no explanation or evidence to show any other conclusion. This is further evidence of the dishonest motivation behind the opening of the Zamtrop account. I reject the suggestion of FJT that these were gifts for him from third parties.
- The only legitimate purpose was of course to pay either Systems or Wilbain. The Defendants acknowledge that the Zamtrop account and its operation under the Finance Charter did not give XFC a licence to spend the money as he saw fit. There may be some legitimate expenses which can be shown to have achieved a benefit for the Government despite the fact that the funds were not claimed for that particular head of expenditure. I do not see how AGZ can claim the Republic has lost a particular sum of money and claim damages if the funds were used beneficially for it. However notwithstanding the fact that it may be possible to identify some such payments the Defendants are wrong to use them to elevate the Zamtrop account to a legitmate Government account. It plainly was not and that is shown by the large illegitimate amount of expenditure. That betrays the true nature of this account.
- Putting aside the payments that have been identified as being paid to MCD, CM, AS and Redcliffe there is a huge dispute between the parties as to the identification of other payments. The significance arises from AGZ's acknowledgment that monies paid into the Zamtrop account may have been used for legitimate purposes although not for payments to Systems or Wilbain.
- I have already observed that AGZ does not challenge the large sums paid to Systems and Wilbain in excess of their apparent contractual entitlement. The payments out are identified in annex 10 to the RRRAPOC. Some of these have already featured in this judgment ($4,100,000 that went to the Permase General account 001). Mr Regis Phiri the current DG of ZSIS himself received $61,000. He received it into his private bank account and was extremely coy in his evidence about why he received it simply describing it as "an operational matter". The Zambian High Commission/Embassy in South Africa received $340,000. There are clearly payments at the other extreme (as CM and BT concede in their skeleton closings) such as payments to FJT's children. Chanobie Resources Limited received $1,100,000. Telecommunications Limited received $60,000 and $1,345,000 was paid to Daimler Benz AG. The Defendants identify the various payments in their closings (paragraphs 194-203 MCD paragraph 139 CM & BT). AS has a similar point as regards his payments but I will deal with that when I deal with individual Defendant claims. The total amount for vehicles appears to be around $2,500,000. Some may be questionable. I am not sure why Pilatus Engineering received $180,000. Mr Huwiler's statement does not make the position clear although on his evidence he appears to have been "minding" the Honda and other motorcycles acquired by XFC from Bob Standaert. From his statement (24/50) it appears that the TF did not ask him about the $180,000.
- There is Mr Nkumbula who received $694,445.05. These were mostly received in cash although there is evidence that he received a cheque in his own name from Mr Meer. The monies were given either to XFC or FJT or FJT's wife.
- In addition AS collected $250,000 in cash and took it to Switzerland and handed it over to XFC.
- AGZ contends that all these payments were improper. The Defendants contend that these payments might be proper and that in effect it is impossible for me to determine those issues given the paucity of evidence adduced by AGZ. I remind myself that in weighing the evidence that:-
- The legal burden of proving that the monies were improperly used rests at all times with AGZ. The evidential burden may shift on occasions see above for example in respect of FJT's clothes purchase. In the case of monies which are received by the participating Defendants in my view the evidential burden will be on them to show that the monies which were Government monies which were misappropriated were used for a proper purpose.
- The same applies to the Zambian Defendants. Where they have received monies which have been removed from the Zamtrop account and not used for discharge of a Systems or Wilbain liability they will have to explain them.
- I have had no explanation. At first blush the first point of call is the fact that the Zamtrop account was not opened in my judgment for a legitimate purpose. Second I can conceive of no legitimate purpose for large cash withdrawals to be taken out and handed over to FJT (by definition his children) and XFC. Absent an explanation the cash transactions are in my view plainly further instances of stealing of Government money. The only possible flaw in this argument is the fact that other people received cash the former Chief Justice Ngulube, Mr Zulu, Mr Regis Phiri (who I accept had a legitimate reason for receiving those funds), and Mr James Mtonga the former Permanent Secretary in MOF who received about £5,000. Some of these people had been interviewed but so far as I am aware no proceedings have been brought against them. It seems to me that AGZ has not established on a balance of probabilities that the payments to Mr Zulu and Mr Mtonga were improper. The other relevant payments are those summarised in paragraph 216 of MCD's closing.
- I have a similar conclusion about the motor vehicles acquired with cash from the Zamtrop account. AGZ has not in my judgment satisfied me on the balance of probabilities that these were improper purchases. The reason for that is that they have never been investigated when there was every opportunity for them to be investigated.
- The same failing applies to the monies paid to Leonidas Papoutsis, Nicholas Grillas and the Zambian High Commissions in Pretoria and Bonn.
- Finally in this context I take the same view about the payments described in MCD's closing (paragraph 223 et seq) as "Other Categories". I exclude however from that determination the Fine Jewellers payments and the $56,000 paid from the Zamtrop account to pay off Beauty Kaluba's credit card bills. None of these is possibly legitimate. Equally I reject MCD's submission that the Standaert payments had any legitimate purpose.
- In all of these cases in my judgment AGZ (save as set out above) has failed on the balance of probabilities to establish that these were misapplied.
- I leave out of this reckoning disbursements made by MCD, CM, AS and Redcliffe which I shall deal with separately when dealing with the claims against them specifically.
- As I have said $4,100,000 found its way into the Permase General account. There was no evidence at the start of the trial as to what had become of it. During the course of trial some bank statements were disclosed. It emerged that there were 3 accounts "Permase General Account 001" at the Findeco Road branch, "Permase General Account 677 and Permase Account 053". Mrs Muyunda produced some incomplete documents. The rest were apparently lost first because of a computer crash and second because of a flood where the documents were stored (it being suggested faintly that the flood was not an accident). Some payments came out of those accounts to Defendants (CM received $200,015 on 6/7/01 and a further $400,015 on 2/11/01). Both those came in from account number 677. That had been fed by a sum of $710,000 which was transferred to account 001 and subsequently credited to 677 Account. GT traced that. Whilst GT traced $2,769,000 of the $3,314,000 credited to the 001 account that does not assist AGZ because I have determined that the monies returned to ZSIS's control by the Permase General account puts the evidential burden back on AGZ to show that they were subsequently applied for an illegitimate purpose.
- AGZ accepts that due to the absence of records it is not possible to give a comprehensive explanation of the disbursements of the Zamtrop money paid into the Permase General accounts. Nevertheless he submits that it was paid out for private purposes and or without proper authorisation and/or without being properly accounted for. I am not persuaded that on the balance of probabilities AGZ has made that out. It is true that it is somewhat odd that the money leaves MOF to go to Zamtrop in London and then back into the Permase General accounts where it is withdrawn in cash. Given the inadequacy of the records and the fact that the TF has not in my view fully investigated these areas I am of the view that the monies taken out in cash in favour of third parties cannot be said to be misappropriated on a balance of probabilities. It is possible that these were operational payments. It is possible they were payments to other fraudsters or to buy silence. I do not know and I am not in a position to determine it. Therefore AGZ has failed to establish this part of the claim applying the dictum in Rhesa Shipping. I stress however I leave out of that determination payments that were made to XFC and payments that can be traced back to the other Defendants.
- I will leave the parties to agree the precise figure in the light of that indication. It will come off the figure of $25,000,000.
- AFSL commenced operations in December 1995. That is a significant date in the context of this claim as it coincides with the opening of the Zamtrop account and follows meetings that took place in the Autumn of that year.
- Its directors were Francis K, FK, AC a Mr Jean-Pierre Rozan (France based with no participation in directors meetings), a Mr S Munthali, and a Mr D Chipungu. He was replaced as a director by a Mr Edward Shamutete on 20th December 2000.
- FK was the Managing Director and Chief Executive Officer at all material times. AC was an Executive Director; Francis K was the Chairman of the Board but was regarded as a non Executive Director.
- The Board met spasmodically with apparently no meetings at all between 19th December 1997 and 25th February 2000.
- FK and AC effectively ran AFSL on a day to day basis.
- The initial shareholders were FK and Irene K. Mr Rozan purchased shares through his two companies. In 1997 Francis K and AC also purchased shares.
- AFSL was only ever licensed to carry out non bank financial services. AC in his Defence (paragraph 11) suggests it had a licence to carry out banking services but there is no basis for that in my view. I accept the evidence of Dr Matibini that the only basis for AFSL for example to accept deposits from customers was for the issue of debentures and money market instruments and the acceptance of 6 month term deposits. The acceptance of deposits in the operation of current accounts from cheque deposits was expressly excluded. Equally AFSL in my view had no entitlement to dispense cash and I accept AGZ's contention that in the operations identified in this case by AFSL it acted outside the terms of its licence.
- It is important to examine the relationship between AFSL and ZSIS. In this context FK's various statements are useful. I stress however that I have not seen FK in evidence although he served a Defence on 13th February 2006 (without a Statement of Truth). He prefaces his Defence by saying it was a lay man's Defence and that he was unable to pay his solicitors to continue to represent him in the proceedings. That was actually incorrect; the representation was selective. His solicitors purported to come off the record as regards the action but remained "on the record" for the purpose of the appeal. He could pay and retain lawyers when it suited him.
- The Defence admits effectively that AFSL was utilised for the receipt and transfer of monies. It is said however that that was at the instigation of XFC and was understood to be secret activities which it was not appropriate to question. A fundamental error is in paragraph 13 where it is suggested that AFSL was established long after the contracts between Systems and Wilbain were entered into. It is true that there was a contract in 1994 but the fraud in my judgment arises from the MOU which came into being in June 1995. Meridien collapsed about that time and after transfers from MOF the substantial transfers to the Zamtrop account occurred from December 1995 at the same time that AFSL was set up. This is not in my view coincidental.
- FK accepts that there were meetings with him XFC and IM (see his statements). However he seeks to minimise his role merely to that of a disburser of funds at the instigation of XFC. I do not accept he had that minimalist role. I will deal with this when I come to deal with the direct allegations made against him by AGZ. His role in the acquisition of properties is particularly significant. FK acknowledges that monies were routed from the Zamtrop account to MCD in London and then transferred from MCD back to AFSL in Lusaka. There is no dispute about this; the dispute is as to the extent of knowledge of what was going on on the part of FK and in this context IM.
- When the monies were routed back to AFSL they would be used in various ways. The key witness statement in this context is that of Enock Mwale. He was employed by AFSL (at a substantially higher salary than his previous employments) as Finance Manager on 17th June 1998. In January 2002 he was appointed Head of Treasury at AFSL. He details the unusual arrangements that took place concerning XFC and ledgers opened with a "ZAM" connotation. Many withdrawals were in cash. The relationship between AFSL and XFC and the OOP and the operation of the ZAM client accounts was not disclosed openly. There can be no legitimate purpose for operations and none has been suggested beyond the "secrecy" mantra which I reject.
- Significantly the ledgers maintained by CM and MCD in the name of AFSL were not recorded in any records with AFSL. Equally there was no general record in respect of "ZAM" accounts and they were operated solely on the instructions of AC or FK giving oral or written instructions to Mr Mwale and other staff. The monies that came into these accounts came from 3 sources cash deposits by OOP employees (especially Mr Ngoma), some cheques on the Permase General account deposited by Mr Ngoma and monies coming to AFSL from MCD.
- That latter course is intriguing. The total agreed amount received by MCD from a Zamtrop account is $9,216,000. GT in their final report have traced $7,021.020.17 to MOF. Of the total receipts MCD then remitted $4,157,469 back to AFSL. No credible explanation has been given for this.
- In addition Mr Mwale identified further receipts (paragraph 147 of his witness statement) which were not in annex 58 to the RRRAPOC but which were accepted by MCD as being remittances from them (T16 page 14.1). Taking these into account the total amount transferred by MCD to AFSL is $6,053,358.43 (see AGZ's closing paragraph 335). The remitter was invariably described as MCD despite the fact that this was purportedly AFSL money received by it from the Zamtrop Account and credited to an AFSL or FK ledger. IM when he gave evidence could not explain the purpose of this arrangement; he was simply following FK's instructions. He in turn of course in his statements said everything that he did with the money was on the instruction of XFC. It is suggested (faintly in my view) that the routing of the money like this was to help ZSIS in its security. With the money coming from MCD with a remitter of MCD the money is no longer apparently Government money. In my view this routing of the money through MCD is strong evidence of the conspiracy to defraud. There is nothing in the AFSL ledgers to link these monies back to Zamtrop and MOF. This combined with the secrecy referred to by Mr Mwale shows in my view operations of the conspiracy and not genuine secret service activities.
- Mr Mwale was extensively cross examined by both Mr Head and Mr Croxford QC. The former established that Mr Mwale knew nothing of the relations between FK and MCD and he had no meaningful relationship with IM and conceded that he (IM) would not know about the disbursal of the monies transmitted by MCD to AFSL through its ledgers.
- Mr Croxford QC's cross examination was designed mainly to seek to establish that AFSL had a legitimate business operation and that the connection with BT and CM was more tenuous than Mr Mwale suggested. I will deal with this in the BT/CM section.
- There was also cross examination in respect of $100,000 and whether or not it was received as a loan from Francis K via the Epakor facility or was a loan by CM. The examination of Mr Mwale established that he had not seen any documentation recording a loan from CM. AGZ in his closing (paragraphs 1409 et seq) appears to accept that CM had no beneficial interest in the Epakor facility. It appears to have been a facility provided by Francis K. It may be that facility was disguised as coming from him possibly in breach of his fiduciary duties that he owed to AFSL. FK expressed surprise that Francis K had interests in Epakor (interview 20th August 2002). I am not in a position to come to any conclusion about that. Nor is there anything significant in my view about this facility for the purpose of this action. AGZ's claim is not about breaches of fiduciary duties of directors owed to AFSL.
- Nevertheless Mr Mwale's evidence as to the inter relationship between XFC, FK and the method of maintaining the ZAM ledgers was mostly unchallenged. I am satisfied that these are indicia of the conspiracy and not the secrecy.
- This reinforces the evidence against the Zambian based Defendants (save Francis K). It also shows in my view that FK and AC knew of and participated in the dishonest conspiracy and dishonestly assisted FJT, XFC and SC in committing breaches of the fiduciary duties they respectively owed to the Republic.
- It is not evidence of participating in the conspiracy or dishonest assistance on the part of MCD, CM and AS. Establishing conspiracy against them will depend on an examination of what they did and what they knew. I do not see that they knew any of the AFSL internal machinations.
- AGZ in his closing (paragraph 177) acknowledges that the conspiracy claim contended for is that of a conspiracy to use unlawful means. As set out in the RRRAPOC the conspiracy caused loss to the Republic of Zambia by misappropriation of its monies and to conceal the fraud and the proceeds of such fraud from it. It is alleged (and as set out above I accept) the vehicle for the conspiracy to steal was the Zamtrop account or alternatively the monies taken from the Zamtrop account which AGZ establishes had not been applied for any lawful purpose. It also extends to other monies which AGZ establishes have come from Government finances and have not been applied for Government purposes.
- The leading authority on conspiracy in this area all parties agree is Kuwait Oil Tanker Co SAK v Al Barder and Others [2000] 2 All ER (Comm) 271 (CA).
- The court summarised the principles of conspiracy as follows:-
- Thus AGZ must establish the following 3 matters taking into account items (4) – (7).
- The Court of Appeal rejected the submission that intention to injure had to be proved and could not be inferred from the acts themselves (paragraph 120). In rejecting the submission they said this:-
- Further at paragraph 121 they said this:-
- The next point to observe is that if a party is found to be a conspirator he does not need to be aware of all the circumstances of each wrongful act done pursuant to that conspiracy but he is jointly and severally liable in damages for all losses caused by the conspiracy to which he is a party. This is established again in the Kuwait case from paragraphs 132-134 as follows:-
- It is possible that a party can withdraw from a conspiracy but they may still be a conspirator because they participate in a cover up (paragraphs 147-148 and 154-155) as follows:-
- None of this poses any problem in respect of the Zambian based Defendants. I am quite satisfied that they were all involved in the conspiracy from the start. I will expand on this further when I analyse AGZ's individual contentions against them.
- The English based Defendants are facing a significant difficulty. It is plain that their knowledge of a large amount of the misappropriations is non existent. There is no evidence to show that they had any knowledge beyond the transactions that they were involved in. If I find that they are conspirators in the over arching conspiracy they will have a liability for all the losses. The differences can be significant. AS has a potential dishonest assistance liability of $3,339,089. That figure reduces to $1,415,762 as a result of the GT exercise of identifying traces from MOF. That itself further reduces in the light of Miss Pincott's further evidence to $1,347,993. In the case of CM the dishonest assistance claim is $3,247,548 reduced to GT traces to $2,127,822 and further reduced if limited to the correct proportion of MOF sources to $1,228,523. In the case of MCD the corresponding figures are $9,216,000 and $7,021,020.17.
- In contrast the final claim for damages for conspiracy is $25,754,316 subject to reduction as set out above.
- There are other further unfortunate consequences. It is not said that ND or BBT had any active role in any alleged conspiracy or were dishonest in any way. Nevertheless if I find respectively that IM and BT were parties to the conspiracy and those acts were done as partners respectively in MCD and CM respectively they too are potentially liable for the sum of $25,754,316.
- Of course as I have indicated above there may be more than one conspiracy. It is possible that when I evaluate the individual Defendants and I find they are guilty of conspiracy the conspiracy is not the over arching conspiracy but the "sub conspiracies" as Mr Croxford QC called them. If that is the case then I accept the Defendants' submissions that the measure of damages on those conspiracies will be the same as any liability that is established based on dishonest assistance.
- The same principles do not apply to Irene Kabwe as no conspiracy claim is pursued against her. Equally the claim against Basile is limited to the $1,029,400 and other sums which were received.
- It is clear that it is possible for a conspirator to join it at a later stage but he must be aware of all the essential facts of the conspiracy and entertain the same object. As the Kuwait case shows a person can become a party to the conspiracy tacitly. Thus I am satisfied on the law for example that the participating Defendants can be found to be conspirators if they were not aware of the initial conspiracy but tacitly became conspirators. They can become conspirators when they are aware of all of the surrounding circumstances and expressly or impliedly share the same object. This is closely akin to the question of whether lawyers (and AS in my view) can be liable in dishonest assistance because they become aware of things that they ought to question but dishonestly fail to question them. I refer to the observations of Mance J in Grupo Torras SA v Al-Sabah (No5) [1999] EWHC 300 (Comm), [1999] CLC 1469 at 1618:-
- Applying these principles as I have said therefore no doubts about FJT, XFC, SC, FK and AC. (I do have doubts about Francis K however). On the basis of the evidence before me as set out above it is plain that they all fully participated in the conspiracies identified earlier in this judgment. It is impossible for them to argue given the fact that it involved the removal of in excess of $25,000,000 of Government money that it was not done with the intention to harm the Republic. No other conclusion is possible.
- I come to the same conclusion as regards the fiduciary Defendants i.e. FJT, XFC and SC. The measure of damages in my judgment as regards XFC and SC are the sums claimed in AGZ's summary namely $25,754,316 plus $600,000 payments to CM from OOP (XFC) and $25,754,316 (SC). At the moment the amount claimed against FJT is $2,995,369 being the amount transferred from the Zamtrop account and other sources attributable to FJT. That sum itself might be reduced to $1,098,962 or $1,031,247 being the amounts traced by GT attributable to FJT and Basile. At the moment I see no justification for such a low figure. I do not see why he should not be liable for his breach of fiduciary duty to the same extent as XFC and SC. At the end of the day he was the President and whatever the actions of XFC and SC and their respective breaches none of it could have happened had FJT himself not committed his own major breach of fiduciary duty. He participated in the secret setting up of the Zamtrop account for the purposes of wrongfully removing the Republic's Government funds. I will hear further submissions on this by AGZ when I deliver judgment.
- The other Defendants I will leave to their individual consideration below.
- In legal terms this has been the most analysed area before me. As is often the case I doubt whether in practice it will make any difference. The dispute between the parties is as to the nature of the test required to establish that a third party is liable for dishonest assistance in a breach of fiduciary duty. I am quite satisfied that whatever the test FK and the other Zambian Defendants (save Francis K) have plainly been dishonest so as to be liable.
- The difficulty is with the participating Defendants. The arguments essentially involve an analysis of Royal Brunei Airlines v Tan [1995] 2 AC 378, Twinsectra Ltd v Yardley [2002] 2 AC 164 and Barlow Clowes International Ltd v Eurotrust International Ltd [2006] 1 WLR 1476. The first and third of those judgments are opinions of the Privy Council and the Twinsectra case is a decision of the House of Lords. The essence of the dispute is as to whether or not the test for dishonesty to make a third party liable for dishonest assistance is an objective test or a subjective test. That is the way the judgments have been analysed. They have spawned a huge amount of academic literature. I suspect this analysis is largely a matter of over elaboration. In this context I refer to two very useful articles. The first is by Lord Clarke MR "Claims Against Professionals: Negligence, Dishonesty and Fraud" [2006] 22 Professional Negligence 70/85. The second is T Yeo "Dishonest Assistance: A Restatement from the Privy Council" [2006] 122 LQR 171-4. In addition I should make reference to the statements of Lord Walker of Gestingthorpe in the John Lehane Memorial Lecture (2004) where he advocated a return to a "jury question".
- In my view when the cases are analysed the question of subjective/objective test is an over elaboration. All of the cases when analysed in my view actually determine that the test for dishonesty is essentially a question of fact whereby the state of mind of the Defendant had to be judged in the light of his subjective knowledge but by reference to an objective standard of honesty. It may be as I shall show that people were side tracked by the Twinsectra case. I have sympathy with Mr Yeo's observation in his article at page 173:-
- Lord Clarke MR in his paper tracks the development of the law in this area. It started with Lord Selbourne LC in Barnes v Addy [1874] LR 9 CH APP 244 at 251:-
- In Royal Brunei, the Privy Council fundamentally altered the test for dishonest assistance. First it rejected the requirement that a breach of trust must arise as a result of a dishonest and fraudulent scheme. Second it rejected the requirement that the third party needed to be aware of the breach of trust. It replaced that requirement with a new dishonesty test:-
- Thus that test as Lord Clarke MR said is simple and straightforward. The Court of Appeal in its judgment in Grupo Torras said the test was not difficult to understand or apply. It is essentially a jury point.
- To understand what Lord Nicholls meant it is necessary to set out further parts of his judgment. He said in the context of accessory liability dishonesty meant "acting dishonesty or with lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstance" (ibid page 389).
- He continued:-
- The test is clearly an objective test but the breach involves a subjective assessment of the person in question in the light of what he knew at the time as distinct from what a reasonable person would have known or appreciated. As the passage stresses carelessness is not dishonesty and dishonesty is to be equated with conscious impropriety. However self evidently a person is not allowed to set his own standard of honesty in particular circumstances. I observe that if he were there would never be any liability because the cases only come to trial if the person denies he is dishonest and did not believe he was dishonest. All that is said in my view is another way of posing the jury question. Merely because a person says he did not believe what he did was dishonest does not mean the court has to accept that. If the court is of the opinion that with his knowledge he consciously departed from the objective standards of propriety he is dishonest. The text equally establishes that honest people do not deliberately close eyes and ears or deliberately do not ask questions lest he learns something he would rather not know and then proceed regardless.
- Most cases present little difficulty in determining whether or not a person is dishonest.
- This reasonably clear expression of the law survived for some 6 years. In Twinsectra a difference appeared to have occurred.
- The case concerned 2 solicitors. The first was acting in connection with a purchase of land which required borrowings. The prospective lender was only willing to make the loan if repayment was secured by a solicitor's personal undertaking. The first solicitor was unwilling to give such an undertaking so the client found a second solicitor who gave an undertaking to apply the proceeds solely in the acquisition of the property. The second solicitor sought assurances from the client that the money would be so used and received them from the first solicitor. Thereupon he released the money to the first solicitor who regarded the money as held upon account from the client and paid it out upon his client's instructions. He took no steps to ensure the money was only applied in the acquisition of the property and a substantial part was used for other purposes. The second solicitor went bankrupt and the lender commenced proceedings against the first solicitor alleging that he dishonestly assisted in the second solicitor's breach of trust. The Judge at first instance found that the first solicitor had not been dishonest although he had deliberately shut his eyes to the implications to the undertaking. The Court of Appeal reversed that finding giving judgment against the first solicitor for the proportion of the loan that had been misapplied. On appeal the House of Lords (Lord Millett dissenting) in effect in my view refused to go behind the first instance Judge's finding that the solicitor was not dishonest and therefore reinstated his dismissal of the claim. The difficulty of the decision was the first instance Judge's finding that whilst the solicitor had deliberately shut his eyes he was not dishonest see Lord Slynn's judgment paragraphs 4-5. The leading judgment was that of Lord Hutton. He expressed the view that Lord Millett's dissenting judgment involved a purely objective test (paragraph 30) and thus expressed the view that Lord Millett's test on determining the liability of an accessory dishonesty was not necessary and that liability depended on knowledge.
- Like Lord Clarke MR with respect I do not see that as the test that Lord Nicholls applied in Tan. Nor do I see with respect Lord Millett's judgment saying that either (see paragraphs 112 and 113). In particular where he stated that "dishonesty …. was a necessary and sufficient ingredient of accessory liability. Knowingly was better avoided as a defining ingredient of the principle (echoing Lord Nicholls in Tan)". In other words Lord Millett said precisely the opposite to the words attributed to him by Lord Hutton. He reinforced this in paragraph 121:-
- In paragraph 32 of his judgment Lord Hutton expressed the view that Lord Nicholls was saying that a Defendant to be liable must know that what he was doing "would offend the normally acceptable standards of honest conduct, and the need to look at the experience and intelligence of the Defendant would also appear superfluous if all that was required was a purely objective standard of dishonesty".
- I agree with Lord Clarke MR's analysis (ibid page 77) that read fully Lord Nicholls in Tan starts with what an honest person should know as he conducts his affairs. Then when it comes to testing an individual's honesty there is no question of what the individual himself thought about his conduct; the court is to assess honesty by taking account of the individual's experience, his knowledge and his reasons for so acting.
- In my view the difficulty in the Twinsectra case arose from the language in the judgment at first instance. This arises because of a common judicial reluctance to make grave findings in particular against professional men. In my view this reluctance is erroneous. First there is no justification in applying a more strict principle against a Defendant merely because he is a professional. It is no less grave for a non professional to be accused of dishonesty. The courts have always been reluctant wrongly in my view to adopt that stance. Second cases in the last decade have shown sadly that there are plenty of professional men who act dishonestly.
- Lord Hoffmann agreed with Lord Hutton that Lord Nicholls' test in Tan required a dishonest state of mind. In other words a Defendant would have had to have been conscious of the fact that he was "transgressing ordinary standards of honest behaviour". He rejected Lord Millett's judgment on the ground that it departed from the principle laid down in Tan (paragraphs 19-20). Once again like Lord Clarke MR I do not think this is with respect an accurate analysis of Lord Millett's judgment.
- The Twinsectra decision attracted a blizzard of academic discussion.
- The Twinsectra decision was considered by the Privy Council in Barlow Clowes.
- These decisions present a nightmare for a first instance Judge. The Tan decision was a Privy Council decision and thus of persuasive authority. Lord Steyn and Lord Hoffmann sat in Twinsectra and agreed with the leading judgment of Lord Hutton. Lord Nicholls, Lord Steyn and Lord Hoffmann sat in Barlow Clowes. Both Tan and Barlow Clowes followed the traditional Privy Council practice of delivering one opinion to Her Majesty as to the decision. Lord Walker also sat in Barlow Clowes (he had referred to the need to return to the "jury point" above).
- Lord Hoffmann delivered the opinion which was an appeal from the decision of the Staff of Government Division of the Isle of Man. In paragraph 11 of the opinion he set out the Judge's first instance finding that there were strong suspicions of the funds passing through the Appellant's hands were monies which Barlow Clowes had received from members of the public who believed that they were subscribing to a scheme of investments in guilt edged securities. The Board expressed the opinion "if those suspicions were correct no honest person could have assisted Mr Clowes and Mr Cramer to dispose of the funds for their personal use".
- In the context of the case before me that is likely to be an important observation in my view.
- In paragraph 12 the Board went on to consider that by ordinary standards such a state of mind would be dishonest. However it pointed out that the Judge found that Mr Henwood may well have lived by different standards and seen nothing wrong in what he was doing. It was submitted on behalf of Mr Henwood that because Mr Henwood had had his own state of mind he could not be dishonest because he was not consciously dishonest and the Judge made no finding about Mr Henwood's opinions about normal standards of honesty. The only finding was that by normal standards he had been dishonest but that his own standard was different.
- In paragraph 15 of the opinion Lord Hoffmann accepted that there was an element of ambiguity in the remarks which might have encouraged a belief in some academic writings that Twinsectra had departed from the law as previously understood and invited an enquiry not merely in the Defendant's state of mind about the nature of the transaction in which he was participating but also in to his views about generally acceptable conduct of honesty. He expressed the view that that was not what Lord Hutton meant and that the reference in Lord Hutton's judgment to "what he knows would offend normally accepted standards of honest conduct" meant only that his knowledge of the transaction had to be such as to render his participation contrary to the normally acceptable standards of honest conduct. It did not require that he should have had reflections about what those normally acceptable standards were (paragraph 15). In paragraph 16 the opinion stated that Lord Hoffmann in Twinsectra (paragraph 20) meant that "consciousness that one is transgressing ordinary standards of honest behaviour" was intended to require consciousness of those elements of the transaction which made participation transgress ordinary standards of honest behaviour. He emphasised that it did not also require him to have thought about what those standards were.
- Finally in paragraph 18 he rejected Lord Neil's submission that the Judge failed to apply the principles of liability for dishonest assistance which had been laid down in the Twinsectra case. He expressed the opinion that there was no difference between the principle stated in Tan and Twinsectra. The Privy Council therefore reversed the decision of the Staff of Government Division and reinstated the decision of the Judge in the first instance.
- What conclusion can be drawn from the two decisions? I can do no better than gratefully adopt the observations of Lord Clarke MR:-
- I also agree that the area has been bedevilled by an inappropriate use of nomenclature. Legal tests which were explained by reference to terms of objective and subjective are open to multiple interpretations. They fail to elucidate, muddy the waters and provide a feast for academic opinion. In my view this is correct and in reality the Tan test was nothing more than a jury question "was the Defendant dishonest". Finally I would observe that Lord Clarke MR expressed the view (without hearing argument on the point) that the unanimous decision of the Privy Council which included Lord Nicholls, Lord Hoffmann and Lord Steyn is likely to be followed by the English courts.
- The Court of Appeal had to grapple with the interesting point in Adnan Shaaban Abou-Rahmah and ors v Abacha [2006] EWCA Civ 1492 the Judge at first instance had expressed the law in this area as follows:-
- That had been accepted as an accurate statement of the present authorities by Counsel for the Appellant. Rix LJ in paragraph 16 said that 3 things needed to be shown:-
- Although there were indications that the Judge below appeared to consider questions of knowledge only he concluded that the Judge had acquitted the relevant Defendant of any dishonesty (paragraph 40) and that it would not be right to reverse the Judge's appeal so as to conclude that the bank was dishonest in the Twinsectra sense.
- Arden LJ considered the dishonesty issue. She expressed her summary (paragraph 59) that "this is the first opportunity, so far as I am aware, that this Court had the opportunity of considering the decision of the Privy Council, and in my judgment this court should follow the decision of the Privy Council…"
- She analysed subsequently the Tan and Twinsectra decisions and pointed out that the Barlow Clowes decision was a persuasive authority only whereas Twinsectra was binding (paragraph 66). However her conclusion was that the Judge and the Court of Appeal were justified in following the analysis in Barlow Clowes for the reasons set out in paragraph 68 of her judgment. She accordingly applied the dishonesty test as interpreted in (Paragraph 69).
- Pill LJ gave the third judgment. He agreed with Rix LJ that it was not necessary in the appeal to resolve the question of the impact of Barlow Clowes as the case before them did not turn upon it. He agreed with Rix LJ's and Arden LJ's analysis of there being a possibly subjective element but expressed the view that this was best considered in a case in which a real issue arose on its impact. As he rightly pointed out in paragraph 93 Barlow Clowes did not find the House of Lords decision in Twinsectra as wrong. As I said earlier the Twinsectra result was based on a finding by the Judge at first instance being restored but that the Defendant was not dishonest.
- It follows that on the analysis of the judgment in the Court of Appeal their observations on the Twinsectra/Barlow Clowes controversy appear to be strictly obiter.
- In my view as set out earlier in this judgment I think the test propounded by Lord Clarke MR is the better one. I do not think anything is gained by using potentially difficult words such as objective or subjective. I do not believe that there was anything other than a misunderstanding as between the effect of the various judgments in Twinsectra which spawned a huge unnecessary debate. This is what Barlow Clowes was intended to confirm and in my view it plainly did. In this context I remind myself of the observations of Megarry J in Cordell v Second Clanfield Properties [1969] 2 Ch 9 at page 16 of the difference between academic writings and legal arguments in court.
- Finally in the case of Barnes v Tomlinson [2006] EWHC 3115 Kitchin J at paragraph 78 in the case before him stated that the parties agreed that the dishonesty test was:-
- I agree with that analysis which in my view is the same as the analysis propounded by Lord Clarke MR and that propounded by the Judge at first instance in the Abacha case. Essentially it is a jury question as to dishonesty to be assessed in the light of all the material as summarised above.
- That is the test that I will apply in deciding whether or not the assisters in this case are liable for dishonest assistance.
- In that context the observations of Mance J in Grupo Torras referred to earlier in this judgment are relevant.
- In addition the cases establish (adopting the observations of Lord Scott in Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd [2003] 1 AC 469 at 116 that "a suspicion that the relevant facts do exist and a deliberate decision to avoid confirming that they exist" is sufficient blind eye knowledge such as to make a Defendant's conduct dishonest. The dividing line between conduct which would be dishonest and incompetence is a difficult one to draw. It is necessary to establish on the facts on which side the conduct was. I say that because in this case both IM and BT acknowledge that they have been extremely negligent in the way in which they conducted matters.
- The action was commenced on 6th October 2004. A limitation Defence is pleaded by MC, CM/BT and AS but not by the other Defendants.
- AGZ concedes that a 6 year limitation period applies to all relevant causes of action.
- During the closings I raised the question of Section 21 (1) Limitation Act 1980 in respect of the claims for knowing receipt and whether the removal of the limitation period for any fraudulent breach of trust to which the trustee was a party or privy or to recover trust property or the proceeds of trust property was relevant. A claim for knowing receipt is a claim that the person is a constructive trustee (contrast the position of dishonest assistance).
- Miss Stanley Junior Counsel for BT and CM provided me with a note on this area which I found extremely helpful. In the light of that note (AGZ not contesting this point) it seems to me that there can be no limitation period against FJT, XFC and SC because they owed existing fiduciary duties. However no claim against them is made in knowing receipt. That claim is against the assisters. I am satisfied on the basis of the authorities referred to in the note that they are class 2 trustees and the 6 year limitation applies to them.
- AGZ therefore accepts that any claim prima facie that involves loss caused by conspiracy or breach of the other duties before 6th October 1998 is prima facie time barred. AGZ also accepts that the burden in proving a claim is not time barred is on him.
- AGZ relies however on Section 32 (1) (a) and/or (b) of LA 1980 which provides:-
- Accordingly AGZ submits that the action is based on the fraud of the Defendant concerned and/or any fact relevant to the Claimant's right of action has been deliberately concealed from it by that Defendant. Accordingly he submits the limitation period does not begin to run until the Claimant has discovered the fraud or concealment or could with reasonable diligence have discovered it.
- All claims for breach of fiduciary, dishonest assistance and conspiracy (but not knowing receipt) are based on a fraud allegation.
- In MCD's opening it was argued that fraud must be given its "usual meaning" (i.e. deceit or fraudulent misrepresentation). Thus it is said fraud is not a necessary element either in the claim of conspiracy or dishonest assistance. The authority for this position is stated to be the case of Chagos Islanders v The Attorney General [2003] EWHC 2222 (QB) at [619].
- That paragraph refers to Beaman v Arts Ltd [1949] 1 KB 550 C.A. at page 558. That decision (based on the provisions of LA 1939) held that there is a difference between an action based on fraud ((1) (a)) and fraudulent concealment ((1) (b)). The difficulty arose in the use of the word fraudulent in both provisions. That is not a difficulty to be found in LA 1980. As Lord Millett said in Cave v Robinson [2002] 2 WLR 1107 at paragraph 19 there is limited value at looking at new statutory expressions in the light of earlier expressions. It is clear that if the Beaman case is still of relevance that the distinction is made out. I am not convinced Ousley J considered this in paragraph 619. In the same paragraph he refers to Beaman and the warnings in Cave. In paragraph 620 he goes on to deal with the nature of the claims made by the Plaintiff.
- AGZ relies upon the Court of Appeal decision in Gwembe Valley Development Co Ltd v Koshy [2004] 1 BCLC 131. That was a case (on limitation) which was dealing primarily with Section 21 LA 1980. However Mummery LJ (paragraphs 79 and 120) made observations on the construction of Section 32 LA 1980. It is important to understand the context of the observations.
- The claim was against a director for breach of fiduciary duty in concealing a secret profit. It was contended by the Claimant that the 6 year period of limitation did not apply as against Mr Koshy as an accounting party because he was a fiduciary and he had dishonestly acted in breach of trust therefore Section 21 LA 1980 applied "no period of limitation … shall apply to an action by a beneficiary under a trust, being an action – (a) in respect of any fraud or fraudulent breach of trust…." Mummery LJ concluded that Section 32 (an action based on fraud) would never apply. The reason for that was that the allegation against the Defendant was that he had participated in a fraudulent breach of trust. It is plain that Mummery LJ considered dishonesty as being fraudulent. I agree with that analysis. Section 21 LA 1980 can have no application in this case against the dishonest assisters or the conspirators (save FJT, FK and SC who do not plead limitation) because they are not in a relationship of trust with the Republic. At paragraph 120 it is clear that Mummery LJ has in mind that fraud is the equivalent of dishonesty in respect of Section 32 (1) (a) and in the case of deliberate concealment. Thus he does not look at a cause of action in a general way (such as breach of trust) but looks at the cause of action as alleged. His judgment was of the whole court.
- I accept that AGZ's claim as pleaded against the participating Defendants is one of dishonesty i.e. fraudulent conspiracy and dishonesty i.e. dishonest assistance. In my judgment the claims plainly fall within Section 32 LA 1980. I conclude that for two reasons. First I do not accept that the restricted wording as to be found in the cases under the earlier Act has any application. I accept the equation of fraud and dishonesty as set out in the Gwembe case. In other words one looks at the allegation. Not every breach of trust is fraudulent or dishonest. Nor is every conspiracy necessarily fraudulent. It seems to me that the word fraud in section 32 if equated to dishonest should look at the nature of the allegations against the person in question. It is different in the case of dishonest assistance because that is an essential ingredient of the claim.
- There are sound reasons for this general approach. I accept the primary purpose of the Limitation Act is to provide for a claim to be brought within a reasonable period. The purpose of that is as IM says in his closing submissions to avoid people having stale actions brought against them. When a party is aware of a claim it is not inappropriate that there should be a reasonable time limit within such a claim is brought.
- The counterpart to that however is where parties are the subject matter of dishonest conduct. It seem to me plain that the balancing exercise as against stale claims is that when someone is defrauded or is the subject of dishonest conduct they are not to be disadvantaged until they have an opportunity to discover the wrongful acts. The reason for that is that it would be an unsatisfactory state of law if people who behaved dishonestly could escape liability by successfully hiding their wrongdoings for the period of the primary limitation period. That would encourage fraudsters.
- In addition AGZ submits that it can rely upon the alternative provision of Section 32 i.e. deliberate concealment.
- In both cases time does not run until the Plaintiff has discovered the fraud or the concealment or could with reasonable diligence have discovered it.
- The legal burden is on AGZ to establish his entitlement to rely upon these provisions to extend the primary limitation period. The basis for his claim to extension is to be found in the Reply dated 20th December 2005 (against CM and BT) paragraphs 16-25. The plea against IM is in paragraph 111 of the Amended Reply dated 21st July 2006 and is in identical terms. The plea against AS is in paragraph 92 of the Amended Reply also dated 21st July 2006 and is in identical terms.
- The primary plea on the part of AGZ is that the fraud could not have been discovered or could not be with reasonable diligence have been discovered prior to the termination of the Presidency of FJT and the accession of the President Mwanawasa SC in January 2002. If that is correct there are no limitation issues.
- AGZ contends that he only became aware of the receipt of monies by (for example CM) upon receipt of the bank statements for the Zamtrop $ account. Prior to that the Republic did not know of and could not with reasonable diligence have known of the fraudulent receipt of such monies or the concealment of the same by the Defendants. It is suggested that the receipt into the CM accounts was "in circumstances where there had been a deliberate commission of a breach of duty by officers of the Government and where the misappropriated monies had been remitted via the Zamtrop account and, in some cases, then laundered through the client account of the First Defendant or through the Redcliffe account or the Shansonga B account, before being remitted to the client accounts of the Second Defendant. The purpose of remitting such monies to and from the Cave Malik client accounts via the Zamtrop account (and other accounts as above) was to conceal from the Claimant and any person investigating the misappropriation of the Claimant's monies the true destination of the monies and/or to conceal from the recipients of the monies their source. Accordingly, receipt of the monies into the Cave Malik client accounts was necessarily in circumstances where the fraudulent and deliberate breach of trust was unlikely to be discovered for some time".
- Further AGZ contends that each Defendant dishonestly assisted in the misappropriation of monies and in the breach of trust or breach of fiduciary duties and dishonestly received the monies knowing that they were misappropriated Government monies and that therefore each Defendant knew that the payments would be concealed by those responsible and AGZ would be unlikely to discover the fraud for some time.
- It is then alleged that it was the publications in the press that led to the discoveries of the frauds following the establishment of the Task Force. If one projects the discovery back to the taking of office of President Mwanawasa SC in January 2002 as the earliest date on AGZ's case then no limitation issue arises.
- There are therefore 4 matters which need to be considered:-
- The burden on AGZ is to satisfy me on all 4 of these points. I am satisfied that the claims of conspiracy and dishonest assistance are based on fraud of all the Defendants (the first question).
- The second question of deliberate concealment is more difficult. I have no doubt that there has been deliberate concealment on the part of the Zambian based Defendants. The whole scheme was set up by them deliberately to conceal their dishonest stealing of the Republic's monies. The first point to consider is whether that is enough to postpone time as against all other conspirators or dishonest assisters. Cave v Robinson establishes that deliberate concealment includes a deliberate breach of duty either concealed or undisclosed and committed in circumstances such that it was unlikely to be discovered for some time. Active concealment is not necessary if the Defendant is accused of intentional wrongdoing in circumstances where he could "safely calculate on not being found out for many a long day" (Lord Millett paragraph 22). As Lord Millett points out the purpose of the deliberate concealment is to cover 2 matters. First there is active concealment and second (Section 32 (2)) deliberate commission of a breach of duty in circumstances which must make it unlikely that the breach of duty will be discovered for some time. Therefore deliberate concealment means either an active concealment or passive concealment committed by deliberate breach of duty when the Defendant is aware that it is unlikely that the breach will be discovered for some time.
- As fiduciaries FJT, XFC and SC had of course a positive duty to disclose their own and their fellow conspirators' breach of fiduciary duty. They have failed to do that. However that passivity was plainly and deliberately done and in my view was plainly done in circumstances where it was unlikely that the breach would be discovered for some time (see below).
- The consequence of the deliberate concealment by the primary conspirators means they have no limitation Defence. None was pleaded by them but it seems to me in their absence I ought to examine whether or not they had any limitation Defence. In my view they do not.
- The claims against the participating Defendants are in conspiracy and/or dishonest assistance for this purpose. The difficulty is that the deliberate concealment by the Zambian Defendants affords a practical cloak for the protection of the participating Defendants. AGZ cannot discover the claims he can bring against the participating Defendants because their role has been covered up by the Zambian based Defendants. That offends sensibility. Nevertheless in my view I have come to the reluctant conclusion that that is the law. Section 32 talks about actions committed by the Defendant. The only exception is when actions are done by agents. I do not see (and AGZ does not contend) the Zambian based Defendants can be regarded as the participating Defendants' agents for this purpose. Any deliberate concealment must be by the relevant Defendant. This is unfortunate because the participating Defendants will have the "benefit" of the deliberate concealment by the Zambian Defendants to conceal the fraud but time nevertheless runs against them in the normal way.
- This seems to be the consequence of the wording of Section 32 LA 1980. It follows therefore that I have to look at the provisions of Section 32 in the light of each individual Defendant.
- Thus as regards the Zambian Defendants I am satisfied that time does not run against FJT, XFC and SC because they were participants in the fraud. It also does not run against them until January 2002 because the very actions they carried out amounted to deliberate concealment under Section 32.
- As regards the participating Defendants and other non-participating Defendants if I find they have participated in the conspiracy or provided dishonest assistance time will not run against them until January 2002 because the cause of action against them is based on fraud and was not discovered until January 2002. It cannot be said that they have deliberately concealed anything however because they have not committed a breach of duty for the purpose of Section 32 as they owed no duty.
- Therefore like the Gwembe case they will either be primarily liable by virtue of Section 32 given the nature of the claim against them or they will not be liable at all.
- Unlike the Gwembe case because Section 32 is relied upon by AGZ the third question to be answered is the date when AGZ accepts the Republic knew it had cause of action. The date is probably later than January 2002 but AGZ is content to take the date as January 2002 when President Mwanawasa SC took office. That concession obviates the need for a dissection of the activities of the Task Force and the like to find a later date.
- The final fourth question for consideration is whether or not the Republic could have discovered the claim earlier with reasonable diligence. The burden of proof once again lies upon AGZ. In Paragon Finance v DB Thakerar & Co [1999] 1 ALL ER 400 at 418 Millett LJ explained that a Claimant cannot rely upon this exception unless they establish "they could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take…" Crane J in UCB Home Loans v Carr, , [2000] EWHC 557 (QB), [2000] Lloyds Rep PNLR 754 at 757, suggested that the word "exceptional" should be removed from Millett LJ's formulation. That was rejected by Robert Walker LJ and Aldous LJ in Biggs v Sotnicks [2002] EWCA Civ 272 at paragraphs 71-72. Arden LJ delivered the main judgment. She did not deal with Crane J's observation although she referred to it (paragraphs 51-52). She determined the appeal on the facts. Lord Justice Robert Walker said this:-
- Neuberger LJ (as he then was) in Law Society v Sephton [2005] QB 1013 (CA) paragraph 116 in the context of Millett LJ's observations in Paragon said this:-
- At paragraph 117 Neuberger LJ said this:-
- I agree with that analysis. It is a question of fact as to whether or not a Claimant could with reasonable diligence have discovered the claim earlier. That does not mean exceptional measures have to be taken in every case unless it is reasonable for them not to take the exceptional measures. The observations address the issue as to whether or not there was a suspicion of fraud and therefore there should be exceptional steps taken to seek to uncover whether there had been fraud.
- I agree with the Court of Appeal's analysis of Crane J's judgment. He said:-
- It seems to me that one gives effect to the section. Time does not run until the Plaintiff has discovered that the fraud, concealment or mistake. The section then introduces a proviso to protect the Defendant against a Claimant who behaved unreasonably "or could with reasonable diligence have discovered it". If Millett LJ was intending to apply a gloss on that and suggest that a Claimant can only rely upon the proviso if it is shown that it has taken exceptional measures and has failed to do it then with respect that is not what the section says and I would not agree with it. That appears to be what Crane J is suggesting is what was said. I do not agree. The test is reasonable diligence. If exceptional measures show that the misconduct on the part of the Defendant could have been discovered that will count against the Claimant unless the Claimant shows it would be unreasonable for him to take such steps. In other words the exceptional measures need not be taken if it is reasonable for him so to act. If it is unreasonable for him so to act then the exceptional measures and the fruits of such exceptional measures must be taken in to account.
- I consider the two questions when did the Republic discover the fraud and could it with reasonable diligence have discovered it earlier.
- AGZ says the Republic cannot have known of the fraud because it did not know of it until January 2002. He submits also that where the defrauded parties are Government and the wrongdoers are at the top of the Government the Government cannot discover the fraud until there is a change of Government because the fraud is being concealed from it by the persons in charge of the Government's operations. Thus until the removal of FJT and the other Defendants in question time cannot run.
- IM submits first that the Republic was not effectively prevented from acting on the fraud.
- I therefore ask myself the question how could the Republic have discovered this fraud before January 2002? I pose that question in the light of the facts as they then were. The relevant facts are that a wide ranging fraud had been perpetrated on it. The participants included the President, the Head of the Secret Service and a senior official (SC). Further those who had the ability to interfere (the Auditor General for example) did not interfere. Although the Government Officials employed to vet payments knew what was going on their silence was obtained by the climate of fear to which I have referred to above.
- How can the Republic take any steps when all of its senior officials are stealing from it and concealing that? The Republic does not know of the fraud because its senior officials conceal it. It cannot therefore have any knowledge because it has no knowledge because the officials are concealing the facts from it. It does not "learn about it" until it is properly informed by the people who are in a position so to inform it. That occurs when President Mwanawasa SC takes office.
- It cannot be right to attribute knowledge of the fraudsters and their cover up and/or intimidation to the Republic for the purpose of applying this provision. Otherwise an organisation like the Republic or any other corporate organisation could never avail itself of this provision when it was being defrauded by the most senior officers within that organisation. That would be an absurd result in my opinion.
- Thus for example if the President did not participate it would not have a cause of action time barred until the President discovered the fraud or could have done so with reasonable diligence. When the President becomes a participator in the fraud the Republic on this argument loses the right to pray in aid to section 32. That cannot be right.
- The question is when therefore the Republic knew. It is plain that it did not know until January 2002 and could not know before then when the persons that controlled it at the top were removed. The only effective way in which the matter could have been investigated outside the conspirators is via the Auditor General (Mr Siame). I have already commented on his position. I am quite satisfied (given his role in the affair) that nothing would have happened. I have not determined that he was a party to the conspiracy but I am satisfied that he would have done nothing to stop the conspiracy carrying on. What I unable to decide is why he would not have done anything. However I am quite satisfied given the evidence set out earlier in this judgment that the one thing he would not have done is take any steps to stop the conspiracy continuing.
- I am not impressed with the suggestion that the parties could have gone to the police (bearing in mind the heavy ZSIS involvement) or other law enforcement agencies or petition Parliament.
- Mr Patel was tipped off anonymously and that led to him being a party to criminal libel proceedings as were the Post and its Editor when it published matters. It is significant that the action only stopped after the Government changed. Had a regime change not taken place I am quite satisfied that the cover up and possibly even the fraud would have continued on "in the same old way" Mr Patel was plainly a brave and exceptional person. For the reasons I have set out in this judgment I do not believe it would have been possible for anybody to have motivated affairs so as to enable the Republic to investigate whether it had a cause of action against its very President and the other senior people identified in this conspiracy.
- Nor are there any steps which the Republic could have taken earlier than January 2002. It is paralysed by the fraudsters.
- I therefore conclude that no Defendant has a limitation Defence against the claims brought by AGZ.
- I now go on to deal with the claims against the individual Defendants. I have had extensive written submissions (mainly from AGZ) running to in excess of 1300 pages. I do not propose to deal individually with every point made in all the submissions but rather will distil those submissions in the light of the evidence I have seen. To do otherwise would mean a judgment of hugely disproportionate length. My findings will be based primarily on documents and the evidence of witnesses especially in the light of cross examination. All witnesses had failings; it is necessary for me to evaluate the failings in the light of their evidence as a whole and to conclude whether they were truthful or untruthful and why they were untruthful (see the EPI case referred to above). I also regard it as essential to evaluate the case against each Defendant in the light of their knowledge. I have to be particularly cautious because AGZ has on occasions tended to blend all the evidence against all the Defendants. I also have to be searching because the Zambian based Defendants did not give evidence. However that searching is to be tempered by the fact that there is no good reason for them not to have participated. As I have already said special arrangements which they ignored were made for them to have full access to lawyers, a full participation in the hearings both in Zambia and in London and a full opportunity to make representations and give evidence if they wished. The reason they have not done so is as I have already said because in my view they were guilty of the conspiracy and breaches of fiduciary duty and dishonest assistance as alleged by AGZ against them.
- AGZ submits that there are 8 events which took place in a very close time frame and that was not coincidental:-
- All of that I accept happened. All of that is not coincidental and establishes beyond a shadow of a doubt that the Zambian based Defendants were parties to the over arching conspiracy. The position of the participating Defendants however is somewhat different. The question for them is whether they were participants as alleged by AGZ or tools of the Zambia based Defendants.
- The conspiracy was given a cloak of legitimacy by payments out to Systems and Wilbain although I have already made critical observations about the failure of AGZ to explore those payments.
- He was at all material times the Director General of ZSIS. He was not a man to be trifled with and ZSIS were certainly not an organisation to be trifled with. This is well demonstrated by AGZ's evidence and is supported by (for example) the evidence of IM and AS. Both of them were initially wary in becoming involved with ZSIS.
- The quantum of the claims in conspiracy against XFC is $25,754,316 plus $600,000 payments to CM from OOP (conspiracy) and $25,754,316 for breach of fiduciary duty in the alternative. Those figures will have to be reduced because of the disallowances I have made earlier in this judgment.
- XFC has played no part in the proceedings.
- He owed the fiduciary duties to Zambia pleaded against him. Dr Matabini confirms that Zambian and English law is the same in relation to fiduciary duties. As the Director General of ZSIS it is plain he owed a fiduciary duty to act in good faith in the best interests of Zambia, to act in accordance with his powers and not to instruct or otherwise cause others to act in breach of their powers, not to place himself in a position of conflict, not to make any secret profit or receive any secret payment and to account to Zambia for any such secret profit or payment.
- The setting up of the Zamtrop account heavily involved him. His letter referred to above to Mr Siame showed it was intended that the payments were to be concealed from the donor countries. This was the first step of concealment as I have set out above. No proper records were kept and if they were they were destroyed as a result of the letter of 6th March 1999 which is a quite extraordinary letter in the context of state documents. XFC not only controlled the Zamtrop account; he was active in the procurement of Government money to that account. Authorisation was obtained on the false premise that the full amount requested was required to discharge debts owed by Zambia to suppliers of goods or services and in particular Systems and/or Wilbain.
- XFC by his control of the Zamtrop account knew that transfers were being made for improper purposes (see the clothing purchases for himself and FJT, the jewellery from Fine Jewellers, the donations to the President's favourite causes, school fees and other payments for the benefit of the FJT children and others).
- He also effected transfers of large amounts of money from the Zamtrop account both to Redcliffe and AS. I am satisfied that those transfers were effected as part of the conspiracy to which he was a party. Whether or not AS was a party to the conspiracy or provided dishonest assistance is a matter which I shall deal with below. Nevertheless the payments out by XFC were so motivated.
- I make the same observation in respect of transfers from the Zamtrop account through the clients' accounts in London of MCD and CM. There is no reasonable interpretation for this routing of money other than a desire to hide the source of the money (the Government) and to use significant amounts of the money so routed for non Government purposes.
- It is equally clear that in 1995 he came to a secret arrangement with FK to use AFSL as the medium for further laundering of Government monies. IM was recruited to this operation by XFC and FK at the Churchill Hotel Meeting in London in 1995. IM's role will also be further considered in this judgment. However the same premise applies namely that the recruitment of IM was a step taken by XFC and FK in the furtherance of the conspiracy. The purpose was to wash money through MCD's client account and hide its source. This is reinforced by FK's statement referred to above when he tried to blame all of it on XFC. The same purpose applied to CM.
- XFC was personally involved or privy to the investment of monies improperly obtained from the Government.
- He was probably involved in the payments from the OOP to CM in July and November 2001. Although Mr Mandona signed the letter of instruction to ZANACO dated 1st November 2001 in relation to $400,000 paid on 2nd November 2001 he signed it "for Director General". He was recalled and in that evidence given on recall stated that he was told to effect the transfer by XFC and that it was "secret".
- XFC received traced benefits of $164,775 plus $90,453 (GT report H4/13). In addition he received substantial cash payments (see for example the $250,000 taken in a suitcase and handed over to him by AS in Switzerland). In addition to those he received some $450,940 out of the Nkumbula cash payments delivered either to XFC or his wife. AS accepts that he used part of the money he received to pay school fees and accommodation for XFC's children (total £181,000). He also accepts he paid off credit cards held by AS on some cards when XFC had a card and was a charge holder. At least £341,520 was paid to Barclays Premier card. The expenditure shows huge amounts of personal expenditure shopping, restaurants and similar. AS said all of these were paid on behalf of XFC. There is no justification for any of these expenses being paid using Government monies and none is alleged in my view. They speak for themselves.
- As I said above when monies received are identified as having been Government monies the burden evidentially shifts on the recipient to show that they were utilised lawfully. XFC has not made any attempt to justify any payments. I do not believe when one looks at the payments and their nature that it was likely that he would ever provide a justification. Accordingly I am quite satisfied that AGZ's claim against him are in the sums set out above and not limited to the actual specific instances of personal benefit identified. XFC was one of the main conspirators. By his control of the Zamtrop account he ensured the defrauding occurred. His control could have stopped it. However he is the one who is controlling the payments out and he is therefore a conspirator and in breach of his fiduciary duties.
- I therefore determine that he is liable in damages for conspiracy and breach of fiduciary duty in the amounts claimed subject to adjustment as set out above.
- FJT was the President of Zambia between 1991 and 2002. As I have set out above his earnings then and before were extremely modest in terms of the sums involved in this action. His current assets are equally modest and there is nothing to show from his background that he was in a position to accumulate large wealth.
- It is somewhat ironic that he was initially elected on an anti corruption ticket against the first President of the Republic Dr Kenneth Kaunda. This case shows how he too rapidly succumbed to the lure of having access to large sums of money which he was unable to keep his hands off. The difficulties of discovery and challenge are shown as I have set out above with what happened to Mr Dipak Patel in March 2002.
- The claims against FJT are $2,995,369 maximum currently for breach of fiduciary duty. I have already observed that in my view that is not the appropriate figure and I invite AGZ when I deliver this judgment to seek the same figure as is claimed against XFC and SC. I do not see how FJT can have any lesser liability for breach of fiduciary duty than them. Indeed there are compelling reasons why he should have the same liability. At the end of the day he was the President at the top of the control of Government finances. He was uniquely positioned to prevent any corruption. Instead of preventing corruption he actively participated in it and ensured it happened. It is difficult to find an adjective that adequately describes the failure on the part of FJT. He has defrauded the Republic. He has deprived the people over whom he was exercising stewardship on their behalf of huge sums of money which was supposed to be spent for their benefit. He has diverted those monies for wide ranging benefits of the co conspirators but has not (unlike Clive of India) shown restraint himself in the amount of money which he "plundered" from the Government coffers. It is a shameful series of actions and he should be ashamed.
- FJT initially participated in the proceedings and served a Defence. He made statements to the press before the proceedings were commenced (see above). On 31st May 2005 he swore an affidavit of means which disclosed limited assets. His Defence was an inadequate document. He only participated in the proceedings as long as it suited him to try and stop them. Once that ruse failed he "discontinued participation". He has therefore made a deliberate decision not to serve a witness statement or give oral evidence despite the fact that every reasonable and fair step was taken to ensure that all of his fears were allayed. He gave no genuine reason for not giving evidence.
- When the trial started in London he issued a statement which broke the terms of the ring fencing order designed to protect him. He was provided with transcripts until the provision of transcripts was abused by one of the Zambian based Defendants by leaking it selectively to the Press.
- As the former President in the light of the serious allegations made against him he ought to have in conscience explained himself to the Zambian people. He was in a position so to do in these proceedings without any fear of compromising any Defence in criminal proceedings and without any fear that the evidence he gave could be misused by AGZ. He has not taken advantage of that option and in so doing he has in my view further abused the people of Zambia. They are entitled to an explanation from him as to what has happened to the large amounts of monies which were under his control by virtue of the Finance Charter and which came into and out of the Zamtrop account. He had all the documents provided and therefore lacked in nothing to present his case.
- It is plain that he owed fiduciary duties to the Republic as alleged by AGZ. Dr Matibini confirms this.
- I have already dealt with his inadequate Defence in respect of the conspiracy. I am quite satisfied that he had an active role in the setting up of the Zamtrop account and its operation. I am also satisfied that on occasions he actively participated in payments made to it and he received substantial personal benefits. The first personal benefit occurred as early as 29th December 1995 when $20,000 was transferred to Basile. That payment was authorised by XFC. Significant sums were spent on benefits for his children in terms of cash, business class air tickets, expensive school fees or similar. He did not have the resources to fund this. The only slender possible justification put forward is that the Zamtrop account was fed by beneficial donors and this money was used. I reject that as being incredible. I cannot conceive as I have said earlier that an innocent person would mix donation monies with Government monies in a Government account if it was a genuine Government account. Second no evidence has been adduced to show any such donations. Third even if there were donations there is a procedure for declaring the donations; they are not supposed to be hidden away in a secret account which is monitored by FJT, XFC and the Auditor General. In other words FJT is simply lying.
- The "Picture payments" (so called with some hilarity by the Zamtrop officials who administered it by reference to a picture of FJT on the wall) whilst not clearly identified as having come from MOF and into the Zamtrop account (as shown by IM in his closing) nevertheless are sums which FJT ought to have declared and accounted for if they came from third parties. This is the sole potential instance of third party monies. They are however not available for his private use unless they are fully declared and accounted for. FJT well knew about the payments. On at least one occasion he discussed them with Beauty Kaluba the ZANACO Branch Manager in London (her statement to the TF 24/71). Absent any explanation for these payments (and there is none) I conclude any third party payments were made dishonestly to repay or secure favours from FJT.
- FJT in his interview statements with the TF and his Defence suggested any questions to the operation of the Zamtrop account should be addressed to XFC the controller of that account. This is disingenuous. First it ignores FJT's overall control of the Zamtrop account via the Finance Charter and his right to have that account audited. Second it ignores the fact that he received significant benefits from the Zamtrop account without any justification for such entitlement.
- The best example is again the Basile clothes. FJT has created for himself a wardrobe of stupendous proportions. He knows he has not paid anything towards it. He knows therefore that somebody must have paid for it and he knows in fact that XFC has arranged the payments through the Zamtrop account. He knows therefore that Government monies have been used to provide his own personal wardrobe. Much of it has been seized but it is plain that he is still benefiting from the wardrobe when he goes out in public in Zambia or when he goes abroad for treatment as the Press photographs show.
- If he had carried out his duties of checking the audit and operation of the Zamtrop account he would have known he had received substantial benefits from it. He ought then to have questioned that and in effect refunded the Government. He either made no enquiries because he knew full well the money was being dishonestly misappropriated (inter alia) for his own benefit. Alternatively he made no enquiries because he knew dishonest activity was being carried out on that account and he did not wish to make any such enquiries. The latter is the less likely scenario because he himself received substantial benefits. Nevertheless it makes him responsible for the full losses caused by the conspiracy and the breach of fiduciary duty.
- FJT raised a number of specific points in paragraphs 13 and 15 of his Defence. I will deal with them in turn by reference to the letter reference in FJT's Defence.
- (A) NDOLA FARM (MONKEY FOUNTAIN) FJT denies any ownership of this property. I am satisfied on the basis of the evidence led by AGZ that this property was bought by Fountain Estates Ltd a company incorporated on 13th August 1999 in Zambia with BBT as a director and shareholder for the benefit of FJT. It was used to purchase this property and FK said it was owned by "FJT". He said it was set up on instructions from XFC through CM. There is no reason why FK should lie about FJT owning the property. CM was plainly used to conceal the true ownership of the company behind the nominee shareholders. BBT has not revealed on whose behalf he held his shareholding. BT has not revealed any further information.
- (B) PROPERTIES PURCHASED FOR FJT'S SOLICITORS. It is plain once again that AGZ's allegations are made out. Zamdaell Ltd purchased 2 properties under an agreement dated 7th February 1997 for the benefit of FJT's lawyers Eric Silwamba and Vincent Malambo in lieu of legal fees owed by FJT to them. FK in his Defence says that he and AFSL acted on instructions of XFC. AC's Defence is similar. Their justification was that the purchase was for ZSIS purposes and they were not entitled to enquire further and had no need to. This is a mantra repeated by the Defendants repeatedly. It is not a sufficient answer when a transaction puts a person on enquiry as to its correctness. However that does not apply to FK and AC because I am satisfied that they well knew what the purpose of the purchase was and this statement is merely a lie to justify their role in an attempt to legitimise it. There can be no ZSIS purpose to justify this purchase.
- (C) MONEY RECEIVED FROM CM - £30,000. Although FJT lists this as an issue he fails to deal with it in paragraph 15. It is impossible in my view to think of any lawful justification for monies in the Zamtrop account being handed over in cash to FJT. It simply shows how FJT regarded the Zamtrop account as a "cash cow" for him and the other conspirators to take from as he wished. In the terms of his salary this represents nearly 45% of his total salary received over 10 years.
- (D) PURCHASE OF 12B SERVAL ROAD BY RIVER PROPERTIES OVERSEAS LTD. I am satisfied that this purchase by River Properties (using Government monies) with a CM nominee company as director and secretary and BT as a shareholder was used to buy this property using Government monies for the benefit of FTJ. The total amount expended appears to be $145,000 purchase price and $297,500 for chattels. FJT still lives in this property and there is (to put it mildly) an ambiguity as to whether or not he is supposed to be a tenant. There is more detail on this transaction in respect of claims against BT but I am quite satisfied that the property was intended to be purchased for the benefit of FJT beneficially and that beneficial interest was deliberately obscured by the way in which it was acquired. It belongs to the Republic as do the chattels. The faint suggestion that this was a government pension provision is untenable. If it was there would be no need to hide the acquisition through obscure nominees.
- (E) UNLAWFULLY RECEIVING $74,730 BETWEEN FEBRUARY-SEPTEMBER 2002 FROM CM ON INSTRUCTION FROM AFSL. In this period BT effected a large number of payments to or for the benefit of FJT and/or his children. Once again I will deal with this in more detail in respect to the section against BT. No justification has been forward by FJT which shows he was entitled to these monies. In his Defence he denied that it was Government property and that the transfers were illegal and he says that he did not authorise a transfer of Government money to CM and demands AGZ prove this. FJT however provides no evidence as to the source of the funds other than misappropriated Government monies. The preferable interpretation (which I accept) is that FJT knew that these payments were funded out of Government money which had been transferred under the direction of XFC from the OOP to CM between July – November 2001. He knows this money is coming in because he received £30,000 in cash in November 2001 at the hands of BT personally and he asked for it in advance according to BT.
- The significant point about these payments over and above the fact that they were made for the benefit of FJT and/or his children is that they were made after the huge publicity in Zambia about the corrupt activities. This is an example of the conspirators carrying on in the same old way finally removing the last elements of stolen money from the CM client account. It is done with the connivance of XFC because he authorised the original payments, with the connivance of FK because he directed CM to effect the payments and with the connivance of FJT because he received the benefit of the payments. I remind myself that the figure of $74,730 paid in this short period represents 75% approximately of 10 years of FJT's salary. There is no realistic prospect of him establishing any legitimate entitlement to these monies. BT's role will be discussed further in this judgment.
- (F) RECEIVING $308,255.54 FROM THE ZAMTROP ACCOUNT BETWEEN 8TH DECEMBER 1995 AND 10TH JULY 2001. This figure comprises payments from the Zamtrop account to or for the benefit of FJT. Once again FJT asserts that money received by him and his family through the Zamtrop account was private money. I reject that again as a lie. No justification for these payments has been provided by FJT.
- (G) THE PICTURE PAYMENTS $105,000. The same point applies as I have set out above.
- (H) A PICTURE PAYMENT OF $91,664.01 OUT OF THE ZAMTROP ACCOUNT TO CHIEF JUSTICE NGULUBA AND HIS FAMILY. Once again his suggestion that this was private money I reject. He procured it and he is liable for it.
- (I) ORDERING AND RECEIVING CASH FROM THE ZAMTROP ACCOUNT THROUGH NKUMBULA. FJT in his Defence said he had no recollection of these receipts and had never dealt with Mr Nkumbula. I reject that. I accept Mr Nkumbula's evidence having seen him give evidence before me.
- (J) UNLAWFULLY ORDERING THE PAYMENT OF $179,000 FROM THE ZAMTROP ACCOUNT TO CHURCHES IN AMERICA. Once again FJT affects not to remember this. This too is not credible.
- (K) THE PAYMENT OF $1,029,400 OF GOVERNMENT MONEY TO BASILE. FJT denies this completely. This is not credible. Who did he think paid for all these clothes?
- In this context I reject the faint suggestion of IM in his closing that the difference between the invoiced amount ($557,803) and the amount actually paid ($1,029,400) (excluding the payments made by MCD) could be cash paid to Basile for ZSIS operatives. First there is not a shred of evidence to support that. Second Basile has not said that. I am not required to determine why the excess money was paid and where it has gone. There is no lawful justification for it. I am satisfied that it was paid away as part of the conspiracy. The conspirators are therefore liable for the entirety of the payment whether it went on Emperors clothes or was pocketed by Basile or was otherwise remitted back to them unless they adduce evidence to show it was properly spent. No such evidence has been adduced. The conclusion I draw therefore is that it was stolen in its entirety.
- The people of Zambia will know that whenever FJT appears in public wearing a smart handmade suit or a pair of his "signature" shoes that they were acquired by stealing money from the people the vast majority of whom live at subsistence levels.
- (L) BENEFITED FROM BOB STANDAERT'S PURCHASE OF MATERIALS FOR HIS RE-ELECTION. I have already referred to the amount of $660,000 transferred from the Zamtrop account to an account held by Bob Standaert and his evidence as to what it was used to discharge. FJT's assertion that Standaert had not said that FJT had instructed him and that he denies authorising it or having any knowledge is simply disingenuous. The amount of expenditure that has been incurred is huge by Zambian standards and it was incurred to procure FJT's re-election. He does not say how these purchases were financed which were so utilised for his benefit if they were not simply stolen Government monies.
- I am therefore satisfied that all of the above leads to the inevitable conclusion that FJT was a major conspirator and was also in breach of his fiduciary duties.
- The conspiracy quantum is the same figure of that of XFC. Although AGZ limits the amount of breach of fiduciary duty I am not persuaded about that. GT has specifically traced from MOF monies the sum of $140,847 and $11,000 to FJT.
- I refer to the other payments which AGZ contends are attributable to FJT (paragraph 455-464). In my view as I have said this level is too low as regards breach of fiduciary duty. It is too low as regards the conspiracy claim. In case I am wrong I am of the opinion that all of the items are properly recoverable from FJT as a minimum. The only inference to be drawn from the transactions given his modest background is that these represent Government monies which have been misappropriated for his and his family and friends personal benefit. He is therefore accountable in full for these amounts as they have been paid in breach of his fiduciary duties.
- SC joined the Civil Service in 1979 as an economist in Ministry of Commerce and Industry after graduating from Zambia University. By 1995 she was an experienced Civil Servant and was then Assistant Director (Loans and Investments) in the Ministry of Finance. She knew AS at University a fact he tried to hide from me.
- On 9th December 1996 Professor Mweene (then Secretary to the Treasury) wrote to SC to inform her to report to his office where he would assign special assignments to her. In June 1997 she assumed the role of Deputy Director (PMS/2). In February 1999 XFC wrote to her informing her she had been appointed Director of the Board of Executive (Airline of Zambia Ltd) and in December 1999 she was appointed Permanent Secretary at MOF. She had previously acted in that position since March/April 1999. Her employment was terminated on 18th January 2002 subject to payment of 3 months salary in lieu. In February 2002 she was appointed as an advisor to the Executive Director at the World Bank in Washington. This appointment was terminated on 15th September 2002 following the allegations of corruption against her.
- I have already set out the claims against her and her Defence.
- On 27th May 2005 she swore an affidavit of means which disclosed negligible assets as I have said but included $10,252 in an account with Standard Bank in the Isle of Man. She said her properties were acquired either from her income or from Government loan facilities. She has been a career Civil Servant. There is nothing in her personal background which she has disclosed to show she has access to wealth.
- She served her Defence on 13th February 2006. She served no witness statement nor gave oral evidence. She gave a brief statement to the TF on 18th December 2002 which is not illuminating.
- Like the other Zambian based Defendants she was given every opportunity to participate and was served with all documents but she like the others chose not to appear or present her evidence.
- As a Government employee she plainly owed fiduciary duties of the same nature as FJT.
- The breaches alleged against her by AGZ are as follows.
- First she participated in the creation of the MOU's signed with Wilbain and Systems on 6th June 1995. She participated in the discussions. I refer to the earlier evidence about the signing of the MOU's and SC's role in it. She was involved therefore directly in the preparation of the MOU's which cannot conceivably have had any genuine basis. Mr Wills in his statement (as I have said) said XFC wanted him to buy him a $50,000 gold Rolex for him and cut some money out for Stella. He asked for $20,000 but he refused. Despite that so called refusal Wilbain transferred $50,000 to SC's personal bank account with ZANACO London on 5/6th June 1995. This payment can only be on the basis that it was a bribe and she does not deal with this in her Defence simply denying she made any financial gains and did not receive any secret benefits. Both statements are untrue and she has therefore lied in her Defence.
- I have already set out the train of events from April 1995 to December 1995. She had a clear role in that in that for example she took instructions from XFC in hospital and participated in the correspondence between XFC and Mr Penza.
- Second, and more importantly, her major role however is in the implementation of the payments. She was one of two signatories to all but a handful of the numerous letters of instruction between 8th January 1996 and 27th August 1998 and the PA's between 24th September 1998 and 30th November 1999. I have also set out her role in ensuring the payments were made and that any questioning of the payments was discouraged. I do not accept that she was merely carrying out matters under the veil of state secrecy acts. She plainly had a far more significant role and knew more. For this she was paid. In addition to the $50,000 GT has attributed payments to her of $37,103. GT in its original paragraph 4.4 had that figure but in its revised report H4 4.4 reduced it to $16,847. However that was because at that stage BLG CM's solicitors would not agree that PC Mumba the recipient of $20,256 on 12th March 1998 was either SC or a member of her family. That has been subsequently conceded and the original number in the original report restored.
- A further sum of $50,000 AGZ contends is attributable to her (paid 14/03/97). That is found in trace GT/7 in the name "Mumba". In the absence of any other evidence I accept that also is attributable to SC and is thus traced from the Zamtrop account into MOF monies. In addition AS's Barclays bank account shows payments to her or members of her family in the sum of £20,457.66 and payments from Redcliffe's account show £9,146 to her a sum which GT has traced to MOF (trace 23).
- In addition $10,000 was paid to her from MCD and GT traced this back to MOF (GT trace 46). The actual payment was to her son.
- Third whilst she did not have a main role in the conspiracy her intimidation of those in various Government departments ensured the operation of the conspiracy, and that the removal of monies from MOF to Zamtrop went smoothly. She received as I have set out above substantial payments. In my view her breaches of fiduciary duty extend to the full amount and the conspiracy likewise in the sum of $25,754,316.
- I have already adverted to his role in Meridien and his subsequent involvement in the creation of AFSL. He had known XFC since his school days and had been a friend of IM since meeting in London in the late 1970's. By 1989 he had met BT. He appears to have had an association with Francis K going back several years.
- FK arranged the meeting that took place in Autumn 1995 between XFC and IM. XFC targeted IM because of his connections.
- He also had meetings with BT during 1995. He met him at least once but probably more before their meeting on 31st October 1995.
- By December 1995 BT had agreed that money could be distributed through a new $ account with Habib Bank which was opened initially in the name of Kehimkar & Co but was then changed to CM. FK's role also stems (for example) from the meeting with IM and XFC. ZSIS monies were to be channelled through MCD's client account in the name of AFSL. FK was to give the instructions. FK therefore had a pivotal role in the disbursement of monies received from the Zamtrop account to MCD. He also had a pivotal role in respect of the monies transferred through CM. When the allegations of corruption arose as I have said the Zamtrop account was no longer used but Government money thereafter was transferred from the Permase General 667 Lusaka account to CM for BT to distribute as instructed by FJT or FK.
- His role in the conspiracy was therefore significant. It could not have happened without him. In my view and I so find he was in it from the start with XFC and FJT.
- The monies that passed through MCD's and CM's respective client accounts were disbursed on the direction of FK. Large amounts of that money were sent back to AFSL (approximately $5,800,000 from MCD) (IM closing paragraph 207 note 112).
- In addition Mr Mwale's evidence shows large amounts of cash coming in from ZSIS operatives and being removed by XFC. His evidence also highlighted the secretive nature of the operation of the Zambian ledgers. None of this was for a legitimate purpose. FK must have known this because of his central role.
- FK was also involved in various property purchases (see below in the MCD and CM sections). The part of this operation was to conceal the true owners of the properties.
- FK had a key role (see for example his position in respect of the Jarban properties in particular).
- All of the instructions addressed to MCD or CM whether in writing or oral came from him. He knew he was disbursing Government monies and that AFSL had no entitlement to them. No legitimate purposes have been identified.
- It follows therefore as I have found that not only was he a conspirator but also he was dishonestly providing assistance to FJT and XFC. The dishonesty is shown by the secret nature of the meetings for example with IM and the other meeting with BT, his role in the routing of the known government monies into MCD and CM and out, the maintenance of secret ledgers at AFSL (which did not even to refer to the monies it received into MCD and CM's client accounts), his role in the acquisition of properties and his disbursal of the OOP monies after the events became publicised. All of these are actions which can have no honest motives attributable to them.
- It follows that FK is dishonest for the purpose of dishonest assistance as set out in the cases summarised by me above. His only serious Defence point is the suggestion that this was all secret and therefore lawfully justified. I do not accept that there was any secrecy element which justified any of these matters.
- Equally I reject the suggestion in his statements and the Defence effectively that he was misled by XFC. It is too convenient because XFC has fled the jurisdiction. An honest person would not have done the things set out above unquestioningly. Once again either FK did not question because he knew precisely what was going on or alternatively he did not question because he was fearful of the truth. Of the two once again the former is the more likely possibility by far.
- This is shown for example by the transfer of $327,512 traced payments to Irene Kabwe his wife. FK in his Defence simply says that any monies transferred by his direction was money due to him "as compensation associated with the services rendered externally to ZSIS and several other clients whose funds or accounts were with the London lawyers".
- No details are provided. This is simply untrue. The reality is that he himself achieved indirect benefits of $349,200 in respect of the direct payments for his wife or for the benefit of his children. This is part of his reward for being in the conspiracy. Another example is the Harptree purchase of Jarbans SA
- In conclusion I determine that FK is liable in respect of conspiracy in the sum of $25,754,316. As regards dishonest assistance the amounts are the traced sums transferred to MCD, the traced sums transferred to CM and $599,990 transferred from OOP to CM. The traced amount for MCD is now $7,021,020.17 and for CM it is $2,127,822. Those figures represent the amount of the dishonest assistance claim against FK plus the OOP payment referred to above.
- Accordingly I determine that FK is liable in those sums under those two heads respectively.
- I have set out above his executive role in AFSL. He is in the same position as FK although he did not give direct instructions to the extent that FK did. I am satisfied however on the evidence of Mr Mwale that he too had a key role in the conspiracy and he too was equally dishonest as regards assisting that conspiracy in the same way as FK. He too has not participated actively in these proceedings despite having the same opportunities. In my view he has the same liabilities to the Republic as FK and I determine that he is liable in the same sums.
- The claims brought against Francis K are conspiracy, dishonest assistance and knowing receipt. AGZ claims the same quantum of damages against Francis K as he claims against FK.
- GT have traced $121,822 as against Francis K (H4/13).
- In addition AGZ contends that it can attribute 7 further items (paragraph 923 of his closing) amounting in total to $62,279.
- In addition AGZ claims sums in relation to the Epakor loan facility.
- AGZ sets out some of the background to Francis K in its closing (paragraph 898 and following). The evidence in my view (see the statement of Enock Mwale) is scanty. In my view the evidence shows that Francis K had a figurehead role in AFSL as Chairman. The executive decisions were in my view made by FK and AC. I accept he was the beneficial owner of the Epakor loan but I am not convinced that was not disclosed nor am I convinced on a balance of probabilities that that is within the Zamtrop conspiracy.
- Francis K served a Defence 13th February 2006 and has provided some material. He too elected to discontinue participation.
- AGZ's claim claims against Francis K in my view are largely matters of supposition. For example at paragraph 914 it is stated that he is an extremely well connected member and presumably discussed the setting up of AFSL in detail. It is suggested that because his brother incorporated AFSL his involvement was much greater.
- Second it is suggested that FK and AC would presumably have told him of their arrangement with XFC and the recruitment of IM. Third it is suggested FK, BT and Francis K would have all discussed matters freely between them. Francis K fourthly it is said visited AFSL's office in Mambilima House every two months and he would see FK and AC and have regular meetings. It is suggested that it is most probable the FK and AC kept him informed about their activities.
- None of this is evidence. Even if it were capable of classification as evidence it is plainly insufficient to found an allegation against Francis K of dishonest assistance, and conspiracy. There is no evidence to show that he had any knowledge of the conspiracy. Unlike FK and AC where there was executive involvement and positive involvement there is no such evidence against Francis K.
- Accordingly AGZ's claim in dishonest assistance and conspiracy is in my view not made out against Francis K.
- That leaves the question of knowing receipt. GT has as I have said traced $121,822 as being transferred from MOF to the Zamtrop account and on to Kehimkar and MCD. It is not established that Francis K received any of these sums beneficially. In addition there are the 7 extra items which AGZ shows personal benefit for Francis K and his family (totalling $62,279).
- All of these payments are Government monies. As Chairman of AFSL he would have had access to AFSL's records to satisfy himself that AFSL was entitled to receive these Government monies. Based on Mr Mwale's evidence an investigation would have shown that there was no justification for treating these monies as belonging to AFSL. Francis K therefore by choosing not to investigate has constructive notice of the fact that these are Government monies. He does not in his Defence set any justification up for the receipt of these monies in any event. For the purposes of liability for knowing receipt the essential ingredients were summarised by Hoffmann LJ in El Ajou v Dollar Land Holdings [1994] BCC 143 at 154 as follows:-
- I accept AGZ's submission (paragraph 1802) that the test for knowing receipt involves a constructive knowledge test and not the dishonesty test applicable to dishonest assistance as summarised in Twinsectra paragraph 194. There is no need for a finding of dishonesty as against Francis K.
- However the following is plainly established. First AGZ has established there has been a disposal of assets in breach of fiduciary duty i.e. the traced funds from the MOF account into the Zamtrop account. Second he has established as regards the items summarised above tracing of those monies into assets of Francis K or to third parties for his benefit. Third he has established constructive knowledge on the part of Francis K that the assets are traceable to a breach of fiduciary duty. AGZ does not show express knowledge on the part of Francis K in my view. However as I have said he has constructive knowledge because it is all to be found in the records (or non-records more appropriately) of AFSL. Finally in this context Francis K's failure to answer the charges in this court is evidence of that liability. The other claims I dismiss because AGZ has not satisfied me to the requisite standard.
- In conclusion therefore Francis K's liability is limited to knowing receipt in the total of $62,279. This is the only sum in my view that AGZ has established that Francis K received beneficially This is an example of my need to satisfy myself in respect of each claim against particular Defendants on the basis of evidence which is referable to that Defendant. AGZ merely seeks to implicate Francis K by being associated with FK and AC. That is insufficient in my view.
- IK is the wife of FK and a 55% shareholder in AFSL.
- There is no claim against her for conspiracy and no claim in dishonest assistance which goes further than the claim in knowing receipt.
- GT have traced and attributed to her bank transfers of $327,512 which consists of one receipt from Redcliffe and 18 transfers from the MCD $ account. These payments extend to school fees for Boston University for Alice Kabwe, and Knox School fees for TB Kabwe they are her children.
- In addition CM remitted $20,045 and $40,000 to her on 6th November 2001 and 28th October 2002 respectively. Both payments were debited to ledger 1156. The payments were derived from the OOP payments which as I have determined above were taken in breach of fiduciary duty by FJT and XFC, transferred to the Zamtrop account and then transferred to CM by them in breach of fiduciary duty. FK of course for the reasons I have set out above knew that and was dishonest in the subsequent disposal of those funds both to third parties and in this case in favour of his wife.
- There is no evidence in reality of IK being dishonest nor is she in a position to be fixed with constructive notice of these operations beyond the slim point that she is a majority shareholder in AFSL. It seems to me that it cannot be said she has provided dishonest assistance.
- She can only be liable for knowing receipt as a constructive trustee if she satisfies the test set out by Hoffmann LJ in the El Ajou case above. It seems to me that AGZ has failed to establish that she had the requisite constructive knowledge. There is at present no tracing claim as against IK. I do not know whether such a claim is realistic. I suspect the monies have long since been dissipated. Nor is there a claim at common law for money had and received.
- It seems to me that IK is a volunteer. She has not identified any justification for receipt of the monies. She also does not appear to have a Defence based upon change of position. It seems to me that AGZ could seek to recover these monies on the basis of tracing and money had and received see Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548. These potential claims are summarised in Goff & Jones "Restitution" paragraphs 2-025 to 2-030. The claim would be limited to the funds that AGZ can definitely identify.
- I will hear what AGZ has to say about that when I deliver this judgment.
- Saving for that limited prospect in my view the claim against IK as currently pleaded fails.
- Boutique Basile is the trading name of Antonio Basile who operates a tailors shop from 2 Rue Sigismond Thalberg 1201, Geneva, Switzerland.
- He has not participated in the trial. He says he has rendered invoices for goods supplied to FJT and XFC in the sum of $557,803.
- In fact $1,029,400 was transferred directly from the Zamtrop account to accounts held in the name of Basile. In addition in June 1999 and February 2000 a total of $180,000 has been paid to Basile from the MCD account but these have not been traced by GT.
- Of the sums traced from the Zamtrop account GT have traced $879,400 (H4/4).
- The only evidence that AGZ has against Basile in my opinion is the over payment.
- Mr Basile gave a sworn statement to the Magistrates Office in Geneva on or about 12th November 2002. He merely produces the invoices. He says that XFC used to visit the shop personally but that 99% of the clothes were meant for FJT. He met FJT only once at Hotel Intercontinental to take his measurements "he is a very short man and all his clothes have to be made to measure" (I confirm the former statement having seen some of the clothes).
- He does not explain the over payments.
- He has chosen not to participate in this action.
- On that material AGZ invites me to make Basile liable for dishonest assistance, knowing receipt and conspiracy in the sum of $1,029,400 or alternatively $879,400. In fact in my view the claim should extend to the $180,000 also absent any explanation from Basile. AGZ should consider that when I hand down the judgment
- At first blush on the basis of the material that has been provided there is no evidence to show that Basile became a party to any fraudulent conspiracy to defraud the Republic. Equally there is in my view (save in respect of the over payment) no basis for suggesting that he provided dishonest assistance. Finally there is no evidence to suggest that he received the Republic's money with the requisite constructive knowledge that it was Government money (save the overpayments). He was visited by FJT and XFC. They made arrangements for him to be paid via the Zamtrop account.
- AGZ does not know what happened to the over payment. Basile chooses not to explain. If there was an honest use of that money in my view Basile would have come to court. The fact that he chose not to do so supports a finding of dishonesty. However it can only support it.
- In my view the evidence of dishonesty is the receipt of a large amount of money with no explanation as to why he received it and its retention. On that material I am prepared to infer that Basile received the excess dishonestly. Whether he remitted it to back to FJT or XFC or kept it himself I do not know. I do not believe for one minute however that he received it for the purposes of spending on genuine ZSIS purposes (rejecting IM's submissions in that respect). He has therefore in my view dishonestly assisted in the stealing of the monies via the Zamtrop account. He has facilitated it in some way which is unexplained. It is unexplained because he chooses not to tell. In addition in my view the large unexplained excess shows that he knows there was dishonesty in respect of the acquisition of the clothes. There is clearly something far more to these transactions than the purchase of clothes. Whilst I appreciate the lifestyles of the extremely wealthy enables them to spend large sums of money on items like this I do not believe any honest person dealing with FJT and XFC would believe they would have legitimate access to such funds in their own right. The size of the expenditure should have excited suspicion. The receipt of further large sums is supportive of AGZ's contention that the whole transactions are part of a conspiracy to defraud or that Basile has dishonestly assisted in the breaches of fiduciary duty made by FJT and XFC. I accept that submission. Basile in view of the large unexplained excess sums he received which he chooses not to explain cannot assert merely that he was an honest trader selling his wares to a customer and no more. I therefore conclude his actions were dishonest and further were part of a conspiracy to defraud the Republic of the monies he received in their entirety. Either he chose not ask because he did not want to know the answer or he knew there was dishonesty and he knew it. There is no honest explanation for the excess receipts and that in my view taints the entirety of the transactions. There can of course be no benefit to the Republic in the acquisition of the specially designed and sized clothes and I do not know why it should have this expenditure foist on it. It can seek to sell them and if it does will have to give credit for the proceeds. This too should be explored when I hand down the judgment
- I should add that I am of the opinion that apart from these claims he will be liable on the same theoretical basis that I have referred to above in respect of IK.
- MCD is a firm of English solicitors practicing at 4th Floor, 01 Great Cumberland Place, London, W1H 7AL. The partners are IM and ND. They have defended themselves separately in the trial of this action. The strain between them is self evident. In giving evidence IM asserted during re-examination (and then through his Counsel withdrew) that ND had known all about the crucial meeting with XFC and FK. Equally ND in his initial evidence made a whole series of wide ranging allegations of misconduct against IM. They were subsequently excised from the witness statement. However in paragraph 34 of his closing ND stated "[he] accepts the Claimant's contention that IM was a party to various conspiracies and frauds, in part if not in whole". In other words ND agrees with AGZ that IM is a dishonest fraudster.
- IM is a senior and experienced solicitor. He was called to the Bar by Lincoln's Inn in 1967. He was admitted as an Advocate in Zambia in 1968. Between 1982 – 1986 he was General Counsel to ITM International and a Vice President of one of its subsidiaries, Meridien. Since 1987 he has practiced as a Solicitor in the West End Law Firm MCD. He is the senior partner. His areas of expertise include general litigation, commercial litigation and business affairs.
- He maintains that through his life he has sought to maintain the highest standards of honesty and probity. He considers his own standards to be even higher than that of his professional requirements. He is clearly intelligent and very experienced. Amongst his clients he has included Nelson Mandela who has provided a character reference.
- The lynch pin of AGZ's and IM's case is that he met FK, AC and XFC in Autumn 1995 at the Churchill Hotel London. IM maintains:-
- As I have set out above this was a key part of the conspiracy. It led to the disbursement of $9,260,000 through MCD's client account of which $7,021,020.17 have been traced by GT into the Zamtrop account from MOF. This is actually no surprise for IM as he knew of the Zamtrop account and he knew that the monies coming from it were Government monies. His case is that he was acting for ZSIS in this secret operation. During the course of his evidence he attempted to put forward a case that he was acting for AFSL to justify disbursements made at the behest of FK. However his primary case arising out of the Churchill Hotel Agreement was that the whole operation was for the benefit of ZSIS's operations.
- He agreed to this willingly. The following matters are surprising:-
- The failure to tell his co partner is a very serious failure. It could be said that that was part of the belief that what was happening was secret. I reject that. If one is involved in these kind of matters it is one thing to involve oneself alone; it is quite another to fail to tell one's partner and leave that partner exposed and in the dark as to what was going on. The relationship between partners is supposed to be of the utmost good faith.
- In the context of the present litigation AGZ accepts it has no claim against ND for conspiracy or dishonest assistance. ND is dragged into this on the basis that what IM did was in the course of business of the firm MCD and that ND is consequently liable (whether he knew about it or not) under Section 10 of the Partnership Act 1890 jointly and severally with IM for the losses. That exposes ND to a liability of up to $25,754,316.
- The belated attempt by IM to say that ND was involved was a further matter of concern. It was at the end of many days of cross examination but it was not an answer blurted out in the heat of cross examination. It was in my view a measured answer deliberately given by IM in response to a question put to him in re-examination by his Counsel. It was designed to mislead the court. The consequences could have been severe. At that time AGZ made no allegation of dishonesty against ND. IM's outburst questioned that.
- Second it was an unjustified attempt to implicate ND in the conspiracy. IM was a careful and measured answerer of questions. This answer was not a careless answer. The fact that it was withdrawn the next day on instructions shows that it was perceived (rightly in my view) to have been a damaging exercise. It was a calculated attempt to implicate ND. It was a lie. IM knew it was a lie. It was not in my view IM's only lie. I will summarise the areas where I form the view that he lied and the consequence of those findings further in this judgment.
- It was pointed out correctly in IM's closing submissions that there was no documentary evidence which clearly indicates IM was a party to a conspiracy or provided dishonest assistance. The ledgers have been maintained and the GT traces were done through his accounts. Although there were allegations at the opening of bad accounting and myriad breaches of the Solicitors Accounts Rules to support inferences of dishonesty these have been abandoned. They were not put to IM in cross examination.
- In that context I should set out again what I said at the start of the trial. In view of the serious allegations that were made it was important that every person on the receiving end of such allegations should be given a fair opportunity to confront those in cross examination. I made it clear that I would not entertain a criticism of the truth of a witness in closing speeches based on matters which had not been put to that witness. It is important because without such matters it unfairly deprives the witness of the opportunity to persuade me by his answers and demeanour that he is an honest person and is to be believed. The converse is also equally applicable; it deprives me of an opportunity to assess a witness in that light. It is fashionable to suggest that the live evidence of a witness has less importance nowadays. If by that it is meant to assert it is often the situation that the result generally turns upon contemporaneous documents I would not dissent from it. If it is intended to suggest that the importance of live evidence subject to vigorous cross examination is less important I would fundamentally disagree. This case has demonstrated graphically the need for people to present their case and for that presentation to be tested. The failure of the Zambian Defendants to attend has counted against them for that reason.
- It was always going to be necessary for AGZ to establish his case against the participating Defendants based on cross examination and putting to those witnesses their evidence and the documents. I accept the observations in IM's closing that IM's cross examination was an ordeal over some 6 days. It was vigorous but I do not accept it was unreasonably aggressive. Had I perceived it to be like that I would have intervened. There were a number of occasions where it was clear to me that IM made a mistake when answering questions. In making that mistake (for example) he appeared to be acknowledging dishonesty on his part. I gave him an opportunity to reconsider his answer on those occasions. IM never admitted dishonesty on his part during the whole of the 6 days of cross examination.
- Some of his answers were plainly inadequate as he acknowledged in his closing.
- For example he singularly failed to question FK's instructions. His repeated statement was that he did not feel it appropriate to question his client's instructions. That was inadequate. Equally his conduct in respect of the Blue Card warnings (see below) was patently inadequate.
- He acknowledged in effect he had been negligent and possibly grossly negligent. That however is insufficient for him to be made liable. The main question I have to decide as regards IM's case is whether or not he has crossed the line between being incompetent to being dishonest ("fool or knave").
- In assessing that key point I bear in mind a number of factors.
- First IM is an experienced solicitor and has been in practice for decades. Is it likely that such a person would act dishonestly?
- Second he however as an experienced solicitor knows fully the traps of international fraud and the like. His experience therefore makes it more difficult for me to accept that where I find he has behaved inappropriately that was negligence as opposed to dishonesty.
- Third it is clear that he made little or no money out of these arrangements on the evidence before me. There were faint suggestions in cross examination of pay offs but I am satisfied on the evidence that case is not made out. That too is a factor to be borne in mind. Why should such an experienced solicitor at the pinnacle of his career become involved in a dishonest conspiracy with no apparent financial benefit accruing to him?
- The sad thing however is that there have been many cases in the courts where professionals have become embroiled in fraud for little or no personal benefit. They often commit the fraud out of a desire to please clients whom they wish to impress. They are sometimes flattered that famous or powerful people use them. They often succumb to that flattery and fail to exercise their thought processes in a proper way. Once ensnared they find it impossible to remove themselves from the wrong doing. There is undoubtedly a state of affairs that occurs when people are dazzled by being associated with those in power. There may not be an immediate benefit from the conspiracy but it is quite possible that the association with figures of power gives them kudos and indirect benefits. In this context it is significant to note that from the FK statements to the TF he suggested that XFC had singled out IM because he was aware he had international contacts. It is likely in my view that he perceived IM as being susceptible to flattery and might become malleable because of the prospect of being associated with further concentrations of power.
- The Churchill Hotel Agreement was clearly something very unusual. IM if he wished to proceed ought plainly to have taken some protective measures (notes and records) and should clearly have set out the precise parameters to what should be done. A telling example which came up repeatedly in cross examination was the fact that he believed all the monies were ZSIS monies transferred from the Zamtrop account to be distributed for ZSIS purposes. When it was pointed out to him that the disbursements were for some objects which were clearly personal benefits of FK he was then put on the horns of a dilemma. During the course of his cross examination he developed another possibility namely that AFSL had an entitlement to some of the monies because of services that it had rendered to ZSIS.
- This fell apart in cross examination in my view when questions were put to him see AGZ's closing paragraph 954-956.
- It was impossible for him to maintain that he was merely entitled unquestioningly to disburse monies on the instructions of FK as agent for AFSL without questioning them.
- As I have said IM is not a young naïve person. He has plainly moved in circles which would give him a counsel of caution.
- I do not believe IM agreed expressly or by implication to enter into a conspiracy to defraud Zambia at the time of the Churchill Hotel Agreement. I do believe however that when he was asked to do what he says he was asked to do at that meeting he should have been cautious and suspicious. He should have been active in ensuring everything was legal and above board. He did none of the things that one would have expected him to have done to ensure that he was not being used as an engine of fraud.
- That does not mean he was dishonest at the outset. However as an experienced professional he knows he must apply an independent mind to every transaction he becomes involved in. By definition the unusual nature of the proposal required him to be especially cautious. He threw caution to the wind almost immediately and simply did not question anything.
- AGZ says the lack of questioning was because he was in the conspiracy from the start. I do not accept that. IM's background of honesty and integrity leads me to the conclusion that he did not join the conspiracy at the Churchill Hotel Agreement.
- However his need to question does not end with the Churchill Hotel Agreement. The very nature of the supposed arrangement required him to be careful and questioning. He must apply his professional mind to the transactions that he was subsequently asked to effect. It is plain from his evidence that he never questioned anything FK asked him to do.
- AGZ submits that he was in effect doing nothing more than providing a banking service. He was receiving Government money, posting it to a ledger in the name of a non-banking financial institution and disbursing the monies with no knowledge of the recipient or the purpose of the remittance. IM is actually worse than a mere banking operation because IM plainly did not address any of the necessary questions that a bank has to raise when asked to implement transactions of the like that ran through his client account.
- It is instructive to see what IM did with the very first transaction. On 23rd November 1995 FK sent him a fax primarily concerning his Sun Alliance policies. He also however said "I am expecting a fairly large payment into the account as discussed. Please notify me as soon as this happens as I have some urgent disbursements to make thereafter.
- When referring to the timeline the period of December 1995 is significant of course. IM in his witness statement says he does not recall whether he had a separate discussion but it seems to me plain that on the basis of that fax he did.
- On 30th November 1995 $249,998.51 was received into the MCD $ account. FK had sent a letter dated 24th November 1995 to MCD advising them that he has instructed ZANACO to remit the sum of $250,000 and he requests MCD to hold it to his instructions. MCD's bankers Nat West notified them of the receipt via swift transfer and it is to be noted that the money came from ZANACO and was by order of "XFC/DN". IM in his witness statement says that he was not sure whether he was conscious at the time of the identity of the bank sending the monies. I do not accept that. First the letter of 24th November 1995 made the position clear and his Nat West bank instruction make the position clear. IM (in contrast to BT) does not say that he did not review his bank statements. Equally I reject his statement in paragraph 40 that he was not sure that the reference XFC (on the first remittance) was to Xavier Chungu. It is plain it was and he would recall in the light of FK's fax and letter that reference. This was the first payment I find that he was receiving under the Churchill Hotel Agreement and he knew it. It was therefore received by him on the understanding that it would be Government money used by ZSIS for secret Government purposes and for no other purpose.
- Upon receipt of the money IM opened a client account ledger (2535) in the name of FK. He said he was not surprised to receive this money because he had been expecting sums for AFSL. Despite that, for a reason which he was not satisfactorily able to explain he opened the account not in the name of AFSL but in "FM Kabwe/Commercial". His professed reason was to differentiate between this work and private matters on which he acted for FK previously. He says with extreme casualness in his witness statement "I probably should have opened a file and ledger in the name of AFSL at this stage since both XFC and FK had made quite clear that the party carrying out the services for ZSIS was AFSL and that AFSL was my client". It took him nearly 3 years after the initial receipt to open a ledger in the name of AFSL which was opened on 26th February 1998 (ledger no 3556). Over the next month some $175,000 of that credit was disbursed on the instructions of FK. The first disbursement was a cash payment of £5,000 to FK himself on 7th December 1995. That was effected by an instruction signed by IM and ND of the same date addressed to Nat West to transfer it from the client account to the office account.
- On 7th December 1995 FK gave instructions to disburse $40,000 to SW Munthali and $20,000 to Osman Samantar. IM and ND carried out those instructions on the 11th December. IM then received instructions on 20th December 1995 to remit $15,321.45 to AFSL's account with First Merchant Bank in Zambia. On 21st December 1995 he received instructions to transfer $75,000 to Sports Simulation Inc (into its Savings Bank of New York account). That was implemented on the same day by an authority signed by IM and ND.
- On 2nd January 1996 IM received instructions to transfer £5,000 to Atlas Trading. This was said to refund Mohammed Omar for assistance availed to FK over the holiday period. On 8th January 1996 FK gave instructions to transfer $12,000 to Chabala Kaunda into his University Village Branch at Bank of America. On 22nd January 1996 FK gave instructions urgently to transfer $15,000 to Irene Kabwe to a bank account in New York. The fax also required IM to inform FK if he received further monies. On 26th January 1996 IM and ND effected a transfer of £6,000 to a Mr and Mrs Mok.
- On 22nd January 1996 MCD received into its client account a further sum of $373,988.68. The advice note from MCD's banker said it was on instructions from Nat West Bank Plc New York branch by order of Paine Webber Inc. IM in his evidence referred to this credit but acknowledged that no information as to the reason for the payment was provided. Further there was no evidence to show that this money was attributable to AFSL/FK save on the basis that FK had said some funds were to be expected. IM says that he assumed or it may have been that FK told him that the sum was from a sale of shares as Paine Webber were Stockbrokers.
- I do not accept any of this. If it was a sale of shares then that must be FK's personal shares. If that is correct it should have been credited to his existing client account and not the one that "probably should have been opened in the name of AFSL". By posting it to FK's account number 2535 IM is assuming that it is Government monies when his witness statement suggests that it was not.
- The major difficulty that faces IM in my view is that right from the start he apparently credited Government monies to a ledger in the name of FK. He accepted unquestioningly instructions from FK to disburse money from that account. It is plain that all of the disbursements in respect of the very first payment in are plainly not for Government purposes. An honest person would know that those payments are not being utilised for secret service commitments. IM must have realised that; it is self evident from the nature of the disbursements. It must be appreciated that on IM's case FK had no beneficial entitlement to the monies. Simply following FK's instructions as to disbursement would lead to the possibility that IM must be alert to that FK might actually be defrauding the Government. In fact IM asked nothing about the disbursements or why Paine Webber were sending monies which he credited to this particular FK ledger. Equally in addition to the clearly questionable payments to FK's wife IM really should question why monies coming from Zamtrop account allegedly for the benefit of AFSL are then partially remitted back to AFSL Zambia. By 8th May 1996 virtually all of the monies had gone. $50,000 was transmitted to Tokyo Overseas Corporation and AFSL, $20,000 to Rajani, $100,000 each to Grove International and Kudu Enterprises and $52,580 was remitted to Mitsui & Co. There were further cash payments to FK and IK. None of these payments was explained. IM did not know what the payments were for.
- In all cases IM received instructions from FK which he simply implemented without question. It does not appear to me to be clear how anybody can accept any of these payments as being for the purpose of ZSIS activity on their face. In some cases the remitter is identified as a complete stranger. For example the $100,000 sent to Alnida has a remitter as being Aslan. The remittance of $100,000 to Kudu Enterprises has a remitter Salim Patel. In these cases FK tells IM to identify the remitter and IM simply implements it without question. The only transaction that comes anywhere near a possible ZSIS acquisition is the Toyota vehicle purchase funded by the transfer of $52,580.28 to Mitsui above. However I have no evidence to show that that was a purchase of a Government vehicle. In any event such a purchase in that way is not the normal way for acquiring Government vehicles.
- The next receipt is $309,988.66 received on 21st May 1996. The payment is stated to be by order of "Zamtrop" from ZANACO. IM credits that sum to the FK account 2535 with a narrative "from Zamtrop". The first disbursal of these sums is on 29th May 1996 in the sum of $60,071.17 to somebody with a name of "Thoger Daell". FK gave instructions on this and directed him to identify the remitter as Zamdaell Zambia Ltd as arranged by Murray Dewar. IM and ND implemented this without question on 28th May 1996. All of these disbursements take place even though IM's initial evidence (paragraph 48 of his witness statement) was "so far as I was concerned, however all payments received into Meer Care's client account (whether from the Zamtrop account or from other sources) were the property of AFSL or, as appropriate Harptree Holdings". They could then he suggested be mixed with receipts from other sources as directed by FK and could be disbursed according to his instructions. This is despite the fact that from May 1996 onwards monies were received mostly from the Zamtrop account at ZANACO in London.
- He was unable to explain how AFSL had an entitlement to these very large sums of money (in a Zambian context). He was supposedly receiving ZSIS money.
- All of this in my view is impossible. The account ledger 2535 (although in the name of FK) was allegedly opened to show that that was for the ZSIS operations when the disbursements plainly were not. The separate AFSL account was opened 2 years later but as will be seen further in this judgment IM still posted Zamtrop funds on occasion to the original account. His evidence also was that the account had sums mixed in it allegedly from private activities of FK/AFSL or in respect of entitlement on the part of AFSL to receive Zamtrop monies for services rendered. All of this mixing took place without any question by him. It means that he could never be sure whether any payment was properly payable because on his own case he did not know the beneficial ownership of the funds he received. He did not ask so he never knew on his evidence who owned the funds.
- That this was impossible should have been blindingly obvious to the most inexperienced of solicitor. To someone of IM's skill and experience in my judgment it is impossible for him to act merely on the instructions of FK in the way he did.
- I remind myself of what Mance J said in Grupo Torras "…no honest lawyer would have implemented the instructions which Mr Folchi recounts in this transaction unquestioningly and uncomprehendingly in the manner in which Mr Folchi did. There can be no question about Mr Folchi's competence. An honest lawyer in his position would, to safeguard himself and his clients, have insisted on obtaining a proper understanding and assurances regarding the situation (quite possibly in writing despite the supposed confidentiality of what was occurring). If his clients would not give him this, he would have refused to become involved…… I conclude that Mr Folchi received and complied with instructions which conflicted, on their face and in the most obvious way, with the most fundamental of fiduciary duties, to keep private and corporate affairs and money separate. Despite any confidence Mr Folchi may have had in his clients and the distinction of the officers whose accounts were in question and despite the prevalence of the complimentary payments, I cannot view it as honest conduct for any lawyer to facilitate indirect payments from ones clients company accounts to unknown accounts in the names of the clients company director without any clear understanding as to why this should be necessary or appropriate. Any other conclusion would be an invitation to fraud. Directors of previously impeccable reputation can succumb to the temptations of their stewardship. Any lawyer in Mr Folchi's position must be taken to be aware of this risk, and I have no doubt Mr Folchi was as aware of it".
- In my view IM was in exactly the same position right from the start of the first instructions to disburse monies. He further compounded the situation by the manner of the accounts he operated and the supposed mixing of funds. I reject his evidence that it was AFSL money. He plainly believed that all the monies were to be received in respect of the Churchill Hotel Agreement and were to be disbursed under that regime. If a disbursement was not to be under that regime it ought to have been clarified and justified. IM should have requested that clarification and justification especially in respect of requests by FK to remit money (for example) to his wife and to make payments back to AFSL in Zambia. In my view any honest and competent solicitor would have sought immediate clarification. Given the nature of the supposed transactions IM was particularly vulnerable and he ought to have enquired if only to protect himself and the various potential clients. FK as I have said could have been defrauding AFSL.
- This is classic blind eye dishonesty. There are two possibilities. IM did not ask because he knew precisely what was going on namely that there was a conspiracy to defraud and he participated in it willingly. The other possibility is that he did not ask because he did not want to know the answer.
- In my view it is not necessary to decide which of the two is the more likely scenario. I am quite satisfied however that no honest solicitor in his position would have done what he did namely nothing whatsoever beyond implementing the instructions without question. His conduct therefore was dishonest as soon as he failed to question the very first instructions to disburse funds. This grew and grew and of course it must be appreciated that he received at least $7,000,000 over the period of time. Not one direction to dispose of these funds was ever questioned by him.
- I am therefore satisfied on this evidence alone that he provided dishonest assistance. However this conclusion is supported by other evidence which I shall set out below. He was not in my view a conspirator in the over arching conspiracy to defraud with XFC, FJT, FK and SC. He was however in a sub conspiracy to steal the monies that were routed through his client account. Once again I do not know whether he became actively a conspirator i.e. knew that there was a conspiracy and agreed to join it or whether he was aware of such material that if he participated in the activity he became a conspirator. It is not necessary for me to decide that potential difference. I am satisfied that he became at least a conspirator because he was aware that money was being improperly applied and chose not to question that activity. Further he facilitated the theft. To avoid becoming a conspirator he should have refused to act unless satisfied that the transactions had a genuine honest purpose. He failed so to act and was accordingly dishonest.
- IM's counsel in their closing submissions provided a schedule which identified all of the transactions on the MCD ledgers with the appropriate narrative. It is self evident from an examination of those that none of the transactions can be said to have a clear ZSIS purpose. With further explanation I suppose it is possible that some might have a ZSIS purpose but on the face of them none of them does. It should be observed for example on 30th June 1999 ND implemented FK's 21st June 1999 instruction to remit $100,000 to Vittorio Lembo and an identical amount to Basile on the same day. They bear no relation to the task that he was being asked to do namely ZSIS operations.
- The faxed instruction was addressed to IM/Yasmine IM's secretary. She took the instruction to ND who processed it on his own because IM was away. However IM was aware of the transaction because ND's evidence (which I accept) was that there would be discussions between him and IM even though IM was not at work over these authorities which he signed on his own. Thus IM drew ND unwittingly into the implementation of the conspiracy to defraud.
- I am reinforced in my view as to IM's dishonesty by taking into account a number of lies that he has told to investigating and official authorities over the years.
- Harptree was incorporated as an IBC (international business company) in the BVI on 2nd January 1997. IM said he incorporated it on the instructions of FK and that he was told that the company was set up for ZSIS purposes. MCD however has disclosed no documents which records any instructions as to the incorporation or the intended ownership of the shares. No Trust Deed or similar document has been disclosed in relation to the holding by FK of shares as an alleged nominee for ZSIS. The shares are held by a nominee at Bachmann Trust Company Ltd.
- Harptree is relevant because it was the corporate vehicle used to purchase properties with Government money in particular in Brussels i.e. through Jarban SA. Mr Hamunjele sets out various steps (which are not disputed) in his 6th witness statement (paragraphs 119-142).
- There was an issue concerning the ownership of those properties which I heard in August 2005. Jarban SA is a Luxemburg company and it owned the Belgian properties through a wholly owned subsidiary Belsquare. The acquisition was funded by monies from the Zamtrop account remitted to MCD. Each transfer of monies was credited to Harptree's ledger (3388).
- IM's evidence in respect of Harptree is in my view ambiguous and misleading and deliberately so. The story he sets out in paragraph 52 of his witness statement contains a serious number of obscurities and evasions. He set up Harptree yet he failed to reveal who gave him instructions and has never revealed any of the documentation. He stated that he believed that FK informed him that he would be the beneficial shareholder of the bearer shares in Harptree but that he would hold the shares as a nominee for ZSIS. That is inherently contradictory. Nevertheless whilst all of his instructions re Harptree came from FK he did not consider the Zambian Government or ZSIS to be his client. This was despite the fact that he knew it was funded from the Zamtrop account. He considered Harptree to be his client and that he held Harptree's monies subject to FK's instructions. He has never revealed how FK was in a position to exercise control over Harptree. It is disingenuous to say the least to say that Harptree was his client without revealing upon what basis Harptree became his client.
- The incorporation of Jarban required a document called a "Mandat" to be provided. The importance of the document is set out in the letter from Banque Cogeba-Gonet S.A. On his evidence in his witness statement the ultimate beneficial owner of Jarban SA is apparently ZSIS. It is not FK on this evidence. The Mandat had to be signed by the beneficial owners and the origin of the funds invested in the company had to be indicated. For both of those to be truly answered by IM according to the evidence before me the ultimate beneficial owner should be ZSIS and the source of monies should be Government monies received from the Zamtrop account. He sent the documents back on 13th May 1998. The Mandat was signed by the beneficial owner. Unfortunately that document has been lost. IM gave evidence to the effect that he believed he would have identified FK as the beneficial owner. He acknowledged (T29/76/20-25) that in identifying the beneficial owner as FK if that was correct his evidence before me was untrue. The other alternative was that the evidence before me was true i.e. ZSIS was the beneficial owner but the answer he gave to the Luxemburg authorities was untrue. Equally he told an untruth in respect of the source of the monies. IM acknowledged (T29/75/4) that the requirement for the source of the monies was a money laundering check. He did not identify the Zamtrop/ZSIS source. He therefore provided 2 false statements to the Luxemburg authorities and misled them in respect of money laundering activities.
- He compounded this in my view by lies to the Office for the Supervision of Solicitors ("OSS"). He and Mr Desai were interviewed by the OSS on 2nd April 2003 by a Mr Udin and a Mr Fletcher of the OSS. Although IM suggested at some point during his cross examination that he had been ambushed by the OSS the preamble to the interview shows that is not correct. Further he had an opportunity to correct any errors in the transcript and the part in relation to Harptree was not challenged. It should be noted that the interview was recorded. The answers that he gave in relation to Harptree and AFSL were plainly deceptive. First he stated that there was a loan between Harptree and AFSL when he knew there was no loan. Second he failed to reveal who was behind Harptree. Part of that failure arises out of the careless question asked by Mr Fletcher "who is behind Harptree then? Is it anything to do with AFSL" IM answered the second part "nothing". Mr Fletcher demonstrated the problem of asking two questions in a single question. He was asked whether FK was the bearer shareholder of the BVI company and his answer was "I have no idea whether he is holding the bearer shares in his hands or whether somebody else is holding bearer shares". That is a deceptive answer when looking at his evidence in paragraph 52 of his witness statement.
- His failure to tell the OSS was explained by him in cross examination (T29/80/25) as a belief that he wanted to be discrete. In other words he was prepared to lie to the OSS or be evasive. That in my mind is something that an honest solicitor would not do especially by April 2003.
- Finally in this context IM decided to make a report to the National Criminal Intelligence Service ("NCIS") on 23rd February 2004. He reported FK on the basis that he was "the ultimate beneficial majority shareholder" in Harptree. The reason for the disclosure was the fact that he then held $783,066.10 for the credit of Harptree Holdings Ltd ("we are without instructions"). After setting out the transaction he then stated "the beneficial owner Mr Kabwe in Zambia was charged with theft of public funds in 2002, together with various other persons who are not our clients including the ex President of Zambia". That was either a false statement to NCIS as to the beneficial ownership of Harptree or IM is lying now when he asserts that Harptree was beneficially owned by ZSIS. It was put to him in cross examination (T29/60/1) that his Defence as put forward in this trial that the acquisition was for ZSIS was to legitimise the transaction belatedly. IM denied that. He was unable to explain why he did not tell what he now says to me to NCIS. Once again either he lied to NCIS or he lied to me. In my view he lied to me.
- In my view it is obvious. The Jarban purchase was FK's pay off for his role in the conspiracy. IM whilst he did not know the over arching conspiracy details took instructions from FK on behalf of Harptree because he believed it belonged to him beneficially. Yet he knew that the purchase was funded by Government monies via the Zamtrop account but did not question FK's entitlement to them. That failure, (even if his case is to be believed, that it was a ZSIS purchase), and the failure to record that in any document are actions again which an honest solicitor would not do. Such a large purchase of a block of flats and an apartment hotel cannot conceivably have been regarded as a purchase for ZSIS operations. Equally the labyrinthine routing of the ownership of the properties via a BVI holding company with nominee directors and bearer shares and a Luxemburg company interposed show that the whole operation was to hide things. I do not accept that the purpose was to hide ZSIS involvement; it was to hide the fact that Government monies were stolen and used to acquire assets which apparently belonged beneficially to FK and IM dishonestly knew it.
- AGZ in his closing has provided a detailed analysis of all of the disbursements by MCD out of the monies they received. IM has done the same. None of them is really disputed to any degree.
- I start with the proposition that the legal burden on AGZ is to show that Government monies were used in an improper way as part of a conspiracy to defraud or (as regards IM) he dishonestly provided assistance. That legal burden remains on AGZ. However once IM acknowledges he knows he is receiving Government money the evidential burden then goes on to him to show that it was being applied lawfully. The only lawful use that he can pray in aid is a disbursement under the umbrella of the Churchill Hotel Agreement. I have looked extensively at the disbursements. Not one can be clearly identified as being for a ZSIS purpose under that agreement. IM in his closing suggests there might possibly be some but in my view that is not enough given his failure to ask any questions whatsoever. He has no idea at all what the funds which ran through his client account were being used for.
- I have referred to the various Press articles that came out in the Zambian Press. The most significant one from IM's point of view is the Post of 25th June 2002 with the analysis of "Chiluba's matrix of plunder". This cannot be dismissed as a piece of sensationalist journalism. As I have said earlier it for the most part accurately set out what had gone on. MCD and IM are named and references made to the fact that $9,000,000 has been paid to MCD (which is correct).
- MCD had received a letter on 9th May 2002 from the SFO in respect of documents relating to an investigation about Systems.
- IM said he became aware of the Press reports that AFSL was being investigated regarding allegations of corruption. In his witness statement (paragraph 117) he said he ceased acting for AFSL pending clarification. Such a statement barely addresses the issues which an honest solicitor must have concerned himself about in the light of the newspaper articles. He would have been bound to question the inter relationship that he perceived between ZSIS and AFSL. He would be bound to question the validity of the payments which had been run through his client account in the previous 6 years. He would want to know answers from FK and XFC.
- Finally if he was an honest solicitor I would have expected him bearing in mind the fact that his firm was named in the Article to have contacted the authorities first to protest his innocence and second to assist in any investigation. In fact he did none of these.
- Equally when he said in his witness statement he ceased acting for AFSL in June 2002 he is being extremely economical with the truth. The day after the newspaper report he paid out $12,545.74 to IK. That came out of the AFSL account 3556 which was supposed to have taken over from the earlier account (2535). That left a balance of $7,161.45 on that account. On 31st May 2002 MCD transferred $10,000 to CM. At June 2002 the balance on account 2535 was $9,815.95. On 1st November 2002 MCD paid $7,541.03 to Robert Simeza (FK's lawyer). At June 2002 the Harptree ledger was in credit in the sum of $871,311.99. On 12th November 2002 MCD transferred a further $75,058.03 to CM on the written instructions of FK dated 15th October 2002. That account remained dormant until I made an order on the opening of the trial to transfer the funds to the credit of AGZ.
- An honest solicitor in my view would have told the authorities of the existence of these funds in the Harptree account. One has to look at the situation in June 2002. FK is accused of fraud. IM asserts that FK/AFSL were his clients but in respect of Harptree FK though not the client gave the instructions. IM knew that the money that came into the Harptree account came from the Zamtrop account and was Government money. Yet he did not report the matter to NCIS for another 2 years and he never reported the matter to the authorities in Zambia. Those are not the actions of an honest man in my view. Further in my view his statement that he ceased to act for AFSL is a lie designed to give an impression of honesty when he was still making dishonest payments. The very minimum an honest solicitor would have done in those circumstances in my view is to say to FK and the others that he could do nothing and would release no monies until the position was made absolutely clear.
- Simultaneously MCD was investigated by the OSS in July 2002. Yet still IM disbursed money thereafter on FK's instructions.
- CM sent MCD the instructions with FK's signature on to transfer the funds to Mr Simeza. The instructions in respect of the $75,000 transferred to CM are even more intriguing. The first one was a fax from FK on AFSL notepaper to IM dated 15th October 2002. In this FK requested "on behalf of your client Harptree please arrange to pay the sum of $75,000 to [CM] in connections of expenses incurred on behalf of this client"
- Despite the furore created by the Press releases IM never asked what services were being provided to Harptree. It never apparently occurred to him to think that he should not accept instructions from FK to transfer monies held in the name of Harptree which he knew were Government monies derived from the Zamtrop account. There was obviously some prevarication which IM has not explained because he received a further letter from FK dated 6th November 2002 where it says "I have been asked by Access Financial Services Ltd to request you to remit the sum of $75,000 to Cave Malik & Co London on behalf of client Harptree". This was sent to him by fax on 8th November 2002 by BT. There is an attendance note written on it by IM as follows:-
- He had received a letter dated 1st November 2002 from AFSL written by AC. This letter purported to give IM authorisation to continue dealing with FK in relation to any business between the two organisations. FK was stated to have full authority to represent the company in this regard.
- IM dealt with this in paragraph 121 of his witness statement. He had received the letters set out above but notwithstanding this was not happy to take instructions on behalf of AFSL. He states that he did not believe at that point that he could not act for Harptree and that he was prepared to do so acting on FK's instructions on behalf of Harptree not AFSL. He said "It seemed to me at the time that this was entirely permissible. [FK] remained the person who was authorised to give instructions on behalf of Harptree irrespective of his other difficulties".
- In my view this is dishonest window dressing to provide a spurious justification for continuing to deal with FK. It is impossible in my view to compartmentalise Harptree from the troubles that were apparently affecting AFSL, FK and AC who were all identified in the Matrix of Plunder article. Simply accepting without further ado AC's statement that FK continued to have authority is something that an honest solicitor in my view would not do. They are all alleged to be involved in the conspiracy and being told by the conspirators to carry on in the same old way is simply not acceptable. Equally given the sourcing of the funds in Harptree and the fact that it was Government money and the fact that whilst FK might have had instructions those instructions were on behalf of the Government it is impossible for an honest solicitor to allow FK to direct $75,000 out of the Harptree account to CM without finding out fully what is going on. IM followed the same practice that he had done throughout the whole of the relationship; he made no enquiries.
- Unsurprisingly he was cross examined on all this (T33/124 et seq).
- At sometime during this period there were discussions between IM and BT. There is a dispute between them as to how these discussions took place. There is an undated attendance note of BT's "attended offices of IM to discuss options on various occasions too numerous to mention". He was unable to explain how he could use money that belonged either to AFSL or ZSIS to pay Mr Simeza.
- In respect of the payment of $75,000 he said it did not occur to him to get in contact either with the Republic or ZSIS but maintained he thought it was permissible for him to act on FK's instructions despite the fact that by then FK had already been arrested. As had XFC the two people of course who had introduced him to the arrangements under the Churchill Hotel Agreement. The answers are completely unconvincing. This too is a pattern of dishonest conduct on the part of IM.
- I should set a little background to this part of the judgment. Money laundering was first made an offence in the United Kingdom under the Criminal Justice Act 1988. The CJA 1993 broadened the scope of the offence to cover the proceeds of criminal conduct generally. Various regulations culminating in 1993 Money Laundering Regulations were implemented to prevent the use of the financial system for the purpose of money laundering. They required the maintenance of specified identification, record keeping and internal reporting procedures.
- On 28/29th March 1994 the Law Society circulated to all senior partners in every firm in England and Wales a "Blue Card" warning on money laundering. In addition the warning was repeated in full in the Law Society Professional Standards Bulletin No 12 which was published in February 1995 and circulated to every solicitor who held a practicing certificate at that time. Bulletin No 14 was then published in August 1995 and the second edition to the money laundering guidance notes was then circulated to every senior partner in a firm of solicitors in England and Wales on 26/27th July 2000.
- The purpose of these guidance notes is to warn solicitors about important international criminal activities. They are meant to be read. The court will have little sympathy with a solicitor who when confronted with a claim says he did not read the warnings. The court will carefully scrutinise a solicitor in that position who in effect says I was grossly negligent in not reading the warnings but I was not fraudulent. The purpose of these warnings is to ensure that solicitors are properly informed. The need for vigilance is shown by this case and the case of Manolakaki v John Constantinides [2004] EWHC 749 Ch where the "Yellow Card" warning was sent out in respect of banking instrument fraud. The solicitor there never read the Law Society Gazette, never bothered to update himself as to the rules of conflict of interest and never considered the Yellow Cards. He was found to be dishonest.
- I accept that a breach of the rule is not determinative of dishonesty. I reject MCD's submission in its opening that it is not of much persuasive value. Equally I reject the plea by CM in their opening that money laundering is "a wholly pejorative and inappropriate term to use in a statement of case". I agree with AGZ's submissions that it is important that solicitors and others pay heed to and follow money laundering legislation and guidelines. A failure to do so will expose a professional to allegations at the lowest of gross incompetence and at the highest that failure may be added to the evidence in deciding that the professional in question has been dishonest. Rix LJ put it succinctly in Abacha [2006] EWCA Civ 1492 at paragraph (36) where he said:-
- Of course one considers that also in the context of the person in question. Here IM's expertise and experience counts against him. His background shows that he should be well aware of these matters. It is far less easy for him to persuade a court that a failure to adhere to the Blue Card warnings is grossly negligent as opposed to dishonest.
- IM in his evidence (paragraph 89) acknowledged that he received the Blue Card warnings and more probably the original version but he could not recall precisely. He said that the vast majority of clients were people with whom he had had a long standing relationship and therefore the concept of obtaining detailed identification evidence for the purpose of money laundering prevention was not likely to be an issue for him regularly.
- The 1994 Blue Card warning asked solicitors "could you spot a money laundering transaction?" It gave 5 signals to watch for ( of which 4 are relevant):-
- It seems to me clear that the proposed transactions raised at least 3 and probably 4 of those tests. There is no suggestion that checks should not apply to existing clients.
- A revised Blue Card warning was issued in December 1995 and February 1996 the warnings were virtually identical.
- On 26/27th July 2000 the Law Society circulated to every senior partner in every firm in England and Wales its second edition of "Money Laundering Legislation: Guidance for Solicitors". An express warning in annex G set out similar 5 areas of concern but also added a warning that solicitors should be alert to any proposals which are an attempt to use a solicitors firm for nothing more than banking services. Annex H set out amongst other things "cause for concern", including where "there do not seem to be any legal services being performed or required as to be expected in the normal course of a solicitors practice".
- Whilst the Blue warnings became a little more focussed over the years it is plain in my view that if the Blue warnings had been properly considered by him IM could not properly merely act on the assumption that because he had known FK for a long time he could trust him. I pause to observe that his personal knowledge of XFC was non existent.
- These are serious failures. They are in my view supportive of the other evidence set out above which shows that IM was dishonest. An honest solicitor would have had heeded the warnings looming large in respect of the large number of transactions over the years and would have realised almost as soon as he was requested to make the first transactions that matters required considerable further investigation.
- IM in his closing submissions submits that he had a limited role. In the context of the over arching conspiracy that is correct but it ignores the substantial part he had to play on a subsidiary basis. The sums involved are still large. It is no good IM submitting that he made little direct financial money out of the transactions. That often occurs and I have no means of assessing whether he perceived he had indirect benefits from being associated with those in power in Zambia. His conduct is clear in my view. Nor is it particularly significant that his records (in stark contrast to that of BT's see below) fully set out the transactions. I have no doubt that he must have been reasonably confident that everything would be hidden within his client account in England and the Zambian authorities would not have been as persistent as they have proven to be in this case.
- As is acknowledged in paragraph 26 of his closing IM was an unsatisfactory witness. The unsatisfactory nature was not in my view because he was eager to please and consequently rather suggestible. There is a limit to the number of times that can be said on behalf of an experienced individual of the like of IM. He has sought to explain the answers he gave to the OSS in a similar vein. Of course allowances have to be made for the pressure of the case and the errors that are clearly made. His answers were regularly confused and illogical. However the reason for that was the fundamental implausibility of his case. Time after time he was unable to explain whether a particular transaction was a ZSIS transaction (they were all supposed to be such). When a disbursement (for example to IK) was put to him his answer was that that was FK's personal entitlement out of AFSL. This falls apart for the reasons I have already set out in this judgment. I reject the criticism that Mr Sullivan for AGZ cross examined in respect of each example. This was necessary so that AGZ could show the enormity of the transactions and to demonstrate the patent inadequacy of IM's performance as a solicitor because of the large number of transactions which were clearly questionable but were cases where IM made no enquiries whatsoever. The cumulative effect of this demonstrates IM's dishonesty.
- Equally I reject the suggestion that IM should not have been suspicious of FK in 1995. The Churchill Hotel Agreement is so unusual its implementation should be considered cautiously by a professional man. The lack of documentation, the lack of informing of ND and the unusual disbursement requests that arrived almost immediately all required an honest solicitor to question what was going on. IM was dishonest because he did not act as an honest solicitor; he never questioned anything. He cannot have been under any illusions that the monies were Government monies. There can be no commercial transactions that AFSL could have had with ZSIS that could have generated a fee income that ran to at least $7,400,000. An honest solicitor would have questioned this.
- During cross examination IM acknowledged his fundamental difficulty. Too much money had been paid away on clearly non ZSIS activities. He justified this on the basis that it represented remuneration that was due to AFSL. The major difficulty about this of course is that he was party to arrangements where on his case AFSL money and ZSIS money were freely mixed. As I have said above it countered his initial justification by the opening of account 2535 in the first place. In his closing (paragraph 69) it is suggested that his answers were after the event rationalisation or acceptance of suggestion rather than a recollection of his understanding at the time. I do not see that any of those is the correct analysis. It was simply put to him that his story that AFSL was not spending its own money because of the large amounts involved was impossible. He fell in with that suggestion when he acknowledged that the amounts far exceeded any amount that reasonably could be attributed to AFSL remuneration. The difficulty facing him however was his acknowledgement that he did not know when asked to carry out each FK directive whether or not it was a ZSIS operation, an AFSL operation or whether it was using money to which ZSIS was beneficially entitled or whether it was using monies to which AFSL had somehow become beneficially entitled.
- The most graphic example of this is in fact the Jarban acquisition where all the paperwork showed that the properties ultimately belonged to FK beneficially. Yet IM knew the monies came from the Zamtrop account and the bulk of them have been traced back to MOF. I do not accept that there was any genuine confusion. It is not after the event rationalisation in my judgment it is after the event justification. The justification however is false. There is no serious possibility that IM even on his own case could have seriously believed these large sums of money belonged beneficially to AFSL. FK and XFC did not provide him with any such possibility at the Churchill Hotel Meeting and there was nothing in the communications between FK and IM which suggested that either. As I have said above the nature of the requests for disbursements themselves called out to the need for an honest solicitor to make enquiries. IM is merely trying to invent at the trial a legal justification for not enquiring further with FK. He is attempting to mislead the court and in effect submit he did not need to make enquiries because it was all AFSL's i.e. his client's money. This is plainly dishonest. No honest solicitor in my view in IM's position could allow this mixing. I acknowledge he probably had no idea to whom the funds belonged but that was a question that he did not ask because he was simply implementing whatever FK told him. He suggested he was satisfied that he could do that and mix but there is in my view no honest justification that could entitle him to treat monies as belonging to FK/AFSL/ZSIS.
- Of course there are possibilities that the monies might have had a legal purpose but no evidence has been adduced to suggest any of them had. Certainly IM cannot put up any reason as he acknowledges in his closing submissions. All of this is speculation and the court is being driven to speculate that there might be honest motives because IM chose to make no enquiries when an honest solicitor would have made enquiries. If these were for ZSIS purposes it would have been the easiest thing in the world to speak to FK or XFC about it. They have trusted him with the receipt of at least $7,000,000. There is no basis for suggesting that if the operation was honest that they would not have explained to him in some way so he could be satisfied what the payments were for. That was a necessity to discharge his obligations as a solicitor of the Supreme Court. He has to apply an independent mind if only to be satisfied that dishonesty is not happening and that he is not being involved in it. Although IM suggested that he had no reason to distinguish ZSIS funds from AFSL funds that is an incredible observation to make by a solicitor.
- A solicitor's client account does not consist of a separate independent numbered account for each client. What a solicitor does is have one account in which all client monies are mixed together. It is essential for a proper understanding of the beneficial entitlement of client account monies to exist that the ledgers which represent each client's contribution to that global account figure is clearly identified. IM whilst his accounts correctly recorded the incoming and outgoings failed utterly to identify the beneficial owner of the various incoming and outgoings. Normally one would expect a relevant ledger with the name of the client and the funds credited to that to belong to that client. IM fails this logical requirement from the first. He opened account 2535 in the name of Faustin Kabwe. This he did despite the fact that he understood that the remittances were to come from ZSIS via the Zamtrop account. His evidence was that it ought to be monies which belonged to AFSL yet he allowed FK to disburse AFSL monies for clear non AFSL purposes. For the account to be properly operated it should have been designated in the name of ZSIS and the monies attributed to it.
- One sees the same in respect of the Harptree Holdings account where as I have set out above monies were at the instance of FK distributed for clear non Harptree purposes. The Harptree account itself is ambiguous. The monies that come into it come from Zamtrop or Zarkam (which has a connotation with XFC) in the main. It is true that there are some credits which are stated to be from clients but that rather makes the point. I have already observed the payments made to Vittorio Lembo and Basile (in excess of $200,000) out of this account together with the payments to Bob Standaert and the acquisition by Jarban. There are other credits from Katumbi, Betti which are relevant to the BK conspiracy to which I shall refer at that part of the judgment. These are serious failings. They are in my view an attempt to disguise where the monies are coming from and where they are going to. IM has a role in that because either he knows the dishonesty is going on or he suspects it and dishonestly failed to make any enquiries which would lead an honest solicitor to seek to understand the activities. I agree it is not surprising that IM received $9,000,000 of Zamtrop funds and mixed them in the ledgers as he suggests in his closing (paragraph 74) but not for the reasons he gives. In my view they are part of the cover up and he did it dishonestly and thereby facilitated the unlawful stealing of the monies that were run through his firm. I do not accept having seen him in evidence and cross examination that there is any other credible honest explanation for the enormity of the failings on his part.
- It is suggested in his closing that the interposition of MCD was to preserve secrecy but it was acknowledged in closing (T21/2/7 page 101) by Mr Head that having a spy client does not absolve IM from complying with the obligations that he has as a solicitor practicing in England and Wales. In reality there was no real way in which the arrangement would support the secrecy of ZSIS. Nor was any explanation of any credible nature put forward by IM as to why the transactions that he was asked to effect needed this cloak of secrecy. Throughout all of this is his failure to question why his client account had to be used in this way as opposed to ZSIS or even AFSL opening bank accounts either in the UK or operating these transactions through AFSL's existing banking facilities. It is submitted that the assumptions that he made are perfectly understandable. I do not accept that. I am of the opinion that they are not understandable.
- His failings are supported by the failings already identified earlier in this judgment.
- Finally I look at IM's conduct in relation to the disclosure applications and the order of Pitchford J requiring MCD to disclose the whereabouts of documents "which are the property of or relate to the affairs of [AFSL]" (order 29th January 2004).
- In purported compliance he swore an affidavit on 5th February 2004. In paragraph 3 he said "we hold 3 files relating to the affairs of [AFSL] together with our financial ledgers relating to this client. …. there are no documents that have left our custody or control other than the originals of letters which were posted to the respective addressee on the dates specified on those letters……we do not hold any other documents or records on behalf of [AFSL] other than those detailed above". IM merely identified "AFSL files" meaning the files labelled "AFSL". In so doing IM failed to reveal the existence of the file 2535 and its associated ledger which included a considerable amount of material relating to AFSL. IM's evidence before me is that ledger 2535 should have been an AFSL ledger. It is submitted that the withholding of the file and the others is clearly not a concerted effort to hide any wide ranging fraud or conspiracy since the ledgers remained intact in his office and were referred to frequently in the instructions and the ledgers that he did disclose. I have been provided with no explanation as to this glaring failure. In my view it is another example of IM acting dishonestly. By this stage he becomes more actively dishonest because he is concerned to cover up his involvement in the arrangements.
- Drawing all of the above together the inevitable conclusion in my opinion is that IM participated in the sub conspiracy with XFC, FJT and FK to steal the Government monies by the use of MCD's client account. In so acting I also conclude that he acted dishonestly in assisting the Zambian based Defendants to steal government money and dispose of it through his firm's client account. I have not reached this conclusion without regret. IM clearly has had a long and distinguished career but that should not deflect me from the conclusion that I ought to come to in the light of the evidence before me. Taking into account all that evidence including the documents IM's primary evidence and his cross examination I have come to the conclusion that I have. The loss on both heads is for the traced amount. ($7,021,020.17) plus an additional amount reflecting what I have said in paragraph 275 above.
- As I have said above no allegation is made of dishonesty against ND. He clearly authorised the bulk of the transactions jointly with IM involving disbursements out of the client's account. The banks mandate required both to sign or a coded message to be given if only one was signing. Some transactions ND did on his own singular authority having discussed it previously with IM.
- ND struck me as an honest witness. I accept his evidence that he trusted IM and can well understand in his position looking at IM's seniority and status why he would do that. It is not the normal practice of partners to question their senior partners and have them justify the transactions that are being done are lawful transactions. I accept that IM did not tell him the details of the transactions. Equally I accept that he knew nothing of the Churchill Hotel Agreement.
- AGZ submits that ND is jointly and severally liable with IM under Section 10 of the Partnership Act 1890. He submits that IM was expressly and/or impliedly authorised by ND to receive and disburse the funds as set out in the claim through MCD's client account even in the absence of the provision of any underlying legal service by MCD.
- He submits (correctly) that ND expressly or impliedly authorised all of the instructions to Nat West Bank to remit funds and further submits that on those occasions when IM was absent ND was a sole signatory and he "must have appreciated from the tenor of the instructions which he accepted he saw from FK to IM and upon which he acted in giving effect to such instructions ….. that IM was permitting the receipt and disbursement of funds through MCD's client account in circumstances where no underlying services were being provided by MCD".
- The difficulty with that submission in my view is that it is tantamount to saying ND knew of the fraud. If he knew of the fraud he became a conspirator and/or a dishonest assistor. Yet AGZ makes no such allegation against him.
- Nevertheless AGZ argues that expressly or by implication ND has allowed the firm as part of its normal operations to conduct a business of receiving and disbursement of funds through the MCD client account in circumstances where no underlying legal services were being provided. Examples are given at AGZ's closing paragraph 1221. All in question are examples where ND acted on his own. One is particularly significant that of 18th September 2000 where FK asks IM to remit $50,000 from the Systems account and $6,000 from the Access No 2 account (total $56,000) to AFSL. The fact that MCD had opened an account in the name of "Systems Innovations Inc" (ledger 3762) from 27th May 1999 is something that plainly requires an explanation. IM's explanation is in paragraph 59 of his witness statement:-
- AGZ submits (and I agree) that there would be no underlying legal transaction discerned from the instructions that were largely either signed by ND on his own or co-signed with IM. ND acknowledged this as set out in the cross examination of him in respect of various transactions (T43/115-122).
- As I have said however I accept (as does AGZ) that there is no dishonesty on the part of ND.
- ND was also interviewed by the OSS on 2nd April 2003. It is plain by that interview that ND acknowledged that MCD was in effect disbursing funds as ASFL directed. Whilst I accept he might not know that the monies had come from the Zamtrop account and ZSIS was involved he plainly knew that MCD was simply disbursing money on behalf of AFSL with no underlying transaction. That in my view is apparent from the authorities which ND acknowledged he usually saw.
- Whilst I accept ND's evidence that IM did not tell him the detail about what was going on (because he did not know and thus he fobbed ND off) nevertheless ND knew that instructions were being given by FK to disburse money over several client account ledgers. The following exchange took place between him and Mr Uddin during the course of the OSS interview (page 23 of 130; 6.5.145):-
- ND is describing what happened. He had a full role in those operations. His evidence to the OSS shows that he acknowledges that MCD is simply disbursing monies that he believed belonged to AFSL as FK directed.
- Later on (page 30 of 130; 6.5.142) Mr Fletcher the other OSS representative suggests it is "almost like an overseas banking service for Zambian nationals". IM denies that, Mrs Meer says that it was acting "in the old conception of solicitors as somebody's man of affairs who would deal with people's business affairs that stretch either side of specific legal transactions….."
- ND denies it was a banking service. However he acknowledges that the monies are disbursed in a certain manner when they come in. Although ND reinforced that denial (page 39 of 130; 6.5.161) what he is saying is that MCD was used by FK to disburse money as a matter of convenience.
- My conclusion therefore is that ND not merely acquiesced in but also participated in the disbursal of funds from the various ledgers at the direction of FK. He did not agree that that should be part of a conspiracy to defraud or to provide dishonest assistance to fraudsters but he did agree with the operation of the receipt of and disbursal of monies in that way.
- Does that mean that he is jointly and severally liable? AGZ's claim is based on Section 10 of the Partnership Act:-
- I have already observed that IM became a party in the conspiracy and/or provided dishonest assistance. The question is whether his actions were done in the ordinary course of business of the firm or with the authority of his co-partners.
- The impact of dishonest assistance in this area has been considered by the House of Lords in Dubai Aluminium Co Ltd v Salaam & Ors [2003] 2 AC 366.
- The determination of the issue of liability was in the context of contribution proceedings brought by the innocent partners in the firm on the basis that they were vicariously liable for the actions of the alleged fraudulent partner. The main claims had been settled and it must be appreciated that there was no actual finding of dishonesty as against the alleged wrongdoer partner. Therefore somewhat unusually it was the innocent partners asserting that Section 10 PA 1890 made them liable and that thus could claim contribution from the fellow conspirators for the payments they had made out. It was therefore alleged wrongdoers ironically who were arguing that the innocent partners were not liable.
- Lord Nicholls gave the lead judgment. Lord Slynn and Hutton agreed with his judgment. In addition Lord Hutton agreed with that of Lord Millett. Lord Hobhouse did not say anything in respect of Section 10.
- Lord Nicholls addressed the issue of vicarious liability. He correctly pointed out that the work that the wrongdoer did was allegedly in furtherance of a conspiracy and that he had no authority from his partners to conduct himself in that manner nor was it in the ordinary course of the business to draft a document for the dishonest purpose of a criminal conspiracy (paragraph 20) however he went on to say this:-
- He then went on to analyse the conduct in question and concluded that he was acting as a partner as opposed to acting solely in his own interests or the interests of others on the following analysis:-
- He analysed the inter-relation of acts of a partner and those acts giving rise to a liability of dishonest procurement or assistance in the context in particular of the case of Mara v Browne [1896] 1 Ch 199, 208 as follows:-
- It is also important to appreciate that the personal innocence of the other partners is not a relevant factor (for example) in deciding the question of contribution. The firm is either vicariously liable for the wrongdoer's dishonest wrongdoing or not. If it is liable the fact that they did not know what was happening was dishonest is irrelevant (see paragraph 49).
- Lord Millett also dealt with the Section 10 point.
- He stated that the first question is whether or not the actions of the party primarily liable are legally capable of being performed within the course of his employment or in the course of the partnership; the question whether they were so performed is a question of fact not law (paragraphs 112-113).
- He went on to consider the observation of the Court of Appeal that it has never been the part of business for a firm of solicitors to draft sham agreements giving effect to a scheme known to be dishonest of which the dishonest partner had a role in planning. He emphasised that vicarious liability can be established even if the employee is guilty of intentional wrongdoing relying upon Lloyd v Grace Smith & Co [1912] AC 716. The vicarious liability of the employer (and likewise the partnership) does not depend upon the employee's authority to do the particular act which constitutes the wrong. It is sufficient if the employee is authorised to do acts of the kind in question. He points out correctly in my view that to say a solicitor (for example) drafted an agreement negligently is to describe the way in which he drafted it. It is equally when an agreement is drafted dishonestly or a sham agreement does not describe the way in which he drafted it or the nature of the document it describes the purpose for which he intended it to be used. The question in those cases is whether it was within the ordinary course of business of the firm to draft documents. The House of Lords held that it was. How those documents were used, whether correctly, negligently or dishonestly is irrelevant to that issue.
- On the question of constructive trusteeship he also considered the Mara case set out above. He rejected the submission that Mara could be distinguished because solicitor's practices had changed. He came to the conclusion on a review of authorities "….given that a solicitor may be guilty of deliberate and dishonest conduct while acting within the ordinary scope of his practice, there is no conceivable reason why his firm should not thereby incur vicarious liability for loss caused by the conduct which constituted him a constructive trustee [by virtue of dishonest assistance]"
- The question to be decided therefore is looking at the partnership was what IM did done within the ordinary course of business of that firm. Alternatively was it done with the authority of his co-partners?
- In my view the clear answer to both limbs is unhesitatingly "yes". It is true that one would not ordinarily look at what IM did as the ordinary course of business of a firm of solicitors generally but it is plain that it was part of the ordinary course of business of MCD. Neither IM nor ND (for example when discussing the matter with the OSS) denied that this was something that they did. ND knew precisely what was going on. He authorised whether on his own account or jointly with IM every disposition. He also was aware of the nature of the instructions. It was unusual for a solicitor to do this but it was nevertheless within MCD's ordinary course of business.
- Equally the partnership consented to it. I did not have any terms of the partnership provided to me and I assume that it required the unanimous decision express or implied that both partners to participate in the various actions. IM plainly consented. ND plainly consented because of his role in the disbursements.
- What ND complains about is that IM was dishonest. However knowledge of dishonesty is not a test for Section 10 vicarious liability. If it was a relevant factor ND would be liable as a primary conspirator or for providing dishonest assistance. He knew the nature of the transactions and agreed to them. What he did not know was that it was part of a dishonest conspiracy or dishonest assistance. That for the reasons set out in the judgments in the House of Lords in Dubai Aluminium is irrelevant.
- I therefore conclude that ND is liable jointly with IM to the same extent as IM is liable. I reach this decision with regret but it seems to me that on the cases set out above the loss as between AGZ representing the innocent victim and NCD falls on him. There are good public policy grounds for making the fellow partner liable for the acts of his co partner as opposed to making the victim bear the loss.
- The conclusion to be drawn on the evidence is that ND knew what was happening and could not conceivably have believed that there were underlying transactions. He participated in the transactions themselves and it cannot be right for him to say that the actions were not either in the ordinary course of business of MCD or authorised by him simply because IM did it dishonestly or as part of a conspiracy. That is the use to which the operations are put and not the actual operations themselves.
- Whether or not IM was acting in breach of his duty of good faith as between partners to ND is also irrelevant for liability to AGZ although it may be relevant as between IM and ND. The question under Section 10 is the liability of the firm for loss caused to outsiders by the acts of a partner acting in the ordinary course of the business of the firm or with the approval of the co-partners. ND knew that MCD was receiving money on behalf of AFSL and disbursing it according to the instructions of FK. He did not know that the monies that were thus received were stolen as part of a conspiracy and that IM had dishonestly facilitated that by allowing the firm to be used for that purpose. That knowledge however makes the transaction i.e. receipt of AFSL's money and disbursal by the direction of FK the ordinary business of the firm. It also means that the firm is aware of it because ND is aware of those facts and agrees to them.
- It would be otherwise of course if ND did not authorise the transactions with the knowledge that he plainly had and/or did not know what business IM was conducting with AFSL. ND's knowledge of those facts however removes the argument that what IM was doing was not normal for the ordinary course of business of a solicitor. I accept that the ordinary business of MCD was not that of the ordinary solicitor because of the transactions which both partners were aware of.
- That in my view as I have said makes ND liable just as IM is liable.
- AGZ contends that both MCD and CM (and all relevant partners) are liable for knowing receipt to the same extent as they are liable for dishonest assistance. This is attractive to AGZ because as set out above the test of knowledge is constructive knowledge.
- This submission is made not withstanding AGZ conceding that neither MCD nor CM nor any of their partners received any of the funds beneficially. It is based upon a decision of R v May [2005] EWCA Crim 97 at paragraph 33 per Keene LJ. The submission is based upon the following:-
- The case turns on the meaning of Section 71 (4) Criminal Justice Act 1988:-
- All the Court of Appeal (Criminal Division) decided was to apply the self evident wording of the section. The test does not involve whether or not he retained any benefit: for the purposes of that section he obtains a benefit if he obtains property. If he passes it on to a third person it makes no difference. That has never been the case of knowing receipt. Intermediaries who pass on property have never been liable for knowing receipt. If AGZ was correct it would radically transform the law in this area. It should be noted that it is not limited to a conspiracy case. It would mean for example Hoffmann LJ's analysis of liability for knowing receipt in El Ajou was wrongly decided. It would also lead to the overturning of a whole series of cases starting with Barnes v Addy [1874] 9 Ch App 244 at 254-255. I cannot believe the Court of Appeal believed they were doing away with this long line of authorities without it being cited to them. All they were doing was construing the particular section and the wording of the words in question.
- I therefore reject any claim by AGZ against any Defendant for knowing receipt unless the person in question received the funds beneficially. It is not suggested that any of the solicitors received money beneficially.
- BT is sued individually and as a partner in the firm of CM. AGZ contends that at all material times since 1st June 1996 BT carried on the business in partnership with his father BBT in the name of Cave Malik & Co (a firm) BBT is therefore sued as a partner in CM.
- Like ND AGZ does not allege that BBT participated in any conspiracy or provided any dishonest assistance. His liability is alleged to be solely that of co-partner under Section 10 PA 1890 as being jointly and severally liable with BT for his acts done in the ordinary course of business of the firm CM or with the knowledge and agreement of CM.
- There is an issue as to whether or not there was a partnership between BT and BBT. This issue arose in curious circumstances.
- It is important to start with what BT said about CM before it became a live issue in the present case. It started with another action JJ Coughlan Ltd v (1) Minesh Ruparelia and (2) BT (formerly trading under the name Ruparelia Thaker (a firm) (HQ0007203). The Claimant sought £300,000 from the partners. After full pleadings, disclosure and witness statements there was a trial in July 2002 (a significant time in the chronology of this case) and Mackay J gave a judgment arising out of the trial on 30th July 2002. BT was represented in the Coughlan action by RPC. Mr Ruparelia was represented initially by BLG until they came off the record shortly before the trial. BT referred to the Coughlan action in his witness statement in this action (3rd witness statement paragraph 33 et seq). Despite that BLG refused to disclose the pleadings stating they were irrelevant. It is unfortunate AGZ did not apply for disclosure because that stance in my view is completely untenable. The witness statements (redacted) were disclosed. There seems no basis for the redaction either.
- In his witness statement (dated 30th May 2002) BT deposed that he was then a partner in CM. He described CM in effect as being a firm in Zambia with a London office. The allegations appear to be very similar to the allegations in the present action save the wrongdoer is BT's partner Mr Ruparelia.
- He was cross examined by Andrew Sutcliffe QC (leading Counsel for the Claimant). In that cross examination the following exchange took place (day 3 page 212):-
- In the course of the judgment Mackay J clearly had the understanding that there was one firm Cave Malik & Co practising in both Zambia and London (see page 15 of the judgment).
- Mr Ruparelia was found guilty of fraud and ignoring the "Yellow Card" warnings to which I have made reference in this judgment. BT in his oral evidence (T7.12/32) in the Coughlan trial stated he never read the Law Society's Yellow Card. This seems a consistent course of action by him if true. The firm had an OSS investigation in March 1998. This is significant because it shows that BT because of personal experiences must be aware of these warnings and the potential fraud of fellow partners. The Judge found that the representations that Mr Ruparelia made were not in the ordinary course of the business of a firm of solicitors. The action therefore failed against the firm and thus BT.
- AGZ submits that he gave his evidence on 24th July 2002 shortly after the Matrix of Plunder article published on 5th June 2002 and shortly after President Mwanawasa SC's speech at the Zambian Parliament on 11th July 2002. The witness statement was only produced unredacted on 18th January 2007 2 months after it had been requested.
- In January 2004 proceedings in the name of AFSL and ALL were commenced against MCD and CM to preserve and obtain delivery of documents relating to those companies. BT defended the proceedings, sought to have the injunction granted by Pitchford J discharged, tried to strike out the proceedings and questioned how AFSL and ALL had been taken over by BOZ. In all of his witness statements he described himself as a senior partner in CM. In his final witness statement dated 5th November 2004 he said (paragraph 11) "in the same vein is the suggestion or innuendo that I should not have received money other than directly from Access and applied that money to the credit of Access and that I should have not dealt with the money on instructions of Access without making enquiries of my own. In answer to that, I would point out that Access is in effect a bank for which I have acted since it first began trading in the early 1990's Access was created as a bank by [FK] whom I have known since about 1989. Although, to the best of my knowledge, I only received money directly from the Zamtrop account twice, like most people, I did not know what the Zamtrop account was until after the last election in Zambia in December 2001"
- The present Claim Form was issued on 6th October 2004. BT was individually named as D8 and CM as the D2. CM was described as a firm of English solicitors practicing in London with offices in Lusaka and Ndola, Zambia.
- The schedule attached to the Claim Form stated expressly that CM was sued as a firm. On 1st December 2004 BT signed acknowledgments of service on behalf of the firm and his own behalf giving notice of intention to defend. He amended the wording to confirm that "we" rather than "I" intend to defend the claim, and he signed each as "Partner/Defendant". BLG initially acted for itself and BT. On 10th January 2005 BLG wrote enclosing a notice of change stating BLG was instructed to act on behalf of CM. On 8th November 2005 BLG served a notice of change to confirm that it acted also on behalf of BT as a Defendant.
- In his first affidavit on 29th March 2005 in these proceedings he deposed that he was a solicitor of the Supreme Court and a partner in CM & Co.
- He made his first witness statement on 9th September 2005. This was in support of CM's application for summary judgment against AGZ in relation to the claims against CM for dishonest assistance and conspiracy and to strike out claims made against CM on the grounds that they were an abuse of the process or otherwise likely to obstruct the just disposal of these proceedings.
- By this time BLG were of course CM's solicitors. He described himself as a partner in CM. On 14th September 2005 BT made an identical application in his own name and relied upon the first witness statement. I dismissed both applications on 22nd May 2006. Both CM and BT sought permission to appeal but that was refused by Sedley LJ on 28th July 2006 on the basis that it was open to CM and BT to renew their application if the pleadings brought by AGZ were still inadequate. No such application was made and the trial proceeded.
- On 22nd November 2005 (whilst the strike out application supported as set out above was still active) CM and BT served a joint Defence. It was now alleged (for the first time ever) (paragraph 3.4) that BT had been a sole practitioner and therefore the claim against the firm was otiose. The pleading continued at paragraph 3.5 to plead an alternative case on the basis that BT was a partner. This was supported by BT's second witness statement dated 22nd December 2005 which included the statement in paragraph 6 "since I served my first witness statement, I have received legal advice from Leading Counsel. As a consequence of that advice I now believe that at no material time has my father been a partner in CM within the meaning of the Partnership Act 1890….."
- This is a quite extraordinary paragraph in my view.
- BT's main evidence for the trial was his witness statement dated 11th September 2006. In the combined Defence it had been stated (paragraph 3.5) "if, which is denied, Mr Thaker was not a sole practitioner in CM but a partner therein….. it is denied that the Claimant's pleaded case discloses any sustainable claims against the firm, CM, whether under the Partnership Act 1890 …. or at all. The Claimant's case as pleaded in paragraph 175 and 1137 of the RPC (which allegations are, in any event denied) is that Mr Thaker was not acting in the ordinary course of solicitor's business".
- The non pleading of the Section 10 point was addressed by amendment but that paragraph of CM's and BT's Defence was not consequentially adjusted.
- The difficulty about this was that BT in his witness statement (paragraph 113) said "the assistance that I provided with regard to the transfer of funds in currency transactions was not part and parcel of giving simple legal advice such that lies at the centre of the ordinary practice of law of a solicitor. However, it was an extension thereto, namely that I offered broader commercial assistance in and about the business affairs of my clients. I considered that it was important for my relationship with my clients to assist them whenever possible. Given that AFSL were a respected financial institution, licensed by BOZ, I did not see any difficulty with assisting in this way from time to time in order to maintain good client relationships".
- Thus BT's evidence and the evidence put forward on behalf of CM appears to be that the transactions in question were in the ordinary course of business of CM. Yet the plea on behalf of CM was that it was not in the ordinary course of a solicitor's business.
- There is no reason why the firm separately represented cannot repudiate the activities of one of its partners if it is proper for it so to do. What I found unacceptable was the proposition that BT could on the one hand in his own capacity assert that it was within the business of the firm and on the other hand in effect as the proprietor of CM (in case it was found to be a partnership) deny that it was in the ordinary course of the business of the firm. Further unacceptability in my view occurred when the same firm of solicitors and Counsel appear for both the entity CM and BT. I should say that although Mr Croxford QC who appeared for both BT and the firm declined to say who was instructing him on behalf of CM. There was only one candidate namely BT.
- However as the evidence was deployed during the trial it transpired that BBT had been unable to manage his affairs (save apparently signing a set of partnership accounts as to which see below) since 2001. CM and BT raised an issue over whether or not there had been acknowledgment on behalf of the firm. In my view (and I so determined) there had been acknowledgement on behalf of the firm by BT (if a firm was found to exist). However it was clear (and I so ruled) it would not be possible to levy execution abroad against the assets of BBT in the event that I determined he was liable as a partner. Under RSC order 81 rule 5 (3) execution could not be levied against BBT for a judgment against the firm unless he had either acknowledged service of the Claim Form or been served within the jurisdiction or had been served out of the jurisdiction with permission.
- None of those factors could as I ruled have precluded a judgment against the firm; it was limited to execution against BBT. Accordingly I made an order for alternative service on BBT at BLG. BLG then came on to the record on behalf of BBT. One of his other sons Dr Hitendra Thaker was appointed his litigation friend, served a Defence and two witness statements on his behalf.
- During the course of Mr Croxford QC's opening I pressed him about the position of representation. Mr Croxford QC stated that BT's evidence was "on behalf of BT and the one man band firm known as Cave Malik. In the alternative, my Lord, if your Lordship is against me on my primary case …. there is a firm consisting of two partners then we are satisfied that those instructing me and myself are satisfied that they are entitled to act on behalf of that firm and to take instructions on behalf of that firm on the advice the firm takes a point which is your Lordship will appreciate is largely a point of law". Mr Croxford QC declined to tell me who was instructing him but as I have said it could only be BT. He was equally unwilling to tell me whether he had instructions from BBT (it is plain now that he did not). It was pointed out to Mr Croxford QC that BT's view was that what he did was within the business of a solicitor and that was his evidence as a proprietor of CM and (if it be the case) a partner. I could not understand how Mr Croxford QC on the one had could represent BT whose evidence was that his work was within the business of CM simultaneously undermine his own witness on behalf of CM and assert that the work was not in the business of CM (T4/9). I indicated that I would not allow him to put these alternative arguments. It was not in my view primarily a matter of law at all.
- In the event Mr Justin Fenwick QC appeared on behalf of BBT and argued the point in effect on behalf of CM.
- I find it surprising that it was ever considered an appropriate way to act. I have no doubt why it was done and it involves insurance. If there is a sole proprietor an insurer will not pay out if that sole proprietor is found guilty of dishonesty: see the Constanides case referred to above. Insurers behind CM therefore had an incentive to a finding that there was no partnership as they would not pay out if CM was the sole business of BT in the event that he was found liable to AGZ in this action.
- BT of course will not obtain an indemnity personally if he is liable to AGZ because he would be the conspirator/dishonest assistor. However he would be able to save something out of the wreckage because if BBT was a partner CM would be entitled to an indemnity. On that basis for example BBT would have the indemnity benefit in the event that the firm is found liable. Notwithstanding that attractive stance from BBT's point of view as will be seen he through his next friend and his lawyers (BLG instructing Mr Fenwick QC) in effect argued against that proposition.
- I find this all very unattractive. It is the kind of shadow boxing that in my view is unacceptable in modern procedure.
- Further had I not intervened it would have led to an inevitable attempt by CM to undermine BT's evidence at the time when BT was plainly giving instructions on behalf of CM. Such gymnastics are not appropriate in the law of England and Wales.
- As a result of this order and service of the pleadings it has now been possible for in effect the arguments on behalf of CM to be separately argued. It is also possible in the event that those arguments are lost and BT is found to be liable for execution to be effected against BBT as well as BT.
- The claims are for dishonest assistance (the maximum claimed $3,247,548 reducing to $2,127,822 being the CM receipts traced by GT via Zamtrop to MOF). In addition AGZ claims $599,990 transferred from OOP to CM.
- An identical sum is claimed for knowing receipt but for the reasons set out above I do not accept there is any knowing receipt claim against BT, BBT and/or CM.
- The amount claimed for conspiracy is $25,754,316 or alternatively the amount claimed for dishonest assistance.
- BT was born in Kenya in 1961. He first lived in England in 1969 and after an education at Harrow High School continued with his education in England until 1978. He returned to Zambia to spend summer holidays with his parents. In 1979 he embarked on a 5 year articles program with a view to qualifying and practicing as a solicitor in Zambia. He undertook his training with CM Ndola ("CMZ"). At that stage it was a partnership between Mr Malik and a Mr Cave. The latter emigrated to Australia in the mid 1980's and Mr Malik practiced as a sole practitioner until his death in 1991.
- In the middle of his articles BT returned to England and completed a law degree at Buckingham University in 1987 and took the Law Society final exams at the City of London Polytechnic and thereafter had articles with a firm Bridgman Morris a firm in Bedford and was admitted in 1989.
- Upon Mr Malik's death in 1991 BBT took over the firm. BT joined the firm in 1991 as a non admitted solicitor pursuant to the provisions of the Legal Practitioners Act. He also obtained limited rights of audience in the Zambian High Court. BBT had been persuaded to carry on CMZ following Mr Malik's death until one of his daughters was in a position to take over. That never happened however and BBT continued to run the practice until he ceased practising in 2002/2003. After that 2 of BBT's assistants continued the practice until the office closed permanently in 2005.
- Another operation CM Lusaka was opened in around 1999/2000 and was operated by Mr Rajesh Mittal who ran the office. BBT agreed to allow Mr Mittal to use the CMZ name because it was apparently a name with a good reputation which he was keen to exploit. Mr Mittal opened an office in Cairo Road Lusaka and moved to Mambilima House (where AFSL is located) in 2000.
- It is AGZ's primary case that there is one firm CM which has offices in London, Ndola and Lusaka. It is BT's and CM's case that there are 3 separate firms and there was not a partnership in CM; it is now alleged as I have said that BT was a sole proprietor.
- BT returned to London in 1992 after a year in Zambia allegedly because it was difficult to practice under the new regime and the new Government's attitude towards CMZ (i.e. the Chiluba Government) was not favourable.
- BT initially found work with a firm of solicitors Weatherman Wright in 1992 which was a 2 partner firm. He worked there until 1994 when he bought the firm Kehimker & Co near Chiswick. He asserts in his evidence that he bought the practice and continued to operate as sole practitioner. He asserts that his father was not a partner in Kehimkar & Co. From 1st June 1996 he changed the name of Kehimkar & Co to CM. He needed the permission of the Law Society under the Solicitors Practice Rules 1990 ("SPR 1990") to practice in the name of CM because it was a name that did not consist with a name of a present or former partner. On 30th September 1994 he wrote to the Law Society to seek such consent the letter said amongst other things:-
- In paragraph 25 of his 3rd witness statement BT selectively quotes that extract. He omits from the paragraph the phrase "as consultants".
- In fact whilst it is true that BT appeared on the CMZ notepaper as a consultant BBT always appeared on the CM notepaper as a partner. CM was apparently set up with effect from 1st June 1996 and the practice consisted of BT as solicitor, BBT as registered foreign lawyer and John Marshall as consultant (Law Society letter of 31st May 1996). That letter refers to Kehimkar and Co ceasing to trade on 31st May 1995 but it is plainly 1996 as BT's letter-head up until that date was Kehmikar & Co.
- Shortly before this changeover he had introduced himself formally to FK in a letter dated 9th April 1996. He had already received monies in the firm Kehimkar & Co for disbursement. Shortly after that letter for example he remitted $7,500 to IK on the instructions of FK. In May 1996 he received instructions from FK to remit $50,000 to Thoger Daell which he implemented by a letter to his client account bankers (Habib Bank AG Zurich) dated 29th May 1996 (in a reduced sum of $40,000). The remitter was stated to be John Howard & Co (Overseas) Ltd.
- The next day he wrote to Mr Suleman Sheikh at Habib Bank informing him that Kehimkar & Co had decided to change its name with effect from 1st June (with Law Society approval) to Cave Malik & Co. Habib Bank clearly asked questions about this and he provided a letter addressed to a Mr Zia enclosing the Law Society letter and saying this:-
- The earliest copy of the CM notepaper I have found is that dated 19th August 1996 concerning Epakor Investments SA. The partners are identified as BT and BBT. It was confirmed in evidence that that notepaper as regards that designation never changed as long as CM operated in practice.
- BBT therefore was on the notepaper because he was a partner or because he was held out as a partner right from the inception. Of course although in the opening AGZ suggested its claim against CM and thus BBT was (inter alia) based on holding out there has been no representation addressed to AGZ which has been relied upon so as to found a holding out and/or estoppel which prevents these Defendants from denying that BBT was a partner.
- Of course the designation of BBT as a partner might be a holding out and he is not actually a partner. However it might also constitute the true state of affairs i.e. he was a partner. The BT letter to Habib Bank makes it quite clear that he has decided that BBT would be a salaried partner. What is certainly the case is that he was never designated merely as a consultant in the firm. I will return to this aspect later when I consider the secondary liability if any of BBT and CM.
- It follows therefore however that BT did not follow the arrangements that he told the Law Society he was intending to do and his witness statement was selective in its quotation of the letter of 30th September 1994.
- All of the solicitors' indemnity funds annual returns and the accountants reports submitted annually to the Law Society from 1996 describe BBT as being a partner in CM. Take for example the return to 31st December 1997. BT and BBT are described as partners. BBT is not described as a foreign practicing lawyer. The return was stated to be sent to BT as the partner in the firm "on behalf of all the partners in the firm".
- The first set of accounts to 31st December 1998 showed BT and BBT as partners. The earlier accounts have not been produced but they can be seen from the accounts to 31st December 1998. They are apparently signed by BT and BBT. The capital account shows BT as being overdrawn by £16,117 and BBT as having introduced capital of £5,000.
- The accounts for the next year show a loss of £31,793 for the year. A current account as for BT is created so that the loss can be debited to him. His drawings in the year were £17,371 and his current account was in deficit to the sum of £45,590. BT apparently introduced capital in that year of £15,850 but BBT introduced capital of £32,471.
- In the next year BBT is recorded as providing a further capital introduction of £22,899 giving his total capital account as at that date of £60,370. There was a lame suggestion that BBT had lent £20,000 at this stage but it is not shown in the accounts unless it is hidden in the creditor's figure of £28,970.
- The next accounts produced are those dated 31st December 2002. The intervening accounts have not been produced but they are shown in those accounts. By this time BT is shown as having a capital account of £14,733 but BBT still has a capital account of £60,370. The profits are all allocated to BT.
- These accounts were signed off on 2nd July 2003.
- There is a curiosity about the signing of the accounts. Hitendra Thaker in his witness statement dated 24th January 2007 says that his father after a number of illnesses on 7th April 2001 suffered a severe stroke which rendered him unconscious and paralysed. After a physical recovery it is stated that he was simply mentally incapable of assisting at all with any legal issues. He provided a 2nd witness statement dated 5th February 2007. In that he commented on the 2 copies of the CM accounts 1998 and 1999. He states that he does not believe they are his father's signature. He attached a copy of his passport which includes a signature. Paradoxically however he did not address the 2003 signature. On instructions Mr Fenwick QC told me that it was acknowledged that that appeared to be BBT's signature. He was unable to explain how his signature came to be appended on the accounts in 2003 when by then he was on the evidence incapable of managing his affairs.
- Following Hitendra Thaker's witness statements AGZ contemplated seeking the recall of BT but it was agreed he would answer the questions on this in correspondence. BLG's letter of 13th February 2007 stated that BT did not know who signed the accounts on behalf of BBT, he does not know whether the person who did sign was therefore authorised and he is unable to explain the circumstance in which the accounts came to be signed by his father.
- I could have heard from BT or even the accountants who prepared these accounts in this form for many years. I could have received the accountants' working papers and/or any correspondence between BT and possibly BBT concerning these matters. None of that has been provided. Further BT has not explained how his father's signature apparently was appended to the accounts. Nor did he explain this curious state of affairs in his witness statement. Paragraph 28 of his 3rd witness statement said "…although the returns describe my father as a partner in CM, I now (emphasis added) understand that in reality he was not a partner pursuant to the Partnership Act 1890 as set out in my witness statement dated 22nd December 2005. In particular, my father has never worked in the UK firm, does not (and has never) received any share of the profits and is not responsible for any loss of the business. Further my father has no interest in the capital and has no past or current involvement in the business of CM".
- That is a lie as the accounts show. He attempts to explain those capital account entries as being "non refundable gifts". He affects not to recall instructing CM's accountants as to how the monies should be accounted for in CM's accounts but he believed he would have told them that the funds came from my father and "that must be why they were included in the capital contribution column under his name".
- This is breathtaking in its evasiveness. If the monies handed over by BBT were gifts they would simply go into BT's pocket and would not need to be put into the account. The plain fact is that for the entirety of the operation of CM BBT had a capital account. He has been apparently advised that in law he was not a partner with BT. I have not seen that advice. I do not know what material was put before the anonymous Leader. I have not seen what explanation was given for the accounts and other documents set out above and how the Leader dealt with them if at all. However there is nothing wrong with the concept of a partnership whereby one partner takes all the profits to the exclusion of the other partner. The other partner is content to have a share in the capital of the firm. BBT by having capital in the firm however (contrary to BT's assertion in paragraph 28 of his 3rd witness statement) will be exposed to losses on dissolution by Section 44 PA 1890. It appears that trading losses (like profits) were attributable to BT. That is not surprising given the fact that BT clearly ran CM and thus took the rewards but was exposed to the trading losses. That is of course as between BT and BBT; it has nothing to do with the outside world or whether or not BBT was actually a partner.
- No explanation of all of these matters has been provided to me. I should say however that there was no suggestion that the accountant's records were not available. The accountant who prepared the earlier accounts was BT's cousin and was available to give evidence.
- It must be borne in mind that the accounts produced to me were as recent as 2002. A trading body has to keep its records for at least six years. Accordingly it is plain that there must be other documentation that has been withheld from me which could throw light on this situation. In my view absent any credible explanation as to the production of the working papers of CM and/or CM's accountants or evidence from the accountants I conclude that they would not show what is now being suggested as a "question of law" that BT and BBT were not partners. BT plainly thought he and BBT were partners until he received this advice in October 2005. BT gave no initial evidence about the relationship with BBT. Ultimately there was an exchange of letters which barely addressed the matters which BT ought to have dealt with but failed to do.
- I simply do not believe any of this. I can well understand why BT was unwilling to give evidence on oath about this. It is simply impossible with any credibility for him to be unable to explain the accounts, his signature to the accounts and how the accounts came to bear a signature purporting to be the signature of his father. The reason is self evident. BBT became a partner in CM right from the start and was a partner throughout. Any lack of clarification of the terms of the partnership arises simply over BT's attempt to deceive the court by putting forward a bogus case asserting that BBT was not a partner. There was and remains plenty of material which has been withheld as I have set out above.
- Further in response to questions by me arising out of the fact that BBT was on the notepaper as a partner he said "On the basis that he was helping me generate my business, he volunteered himself to be a partner so that I could use the name Cave Malik & Co" (T35/34/20). In my view that is the reality of the case and is the end of any argument as to whether or not BBT was a partner. There may be arguments as to the terms of the partnership and the nature of the work carried on by the partnership but it is impossible in my view (whatever advice BT claims to have been given in 2005) to argue that BBT was not a partner. He became a partner by consent and was always a partner.
- The only indication I have of BBT's view is a letter he wrote on 3rd October 1997 to FK this letter is on CMZ notepaper. BT is described as a consultant. CM is described as having offices in Lusaka, Ndola and London. In the letter BBT says:-
- AGZ's case against BT is that he was part of the over arching conspiracy to defraud and/or provided dishonest assistance. The latter involved allowing Government monies to be run through his client account.
- AGZ needs to show that BT agreed expressly or by implication to become a party to the conspiracy and knew the broad terms of it. This necessarily involves proving that BT was involved with XFC and FK and FJT the prime movers in the conspiracy. In the AFSL Documents action BT said he had known FK since 1989 but in cross examination he said that that was only as a round tabler.
- BT asserts that he had a limited knowledge of XFC and that prior to October 2001 he had met him from time to time at cocktail parties held by AFSL but had never spoken to him. There is a letter dated 20th October 2000 which he sent to XFC setting out the proposal for the OOP to retain CM. BT suggests in his 3rd witness statement (paragraph 57) that this letter is wrongly dated. It is true that a copy of the letter was apparently faxed on 6th November 2001 but I do not have the complete facts. I have no evidence to show that any letter was actually faxed on that date. Where the letter was apparently faxed does not appear from the fax transmission header. And it does not accord with BT's letter of 20th February 2002. He refers to the letter as being 20th October 2000 and the retainer "[which] was renewed by you with a further copy of the said letter having been sent to you in November 2001 and you have resigned and returned the same to me under cover of your letter of 30 November". That accords with the contents of that letter of 30th November 2001. It is plain to me that the letter of 20th October 2000 was actually created on that date. BT in my view is seeking to hide the period of his involvement with XFC. I conclude that the letter was actually sent on that date and not a year later as BT now asserts in his witness statement. It is also interesting that according to AS when he approached BT in 1995 he did it on the instructions of XFC. That would show XFC having a knowledge of BT much earlier than the latter admits.
- BT says in his witness statement that he had an initial meeting with FK and was given a note setting out the services that AFSL provided. He says he was instructed in about 1995 by AFSL. He wrote to FK on 6th November 1995 (on CMZ notepaper) and referring to the proposed change from Kehimkar & Co to CM. He sought a business relationship with FK. He was involved in one transaction but that did not proceed.
- It is instructive to analyse the receipts and disbursements carried out by BT. It must be appreciated that there are very few written instructions, the ledger narratives are non existent and BT claimed not to read his Client Account Bank statements in any detailed way. Like IM he simply carried out unquestioningly everything he was asked to do both by FK and AS.
- On 23rd January 1996 he received $185,995.01 from Paine Webber. He told FK of the receipt by fax dated 30th January 1996. It is credited to a ledger "FM Kabwe – Access Financial Services (No 1156)" and is described as a receipt. Of that sum $150,075.50 is paid away on 17th February 1996. The ledger describes it as a "payment". There is an attendance note where BT records telephone conversations with FK asking for his bank details because he wants to transfer $186,000 and would tell BT what to do with it in due course.
- BT does not deal with this transaction in his witness statement but he was cross examined on it. This was the first transaction concerning FK where he handled money. He was cross examined about the Blue Card warnings. His first response was like the Yellow Card question that he had answered in the Coughlan litigation namely he didn't recall receiving the warning. He acknowledged that the Law Society published these in the Gazette and sent them out individually. He was entitled to and read the Gazette. That is known because he bought Kehimkar & Co as a result of reading an advertisement in the Gazette in 1994.
- He confirmed that the $186,000 was commission due to FK (as referred to in a telephone conversation with him on 20th December 1995). From a timeline point of view these receipts coincide with the setting up of the Zamtrop account as set out earlier in this judgment. There is no evidence to show BT was aware of that. Nor (although it is significant in the context of the over arching conspiracy) is there any evidence to show that BT knew that FK had sent MCD on 22nd January 1996 a further sum of $300,000 from Paine Webber.
- BT had no documents or records which showed why he was receiving $186,000. He could not recall any discussions with FK about it nor could he recall beyond the fact the commission was due to a number of people and FK/AFSL was entitled to it. He did not know who Paine Webber were and he did not ask. He knew nothing about the remitter of the monies and he did not know anything about the work which entitled FK to the commission. He was unable to explain why the bookkeeper (who also has not given evidence before me) merely put "receipt" in the ledger. He acknowledged that it was a large commission payment but said they were generally known to be large in Africa. As I put to him (T35/47) "what has AFSL got to do receiving dollars in the UK from a Stock Broker in the US into your client account in respect of a transaction about which you know nothing" his answer was:-
- I do not find that to be an acceptable answer. BT if his evidence is to be believed knew absolutely nothing about the arrangements, the entitlement to the monies by the remitters (whose identity he did not know) or the recipients. Although he says he is providing for the first time services there is no service provided beyond receiving money and then in a matter of days transferring it on elsewhere. On 22nd February 1996 BT's secretary sent a fax to Habib Bank enclosing an authority signed by BT to remit $150,000 to an account of a Mr O. M. Samantar with National Westminster Bank PLC Oxted Surrey (BT was in Zambia at that time). He had no idea who Mr Samantar was. There is evidence as set out in the FBI interview of Jim Wills of Systems that Samantar was Wills' partner. He was allegedly well connected politically in Somalia and knew XFC. Wills said that Samantar introduced him to XFC and he was a door opener and Wills thought he knew FJT also.
- BT denied any knowledge of this. If that was true it was because he failed to ask the questions that an honest solicitor would do. I do not believe an honest solicitor would on the oral say so of FK receive money from a US Stock Broker and pay it on to somebody else whose identity he did not know within a matter of days without taking steps to find out what was going on. In my view BT failed to ask any questions because he did not want to know what the answers were. This is classic blind eye dishonesty. BT is therefore in my view dishonest in respect of the very first receipt. All he understands is that there is some kind of commission payment but he does not know who precisely is entitled to it and on what basis. It is a very large commission payment. He then transmits the money on to an account in Oxted in favour of somebody whose identity he does not know. He has no written instructions for any of these activities and he does not ask why this is happening and why it is necessary for these matters to be run through his client account as opposed to (for example) Paine Webber if it is a genuine transaction. He simply remitted the funds direct in to Samantar's dollar account. The reality in my view is that the CM client account is interposed and the money washed through it to give an air of authenticity and to obscure where the money is coming from and where it is going. That is compounded by CM's ledgers which have no narrative about the transactions at all. This is a classic money laundering operation in my view.
- I should say that having seen BT give evidence and being cross examined I am satisfied that he lied to me on a number of occasions. I do not believe him when he said he did not receive and did not read the Blue Card warnings. It is incredible for him to say (in separate actions) that he did not receive the Yellow warnings and the Blue warnings. I simply do not believe him.
- He also asserted that he did not know the money came from Paine Webber (T35/53). For me to accept that as a truthful answer requires me to accept that he did not see from his bank statements "B/O Paine Webber Inc".
- It is BT's case that he never looked at his bank statements in any way and never looked at his ledgers. Whether or not he was the sole partner in CM he was plainly the person who exercised the administrative control over the operation of the business. There were periods when he was abroad in Zambia. Given the size of the firm and his role I simply do not believe him when he says he never analysed the bank statements nor the ledgers. As it is his responsibility for administration he would be bound to do that. Further if he is away that means that it is inevitable that he would wish to update his knowledge. These are very serious lies.
- FK and BT had a meeting in London on 8th December 1995. The coincidence of the High Commissioner's letter to Mr Siame also of that date is too much in my view. It shows that XFC and Siame and quite possibly FTJ were also in London on the very day having meetings relating to the closure of the old Zamtrop account and the opening of the new account. The following Monday BT provided his bank account details as requested to FK.
- Those bank account details were subsequently provided to XFC either by BT or by FK. XFC remitted $99,995 direct to CM's client account as set out later in this judgment. There are no documents recording the receipt of this money and its disbursement beyond BT's letter of 20th March 1996 to Habib Bank recording the confirmation of the receipt of $100,000 in to the Habib Bank account. The first debit in respect of those monies was $15,000 paid to Chabala Francis K's son.
- Although BT in his witness statement (paragraph 114) was told by FK to expect a payment that payment came from the Zamtrop account. BT in his evidence said that he was not "reviewing his bank accounts at that time" I do not believe him. Even if I accept his evidence that he was not reviewing the bank statements that is a quite extraordinary thing for an honest solicitor to do. He does not know that money coming in from Zamtrop is necessarily FK's to deal with. There is no record of any instructions from FK and BT has nothing on paper to justify allocating the money to the FK/AFSL ledger because he does not know what the Zamtrop account is. He does not know either because (on his evidence) he did not look at his statements or he looked at the statements and did not bother to ask himself what the Zamtrop account was. This lack of documentation and lack of enquiry are in my view further badges of dishonesty. Although he suggests in his witness statement that this was in respect of currency transactions there are no records to substantiate that. I only have the direction to transfer $85,000 to African Direct Bureau De Change without explanation. It was significantly a company owned by FK.
- That next credit to the ledger is ($99,995) and is merely described as a receipt on 21st March 1996. The narrative on the bank statement is "B/O Zamtrop". GT has traced this sum to MOF (trace 2). The instruction to ZANACO to pay the $100,000 is signed by XFC and Mr Nyangulu. The instructions are to pay in to Kehimkar's account giving the name and address and the account details. BT's evidence (T35/57) was that he did not know at that time who XFC was. I do not believe him. It is difficult to see how XFC had his bank account details if he did not know him.
- There was no written record of any instructions to receive this money. BT applied it to the Kabwe/AFSL ledger. He says that he did not know what Zamtrop was. Yet by this time BT had contact with AS (on the instructions of XFC). This in my view is not a coincidence. Why would XFC pick on BT as a solicitor for Redcliffe/AS if he did not know him and vice versa? BT was unable to explain it. He never asked AS why he was used. The inescapable conclusion is that he knew XFC far more than he is admitting.
- He would only do that if he wished to hide his connection from me. He is thus not being truthful in his evidence of lack of connection with XFC. He would only do that if he was being dishonest.
- It was also in March 1996 that BT began to receive credits from Redcliffe and AS which were placed in a sterling account. The Redcliffe/Shansonga ledger (1177) entries are extremely difficult to follow.
- Although AS asserted that BT set Redcliffe up he withdrew that during the course of the trial.
- BT suggests in his witness statement (paragraph 206) that he allowed CM's client account to be used because Redcliffe did not have a bank account. AS denies that that is the position. Redcliffe had had an account at ZANACO from 15th August 1995. AS had a personal account with Barclays Bank at Marble Arch from latest 25th November 1994. The first credit to Redcliffe's account at ZANACO was £100,000 (before bank charges) on 21st August 1995 from XFC.
- The first credit to the CM sterling client account re AS/Redcliffe was £48,200 on 22nd March 1996. The Habib Bank narrative is "B/O Redcliffe". It was telegraphically transferred from Redcliffe's ZANACO bank account. On 25th March 1996 AS sent a fax to BT referring to the £48,200 transferred from Redcliffe to AS's client account and instructed him to remit £7,200 to AS's BB account. On the same day BT instructed Mr Sheikh at Habib Bank to effect that transfer. In cross examination BT could not explain why it was necessary for Redcliffe to transfer money to his client account and transfer it on to AS when he knew that Redcliffe was AS's company. He knows this because AS by the fax of 25th March 1996 is instructing BT on behalf of Redcliffe to transfer money to himself.
- Once again he was not providing a legal service for Redcliffe/AS. He needs therefore to come up with some explanation for providing this service through his client account.
- There is his statement that Redcliffe did not have a bank account. He never questioned the transaction. Further he accepted instructions from AS despite the fact that there is no document which shows that AS has any authority to act on behalf of Redcliffe. He is not a director or a shareholder. Further Redcliffe never filed any accounts so it is difficult to see how BT thought he could unquestioningly accept AS's instructions. AS was an authorised signatory on Redcliffe's account with ZANACO but BT would not know that.
- AGZ contends that a total of £185,465.68 was transferred from Redcliffe and AS to CM (annex 33 to RRRAPOC). GT has traced £112,594 of the sums allocated to CM as having been transferred from Redcliffe. They have also traced and allocated to CM a total of £18,846.68 as being transferred by AS to CM. The period covers 22nd March 1996 to 24th June 1997.
- BT would have me believe that during this lengthy period Redcliffe he believed had no bank account. This is despite the fact that an examination of his own client account statements would show that the money came from a bank account.
- Once again, BT is lying to me and I reject his evidence in this regard. This is another very early example in my view of BT simply following the instructions of AS blindly to remit the money. Once again in my view the purpose of the operation is to disguise the fact that it is Government money taken from the Zamtrop account that is being used in this exercise. BT once again fails to make the enquiries that an honest solicitor would make. He makes no enquiries whatsoever. His reason for the operation of the client account is a lie.
- He even received and disbursed payments after Redcliffe has been struck off and dissolved (26th August 1997).
- This is despite the fact that CM received the notice dated 12th June 1997 as Redcliffe's registered office was at their office and that BT had sent it on 23rd June 1997 to AS. There was a follow up telephone conversation on 28th July 1997 where AS promised BT to let him have the accounts. He never did because they were never prepared. BT therefore had no material to show that the company was still in existence. Yet he never enquired when further remittances were made to him later that year.
- This too is not the conduct of an honest solicitor. An honest solicitor given the opaqueness of all the transactions would in my view have regarded the lack of attending to the accounts as the final straw. BT has therefore in my view been dishonest in this regard.
- In my view this lack of documentation once again shows BT's failure honestly to enquire as to what he is being asked to do. There is no reason for his client account to be used for any genuine currency transactions. This is as I have said a sum of money which has been traced back to MOF. It is a classic example of washing money through CM's client account to hide its origins and to clothe it with an aura of respectability. BT is involved because he does not ask what any solicitor would ask. Although BT denied that he knew that Africa Direct was owned beneficially by FK his undated attendance note before the receipt of the $186,000 records FK telling him that Africa Direct was FK's bureau. The more likely explanation rather than foreign currency is that the Zamtrop money was routed into Africa Direct via CM as I said to give it an aura of authenticity.
- On 9th April 1996 BT wrote to FK and Francis K. This followed various meetings that took place both in Lusaka and London. BT apparently kept no records of these discussions.
- In May 1996 BT received a fax from FK instructing him to transfer $50,000 on FK's behalf to Thoger Daell at Credit Suisse in Zurich. He was instructed to identify the sender as "John Howard (Overseas) Ltd". BT acted on those instructions and revised instructions culminating in a transfer of $40,000 on 29th May 1996 and debited it to FK's ledger. BT apparently made no enquiry as to the reason for this transaction. AGZ says it is significant because John Howard (Overseas) Ltd was at all material times the sole director of Zamdaell International Ltd an Isle of Man company which in turn held shares for a Zambian company Zamdaell Ltd. I do not see how an honest solicitor would implement these instructions without making further enquiries. FK and AC in their interviews with the TF said that Zamdaell Ltd was a company used as a vehicle for their secret arrangement with XFC but there is nothing to suggest BT was aware of this although equally there is no evidence to show that he asked. There are no documents on his files showing anything about this transaction. This again is another instance in my view of BT not doing what an honest solicitor would do namely ask why he is being requested to transfer money to Mr Daell's bank account in Credit Suisse Zurich with a remitter who he doesn't know.
- The next receipt is $799,995 received on 13th October 1998. This came from the Zamtrop account. GT has traced $253,763. It was credited to CM's client account with Habib Bank on that day. It was credited to FK's ledger number 1156 with the narrative "Zamtrop- Lusaka". Thus CM's ledger and client account statement show the monies as coming from Zamtrop an entity or organisation which BT would have me believe he knew nothing about.
- BT in his witness statement (paragraph 122) asserts that he believed that the monies were quite properly received in relation to a property transaction and that he did not know and had no reason to suspect that any such monies were stolen and/or Government monies nor did he suspect they were stolen. He asserts that he believed they were AFSL's monies which were properly transferred to his client account. He supplements this in paragraph 75 where he sets out instructions to form various BVI companies including Hearnville Estates Ltd ("Hearnville"). He states that he understood the companies were to be beneficially owned by AFSL having been told this by FK or AC except Hearnville was to be beneficially owned by FK. FK he says instructed him to set up Hearnville to purchase a block of flats in Lusaka from Lonrho Properties Zambia Ltd ("Lonrho") a subsidiary of Lonrho Africa Property & Construction. The file is missing. He refers to Hearnville (mis-calling it Hearnfield) in correspondence with Caversham who then operated under the name Harris Crichton Bell as company formation agents. He reiterated this when he wrote to Habib Bank on 15th October 1998 having been informed of the possession of the $799,995. In that letter he confirmed "that the funds received are on behalf of established clients for the purposes of investment in Zambia". Yet his evidence before me was that he did not make enquiries as to the source of funds and did not know that the funds emanated from Zamtrop.
- He asserts that even if he had known of Zamtrop it would not have alerted him to the possibility that sums represented Government monies as he did not know that Zamtrop was a Government owned account. That depends on what he was told if he inquired and whether the answers he received would have been satisfactory. I do not accept his assertion is correct therefore. As I have set out above this necessarily means that he did not look at his bank statements or ledger entries either. I simply do not believe him. BT submits in his closing (paragraph 277) that "preferences in respect to bank statements can surely vary". Whilst that observation might be true for one's personal banking arrangements it simply cannot be right for a client account where the solicitor needs to know which client has been paying in money and enter his ledgers accordingly. I have already observed that I find the suggestion that BT did not check his bank statements or his ledger narratives incredible and I do not believe him.
- He had a conversation with Habib Bank but he did not keep a note of the conversation. Habib Bank kept a note as recorded on the document at 7.5/23. The bank did not tell him the source but that rather misses the point. BT really ought to know who is sending him money.
- Although it is suggested that the description in the bank account and ledger "Zamtrop" is a surprising way in which to assist in the concealment of money laundering activities I do not accept that. All of this is hidden away from the Zambian authorities in the internal records of a London based firm of solicitors. BT it is submitted would have found nothing significant from the description "Zamtrop". I do not agree with that submission either. BT ought to have asked FK what this was all about and what was the Zamtrop account which was apparently remitting these large sums of money into BT's client account. If FK had told him the true position then BT would have refused to act. At the very least it would have questioned BT's apparently poodle like acceptance of everything FK said or implied to him. FK would have had to explain how it was that AFSL had acquired $800,000 of Government money. He would also have to explain how that money could therefore be used by FK to buy properties in the name of a company incorporated by BT. In this context he would also have to explain why he is using BT in London to act on the acquisition of properties in Zambia when he could easily have used Zambian lawyers. Either BT knew that this was stolen money or he deliberately failed to ask questions because he thought that he would not like the answers. This too is evidence of dishonesty in my view.
- In fact despite his apparent belief that the money was to be used for a property acquisition on 21st October 1998 $500,000 was transferred to John Holt Group Ltd. This is a Liverpool company (a shipping line). It was a subsidiary of Lonrho. In addition to its shipping activities it also had a Land Rover franchise in Liverpool but BT apparently did not know that at the time. He said he had no involvement in the contractual documents relating to the purchase of the vehicles but understood that AFSL was purchasing vehicles with the view to selling them on to the Zambian Government. BT never questioned how the $500,000 could be used in this way when it was remitted for an entirely different purpose. Nor did he explain why he had control of the funds when he was not acting in the transaction (as opposed to CMZ which was acting). Less than a week earlier he had told Habib Bank that the funds were for the purpose of investment. There is no document recording these changes of instructions being communicated to Habib Bank.
- Despite the loss of the $500,000 in the purchase of the Land Rovers the conveyancing transaction still proceeded. CMZ was apparently acting. There were two purchases. The first was from Delkins Ltd to Hearnville Estates and the second was from Lonrho to Zamdaell Ltd. There is a draft of the proposed assignment of the former which recites a sale of $1,100,000 and a contract in the latter for a price of $300,000 (total price for the two property purchases $1,400,000).
- On 18th December 1998 CM wrote to FK and AC referring to the two contracts of sale apparently dated 20th October 1998 (which have not been produced). They are reminded that the balances have to be due 90 days after the date of the contracts namely 20th January 1999. CMZ ask for the balance of the monies namely $700,000 and $200,000 respectively. Thus at that stage $400,000 of the purchase price for the Hearnville properties had been provided and $100,000 of the Zamdaell property purchase had already been provided. CMZ sent a reminder on 7th January 1999. They received a reminder on 26th January 1999 from the sellers' lawyers. On 28th January 1999 CM then asked Habib Bank to transfer $500,000 to Lonrho's account in Lusaka with Standard Chartered Bank. They were told by Habib Bank that there was only $456,000 in the account and the client account could not go overdrawn. On 1st February 1999 $399,995 was received from MCD. That boosted the balance to $552,348.87. On the same day $500,000 was sent out to Lonrho. Therefore as at 1st February 1999 Lonrho had apparently received $500,000 for the Land Rovers and $500,000 for the property purchase. The AFSL ledger which shows these transactions at this stage is obscure to put it mildly. There are alterations which suggest a credit balance at the end of these transactions of $226,780.95. I am unable to see how that figure has been arrived at. On 8th March 1999 a further sum of $299,995 was received from MCD and on 10th March 1999 a further sum of $400,000 was paid out to Lonrho. The total payments to Lonrho therefore are $1,400,000. However according to the contractual documentation and assuming the Land Rovers were purchased the actual amount that ought to have been paid out to Lonrho should have been $1,900,000.
- BT explains the reduction of the purchase price for the properties by $500,000 on the basis that the price was re-negotiated because of the state of the property. There is no evidence of a documentary nature to support such a statement. There is evidence to the contrary. On 25th February 1999 Mopani Chambers wrote to CMZ agreeing an extension to the date for completion and stating that the balance of the purchase price was $400,000. That would reflect the balance of the two properties' purchase price assuming the Land Rover payment and the January remittance of $500,000 had already been paid. There is no reference in the letter to an agreed reduction of the purchase price by $500,000. In particular it is the vendor who is giving notice to complete as opposed to the purchaser who according to BT had a claim for a reduction in the purchase price.
- BT was cross examined on the basis that the property purchase price was $1,400,000. By its closing however and its final schedule of recoveries AGZ appears to have acknowledged that the purchase price was actually $900,000 and not the $1,400,000 suggested.
- The position is obscure. There is no other evidence to support a sale of Land Rovers for $500,000. I remind myself that I should not speculate as to what has happened. The correspondence suggests that whatever the original contractual position was that $500,000 was sent to John Holt for the purchase of Land Rovers and the purchase price was reduced for the properties. I do not know whether there was any connection between the two but I proceed on the basis that the contract was at $900,000.
- Accepting that the conveyancing file has been lost BT plainly knew nothing of any significance about what was going on in the transactions. Yet he allowed his client account to be used for the transferring of monies in and out and remitted back to Zambia in respect of a property transaction in Zambia. He never questioned why this exercise had to be gone through. Nor did he question why MCD needed to remit monies to him when they could have remitted them back to Zambia. GT has not fully traced either of the payments although the payment of 8th March 1999 features in GT trace 33.
- Once again given the lack of any background in my view BT has again been dishonest in failing to ask the appropriate questions.
- BT's evidence was that he did not know that the two payments came from MCD. Once again this is dependent on my accepting that he neither read his client account bank statements nor his ledgers. It is said on his behalf that this is likely because he was in Zambia at the time. In my view the opposite is the case. If he is not present in his office he is bound to check his ledgers and bank statements to review transactions that take place in his absence. It is insufficient in my judgment to say that he does not need to question the matter because the money comes from a firm of solicitors. Once again the question that ought to be asked is "why are funds coming from a different firm of solicitors in London to provide funding for him to complete a transaction in respect of properties in Zambia ?". These are the kinds of matters which (for example) in my view the Blue Card warning is designed to address. Apart from the Blue Card warning the circularity of the transactions ought to raise questions in the mind of a solicitor. A failure to question that might be negligent or reckless but it might be dishonest. In my view in the present case BT was dishonest. I do not believe him when he says he did not look at his documents. He says that because that is the only way he can maintain his stance that as far as he was concerned he was acting for AFSL and the monies were AFSL monies. A perusal of the sources of the monies would raise a question as to the nature of the transaction and its funding. He might have been fobbed off with lies by FK but he did not ask. In my view he did not ask because he did not want to know the answer. This is blind eye dishonesty in my view. Between 13th October 1998 and 10th March 1999 a total of just under $1,500,000 was received. BT disbursed it without any enquiry as to the basis for FK claiming to be entitled to remit these monies and then direct them to be disbursed in respect of the Hearnville properties and the purchase of $500,000 of Land Rovers. To this of course must be added the unquestioning receipts previously referred to. There are in my view too many large receipts which are not apparently investigated for BT's evidence to have any credibility.
- BT's casual approach to professional and fiduciary duties was demonstrated by some of the evidence concerning his consultancy.
- He was retained from about 15th August 1997 as an independent legal consultant by ZCCM at a monthly rate of $10,834 (net of tax). His duties included scrutinizing and commenting on legal documentation creating the privatisation process working closely with Clifford Chance and the ZCCM legal department to assist in the preparation of documents and to work on all matters related to present and future liabilities of ZCCM and all such tasks of a legal nature as might be required. Francis K was the Chairman and Chief Executive of the ZCCM negotiating team and he gave the instructions to BT. He worked effectively full time between August 1997 and late 2000/early 2001 mainly in Lusaka.
- He kept his existing clients and says that for example in the case of AFSL he would continue to receive instructions from FK and AC but did those outside the ordinary office hours.
- Clause 16 of the Consultancy Agreement required him not to engage directly or indirectly in any professional activities which would conflict with the activities and duties assigned to him. He was prohibited from taking any trade commission, discount or allowance or indirect payment in connection with or in relation to the Consultancy Agreement and discharge of his functions (Clause 17) and he was required to keep his information and knowledge secret and confidential (Clause 18).
- As part of the privatisation process he was involved in the privatisation of Ndola Lime.
- On 25th November 1998 the first of two meetings took place between ZCCM and Socomer. It should be noted that FK was one of the negotiators on behalf of Socomer at both meetings. BBT was also there as a representative of Socomer (called "Tarka" in the note of 25th November 1998).
- On 26th November 1998 for example meeting minutes are revealed in respect of the continuation of the earlier meeting to discuss (inter alia) the extent of warranties to be provided to the prospective bidder Socomer. BT was part of the ZCCM team (contrary to his denials in cross examination). BBT his father was part of the negotiating team for Socomer as was FK. The ZCCM team was led by a Mr Patterson.
- Prior to those meetings there had been exchanges of correspondence about the giving of the warranties culminating in a letter of 28th October 1998 from Mr Patterson on behalf of ZCCM rejecting the warranties suggested by CMZ (BBT acting). The day after BT sent a fax to his father addressed "Papa". In that fax he said "I am not sure in which capacity Patterson has rejected the warranties but I feel that we should perhaps write a letter addressed to the Chairman. Obviously depending on the manner in which Patterson has rejected the warranties I propose the letter take the following form, please amend accordingly".
- He then drafted a letter to be sent by his father to Mr Patterson. He added a note at the end of the draft "I would suggest a copy of this letter go to AFSL for their approval before dispatch". This is because FK is interested in Socomer and represented it at the two meetings.
- Thus BT whilst acting for ZCCM in negotiations sends a draft letter to his father who is acting on the other side in the negotiations to send to Mr Patterson the head of his organisation. He also suggests that the letter is copied in to AFSL before it is sent.
- In other words he is advising his father what line to take in negotiations with ZCCM for whom he himself acts. Hardly surprisingly he was cross examined on this (T38/71/84). His explanation was in my view deceptive. First he suggested he attended the meeting on a watching brief which is plainly incorrect. It was clearly within the ambit of his duties under his retainer. The meeting was headed up by Mr Patterson and he had drafted a letter for his father to send to that very person.
- Second he acknowledged that the discussion of the warranties was overwhelmingly likely to be as a result of the letter that he had drafted to send to his employer (T/39/77/9). I asked him whether he recalled telling Mr Patterson "oh by the way I drafted this letter" and he could not recall. I do not believe him. I cannot believe for one minute he told Mr Patterson that he had drafted the letter which the other side had sent to him. So he deceived ZCCM.
- There was a further letter dated 26th October 2000 some two years later where he sent a further draft letter to be sent by BBT to ZCCM. At this time he was still retained by ZCCM. The draft letter he stated should be signed by his father and "my reference should not appear". His explanation for this in cross examination was because this was not his file. In my judgment the true explanation was that he wished to conceal his role in drafting the letter. That in my view also shows that he was being dishonest both in relation to that letter and the letter that had been written two years earlier.
- These are not issues before me but they go to show how BT viewed duties that he owed. He was prepared to be dishonest to ZCCM and when confronted with it still persisted in maintaining that there was nothing wrong. I do not believe him when he tries to give the impression that there was nothing wrong with what he was doing. It shows in my view quite strongly that BT was prepared to be dishonest when it suited his and AFSL's purpose.
- On 1st February 2001 BT's client account was credited with $455,213.75 and $149,990.57. The former of those was from the Zamtrop account and is GT trace 52. The latter is in respect of Semyon Holdings Ltd. The first was credited to FMK-AFSL ledger 1156. The second item was credited against the name Semyon Holdings in a ledger A Rathi. On 16th March 2001 a further $199,995 from AFSL was credited to BT's client account and credited against the same ledger. BT did not ask FK what the purpose of these transactions was.
- Habib Bank were concerned about these large credits. On 1st March 2001 BT wrote to Mr Sheikh referring to the receipt of $698,000 from Barclays Bank Jersey. He "confirmed that the monies had been forwarded by clients for onward transmission to a particular client who is known to the bank, Mr Rathi. In fact, the monies are to be remitted to his wife's account and I shall shortly let you have instructions. The origin of the funds is known to me and relates to the sale of precious metals to a South African company …… you will appreciate that I cannot give you any further information due to client confidentiality." That payment had been credited to the same Rathi ledger on 27th February 2001. On 15th March 2001 BT wrote a further letter to Mr Sheikh. He complained about the bank's reluctance to engage in a transaction involving his firm in a currency transaction which was a substantial amount. He expressed his disappointment that the bank were not allowing him to carry out his duties as a solicitor for various clients both local and international. He said in the second paragraph of the letter:-
- The sum of $455,213.75 credited to the FK-AFSL ledger on 1st February 2001 put that ledger into credit. As at 1st January 2001 it was in debit by $221,948.87.
- BT in his witness statement (paragraph 145) stated that AFSL was entitled to these monies because it was the repayment of a loan facility provided by AFSL to Zambia National Commercial Bank Ltd ("ZANACO").
- An analysis of the Zamtrop account shows that on 29th December 2000 $449,995.48 was credited to it. The statements suggests that it had come from an account at Barclays Bank held by CM. It remained in the Zamtrop account and was part of the $455,213.75 credited to CM's client account marked "B/O Zamtrop". As I have said it was credited to ledger 1156 and put that ledger balance in to credit by the sum of $305,840. That credit balance was transferred away by transfers to various people of $100,000 each between 9th March 2001 and 15th March 2001.
- The source of the $449,995.48 appears to have been MCD. On 6th June 2000 FK instructed IM to transfer $500,000 on behalf of "your (emphasis added) client Harptree". FK gave bank account details for account number 866801155 at Barclays in Jersey. This was a Caversham client account which received money for BT on various occasions. The monies transferred were debited to the Harptree Holdings account at MCD.
- The monies were put on deposit rolled up overnight and remained there for months. On 4th July 2000 Barclays wrote to Caversham Trustees Ltd wherein they stated amongst (inter alia):-
- On 28th December 2000 Beauty Kaluba the manager at ZANACO London sent a fax to CM reference BT giving him details of an ZNCB account in London. On 28th December 2000 BT replied stating that the funds were to be transferred for a 30 day term and they were bridge finance with interest at 8.5% and an arrangement fee of $1,500. The next day the funds were transferred from the CM client account at Barclays number 56300255. There were not actually funds in the account at that time and an overdraft fee was incurred. That payment as I have said covered the overdraft on the Zamtrop account of $418,471.
- That temporary overdraft was repaid with the $500,000 plus interest (totalling $518,384) from MCD.
- On 30th January 2001 BT wrote to Beauty Kaluba requesting immediate repayment and by 1st February 2001 the $455,213.75 (including interest) was received.
- In his Defence and Amended Defence BT stated that he believed on instructions given to him by FK on the telephone that the loan had been agreed whereby AFSL would lend money to ZANACO. He asserted (paragraph 24.6) "[BT and CM] do not know why the Zamtrop bank statement record the transfer of $449,995.48 as saying 'O/O Cave Malik' and assume that is because these Defendants wrote the letter of 28th December 2000."
- Thus AGZ contends BT asserts he does not make the payment as opposed to AFSL bankers. The Amended Defence was served after disclosure in January 2006 but no documents had been disclosed from Caversham relating to the transfer. AGZ submits those documents ought to have been disclosed. Following an application to the court by AGZ on 29th June 2006 BT produced a limited amount of documents in a schedule to his solicitor's letter dated 21st July 2006. In that schedule it was stated that he believed that the $500,000 transferred to Caversham in June 2000 was received by BBT on behalf of AFSL and that the account was operated pursuant to instructions by BBT. "That account was operated pursuant to the instructions of BBT and the said transfer was made pursuant to such instructions. BT does not know the name or the number or any details of the account from which the said sum was transferred, and did not know it was transferred to the Zamtrop account (if that be the case)". AGZ asked BT in August 2006 (before witness statements were served) whether he accepted the transfer of $450,000 was made from the Barclays Bank account in Jersey. His response was "No. The Claimant is required to prove this fact". He was asked to explain the basis on which BT asserted the transfer was made on BBT's instructions and which individual actually gave instructions. The reply was "please explain the relevance of this request".
- In paragraph 147 of his witness statement dated 11th September 2006 he reiterated that he did not arrange the transfer of the sums through the CM client account although he understood that the transfer was made. He referred to the reference "O/O Cave Malik" again and stated that he believed from what BBT told him the transfer was made from an account held by Caversham with Barclays Bank in Jersey held on behalf of BBT. In paragraph 148 he stated he did not know that the $500,000 had been received from MCD. He stated that he believed he was told the monies had been sent to BBT by AFSL through MCD instructed by FK in around December 2000. He conceded with the benefit of hindsight it might well have been prudent to ask why AFSL's money was paid through MCD to BT's account but he did not perceive that to be a problem. I have observed above that Barclays did think it was a problem. I cannot see why BT if he was acting honestly would not have thought these transactions were a problem unless fully explained to him.
- On 23rd October 2006 a week before the trial BT and CM provided disclosure of 5 files of further documents "recently received from Caversham Financial Service". It was asserted that the documents were not strictly relevant to the pleaded case but were disclosed out of an abundance of caution and in order to assist the court. The documents were heavily redacted. One document disclosed is a hand written note from BT to Christine Amorin dated 29th December 2000. She was a Senior Administrator at Caversham in Jersey. This document had not previously been disclosed.
- It was written by BT and refers to two conversations and states that following the conversations transfer details are enclosed and there is a request to transfer $450,000 that day. She is invited to call him on his mobile if there are any problems. He enclosed a letter sent to the bank for her information and regulatory requirements. The relevant letter is that of 28th December 2000 from BT to Beauty Kaluba setting out the terms of the loan.
- All of these documents showed that BT's Defences and witness statements were false. All of the instructions actually came from him. It was plainly relevant because it was in respect of the $450,000 being challenged by AGZ. Yet BT apparently did not keep a copy of his own hand written fax to Christine Amorin. If that is correct it is because he wished to conceal his involvement. More likely in my view is that he did and that he has lied to me again. That is my conclusion.
- On 10th January 2007 BT served a further witness statement where he referred to the Caversham documents in paragraph 8 and said "from those documents, I can now see that the transfer was made on my instructions… unfortunately I cannot now recall giving the instruction to this transfer but accept that I must have done so in the light of this document".
- I do not believe him.
- First he denied (T35/126) that he knew the $500,000 had come from MCD. That cannot survive in the light of Caversham's letter to Barclays sent by Mr Whale (see above). He could only have received the information from BT as the letter makes clear. BT stated that he did not recall speaking to Mr Whale and was not aware of any client. I do not believe him. Second he acknowledged that there was no underlying property transaction. He must therefore have told a false story to Mr Whale. Third I do not believe him when he says that he had forgotten the documents which showed he effected the transfer when he did his September 2006 witness statement. His Defence that he was told the details by his father is plainly a lie also. His father has been unable to give any instructions since mid 2001. He cannot have given BT any recent instructions in relation to this matter. In his witness statement of course he "recalled" a non existent conversation with BBT. Despite that recall he failed to recall his role in the transaction. In my view he falsely invented a conversation with his father. When the documents from Caversham arrived after the witness statement they were merely handed over at the start of the trial. However as the trial progressed it became obvious that BT had to say something hence his January witness statement.
- His case was that money was lent to ZANACO. It was remitted to ZANACO and then credited to the Zamtrop account. I accept AGZ's submission the purpose was to put the Zamtrop account in credit for the purpose of the year end.
- Although BT was insistent he was dealing with ZANACO the credit back on 1st February 2001 is not from ZANACO; it is from Zamtrop. Once again his answer on that point is that he failed to read either his bank statements or his ledgers. I disbelieve him again. It was credited to FK/AFSL's ledger again. Someone needs to connect them up and it is hardly likely that it can be junior staff.
- As AGZ has shown the source of these monies was MCD's Harptree ledger which was supposed to be Government monies. The purpose of routing the monies through Caversham was to create a false trail to hide the fact that Government monies were being used to restore the Zamtrop account temporarily to credit. I do not believe for one minute ZANACO borrowed any money from AFSL at this time.
- That means that the loan document drawn up by BT was bogus. I do not know whether he actually knew all of this but I am quite satisfied that he was dishonest again because he failed to make any enquiries that an honest solicitor would make. Equally by failing to make those enquiries he became a party to a conspiracy to defraud the Republic.
- CM's client account was credited with two payments of $199,995 and $399,995 on 10th July 2001 and 6th November 2001 respectively. Both were credited to FK's 1156 ledger and both were stated to be transmitted from "B/O Office of the President". Both of these monies were sourced from a Government account. They were plainly Government monies. Both are so designated in the ledger account narrative. Further credits were made to the account from "one of our clients" ($79,995), XFC ($99,995) and FK ($54,995). Out of these credits £30,000 was paid by BT to FJT in cash (see above). As I have already observed as regards FJT I can see no honest purpose behind this transaction. FJT was dishonest. I cannot see that BT can have had any honest justification for acting in that way. He too therefore was dishonest in that transaction. Either once again he did not ask (when an honest solicitor would have asked) or he knew precisely that the Government monies were being misappropriated by FJT.
- A further sum of $150,000 was transferred to Barclays in Jersey as security for part of the purchase of 12b Serval Road by River Properties Ltd. A further $297,580 was transferred to pay for the chattels for that property. FJT still lives at Serval Road.
- There is no honest basis for any of these transactions in my view either. BT cannot have believed if he were an honest solicitor that funds of this size were available to FJT to purchase property for his residence in retirement. If it was legitimate there is absolutely no reason for the President's retirement home to be bought and furnished via an offshore bank using an English company incorporated by BT on 26th October 2001.
- This company had a registered office at CM, its secretary was Cave Malik Secretaries Ltd and the director and shareholder was Cave Malik Nominees Ltd. BT arranged for the company to be registered as a foreign company in Zambia with the cooperation of FK and AFSL. BT gave an address in Ndola as his usual residential address. The company was struck off on 18th May 2004 and dissolved on 25th May 2004. The extraordinary aspect of this is that the striking off procedure was initiated on 17th December 2003 by BT. I cannot conceive of any honest reason why he would strike the company off at that late stage. There is a restriction notice over the property subject to challenge in Zambia but AGZ will have to restore the company before it can proceed. At the moment the property and the chattels have presumably vested in the Crown as bona vacantia in respect of the assets of a company dissolved which had a registered office in England and Wales (except Lancashire or Cornwall of course).
- CM was instructed to set the company up in October 2001 and as I have said were the nominee shareholders and secretaries. In paragraph 172 of his witness statement BT said:-
- That is a quite extraordinary stance for a solicitor to take in my view and he was not surprisingly extensively cross examined on this transaction (T39/66 et seq). He changed his story and said that he formed the impression (without explaining) that FK was the beneficial owner. That makes a nonsense of course of paragraph 172 of his witness statement.
- If that was his understanding in my view when he opened an account with Barclays Jersey in the name of River Properties he was dishonest in the information he provided to them on 23rd November 2001. It is plain when one looks at the guidance notes and the identification documents that Barclays (doubtless to deal with money laundering aspects) required to know who was the ultimate beneficial owner of the company. BT filled in the form. He described himself as being an authorised signatory. In respect of the individuals connected to the company prefaced "names of shareholders, beneficial owners, directors,…." he only gave his own name and described himself as a shareholder. In my view he dishonestly concealed who was the beneficial owner. If paragraph 172 of his witness statement is to be believed he never knew who the beneficial owner was. I disbelieve him in that regard. The true position was as in his later evidence. FK was expected to be the beneficial owner and this property was acquired using Office of the President monies to provide accommodation for FJT. It is also clear that the purchase was partly funded by the two credits from XFC and FK of $99,000 and $54,000 referred to above.
- BT in his witness statement acknowledges that he should have maybe asked additional questions as to the source of the funds.
- On 27th November 2001 Barclays wrote to BT attaching an offer letter relating to the deposit proposed as security for River Properties borrowings. The letter explained that they needed a letter from CM confirming the source of the deposit funds. BT wrote back on 28th November 2001 "the source of the funds being placed as required under the Deposit Agreement are currently being held in our client account with instruction to forward the same once bank accounts have been established in favour of our client River Properties Overseas Ltd. We have satisfied all our 'know your client' requirements and have satisfied this firms bankers to the funds held".
- The requisite deposit of $150,000 was taken from FK's ledger account number 1156. The printouts for this period are very confusing because they have one column of credits and another column of debits but no balance to reflect individual credits or debits is shown. It can be seen that before the transfer to "Properties Overseas Ltd" on 30th November 2001 $399,995 had been credited (from OOP) on 6th November 2001, $99,995 on 8th November 2001 from AFSL, $195,995 from Supla Ltd, $69,974 from the secretary of Bolton CP and most intriguingly of all on 28th November 2001 "one of our clients" ($79,995). The final credit was from Abbey National in the sum of $124,987.
- BT instructed Habib Bank to transfer $150,000 to the credit of River Properties account with Barclays Bank in Jersey. In the letter he also referred to $80,000 which was in effect the "one of our clients" credit.
- The sourcing of the various monies is not clear. Equally it is not clear precisely how the purchase was funded apart from the $145,000 borrowed from Barclays Jersey on the strength of the $150,000 receipt. That sum was called upon by CM on 13th December 2001. The transaction completed on that date. The amount required for the chattels ($297,000) was paid directly to the sellers nominated bank account. The ledger shows the chattel payment ($297,580) going out to the vendor Bowland Investments Ltd on 13th October 2001. That is plainly an error; the actual date is the date of completion 13th December 2001. Therefore the chattels were purchased using the funds credited to FK/AFSL ledger 1156. The various sources of monies immediately prior to those transfers are set out above. This is all very unsatisfactory and neither BT nor his records was able to provide any meaningful elucidation.
- I have had no explanation as to why XFC and FK would fund this purchase. If the funds are derived from the OOP then they were Government monies as BT admits that it came from the 677 Permase General Account (item 38 of the Scott Schedule).
- I need not come to any definitive finding on this issue. The property has been seized and the ownership will await the outcome of that seizure (assuming it is resurrected in due course). What is clear however is that when BT wrote to Barclays saying he had satisfied all "know all your client's requirements" that was patently a lie. He really had no idea where the monies were coming from for whom the property was being purchased and never made any enquiries on his evidence.
- He had no idea as to the source of the funds from another client and he had no idea as to the entitlement of FK and XFC to transfer the funds. In the case of the OOP payments his initial stance was that he believed the monies were lawfully received. This appeared to be an assumption only. When he gave evidence during cross examination he said that he was told that the monies were from OOP by FK in a conversation on 12th November 2001 (T38/105). This is in the light of his witness statement where he asserts (because he did not read his bank statements or ledgers) he did not know the monies were from OOP. By 13th November 2001 he wrote to Mr Sheikh at Habib Bank reminding him that substantial $ monies had been paid into his client account "from the Office of the President of Zambia". This letter was dictated by BT and signed in his absence. However he knew about the letter because the letter was the request for £30,000 cash which BT handed over to FJT. He acknowledged in cross examination that he knew what the OOP was. There is an attendance note of the conversation with FK. It does not mention the fact as BT said in response to cross examination (but not in his witness statement) that FK told him that the monies were Government monies. The file note is in respect of the £30,000 cash initially.
- What all this shows is that BT knew he received large amounts of Government money but did not know how FK was entitled to it and how they were to be used partly to acquire River Properties property at 12b Serval Road. That is BT's best position on the evidence. I do not believe him. It is plain that he knew the monies were Government monies and they were being used, amongst other things to acquire this property. He misled Barclays. He was evasive with Habib Bank as to the source of the monies. In my judgment the monies were used dishonestly to acquire this property. In my view and I so find BT knew the purpose and he knew that the source of the acquisitions were substantially Government monies. He knew therefore that there was no legitimate purpose for the property being acquired in this way. His initial stance was that the monies were AFSL monies but on discovering that they were Government monies he was unable to explain the basis on which AFSL claim to be entitled to these monies.
- 12b Serval Road was purchased to provide a home for FJT. The total purchase price is way beyond the personal means of FJT. BT drafted a tenancy agreement which FJT signed on 1st January 2002. BT knew that the Government refused to pay any rent and he as a director at River Properties knew that it had never received any. BT conceded all of this in cross examination.
- On 29th July 2002 BT wrote to Barclays requesting that Barclays immediately repay the loan from River Properties to Barclays utilising the $150,000 deposit. The timeline again is significant. This is after the Matrix of Plunder Article. BT's evidence was that he acted on the instructions of AC. There was no record of this.
- On 7th February 2003 the property was seized by AGZ. On 20th February 2003 AFSL's liquidator appointed by BOZ wrote to FK seeking the address of the owners of River Properties so that they could be notified of the seizure as the property would be forfeited to the State if it was not claimed within 3 months.
- On 21st February 2003 Simeza Sangwa and Associates advocates in Lusaka wrote to BT telling him of the forfeiture of the properties and the fact that they would be finally forfeited if not claimed by 26th April 2003. The letter requested that the director of the three companies give them immediate instructions. The letter was copied to FK. BT of course controlled the directors of the company. He was sent a chase up on 18th March 2003. BT replied obscurely on 20th March 2003 "we shall be in a position to revert to you shortly but are dependent on a third party". On 31st March 2003 BT replied to Mr Simeza. In it he said "we were advised that the property was purchased from a private corporate entity through the assistance of a bank facility and enclose herewith a copy of the letter of offer to the company…. for confidentiality I have redacted the branch from which the offer to the solicitors was made".
- This was written by BT on River Properties notepaper. It is a deceptive letter in my view. First it gives the impression that BT really knows nothing about it when in fact he acted on the purchase. Second it suggests that it was funded using a bank facility but fails to reveal that the bank facility was repaid with $150,000 which BT had transferred from FK's client account as set out above. Given BT's statement that he took instructions from FK about this transaction this letter is bizarre indeed.
- A month later somebody called upon BT in London. His name was Bwalya and he came with a friend who was alleged to be a barrister Samuel Afriyie. It was said to BT that they were acting on the instructions of the beneficial owner. Without checking this BT gave them documents and made amendments to a draft affidavit which was sworn by somebody called Kwesi Yao. It was filed in the High Court of Zambia on 2nd May 2003 and was purportedly on behalf of River Properties Mr Yao deposing he was the authorised agent and authorised to swear the affidavit. The affidavit repeated the deception of failing to reveal the $150,000 cash injection used to acquire the property. It made no reference to the $249,000 purchase of chattels also funded from Government funds.
- On 19th December 2003 without instructions BT requested Barclays to close River Properties' account and remit the balance of the monies to him. Further he took steps to have the company struck off the register.
- It must be borne in mind that at this time the company had a property and chattels which it had acquired for $450,000 which was occupied by FJT who was not paying any rent. I find this an extraordinary course of action by BT the only director of the company and therefore charged with preserving its assets. Further he did all of this apparently without instructions.
- I do not believe him. In my view the obscure way in which this property was purchased using stolen Government money was designed to hide the fact that FJT was occupying property which had been purchased using stolen Government monies. BT knew all this at the latest by 12th November 2001 when FK told him that the monies were from OOP. BT failed to react to that. Such failure in my view was dishonest. He does not want to enquire further. Then after the Matrix of Plunder explosion he takes extraordinary steps namely the participation in an affidavit sworn and filed on behalf of the company by somebody who apparently did not have any authority and then cleared out the Barclays Bank account and finally to make things even more difficult arranged to have the company struck off and dissolved. These are not the actions of an honest solicitor. Further given his role namely acting in the acquisition with the knowledge that Government monies were being used or failing to enquire (with wilful blindness) that Government monies were being used and then concealing the transactions at a later stage he was a party to a conspiracy to defraud the Republic of the monies taken from OOP.
- In this context it is important to appreciate that during the period of these extraordinary activities by BT he well knew that AFSL and FK were under investigation and that the Republic had attempted to seize this property. An honest solicitor would have communicated with the Republic to tell them as much as he knew about the transactions. BT did exactly the opposite; he attempted by the affidavits and the steps taken to dissolve the company to make the investigatory path that much more difficult to follow. I reject his assertion that he did this because he could not obtain instructions. He could have contacted the Government but he did not. This is further evidence of dishonesty on the part of BT in my view.
- I have already referred to this in the early part of the judgment dealing with FJT. As I said then the payment of this cash to FJT represents approximately 45% in equivalent terms of the entirety of his ten year salary.
- BT's story is extraordinary. FJT just called out of the blue on 12th November 2001 and requested a meeting. He sought clarification from FK who told him that he should meet FJT although he was uncomfortable. He met FJT with his daughters and after a few pleasantries he said it was his last trip to London and he was getting things organised for his retirement and he needed £30,000 in cash and asked BT to arrange for the payment to him from the funds held by AFSL. BT telephoned FK on his car phone afterwards who authorised him to make the payment. This might be the telephone conversation that is noted. Although in paragraph 271 of his witness statement BT said that he did not recall whether FK told him the funds had been remitted by OOP he firmed that up in his evidence (see above).
- He was plainly concerned but not as to the transaction but because he might be robbed. He requested the money urgently from Habib Bank on 13th November 2001. He stated in his witness statement that he hoped the bank would refuse (so he would not run the risk of being robbed presumably). He could have simply refused to do it. He did not of course do so. Habib Bank however agreed to it. He collected the money and handed it over to FJT.
- In cross examination he acknowledged if he knew it was Government money it would not be right to hand it out to FJT without further enquiry. He persisted in his assertion that it was AFSL money but he did not so describe it when he wrote to Habib Bank on 13th November 2001. I do not believe his evidence again. In my view he knew the monies were Government monies. That is to be seen from his ledgers and his bank statements. It is also to be seen from what FK apparently told him around 12th November 2001. Yet he made no enquiry as to how the President could simply take such a large amount of money. An honest solicitor would not participate in such a transaction without a full understanding of its nature so that he could be satisfied it was lawful. BT did not so satisfy himself because he was unwilling to ask the question because he was afraid of the answer. That in my view is dishonesty. He has also allowed his client account to be used to facilitate the wrongful stealing of Government monies. He has therefore because he knows that it is Government monies and he fails to ask questions as to the legitimacy of the transaction become a party to that conspiracy. He has also dishonestly assisted in FJT's breach of fiduciary duty. The only explanation he could give for making payments for the benefit of FJT was that it was part of FJT's retirement fund. He asserted that he was ignorant of salary levels in Zambia (which I do not believe). This is an incredible statement and I simply do not believe it. It is impossible to believe that a lawful authorised pension fund for the President would be set up and administered in this circular and obscure way using CM as the conduit. This is a lie by BT to deal with the payments not only for FJT but also for his children.
- Despite the Matrix of Plunder and despite the fact that BT was advising FK on the criminal aspects (see his notes of spending 100 hours perusing issues of Zambian criminal law and a series of undated memos) he continued to disburse funds. He also had meetings with IM either face to face or on the telephone. His attendance note "attended offices of [IM] to discuss options on occasions too numerous to mention" is unclear. It looks like an after the event memo produced for the purpose of a bill. IM denied he had such contact with BT. In my view there was contact and this was part of the role of the lawyers in maintaining the conspiracy by creating obstacles.
- Further the various payments that were disbursed between 5th June 2002 and April 2003 were payments that an honest solicitor would not have made given the then investigation that was in place as a result of the Matrix of Plunder article. He continued to remit money to Irene Kabwe and the Chiluba children (including running expenses for vehicles) and payments for XFC's children. These too (because they were not questioned) are not the acts of an honest solicitor. BT was dishonest again. It is insufficient as BT says in his closing to conceive that it was spectacularly stupid. Whatever his belief as to the honesty of FJT an honest solicitor would in my view not have released any further monies without having the matter cleared with the authorities. I also am firmly of the view that an honest solicitor would have gone to the authorities at this time. BT did neither. In my view he remained a conspirator and he was a dishonest assister in the disbursement of the subsequent funds in breach of FJT and XFC's fiduciary duties.
- By this time the cumulative picture against the Zambian Defendants was overwhelming. That too adds to BT's knowledge or lack of enquiry because he did not wish to know the answer.
- In his closing (paragraph 1363) AGZ submits "[BT] has been proved a thoroughly dishonest witness in these proceedings. Zambia invites the court to find that he is liable to the same extent as people with whom he worked so closely in London and Zambia between 1995 and 2002".
- To describe BT as a thoroughly dishonest witness is in my view a fair description of his performance in the witness box. I found him evasive on the key points put to him in cross examination. I have set out at length earlier in this judgment the extensive areas where in my opinion BT was lying.
- I have to consider the question as to why BT lied. In my view he lied because he wished to hide the fact that he had dishonestly assisted the disposal of stolen Government monies by the unquestioned use of his client account. He also for the reasons that I have set out above clearly knew that the client account was being used as part of a conspiracy to defraud the Republic of the sums that were run through his client account. His attempt to portray himself as a naïve incompetent was not successful. It was clear from his performance in the witness box that he was not naïve or stupid. In my view he knew what was going on and participated with that knowledge.
- AGZ has attempted to suggest BT had a far larger role. For example he submits BT drew up a large number of companies. That is true. But it was never put to him in cross examination that that showed evidence of dishonest assistance or part of a conspiracy. I must be careful not to look at things with the benefit of hindsight. The Republic has uncovered a huge conspiracy perpetrated by the Zambian based Defendants.
- Whilst BT has received large sums of money (as to which see below) and whilst he has lied extensively I am not persuaded on the evidence and on the basis of those finding of lies that I should conclude that he was a party to the over arching conspiracy with the Zambian based Defendants. I accept that BT has lied extensively but it is to cover up his role in the transactions which involved the use of his client account.
- Having rejected AGZ's claim that BT was involved in the over arching conspiracy the alternative basis for damages for dishonest assistance or conspiracy is the same. In my view the amount should be the totality of the traced monies transferred to CM's client account from the Zamtrop account ($2,127,822), a further sum in accordance with paragraph 274 above, and the OOP payments ($599,990). In addition the amount transferred from Redcliffe (£155,000) is claimable. I do not limit it to the traced items for the reasons I have given earlier in this judgment. In my view all monies coming from the Zamtrop account (save those disallowed in paragraph 274 above) are to be regarded as Government monies because I do not accept there is any legitimate basis for the view that any of the monies might not be Government monies.
- Therefore I conclude BT is liable in damages for dishonest assistance and a conspiracy to steal monies by routing those monies through his client account in the sum identified above. Credit will have to be given for realisations but that will be determined at a later hearing. There is no liability for knowing receipt for the reasons given earlier.
- Two issues arise.
- First was BBT in partnership with BT in CM? I have already dealt with this and my firm conclusion is that they were. However I do not accept there was one firm operating under the umbrella of "Cave Malik" in London, Lusaka and Ndola.
- The second question is when looking at the activities that I found BT did were the activities such as to make CM and BBT liable by virtue of Section 10 PA 1890? I need not set out the legal principles again as I have summarised them above when dealing with MCD.
- I have already dealt with the unorthodox procedural chronology which led to these Defences being raised.
- I accept Mr Fenwick QC's submission that the activities identified as being done by BT namely in essence the receipt of monies for clients and the disbursement of them on instructions is not the business that would be carried on ordinarily by a firm of solicitors.
- I have not had any evidence from BBT for obvious reasons. The only other person who could assist is BT. His evidence is set out in paragraph 113 of his witness statement. He believed that the services he provided was offering a broader commercial assistance in the business affairs of his clients. What he does not do is say that BBT did not know of that or that it was not part of the business of the firm CM.
- BT's silence on these points in my view is evidence that his activities were part of the business of CM and/or carried on with the approval and knowledge of BBT.
- It is plain that CM was run by BT and that BBT acquiesced in that. His sole role appears to me to be twofold. First he provides as a partner a historical legitimacy to the newly established firm CM. Second he provided capital for the firm. Absent any other evidence I would infer that BBT implicitly agreed that the firm could carry on such business as BT might determine from time to time.
- AGZ in paragraph 1474 of his closing identified evidence which shows BBT's participating in the activities in the name or through CM. However one needs to look at these with caution bearing in mind my determination that there was not one CM firm practicing in London, Lusaka and Ndola.
- Most of the letters relate to perfectly traditional property transactions and are equally explicable on the basis of correspondence passing between the different firms and BT and BBT acting in different capacities in those different firms.
- The transactions which support my view as to this operation being in the ordinary course of business of CM and/or approved by BBT are the transactions in respect of the Caversham remittances where BT lied. He lied in my view because it showed the nexus between him and his father in respect of these unusual transactions (for a firm of solicitors at least). BBT plainly knew about this operation. For all of those reasons I am of the opinion that BT's activities were carried out in the ordinary course of business and/or with the approval of BBT so that the firm CM and thus BBT are liable for BT's acts under Section 10 PA 1890.
- Mr Shansonga is 51 years old. He had an education up to university level in Lusaka graduating in 1979 with a BA degree in Business Administration and Economics. Between 1979 and 1981 he was employed by KPMG in Lusaka and then received a scholarship from them to travel and be educated in London. Between 1981 and 1982 he attended West Bromwich College and obtained a Foundation Certificate in Accountancy and between 1982 and 1984 he attended Luton College of Higher Education where he secured an Advanced Diploma in Accountancy. KPMG funded the education and when he finished he returned to them in Zambia. Shortly thereafter he went back to England and had various accountancy jobs with subsidiaries of ZCCM until 1998. He was very active in the Movement for Multi Party Democracy (the political party of FJT and President Mwanawasa) in London.
- Between 2000 and 2002 AS was the Zambian Ambassador to the USA when he was recalled on 26th July 2002 as a result of the publication of the Matrix of Plunder article.
- He is "associated" with Redcliffe which was a company incorporated on 23rd June 1995 that was struck off and dissolved in August 1997. It was controlled and operated by AS acting on the instructions allegedly of XFC. Although AS was a signatory on the bank mandate and signed all documents in relation to drawings on Redcliffe's bank account a Ms Valerie Edwards (a former shop assistant in John Lewis) was the director and shareholder. Not only was her appointment surprising but AS according to his evidence told Ms Edwards everything about the secrecy of the Redcliffe operation. He also asserted that XFC agreed her appointment although he knew nothing about her. This is in stark contrast to the retainer of CM. There XFC (according to AS) told him to use BT. BT was unable to explain why XFC would use him. AS could not explain it either, despite the higher status of BT (as opposed to Ms Edwards). It is not suggested that she had any role beyond the paper title and shareholding. AS asserted he never told BT about the secret operations
- AS was responsible for all instructions given to CM in relation to the operation of the ledger maintained by CM and held in the name of Redcliffe.
- In early 1999 he acquired two BVI companies one of which is the 13th Defendant Nebraska Services Ltd of which he was the alter ego. The other was De Garnier Holdings Ltd of which he claims to be the beneficial owner. Although that was disputed during the trial by AGZ the RRRAPC (paragraph 927) asserted that he was the beneficial owner of De Garnier Holdings and AGZ never sought to depart from that plea. Accordingly I make no determination as to the beneficial shareholding and for the purposes of this trial AS is to be regarded as the beneficial owner.
- Initially AS had public funding for this case but the certificate was discharged shortly before the trial. From the start of the trial (mid October) 2006 until January 2007 AS acted in person. It is clear he had access to some form of legal advice. His Solicitors and Counsel came back on the record following the sale of DGH's shareholding in a Zambian Hydro Electric company and my Order permitting him to be allowed to use the proceeds of sale of the shares.
- There are four heads of claim:-
- AGZ conceded in closing that the figures should be limited to GT traces.
- I set out below the analysis of the nature of each claim. The dishonest assistance case is that it is alleged that AS dishonestly assisted XFC in breach of his fiduciary duties in paying Government monies through or to him personally or Redcliffe or Nebraska. He knows that this was Government money and that it should not have been dealt with in this way (AGZ's opening paragraphs 340-341).
- I have already dealt with the analysis of dishonest assistance as a matter of law. In this context it is important to understand that AS is in a different position to that of IM and BT. He is not a professional carrying on a practice. It is true that he trained as an accountant and it is also true that he had quite extensive financial experience (see the summary of his CV above). By virtue of his training he is self evidently in my view aware of the need for transactions to be documented if only for fiscal and corporate purposes.
- He does not have warnings given to him by professional bodies (such as the Blue Card warnings). He is in my view to be regarded as a layman as regards money laundering.
- In addition however there are AS's personal characteristics. He is an experienced business man in my view. Such business extends to international operations. He has extensive experience as an ambassador and was aware through his political activities of the extent of corruption in Zambia. He was also aware in my view of the general living standards of people in Zambia (and in particular civil servants' earnings right up to the President).
- The question I have to decide as regards dishonesty is when he carried out the transactions he did, did he do so dishonestly.
- I have set out above the requisite level of knowledge to be liable for knowing receipt. It also seems to me to be the case that for him to be liable in knowing receipt he must have received it beneficially.
- The claim for breach of fiduciary duty is a claim for repayment of monies paid to him whilst he was the Zambian Ambassador to the USA between 27th April 2000 and 26th July 2002.
- I have already set out the over arching conspiracy case as pleaded. Unlike the other Defendants Mr Bourne for AS in his written submissions submits that AGZ should not be allowed to depart from any conspiracy other than that pleaded. That is the opposite stance taken by the other Defendants.
- I accept as I accepted in the closing submissions made by Mr Bourne that AGZ has failed to establish the over arching conspiracy against AS. The following factors lead me to that conclusion. First it is not alleged that AS had any knowledge of or any role in the organised payments from MOF to Zamtrop or from MOF to Systems or Wilbain or from Systems to Zamtrop. Second AGZ accepts that AS had no knowledge of and did not participate in making payments from the Zamtrop account to MCD. AS's evidence is that he met IM once. The latter could not recall meeting him at all. Third there is no evidence to show that AS knew that the monies that were provided by MCD for the purpose of DGH Poly Products were stolen monies. Fourth it is not alleged that AS participated in payments made directly to CM from the Zamtrop account rather that he knew Government monies were paid to CM. AS acknowledges that he was aware of four payments to CM totalling £155,000 all from Redcliffe (which of course he controlled). Fifth there is no evidence other than advancing money to enable payments made for spectacles of any arrangements that involved FJT and finally there is no evidence to show that AS played an active role in AFSL/ALL.
- Mr Bourne summarises his case as follows:-
- Mr Bourne in his closing made a number of preliminary observations.
- There is the issue of limitation. I have already set this out in the judgment and in my view there is no limitation defence available to AS.
- The other Defendants have addressed detailed arguments about the nature of the funds constituting the Zamtrop account. In particular the question of mixing with funds belonging to FJT or XFC has been raised and rejected by me.
- In respect of the claim AGZ confirms he limits his claim to GT traces plus monies which he can show are Government monies even if not the subject matter of a GT trace.
- GT in a report dated 23rd August 2006 supplemented by further comments on 5th February 2007 sought to prove that AS did not have sufficient funds on his own to allow his expenditure (net of the payments made to him or other companies from the Zamtrop account). Mr Bourne established in cross examination that AS received a total of $53,000 more than he spent. He also established that if he had not received the amount he received from Zamtrop he would not have been able to spend an equivalent amount. Miss Pincott accepted this. The figures (which are not disputed) show that AS received $6,042,254 and disbursed directly or indirectly one way or another $5,989,023. Mr Bourne submits that that analysis does not prove that he had insufficient funds from his own resources to fund his living expenses.
- The difficulty with that observation however is the plain fact that the figures show he received $53,000 more than he spent. He has on his case no beneficial entitlement to any of these monies because they were supposed to be expended on ZSIS expenditure on the direction of XFC. In the context of this case I accept $53,000 is modest but not for a Zambian. During the course of his cross examination AS asserted he used other funds belonging to him to discharge liabilities on behalf of XFC and in effect personal receipts by him were reimbursement and/or set offs in respect of those sums. However he has failed to produce any evidence of the existence of such funds let alone the disbursements on behalf of XFC. To that extent the overpayment whilst modest is significant as it is another example of misappropriation which AS has failed to justify.
- AS sets out his case in paragraph 130 and following of his second witness statement dated 11th September 2006. He claimed XFC had approached him outside a private house when he was going to a party and he was introduced to him by a Mr Nyangulu an Intelligence Officer at the Zambian High Commission in London. AS said that he knew him to be the head of ZSIS and head of the OOP Special Division. He thus knew he was an important man a high official and a close confidant of FJT. Apparently XFC discussed with him investigations in to the activities of Dr Chiluba's wife. FJT as I have said was elected on an anti corruption ticket so that was a surprising request. Nothing came of it as AS knew nothing about it and it remains an intriguing but irrelevant issue in this trial. This took place apparently in 1993 or 1994 in London. He said he next met XFC in London in 1995 when he came to his office and told him he wanted to set up a company to work for intelligence. It is stated that he said something to the effect that ZSIS/OOP needed someone they could trust to do things for them in London and to disburse funds and account honestly and properly for such funds. XFC asked AS to be a director of the company. He could not rely upon the diplomats in the High Commission because they leaked information and he wanted to protect the interests of ZSIS. AS offers the view that he had met the staff at the High Commission and was distinctly unimpressed by some of them.
- He had mixed views about this approach but was flattered. This was "doing his bit for Zambia" as it was put to him on occasions in cross examination. He told XFC apparently that he did not want to be a director because he would have to tell his employers so it would not be secret. AS suggested someone else to XFC and this led to the appointment of Valerie Edwards after a meeting between her and XFC. The important point is the secrecy:-
- None of this is documented. AS whilst intelligent and of a professional training and with business experience has absolutely no experience of secret service operations. Further he introduced a nominee Valerie Edwards and, if he is to be believed, told her about all of these arrangements and she agreed to be a front person in Redcliffe. What is even more surprising is that XFC agreed that she could be a front person. Thus the entirety of the secrecy operation was revealed to a shop assistant from John Lewis. It is difficult to believe that has any credibility at all. I reject it. This was done to hide the involvement of XFC and AS.
- Although Mr Bourne in his closing says there is no evidence to contradict AS's version of events that does not mean that I have to accept them. I simply do not accept the primary case put forward by AS that he was approached by XFC as he alleges. It is not like IM or BT where there was a professional service which could have some use namely the operation of their client accounts for the purpose of transmitting money through them. I cannot believe that if this was a genuine secret service operation it would be set up in this amateurish way.
- This view is reinforced by a number of other factors. First AS did not tell BT about this secret arrangement. I find this incredible. According to AS he was directed to BT by XFC. Given that why would he not disclose XFC's recruiting of him? They are all supposed to be working together on this analysis. AS has to say this to explain BT's stance that he knew nothing about ZSIS operations.
- In his primary evidence AS asserted that he instructed BT to form Redcliffe. He denied that. AS persisted in this until just before he was due to give evidence when he retracted it without giving any explanation as to the apparent change of heart. This was done in an attempt in my view belatedly to deal with the obvious credibility issue which showed that BT did not form Redcliffe.
- There are a significant number of other instances which lead me to conclude that AS is not telling me the truth about his fundamental case. These I will deal with further in this judgment.
- At the outset of his cross examination AS was asked about his conduct. First he confirmed that everything he did was for Zambia (T41/21). Second he confirmed that he would see everything he did as repaying back Zambia in exchange for his education and he would do it gratuitously (T41/4).
- Finally (T41/2-3) he said this:-
- The problem about that statement is that it is a course of conduct which AS never adhered to. He never questioned anything and he never refused to do anything. If XFC asked him to do something he did it. He asserted that he was justified in this because XFC was a senior member of Government and AS had no reason to believe that he was not entitled to use the money as he instructed AS.
- That in my view is not sufficient if the transaction does not look like a transaction for which he was allegedly retained. The most glaring of those in my view is XFC's alleged request to AS to collect $250,000 from ZANACO and take it to him in Geneva. He attended ZANACO's offices and signed for it. Beauty Kaluba gave him the money. He took it in an attaché case to Heathrow. The security scanner picked it up and the customs telephoned Mrs Kaluba who (unsurprisingly perhaps) confirmed that it was appropriate for him to carry on with the money. He gave the money to XFC and asked him what it was for. XFC merely said it was "for his work". He said that AS did not need to know anymore about it and he did not ask.
- He confirmed in cross examination (T42/19) that he made no enquiries and had no idea what it was for. He sought to elaborate his explanation (T42/18) on the basis that none of the ZSIS officers or XFC had been able to come to London to take the cash.
- This is incredible. I cannot believe that it is realistic that if this was a ZSIS operation that XFC would entrust the carrying of the monies to AS. There must be any number of potential ZSIS operatives who could transfer the money. The reality is that AS was picked in my view because he is a party to the dishonest removal of Government monies.
- Given AS's background as summarised above in my view an honest person would ask why he is being required to transfer this money and what it is for. It must be appreciated that AS is not under the same threats as public servants in Zambia. This occurred in January 1997 before he became the Ambassador. He knows in my view that it is plainly Government money. And he does not ask because he either does not want to know the answer or because he knows that XFC is in effect stealing the $250,000. On either basis AS is dishonest in my view and is providing dishonest assistance to enable XFC to steal $250,000 from the Government.
- This is further reinforced by the extraordinary types of disbursements which AS implemented allegedly on behalf of ZSIS on the instructions of XFC.
- I have already dealt with the extraordinary version of events given by AS as to the formation of this company and its appointment of Valerie Edwards to act for it. Despite that AS had the control of the bank account and he directed the remittances to CM. It is plain that BT was selected by XFC because they knew each other. I refer to BT's untruthful statement as to why Redcliffe used a client account with CM rather than operating an ordinary bank account. There was no need for XFC to route monies to BT via Redcliffe unless there was dishonesty involved and the purpose was to hide the trail of the monies. If AS was honest he would have questioned XFC as to why this was necessary. Once again either he did not because he knew it was dishonest or he failed to ask the questions that an honest person with his background would do.
- This is reinforced by the events which occurred after Redcliffe's striking off and dissolution. AS was a trained accountant with accounting experience. He held a portfolio of directorships and he had received a letter from Companies House setting out the nature and extent of the obligations imposed on a UK director. He confirmed that he knew of the requirements to file accounts at Companies House and that the failure to file the accounts might lead to the company being struck off. He was aware of the notice yet no accounts were filed by Redcliffe from its incorporation to the receipt of the notice. This in my view is further evidence of dishonesty. It makes the tracing of matters through Redcliffe even more difficult. Despite the urgency by August 1997 AS took no steps to file accounts on behalf of Redcliffe.
- In his evidence he claimed that XFC was not prepared to pay MAP accountants to prepare the accounts (at a cost of less than £5,000). AS's evidence therefore was that he gave the papers to an Australian woman working at ZAL Holdings as a temporary accountant called Orla. I do not believe him. Further as his actions in this regard were further explored in cross examination it demonstrated that he was lying. First on being questioned that giving the papers to Orla at ZAL would undermine the secrecy of Redcliffe he asserted that she was employed by MISSL but retracted that. Second he said that Orla was only temporary and he was unsure as to the extent of her qualifications. Third he was entirely unable to explain how the accounts would be prepared and audited by Orla in time to be filed by 7th August 1997. Fourth he attempted to rely upon the receipt of VAT notices that he believed the company had not been struck off. I do not accept that evidence in the light of his earlier answers. He could not recall when he gave Orla the documents whether it was in 1997 or 1998. He received no communication from Orla and lost communication with her until March 1999. AS produced a letter purportedly coming from Orla dated 2nd March 1999. I observe that if this letter is genuine it is more than 2 years after Redcliffe was struck off and dissolved. I simply do not accept AS's evidence. I do not accept the letter is genuine
- Notwithstanding the above £654,456.06 was remitted from the Zamtrop account to the Redcliffe account after it had been dissolved (T41/39). Of that sum a total of £240,200 was remitted by AS to his own personal bank account. I do not accept he could have had any genuine belief that Redcliffe was still in existence. I do not believe that Orla existed nor that the letter purportedly from Orla is genuine. It follows therefore that in my view I disbelieve this part of AS's evidence and form the view that he was lying about all of this.
- Why would he lie about this? He lies because he has to explain why he was content to allow Redcliffe to be dissolved. He allows Redcliffe to be dissolved because it further obscures the tracing of any monies.
- I have already set out above the patently inadequate performance over Redcliffe records. For a man of AS's background even if his story is true (which I do not believe) it is an incredibly casual way to deal with company records.
- Given his role it would be essential for him to keep detailed records of his income (and its source) and the expenditure which is incurred against it. AS has produced patchy records only. His excuse is that the documents were all saved on his computer in Washington and that when he returned from Washington it was withheld. He alleged that he asked the Task Force to search for his computer. In fact the evidence shows that the computer was released to his wife in London. This is confirmed by the letter dated 28th August 2002 from the Charges D'Affairs in Washington to the Permanent Secretary and the inventory. That shows that the computer was released and transported to London to Mrs Shansonga. The documentation shows that AS's goods arrived in Lusaka in October 2002. There is no reason to suppose that the London goods did not arrive about the same time. It was AS's evidence (for the first time) in cross examination that he found some items had been stolen from the consignment of goods which arrived in Lusaka. Surprisingly he did not immediately contact his wife to check that all the goods (including the computer) had arrived. Once again it is significant because the computer was transported after the Matrix of Plunder article where he was named. To prove his innocence he would need his computer.
- Mr Hamunjele recorded in his notes of interviews with AS in 2004 that officers had searched his office in Washington DC and they might have some documents. AS made no mention of the computer and it is plain he did not (although it is 2 years later) allege at that time that his computer had disappeared. He asserted in evidence (T40/136) having been shown Mr Hamunjele's notes that he did not become aware his computer was missing until after the present proceedings had been commenced. He then said that that was the first time that he complained about it but said that he first missed the computer when he was looking for documents in 2004. This is not credible given the allegations made against him 2 years earlier.
- He acknowledged in his witness statement that he was trained to keep records. He said that XFC told him to destroy records but he did not do so. He was unable to say in cross examination what his parameters were for destruction as opposed to retention of documents. He asserted that the reconciliation documents which were produced were written up at the time of the expenditure. This was obviously false. The only schedules he produced were those in bundle 8.1/1-25. These are hand written and are plainly not written up contemporaneously. There are annotations on the copies in the trial bundle put there by both Mr Hamunjele and AS after the event. They only cover the period September 1997 – 30th May 1999.
- As part of his Defence AS put forward the receipt and expenditure document bundle F4 which purported to identify receipts into his personal accounts (in particular his Barclay Bank account) from ZSIS and from personal sources and to identify the payments out which AS attributes on his case to instructions from XFC. The other two schedules related to receipt and expenditure of Government monies through the Redcliffe account and expenditure on various credit cards held in the name of AS principally his Barclays Premier Card.
- Although these documents were put forward as documents of truth it was apparent that the schedules were not reliable. On day 44 Mr Bourne accepted that the schedules were unreliable. Further the schedules themselves had virtually no supporting documents. In the vast majority of cases where AS attributes cheques to ZSIS expenditure there are no documents, cheque or cheque stubs to identify the payee of the cheque let alone support the attribution to ZSIS. Thus in most cases expenditure could not be clearly identified as having a ZSIS purpose and in reality in such cases it depended entirely and solely on AS's word to that effect.
- In respect of the Redcliffe schedule it merely repeats information obtained from the Redcliffe bank statements. The reconciliation documents are only available for the period October 1997- November 1998 in relation to the operation of Redcliffe.
- The legal burden is and remains on AGZ to establish the following:-
- Those are the issues that Mr Bourne submits are required to be determined (paragraph 14 of his closing).
- It is important however in my view to distinguish between the legal burden, which remains on AGZ at all times I accept, in respect of those issues and the evidential burden. Thus for example no legitimate purpose has in my view been established which can justify XFC transferring these sums of monies to AS/Redcliffe/Nebraska. I reject any suggestion that it was required by ZSIS operations. An analysis of the expenditure insofar as it can be established shows in my view that it is impossible to say with certainty on a balance of probabilities that any of the items of expenditure were in fact Government related.
- It is plain in my view that AGZ has satisfied requirement (1).
- I am satisfied that AGZ has demonstrated that AS received the monies dishonestly (requirement (2)). I have rejected his primary case. It is unbelievable. When one analyses the expenditure it is virtually impossible to identify any expenditure that requires to be cloaked in secrecy. The only "secret" in my view is the requirement to hide this expenditure because it is not lawful expenditure. AS despite his personal and professional background failed to ask any questions. An honest man in his position would have asked questions. He did not ask because either he knew it was dishonest or because he did not want to know the answers. To that extent he has in my judgment dishonestly assisted XFC in stealing monies that he routed through Redcliffe/Nebraska/AS.
- Equally that is evidence of AS participating in a conspiracy with XFC to defraud the Republic of the monies that he receives either personally or via Redcliffe or Nebraska and then disburses without question. The lack of records in my view is down to a desire to cover up the stealing.
- I accept that conspiracy allegation is not pleaded. As I have said earlier the other Defendants did not require a pleading. I will (if necessary) (with my decision clearly reserved pending arguments) consider an application to amend if AGZ wishes to proceed. It might be considered that is not necessary given the measure is the same for dishonest assistance once I reject the over arching conspiracy. That is something to be considered when I hand down the judgment.
- In my judgment AGZ has satisfied questions (3), (4) and (5). I will endeavour to demonstrate that by referring to the expenditure.
- The important point to note on the expenditure is not what was possibly Government expenditure but to consider what was patently not Government expenditure. On his own case AS establishes at best Government expenditure of £582,699.88 (table 1 attached to Mr Bourne's closing).
- Equally once AGZ has established that the monies were stolen or taken pursuant to a conspiracy by XFC or in breach of his fiduciary duty then if AS/Redcliffe/Nebraska is a recipient the evidential burden once that is established in my view shifts to him to show that he has raised evidence which suggests there is a legitimate Government purpose behind the expenditure. He is not required to prove this; it is a matter of raising evidence which shifts back the evidential burden to AGZ.
- Mr Bourne in his closing contends that the figure of £582,699.88 are the "total sums demonstrably paid for the benefit of Zambia". Even if I accept that the first point to consider in my view is the disbursements which cannot conceivably have any legitimate Government or ZSIS purpose. Before I deal with those I should refer to a number of comments Mr Bourne made in his closing about the evidence generally.
- I accept that I must approach the evidence in the light of the fact that some events occurred nearly 12 years ago. It is submitted that the facts are complicated. Whilst that is true the complications have largely arisen because of the lack of evidence produced in this case by AS. He has not (for example) satisfied me with any credibility as to his paucity of documents. This obscures the case but it is an obscurity designed to hide the true position in my view. The major issue is AS's honesty or dishonesty. The actual flow of monies is not seriously disputed. If AS has any difficulties in explaining the expenditure it is because of his own lack of documentary records and that lack does not flow from anything done by AGZ.
- Nor does it flow from the passage of time. There was no reason why documents could not still be there. I reject as incredible AS's assertion bearing in mind his professional status that documents were disposed of as there were too many. I do not believe for one minute AS ever had any documents. It is clear that AS never had any written instructions from XFC and that XFC was not interested in documents. That showed that he never contemplated (for example) the monies remitted to Redcliffe/AS/Nebraska being audited under ZSIS operations.
- The whole matter was therefore hidden away. AS has not produced to me any convincing explanation as to why the operation he contends happened was required for ZSIS purposes. That has fatally flawed his case.
- It is stated that the resources of AGZ vastly exceed those of the Defendants. That is correct but it does not mean that the Defendants did not have access to sufficient resources to defend their case. It is true that AS had a significant period when he was a litigant in person. However the reason for that was because he chose initially to obtain public funding rather than spend his own money. It had always been open to him to seek to realise his shares right from the word go. That would have released more than sufficient funds for him to conduct his case. In any event he had the benefit of legal advice up until the door of the court which extended to the preparation of his witness statements. It was plain he was receiving some form of legal advice when he was in person and he was fully supported from January 2007.
- It is true that the Defendants have raised legitimate criticisms of various aspects of AGZ's preparation for the presentation of its case. However as I have said earlier in this judgment if the absence of evidence was significant and that could be laid at the door of AGZ then he paid the penalty.
- At the end of the day the inflow of the funds is largely not disputed. The disputed area is the outflow and that is down to the evidence to be adduced by AS. It is suggested that AS was denied access to his computer. I reject that. That means that AS is telling me untruths when he says the computer has in effect been stolen by the TF. In my view it is a lie. There is no evidence to show that AGZ, TF or any other Government official had possession of the computer. To do so would require a false statement on the inventory on 28th August 2002. This is extremely unlikely because it would be easily exposed when the goods were received. One would have expected the goods to be examined by no later than October 2002. The loss of the vital computer at that stage would have been bound to be noted and put forward.
- I have concluded therefore that AS is lying about the loss of the computer.
- The only reason I can conceive as to why he is lying about the loss of the computer is that he knows that in reality there is no material on the computer which supports his case. That means contrary to his primary case he did not have complete detailed records and given his background in my view that is evidence of dishonesty on his part. An honest person in his position with his training would have kept and retained records.
- I remind myself of the need to look at a person's evidence in its totality. That involves looking at his witness statement as his primary case. It must not be forgotten that the witness statement replaces a witness' evidence in chief. It is not an "autobiography" (AS closing paragraph 17 (3)). However it is supposed to represent a person's evidence on the relevant issues in the case. If the witness departs from that or the statement omits to deal with significant facts it is perfectly legitimate to cross examine a witness on those. Indeed in reality it is essential because the confrontation of those inconsistencies is an essential tool for the Judge to evaluate the credibility of that witness. I accept that a person might lie; the real point of finding as to lies is to ascertain why a person lied. Equally I accept that it is quite possible (and probably more normal than not) for a recollection to be incomplete or faulty. One views with scepticism a witness who has an encyclopaedic memory apparently of events that took place decades ago when the events were not particularly significant to him at the time.
- I accept that the absence of other witnesses and allegations of corruption against other witnesses are not evidence let alone prima facie evidence against AS. They may be relevant however if the allegations against those parties implicate AS for example because an honest person in his position would question what was going on. A good example is the cash payment of $250,000. AS in his closing (paragraph 20-26) submits "that it simply cannot be said that a reasonable English person would regard a request by the Head of the Security Services to take $250,000 as a courier to Switzerland as posing a commercially unacceptable risk, or be said to be turning a blind eye to dishonest conduct. Such a request is neither outlandish nor surprising. It is not, prima facie, unlawful. It would be hoped that someone approached personally by the Head of Security Services and asked to undertake the exercise would respond positively, rather than with scepticism".
- That is a bold submission and is with respect in my view untenable. The idea that someone who is not ZSIS trained, has no security experience therefore and has no personal method of protecting himself would simply say "of course" when asked by XFC to carry $250,000 in a suitcase to Zurich is preposterous. Anyone put in that position would be bound to ask "why am I being asked to do this". They would also want to know what it was for. Without an explanation any ordinary person who was acting honestly would not touch it with a bargepole of an appropriate length. That is not to suggest that we live in a cynical age; it is that people are required to be more careful especially when being asked for no reason to carry large sums of cash that does not belong to them in a suitcase. AS only got away with it because Beauty Kaluba apparently authorised it when questioned by Customs. At the very least AS would have asked what would be the responsibility if I "lost" the money or I was robbed. In my judgment this is actually one of the clearest indicia of AS's dishonesty and participation in a conspiracy to defraud the Republic.
- I have on a number of occasions in this judgment cross checked the expenditure or the monies in question by reference to the standard of living in Zambia. I reject AS's submission that this is an illegitimate exercise. It is not to be applied mechanistically for obvious reasons. When a Zambian public servant is deployed on duties abroad it is inevitable that he will incur expenditure which will in all probability far exceed his salary. For example a public servant deployed abroad needs accommodation and subsistence allowances. FJT for example earning approximately $10,000 a year could not conceivably when discharging his functions cover the expense of staying in accommodation in London or any other of the capitals of the world. All such expenditure is going to be reimbursable.
- Equally when a Government official is deployed abroad he would take his family. If the children cannot be accommodated in a relevant state school then the Government would naturally make provision for the expenditure that ought to be incurred if necessary for example in a private school. AS knows this because he had a dispute over private fees he incurred for his own children in Washington.
- What is difficult to explain (and also fatally flaws AS's case) is why this kind of expenditure (and a large amount of the disbursements cover this) cannot be done in the usual way. By that I mean the relevant official claims his expenditure or is awarded allowances and that is provided for in his salary and the budget of the relevant department. Once again AS knows this because that operated for him when he was the Ambassador in the US.
- What is not necessary is for that expenditure to be routed through a nominee company with dummy officials and not checked in any meaningful way. The "secrecy" argument simply falls apart. As will be seen from an analysis of the payments there can be no secrecy in paying for XFC's children to be privately educated or live in London, nor buying jewellery, nor paying for a beauty treatment course in London for a lady who worked in the Permodzi Hotel in Lusaka (Rita Parkinson). The payment to her to attend on a beauty therapist course in London exceeded FJT's salary for a year.
- I have earlier in this judgment identified payments SC has received corruptly. In addition AS made payments of $20,000 and $15,000 to her on 12th March 1998 and 23rd April 1998 respectively. Indirect benefits were also made to her or her relatives from AS's Barclays Bank account viz £1,458.98 in July 1998 school fees for Stella Chibanda's children and £6,262.69 paid to Mukupu Joss in May 1999 identified by AS himself as a relative of SC.
- In my view AS was deceptive about the extent of contact he had with SC. In his Defence he pleaded that he had no dealings with her save in her capacity as director of MOFED and his position of representative of MISS and never made any payments to her or on her behalf or received any payments from her. In his witness statement he said he never made any payments to her except those XFC told him to make. Even then he did not identify the payments expressly. He had apparently forgotten that he knew SC well from having been at university with her and meeting her socially in Zambia. This only emerged in cross examination. He was also evasive over £12,232 ($20,000) paid on 12th March 1998 identified on the Redcliffe statement as "PC Mumba". When it was put to him AS said that this payment was not for Chibanda it was PC Mumba (T41/40). When shown his own document (8.1.12) "Stella …$20,000" (x 2) he accepted it was a payment for SC.
- In a period of less than 5 weeks AS paid SC $55,000. The Zambian connection is relevant and pertinent in my view. SC did not work abroad; her duties were almost entirely discharged in Zambia. This payment represents 25 years salary for her. AS in his evidence (T41/46) accepted that he did not believe SC was entitled to $40,000 but paid it because he was told to do so. AS volunteered that the second March payment was collected by her in cash but he did not know what the money was being collected for whether it was for her own use or to take to somebody.
- AS therefore singularly failed to apply his "vigorous verification" procedure. Somewhat lamely later on in his evidence AS suggested that he asked XFC but was told that it was merely "part of his work".
- An honest man in AS's position would know that there is no conceivable justification for SC receiving a relatively huge amount of money. She is not employed by ZSIS. There cannot be any secret service implications about this payment at all.
- Three payments were made from the Redcliffe account to CSW on 28th May 1998, 9th June 1998 and 17th June 1998. The amounts in question are respectively £12,031.86, £27,700.72, and £4,979.25. AS did not plead specifically to Standaert. In his witness statement (paragraph 126(2)) he said he had met Mr Standaert several times but he had never done business with him. Mr Hamunjele records him as saying "Bob Standaert is an old friend of [FK]. XFC is close to Bob through [FK], Bob's wife's company CSW received money from me" AS accepted that this was right (T41/59-60).
- In addition in referring to a letter dated 20th May 1998 addressed to "Mr Attan" and signed off "best regards Bob" about a Honda Gold Wing AS stated that he had never seen the document before, did not know to what it related and it did not relate to him.
- It is plain however that the forex forms showed that the payments were made from the Redcliffe account to CSW for the acquisition of the motorcycle. He maintained in cross examination that he had not seen the letter. I do not believe him. The reason why of course is because he accepted that the purchase of such a motorcycle would have "raised ones eyebrows" (T41/67).
- It is plain in my view that the payment of the monies to CSW was linked to the acquisition of the Honda Gold Wing and other motorcycles. 20 Peugeot scooters were purchased at the same time with helmets, boxes and racks and a Kawasaki motorcycle with 2 other items (believed to be jet skis). AS in his closing does not dispute that these were paid for by the Redcliffe payment referred to above. The Honda Gold Wing motorcycle was recovered from XFC's home.
- The suggestion that the Head of ZSIS would buy a Honda Gold Wing motorcycle with essential leathers and helmet and drive around Lusaka in disguise as part of his duties is amusing but laughable. There is no ZSIS purpose for buying 20 scooters for messengers. It is plain in my view that these were purchases of "boys' toys" for XFC and his cronies. I cannot conceive any honest person seriously believing these were Government purchases. AS acknowledged that in reality.
- AS accepted he made cash payments to Professor Mweene the former Secretary to the Treasury. Further he gave an evasive answer to questions in cross examination as to whether Professor Mweene was also referred to as Professor Loveless. It was only on subsequent questioning that AS told the Court that in fact Professor Loveless was Professor Mweene's wife and that he assumed a cash payment of $10,000 made by him to Professor Loveless was received by her on behalf of Professor Mweene. He did not know why he was being asked to make this payment and was unable to answer why Professor Mweene should be entitled to $10,000 of ZSIS money paid to his wife. AS made no reference in is witness statement to Professor Loveless and identified the $10,000 payment as being made to Professor Mweene.
- AS contends between 1995 and 1996 he purchased on behalf of ZSIS motor vehicles at a total cost of £197,302.28. The first of those motor vehicles was a brand new BMW 540 which was purchased on 21st November 1996 for £44,433.28. He stated in his second witness statement that the car was involved in an accident in Zambia and was sold to Mr Y T Zulu. XFC therefore purchased another BMW on 30th September 1998 for £54,293.34. AS stated in his evidence that he understood the vehicle in question was being used by Mr Regis Phiri the current director of ZSIS.
- In addition he gave evidence as to the purchase of 10 second hand large Mercedes. He produced evidence to show payments in respect of the motor vehicles and their transmission to Zambia. There is also the evidence of Mr Silas Mwemba which was given on behalf of AGZ in proceedings in Zambia. He recollected 10 Mercedes Benz S class vehicles were purchased for the cabinet office.
- It is true as AGZ submits in his closing that there is no clear correlation between the documents produced by AS and vehicles in Zambia. Equally AS has failed to produce a single "invoice or receipt" or any other document proving the purchase of motor vehicles. Finally Mr Mandona gave evidence that such vehicles could and should legitimately be acquired through the appropriate Government procurement office.
- I do not see any secrecy in the purchase of motor vehicles. If ZSIS wishes to operate secretly they do so by vehicles with no registration plates on them (I saw that in Zambia).
- There are two factors I should bear in mind. First it would have been easy for AGZ to counter AS's case. For example he could have shown the provenance of the BMW currently being driven by Mr Regis Phiri. He chose not to do so. Second he could have explored the question as to whether or not within Government offices existed some 10 or so Mercedes. In this context AS somewhat surprisingly (given his loss of other documents) produced a copy of The Post dated 15th September 1995. That refers to the importing of 4 second hand Mercedes Benz under the name of OOP and it is said that they were parked secretly in Zambia under an armed guard. FJT's Presidential aid Richard Sakala is recorded as giving a statement "it is highly unlikely such a purchase could have been made on behalf of State House as State House does not have that kind of money". The 4 Mercedes cars were associated with Redcliffe because it was expressly referred to and it was said that the coordination was done under the hand of its director Ms V Edwards. I suspect that was not the case and that she has merely signed the relevant transportation documentation. Alternatively it is possible her name was discovered from documents lodged at Companies house. AS's connection would not of course be revealed.
- In my view this is supportive of AS's case as regards the purchase of these vehicles. I regard Mr Sakala's denial as a lie because FJT does not want to admit publicly that this kind of expenditure is occurring.
- I am gravely suspicious about all of this. It is not beyond the realm of possibility that the Mercedes cars were simply doled out to people at the behest of XFC/FJT. Equally the purchase of the prestigious motor vehicle on behalf of XFC can be explained on that basis. However I bear in mind the following. These are serious allegations and require them to be clearly and distinctly proven by evidence. Second suspicions are not evidence and AS is not to be condemned because of suspicions. Hindsight is particularly to be avoided in a case like this. Third the legal burden remains on AGZ. It is for him to prove on the balance of probabilities that the purchase of these motor vehicles was part of a dishonest conspiracy or breach of fiduciary duty on the part of XFC to misappropriate Government monies.
- On balance I conclude that AGZ has not satisfied me on the balance of probabilities that these purchases were a breach of fiduciary duty or conspiracy to defraud the Republic. They were hidden but in my view they were hidden so that the extravagance of Government officials would not go in the public domain i.e. in the official budgets. That is not actionable in this case although it is a fraud perpetrated on the people of Zambia. As the Government monies are hidden Mr Sakala can lie in the way he did when The Post caught them out.
- It does not however mean that the operation carried out by AS/Redcliffe/Nebraska had an honest purpose. It is in my view a different form of dishonesty and does not support AS in his case that everything was legitimate. It should be born in mind that it is very odd that AS kept the press cutting and very little else a point that he was not able to deal with satisfactorily. In addition it should also be observed that he carried out further imports after this revelation. That was despite the fact that Mr Sakala in public said that this was not a Government purchase. In my view he carried on despite the press but he knew that the purchase was effected through Redcliffe to hide the involvement of Government monies in these luxurious purchases.
- AS was paying over £15,000 per term out of ZSIS monies to pay for school fees for XFC's children to go to private schools in England.
- The evidence showed that Zambian civil servants based in Zambia are not entitled as part of their salary emoluments to any contribution to the costs of their children's school fees; see the evidence of Oliver Kalabo and Regis Phiri. It is not credible that anyone familiar with Zambia as AS was would believe that Zambian civil servants working in Zambia would be entitled to have English private school fees. Once again in the Zambian context £45,000 per annum (about $72,000) is 10 times the annual salary of a senior civil servant. AS knows all about this because of his own personal situation. In paragraph 39 of his witness statement he stated "similarly when I was appointed Zambian Ambassador in the United States my own terms of employment provided for an allowance for the education of my children." AS failed to disclose that he received only $675 per month and the request that Government funds pay for the entire cost of his children's private schools was refused. The Foreign Service rules provide for limited reimbursement for fees. AS cannot honestly have believed that XFC who was not based abroad would be entitled to this huge amount of money via a ZSIS account. It shows that AS knows that the money was not being used for a legitimate ZSIS purpose. Yet this is the whole justification for Redcliffe. It therefore shows that AS knew that XFC was not entitled to spend the money this way and despite that knowledge he assisted in its expenditure. Moreover by channelling it through Redcliffe he assisted in its concealment. Thus AS does not behave in the way in which an honest person would. This again is very strong evidence of AS's dishonest assistance or participation in a conspiracy to defraud the Republic by XFC and FJT
- I do not see how it can be realistically submitted that AS's evidence should be believed that he thought this was part of a Government package. If it was there is absolutely no reason for it to be routed through a nominee company and hidden away. His evidence (paragraph 172 of his first witness statement) is scanty. His belief that the former Chief Justice had his children educated in this way does not help him because the Chief Justice in question obtained the money dishonestly. I do not believe he had any grounds at all. He was after all the Ambassador to the United States which is quite a senior post in the Government. Yet he had no such entitlement as he well knew (although he attempted to hide this in his evidence).
- Nor was the expenditure limited to school fees. He provided pocket money and additional allowances in cash for XFC's children, bought them computers, gave cash to XFC's wife, and paid for XFC's children's school transport, shopping, dental braces and clothing. In addition he stated [T42/160] that he paid XFC's three daughters an allowance of £500 per month which is not far short of FJT's Presidential salary for a year.
- I have also observed that he made payments on behalf of SC in this context.
- It is not credible to believe these payments are proper and an honest person would immediately reject any suggestion that they were. There is no evidence to show that AS applied his vigorous questions and there is no evidence to show he obtained any answers from XFC. An honest person would simply not behave in this way.
- There are statements for AS's Barclays Premier Card. XFC had his own card for that account. GT has established that the majority of the bills were paid out of monies traced to MOF monies paid directly into AS's Barclays Bank account from the Zamtrop account either directly or via Redcliffe or MCD or CM.
- The expenditure in the main shows expenditure around the world including shopping in exclusive boutiques, expensive restaurants and five star hotels. Thus there are regular bills from Selfridges, Harrods, Russell & Bromley, Austin Reed, Bijouterie Eden (I reject AS's statement that he did not know that the word "bijou" means jewel), Watches of Switzerland, Georgio Rossi, Hermes and Lanvin. The expensive restaurants extend to Langans, Bluebird, La Porte Des Inns and Tante Claire. Five star hotels are occupied around the world. Finally it is difficult to understand what ZSIS purpose might have been served by spending £770.74 on Berketex Brides. I simply do not accept that any of these were legitimate purchases on behalf of ZSIS. I do not accept that any honest person would unquestioningly accept such expenditure. When asked about expenditure such as Legoland [T42/62] AS said that it is very difficult to understand the nature of the work of the intelligence and it is difficult for many people to understand. I cannot conceive of any ZSIS purpose that can be achieved by going to Legoland.
- Equally I reject the suggestion that this enormous expenditure was for gifts to smooth the way in some secret service activity. The reality is that it funded a lifestyle for XFC which only somebody who had access to great wealth could maintain. XFC had no such access to funds and Redcliffe/AS/Nebraska were simply the conduit whereby monies were stolen by him dishonestly and misapplied by him dishonestly. AS knew this and participated in it. An honest man would simply not without question accept all of these matters. He either did not ask because he knew the reason or he did not ask because he did not want to know the reason. On either count he is dishonest. Equally I do not accept that AS (save in respect of the motor vehicles) has established that any of the payments set out in Table 1 to the Closing Submissions was on the balance of probabilities expenditure for a legitimate government purpose. That is not to say the payments were not made; it is a rejection of AS's contention that the payments were for a legitimate purpose. As I have said before I can conceive of no legitimate reason for organising even ZSIS payments through the untrained AS and Redcliffe. I accept AGZ's submission to that effect. Equally I accordingly give no credit for £56,543.31 remitted to Permase General by Redcliffe on 2nd October 1997 for the same reason.
- The sums are very large. Transfers from the Zamtrop account to Redcliffe's account at ZANACO amount to £1,215,447.21 (RRRAPOC annex 31). The dollar equivalent is $2,001,766. GT has traced £811,457.98. These figures are not in dispute and form part of AGZ's claim against AS in addition to the monies that he received directly in to his account.
- Of the credits to the Redcliffe account there were four transfers to CM's sterling account and posted to a ledger maintained by CM under the title "Redcliffe/Shansonga" The payments are £48,198, £38,398, £42,398 and £25,998 (total £148,992).
- The only explanation I received from anyone as to the need for Redcliffe in effect to use CM's client account as a bank was the one I rejected (put forward by BT but denied by AS) that Redcliffe did not have a bank account. In my view its creation and operation was designed to put up another barrier against tracing assets. For example AS who controlled the accounts does not feature on the notepaper. Valerie Edwards does but she plainly would know nothing at all. It is plain that the monies coming into Redcliffe are Government monies. AGZ has established that. AS knew this.
- All of the sums credited to the Redcliffe account were then disbursed on the instructions of AS. This included transferring £26,000 to his own bank account in Zambia on 26th September 1997. He never repaid this money to Redcliffe but asserted that other monies held in the name of Eurotech Ltd by CM totalling £52,000 was disbursed on behalf of XFC. He accordingly asserted he reimbursed the money that he took indirectly. A bank account statement produced by AS showed Eurotech Ltd receiving £26,693 on 18th July 1996 but by the end of November all of those monies had been disbursed and there was no further activity with the account closed in 2004.
- In order to deal with AS's assertion of the existence of a Eurotech ledger at CM with credits to it (which was first raised during his cross examination) I ordered CM to search for such a ledger. No ledger was found.
- This is a good instance of AS benefiting directly from the misappropriation of Government monies for his own benefit.
- There are other examples of AS receiving monies and disbursing them on his personal day to day living expenses; see AGZ's closing paragraph 689-693. His explanation is that set out above namely that he used his own funds and this was indirect reimbursement but as I have said above he has not been able to identify any funds to which he had access beyond the figure of £26,693 which was substantially paid out by November 1996.
- Thus in my view AS benefited directly from these dishonest activities.
- AGZ sought in cross examination in its case to question a number of matters. These were related to a PR representative Mr Roth in the United States, various dealings AS had involving Enron, and other potential contracts such as Aerotech.
- I was left with a deep sense of unease about AS's activities in these regards. However cases are decided on the basis of evidence not unease. At the end of the day after much hesitation I was not persuaded that AGZ had made these allegations out sufficiently clearly for me to determine them against AS on a balance of probabilities. They were issues of credit only.
- The pleaded allegations are set out in RRRAPOC in paragraphs 886-927. On 30th October 1998 De Garnier Holdings Ltd ("DGH") ledger with AFSL was debited in the sum of K398,520,000 against the narrative "MT Ncube Associates $162,000" they were the Receivers of Poly Packers and this payment it was asserted was the purchase price for Poly Packers' assets.
- The same ledger credits the same amount on 29th December 1999 against the narrative "Meer Care & Desai". It is asserted that that was a reallocation of part of $199,900 transferred to the AFSL United Bank account by MCD on 3rd December 1999. AGZ asserted that the monies remitted by MCD were stolen Government monies. In paragraph 927 of the RRRAPOC it is alleged that DGH was beneficially owned by AS. AGZ has not sought to depart from that plea.
- In AGZ's opening (paragraph 344) it was asserted that $162,000 and a further $140,000 (the latter not being identified before) had been traced by GT to MOF and were used by AS for the benefit of his BVI company. What is missing in the plea is any allegation that AS knew that these were Government monies although the claim is for knowing receipt.
- The sum was advanced to DGH Poly Products Ltd a Zambian company. AS owned 1 share and the other 99 were held by DGH a BVI company which AS is the beneficial owner. There is no claim for the second figure of $140,000.
- It is conceded that AS had nothing to do with and was not aware of the internal commercial operations of AFSL. AS says that he borrowed the deposit of $48,000 from Mr Roth. No documents have been disclosed but AGZ does not claim any title to those monies. Nor is there any evidence of repayment.
- AS's case is that he entered into a Management Agreement with AFSL to manage DGH Poly Products because he was out of Zambia for a long time and effectively they broke that Management Agreement and seized control of the company for their own purposes.
- It is clear that AS made the bid to acquire the assets as the evidence of Mrs Ncube demonstrated. There was a dispute between her and AS over the progress of the bid. In his Defence (paragraph 353) he asserted that Mr Matthews was appointed director of DGH Poly Plastics Ltd without his knowledge or consent whereas in fact Mr Matthews was appointed to be a director of DGH Poly Plastics on 8th October 1999. He was appointed at the same time as AS and AC [13.1/71]. AS signed that document against his own name. They are also described as being the first directors in the application for incorporation on 8th October 1999. That document also records the shareholding with AS having 1 share and DGH having 99. It is true that AS has not produced any documentation which shows that he is the beneficial owner of DGH.
- BT acted on the acquisition. In that role he also had communications with AFSL but that is not surprising given the fact that it was funding the purchase. There is a draft debenture in favour of AFSL and the original has not been produced in executed form.
- There is as I have said no evidence showing AS had any knowledge of the internal operations of AFSL. In particular there is no evidence showing he knew that AFSL's funding was traced back to Zamtrop and thus MOF.
- Outwardly it appears to be a commercial loan. The rate is high by UK standards but AS said it was not high in the context of Zambian dollar transactions. That was not challenged by AGZ.
- There are a number of curious features. First apparently AFSL misappropriated the control of the company for its own benefit yet AS never complained. Second when the Republic served a restriction notice AS never challenged it. Third the loan monies appear not to have been repaid although there is evidence which suggests that it was a valuable asset. It was ascribed a value of $833,000 in AGZ's schedule of recoveries.
- In his closing AGZ (paragraph 805) submits "it is Zambia's case that [AS] well knew that Government monies were being used to fund the acquisition of the assets of Poly Packers and further that [AS] was no more than a front for [XFC]"
- That last point was neither pleaded nor put to him.
- It is certainly the case that AS is being coy about providing shareholding details of the holding company. This was both in the evidence before me and in the correspondence with Mrs Ncube. It is quite clear that the beneficial ownership of the holding company was withheld from her.
- FK and AC identified DGH Poly Products as an investment for ZSIS and confirmed that the purchase price was funded by it.
- The only evidence to show that there was a ZSIS interest is the record of the meeting with Mr Hamunjele [8.1/33.2] where he records AS telling him "[FK] came to my house saying that the loan could not be given to you as it was beyond the limit. He said that the money came from [XFC]".
- This was put to him in cross examination [T44/132-133]. After putting to him his Defence that he was not aware the loans were drawn from sources other than AFSL's own resources, Mr Hamunjele's statement was put to him:-
- Mr Sullivan put to him that he knew that XFC was funding it and that he knew that he was funding it out of stolen Government monies. He denied that.
- As I have said before in this judgment it is very important to ensure that each individual is considered in relation to what knowledge he might have and he should be judged in that light. Equally whilst it is now clear both to me and AGZ where the AFSL funding came from it does not follow that the same can be said of AS at the time of the transaction. I should also be careful not to fall into the trap of dogmatically rejecting everything AS says because I found that he had lied in other areas.
- The evidence of his knowledge that the money came from ZSIS rests on a note taken by Mr Hamunjele which is ambiguous. I am unable to reject AS's evidence as lying when he said that the first he heard about it was in July 2002. I have suspicions but in this case it is always important to disregard suspicions and assess liability on the basis of evidence.
- I therefore conclude that AGZ has not established that AS knew the source of the monies that were advanced to DGH Polyproducts. In my view on the evidence I conclude on the balance of probabilities that it was a commercial transaction which AS negotiated (having failed to obtain finance elsewhere) with AFSL. Whether or not AFSL then hijacked the company is irrelevant.
- There is the further difficulty facing AGZ that the allegation that AS was a nominee was not put to him and was not pleaded. AGZ's case in this regard fails.
- It is probably academic because the company has been seized and no one has asserted any rights over it. AGZ can establish that the funding of the AFSL loan was via the Zamtrop account so it can assert the mortgagee rights over the assets in any event. Any surplus has now been forfeited and that is not a matter for me but for the Courts in Zambia.
- My conclusion is that AS provided dishonest assistance to XFC to steal Government money in breach of his fiduciary duties. The vehicle was Redcliffe and AS. He is therefore liable on this basis for both the personal receipts and the Redcliffe receipts. The amounts are set out in paragraph 893 and are (1) the GT traced receipts of $1,347,993, (2) the amount traced into the AS account ($725,754), (3) the traced cash ($53,496.60) and the traced Redcliffe receipts ($811,457.98. In addition there should be a further sum under paragraph 274. He has also been a party to a conspiracy to steal those monies through that medium. That is not pleaded as I have already said. I leave it to AGZ to consider what if anything he wants to do about that. In the light of my findings set out above AS's counterclaim is dismissed.
- Any beneficial receipt by him plainly satisfies the test of constructive knowledge applicable to knowing receipt.
- I reject any claim that he was a party to an over arching conspiracy. The amount of liability for dishonest assistance should be the full figure as set out above less the figure for car purchase (£197,302.28). In that context I assume that figure does not include the motorcycle purchases. If it does then I do not accept those are properly deductible. As I have said above the disallowance as regards to the cars is on the basis that they were acquired in a way to deceive the Zambian people but not as part of the conspiracy to defraud or breach of fiduciary duty.
- MOFED Ltd is an English company beneficially owned by MOF for and on behalf of the Republic. Until after the end of FJT's Presidency its Directors were SC, Beauty Kaluba, Dr Katele Kalumba (then Ministery of Finance), Mr Bonaventure Mutale (then the Attorney General) and Mr Zulu (OOP). Its Secretary was Mr Peter Heath and each of the Directors received monies from the Zamtrop account although in Mr Mutale's case that appears to be $369.57 only (A2/10/81). In the light of my findings set out above AS's counterclaim is dismissed.
- On 21st June 2000 MOFED owned the leasehold interest in Memaco House 215 Marsh Wall London E14 ("The Property"). It was transferred to MOFED by ZCCM (UK) Ltd during its privatisation. MISSL Associates Ltd ("MISSL") was a BVI company controlled by AS.
- On 6th November 2000 a Management Agreement was entered into by MOFED and MISSL in relation to the Property. The Agreement was backdated to 27th September 2000 being the date of commencement of the Tenancy Agreement between MOFED Ltd and Redbus.
- The terms of the Management Agreement provided for the payment by MOFED Ltd to MISSL of two separate sets of fees for management services and consultancy services. Pursuant to clause 4.2 MOFED agreed to pay a fee for the provision of management services. That was based on a percentage of the return achieved by MISSL in the management of the property. In addition under clause 4.1 of the Management Agreement MOFED agreed to pay a fee in respect of the provision of a purported "consultancy service" to be provided pursuant to clause 2.1 of the Management Agreement being £100,000 per annum (subject to annual increase). The term of the Management Agreement was 15 years.
- AGZ takes no issue over the part of the provision of the management services. Further the Management Agreement enables MISSL to delegate the provision of such services. They have been delegated to a firm of Chartered Surveyors Main Allen.
- The consultancy services were defined in the Management Agreement as "the provisions of such services relating to the property (other than Management Services) as MOFED and MISS may from time to time agree…."(clause 1)
- The initial annual rent was £574,194 plus 3% service charge. AGZ submits that it is difficult to conceive what further consultancy services would be provided given the comprehensive nature of the Management Services. It transpired during the trial that MOFED has not paid even in respect of the Management Services although it acknowledges that it has no basis for challenging the same.
- No consultancy services have ever been provided. However in my view that misses the point. This is an agreement for such consultancy services as might be required. The consideration provided by MISSL for the consultancy is to make itself available as and when required. If it is not required to do anything it has nothing to do. However that does not mean that it becomes disentitled to £100,000. It is retained to do things. If during the retainer MOFED chooses not to ask it to do anything it is entitled to the £100,000 nevertheless.
- The first £100,000 was paid by MOFED on 2nd July 2001 and of that £50,000 was paid to Nebraska. That money was remitted mostly back to AS's Barclays Bank account.
- AGZ's case is that the consultancy services were fraudulent and in breach of AS's fiduciary duties owed to the Government (he was a Government officer at the time i.e. the Ambassador). The payment to MISSL is tainted with AS's knowledge and thus it knows that its entitlement is based on a fraud a breach of duty committed by AS. There is also alleged to be a conspiracy to defraud the Government to which SC and AS are parties. MISSL and Nebraska were therefore also knowing recipients in respect of the money received by them because AS's knowledge is attributed to them.
- AGZ seeks a declaration that the provisions in the Management Agreement are void or avoided. That is not the correct head of relief in my view; if the breach of fiduciary duty is established the Consultancy Agreement's provision is avoidable not void. Alternatively MOFED would be entitled to damages equal to the amount it would otherwise pay off to MISSL under the Consultancy Agreement.
- In its closing AGZ did not advance its case any further.
- In order to establish the case AGZ needs to prove that what is said in the RRRAPOC in paragraph 1014.7 [A1/447] as follows:-
- The only alleged fellow conspirator in this action is SC. She has taken no role in the proceedings. AS is right in his closing to submit that her decision not to participate is not to be taken as evidence against him in the MOFED conspiracy.
- Although it is a little difficult to tease out AGZ also in effect alleges that AS and SC acted in breach of their fiduciary duties (see paragraph 1151 (1)). The allegation of fiduciary duties and breach is set out in RRRAPOC paragraph 1046.
- The evidence shows that on privatisation the Republic proposed to sell The Property and that a fair price then would have been £1,500,000. Instead it was let in its entirety to a company called Redbus Interhouse Plc at a rent of £574,194 (subject to review). It is not disputed that the capital value of the building was thereby increased to a figure of not less than £7,500,000. Therefore the negotiating of the lease achieved a 5 fold capital benefit for the Republic.
- The uncontraverted evidence is that this was a result of vigorous activities of AS see Mr Main of Main Allen's email dated 14th May 2002 [8.6/44]. This was confirmed by Mr Heath in evidence [T16/196].
- On 5th June 2000 MOFED's Board met. Significantly also present was Mr Heath who was called as a witness. Mr Wise the solicitor then acting for the company and Mr Main were also present as was AS. Mr Wise acted closely with AS and represented MISSL. There is no suggestion by AGZ of any impropriety by Mr Heath, Mr Wise or Mr Main.
- This is significant. They were all the English based independent advisors to MOFED. They (if anyone) would challenge the unusual or improper nature of the Consultancy fee if it was considered to be inappropriate.
- After the meeting (including the proposed fee of £100,000 was discussed) the Attorney General was asked to examine the contract. A further meeting took place on 6th November 2000 when it was agreed that Mrs Kaluba would sign the agreement on behalf of MOFED. She received express instructions from the Attorney General to execute the agreement. After AS's arrest in Zambia a decision was made to cancel the contract but this was done in the teeth of advice to the contrary from Messrs Wise Geary that it was binding.
- Mr Heath who gave evidence for AGZ when asked by AS confirmed that there was nothing irregular about the contract at all [T16/187].
- The interposition of the various people against whom no allegations of wrongdoing is made fatally flaws AGZ's case. They are not party to the conspiracy and (as regards the English professionals) were extremely well placed to challenge the arrangements or to distance themselves from them if they thought they were improper. Their evidence was that there was nothing improper.
- There is a clear inference that can be drawn from the decision to retain AS. His efforts secured a substantial capital asset which enured for the benefit of MOFED and thus the Republic for which he received no payment. It can therefore easily be seen why there was ample justification in securing AS's efforts given the success of the earlier lease to Redbus.
- I therefore conclude that there was no conspiracy nor any breach of fiduciary duty. The fact that AS was present at the board meeting is neither here nor there as his interest was plainly known to all other board representatives. His interest in MISSL was never concealed. I find that in this case AS acted perfectly properly and that the presence of SC on the board should not be a taint so as to disentitle him to continue to operate under the Consultancy Agreement with MISSL.
- I accordingly dismiss AGZ's claim under this category the claims agains AS, Nebraska and MISSL.
- AGZ's case is that FJT, XFC, SC and Mr Soriano (aka Katebe Katoto) acted in breach of fiduciary duties owed to the Republic and that IM and BT (for whom MCD and CM are respectively liable) dishonestly assisted in the above breaches. It is further alleged that they all knowingly received money transferred as a result of such breaches. Finally it is alleged that they were all party to a conspiracy in different ways at different times in a scheme that enabled Government monies to be misappropriated and the fraud concealed.
- The Zambian based Defendants have taken no part in the trial. Mr Soriano has taken no part in the proceedings since November 2005 although he could have represented himself if he wished. He was represented at recent hearings in the Belgian Court concerning disclosure of bank statements by KBC Bank. He has not offered any explanation in respect of the claims against him nor has he explained why he has not participated in the proceedings. BT and CM sought to strike out this claim. The application was unsuccessful.
- A "Letter of Intent" dated 30th April 1999 was reportedly signed by XFC on behalf of the Republic which purported to appoint Mr Soriano as a consultant to act for Zambia in negotiating and purchasing arms, ammunition and equipment. On 30th August 1999 an agreement was purportedly entered into between "Teraton" EAD of Sofia Bulgaria and Zambia for the procurement of helicopters (4), fighter aircraft (2), arms, and equipment with a price CIF Mbala airport of $80,642,414 ("the Sales Contract").
- A Facility Agreement dated 11th September 1999 was purportedly made by which Mr Soriano as lender agreed to make available to Zambia as "borrower" a ten year facility of $100,000,000 to provide "financing for specific select projects and institutions for the purposes of provision of equipment and the need to replace obsolete facilities"
- A bank account was opened at ABN-AMRO Bank, Basel Switzerland, entitled B105064 Saloman ("the ABN-AMRO account"). No details are known of this account. A second account was opened with KBC Bank Brugge Belgium number 474-7401180-20 apparently named "B.K." or Betti Katumbi ("the KBC account"). Betti Katumbi is the wife of Moses Katumbi, Mr Soriano's brother. AGZ's claim is that $20,200,719 was paid into the ABN-Amro account and the KBC account. Initially the claim was for $34,000,000 but that was a result of an error of double counting.
- It is this sum which AGZ claims has been stolen from the Republic by the virtue of the conspiracy and breach of other duties set out above. In order to understand how that has occurred it is necessary to review the documentation.
- Under the Letter of Intent Mr Soriano was appointed consultant to act for the end user (i.e. Zambia) to represent it in the negotiation and purchase processes. He was also given the right to select the supplier and even change the supplier. An end user in the firearms export industry is the person who is ultimately to receive the arms. Firearms generally cannot be lawfully transported around the world without there being an end user certificate which identifies its ultimate end user. The Letter of Intent also gave him the right to sign any purchasing contract for and on behalf of Zambia.
- The sales contract dated 30th August 1999 is signed by Teraton and the Government of the Republic of Zambia as represented by Mr Soriano. It provides for the sale and purchase of a large number of items of military equipment. It covers 2 MI-24 attack helicopters (overhauled), 2 MIG-23 BN ground attack fighters, 2 MI-17 transport helicopters. Next there was an array of light arms namely 230 AK47's with 1600 30 round magazines, 77 light machine guns, 6 heavy machine guns with ammunitions to support, 10 120mm mortars and 21 RPG-7V rocket launchers with 550 rockets. The order was then rounded off with large numbers of ammunition for all the weapons and bombs for the aeroplanes and helicopters. The total price was $18,642,414 and delivery was specified 30 days after the contract has come into force CIF to Zambia airport.
- The payment involved a 20% down payment, 20% after inspection by letter of credit and 60% after delivery by letter of credit. The letters of credit have to be irrevocable divisible and confirmed to be opened in favour of the supplier. The contract was subject to conditions (clause 16); signature, presentation of an end user certificate, receipt of a 20% down payment, receipt of letters of credit and export licences. It was signed by Mr Soriano.
- The Facility Agreement is the document which sets in train the fraud. It was between Mr Soriano (1) and the Government of the Republic of Zambia (2) and is dated 11th September 1999. It was to come into effect on receipt of a 10% down payment. Somewhat surprisingly this was a down payment by the borrower not receipt of 10% by the borrower. The down payment of $10,000,000 was paid on 11th September 1999 see the letter sent by Mr Mtonga to Mr Soriano of that date. It was credited to the ABN-AMRO account as advised by Mr Soriano. The facility was to remain in force for 10 years; either party could terminate on 3 months notice.
- Subsequent payments were made between 7th December 1999 and 13th November 2001. A total of $2,771,000 was transferred to ABN-AMRO account and $17,429,719 to the KBC account. The payments are set out in the schedule below:-
- The amount due from the Republic of $10,000,000 down payment was allegedly increased by Mr Soriano by a variation of the Facility Agreement by an agreement ("The Variation Agreement") whereby $40,000,000 was to be paid to Teraton instead which would be met by the $15,000,000 from himself and $25,000,000 from the Republic. There are no documents evidencing it see paragraph 104 of Mr Mtonga's witness statement. I am satisfied there was such a purported variation but its purpose was simply to increase the amount of money being wrongly misappropriated. The Republic was to pay $25,000,000 by March 2001 (Mr Soriano's letter of 16th March 2001 to Mr Mtonga). This was clearly the platform for extracting upto $20,000,000.
- Mr Soriano sent corrected account details to SC on 12th September 1999. She in turn sent details to Mr Musonda at ZANACO in London on 19th November 1999 under the heading "call on guarantee". There was in fact no call on guarantee and this too was plainly just a cover. Mr Soriano instructed SC and Mr Mphande on 8th September 2000 to remit payments to the KBC account set out above.
- Mr Mtonga according to his evidence made these payments under pressure from XFC, Mr Soriano, Mr Silwamba and FJT. These payments were not budgeted for and according to Miss Nyirenda's evidence none of them was on the ERM Department's database.
- It was suggested to Mr Mtonga by Mr Soriano that the purchase of the arms related to a need to defend Zambia from threats from Angola and the Congo. Mr Mtonga said he felt compelled to sign the documents even though the Facility Agreement was not beneficial to the Government and the manner in which the agreement had been brought to him was not in accordance with proper procedures. This is of course a familiar story. There were suggestions put to Brigadier General Muchopa in cross examination that in fact the weapons were purchased and that they were secretly operating on Zambia's North West border to deal with incursions from the Congo or Angola. I have already commented on Brigadier Muchopa's evidence. It was unsatisfactory in the manner in which it was delivered. Nevertheless I am satisfied that there is no evidence which shows any such weapons were delivered.
- I base that primarily on two factors. First the monies were paid into the ABN-AMRO and KBC accounts and were dissipated away. There is no evidence to show that any monies found their way to Teraton. Second if this was a genuine transaction and Mr Soriano had effected payment as the documents suggest he undoubtedly would have come to Court to say so. The fact that he chose not to appear in Court is in my view a factor which shows that no transaction was ever concluded. Third Teraton denied the contract was ever fulfilled. In this context there is no evidence showing any of the preconditions referred to in clause 16 were satisfied.
- I accept that the evidence produced by AGZ from Teraton is not the best but it is evidence which carries some weight. I refer to the evidence of Ms Valtcheva (of DLA Sofia) and the attempts she made to obtain a witness statement from the President Director of Teraton Mr Peter Petrov. He has declined to give a formal statement but wrote on 18th December 2006 to confirm that the contract was never finalised that Teraton never shipped any goods to Zambia and it has never received any payment from Zambia. The Bulgarian Ministry of Economy and Energy (Ms Vachevanova) confirmed that. Brigadier Muchopa confirmed that no defence equipment was ever received (I am sceptical about his preliminary investigation in August 2002 in conjunction with PWC and in November 2006 but it is difficult to see how equipment of this size could be delivered and not be readily discoverable).
- I would have concerns if this was the only evidence but the operation of the ABN–Amro and KBC Bank accounts really show that this was a fraud perpetrated by a bogus facility driven by Mr Soriano. That and a non existent guarantee was used as the justification for removing $21,000,000 plus.
- The disclosure of Mr Soriano's payment instructions to KBC Bank demonstrates that no payments were made to Teraton. Many payments were made for purposes which were not on their face Zambian Government purposes and had nothing whatever to do with the purchase of arms. For example on 22nd December 2000 Mr Soriano instructed the bank to pay $700,000 to a bank account held at Natwest Bank against reference "loan to be repaid to KBK". This is a reference to Mr Soriano himself. Other payments include:-
- AGZ has also identified further payments of $6,580,155 transferred from the accounts. All cash withdrawals were apparently made through KBC's branch in Brugge. Mr Soriano lived or lives in a large house in Brugge.
- On 23rd October 2000 Mr Soriano instructed KBC Bank to pay $130,000 for the ultimate credit of XFC. This was credited to his sterling account on 27th October 2000 with the narrative "B/O Betti Katumbi" ...the sterling equivalent being £87,824.32.) On 1st November 2000 he paid £69,565.22 to MCD where it was credited as $99,989.14 and posted to the Harptree ledger ref "F Chungu – ZNCB". Separately XFC's ZANACO account showed that most recipients were members of his family.
- All of the receipts were marked "Katumbi Betti – KBC Bank". All payments are traceable to MOF money.
- IM denied having any knowledge or contact with Mr Soriano or Betti Katumbi. He treated them in the same way as he treated all other credits.
- Of those credits two tranches of $499,995 were credited in the Harptree ledger against the narrative "Katumbi Betti – KBC Bank". On 11th May 2001 $200,000 was remitted to CM and credited there against the Kabwe/AFSL ledger. This was disbursed to various recipients about whom little is known.
- On 15th October 2002 FK wrote on AFSL paper to IM "on behalf of your client Harptree please arrange to pay the sum of $75,000 to CM in connection of expenses incurred on behalf of this client". A further payment of $75,058.03 was debited to Harptree's ledger with MCD on 12th November 2002 and marked "Cave Malik & Co".
- Both of those payments were made after the Matrix of Plunder article. I have already commented on those payments. The ultimate balance was the subject of an NCIS report as I have already said and was repaid to Zambia pursuant to the Court Order 16th November 2006.
- The first payment was $199,989.12 on 26th January 2001. This was used in a transaction to acquire a lodge (the Nkamba Bay Lodge) by a company Game Trackers Nkamba Ltd.
- CM through BT acted for the purchaser. BT said all of his instructions came from AFSL via AC but in fact it is clear that the Soriano family were the purchasers. BT in my view was lying to hide his connection with Mr Soriano. Once again BT had no attendance notes.
- The shares in the company have been forfeited to the Zambian State by order dated 22nd August 2003.
- In my view Mr Soriano has dishonestly used the money stolen from the Government to acquire this Lodge. I will deal with BT's liability further in this judgment.
- On 19th March 2001 Mr Soriano instructed KBC Bank to credit MCD's account with $100,000 against reference "second buy down payment Nkamba Bay Lodge". This was credited to the AFSL ledger with MCD with the narrative "Katumbi Betti – KBC Bank". Despite Mr Soriano's instructions the monies were transferred to FK's ledger ($17,672) which part funded a payment to IK of $15,067.11. A further $10,000 was transferred to IK on or about 3rd April 2001 and $25,000 was transferred marked "BD Patel".
- The direct payments of $176,985 were paid into CM's Habib Bank account on 16th October 2001. All three payments have been traced to Government monies and were made payable by a single instruction dated 9th October 2001 from Mr Soriano to KBC Bank requesting it to credit CM's account against various persons including $30,000. The direct payments were credited to Habib Bank and were clearly marked "BO Katumbi Betti" on the account statements. Each payment also provides a reference for the transfer including "disposition de Mr Frank Chungu" (i.e. XFC) ($29,995). The three receipts were simply marked in the AFSL ledger at CM "Katumbi Betti" as that ledger does not show a balance it is not clear how the money was disbursed.
- BT said that he understood from AC that the three direct receipts related to the purchase of shares in Game Trackers. As to the three payments from the KBC account to CM in October 2001 he said that he thought that they were part payment of a loan that AFSL had advanced in relation to Game Trackers. He conceded that he did not know who Betti Katumbi was or why there was a reference to Frank Chungu and he did not ask.
- In other words BT dealt with these in the same dishonest way in which he dealt with the Zamtrop receipts. The conclusion is precisely the same.
- Once again BT failed to ask the questions that an honest solicitor would do. There is no honest reason why the monies should be routed to him from MCD and none was put forward. He is liable for these sums also which total $275,058.
- On 5th April 2002 FK sent a fax to BT forwarding a manuscript note from Mr Soriano with details of the BK account and he noted "BT. As discussed this for up to $200k". On 11th April 2002 CM transferred this money debiting CM's AFSL ledger 1156 on 10th April 2002. This payment was credited to KBC US number 1 account and funded amongst other things a cash withdrawal of $80,000 on 17th April 2002. BT could not explain this transaction. It is further evidence of dishonesty on his part.
- It is plain that Mr Soriano has acted in breach of fiduciary duty, or provided dishonest assistance to XFC and FJT and SC and that he has knowingly received monies and has participated in a conspiracy to defraud Zambia as pleaded in the RRRAPOC.
- The evidence of that is set out above. The documents themselves plainly are so unusual as to their terms that no-one would consider them to represent genuine commercial arrangements. I summarise the effect. Mr Soriano was appointed consultant for Zambia which gave him unusually wide powers. Using those powers he negotiated a sale contract and committed Zambia to a significant expenditure. He obtained the Facility Agreement which had an upfront payment of $10,000,000 before he advanced any monies to Zambia. It was plainly a fraudulent instrument to provide an umbrella for the removal of the monies from Zambia. Finally he procured the payment of $20,200,917 over the next three years from MOF monies which were paid into the two accounts that he controlled and were dissipated by him. The clear abuse of this is shown by the payments summarised in paragraph 1598 of AGZ's closing. He put up no Defence but the nearest to a Defence are the explanations that he gave to Price Waterhouse Cooper in an interview on 16th August 2002. These are entirely bogus. In particular there is no evidence to show he paid Teraton $15,000,000 of his own money along with the $20,000,000 paid by the Republic. Once again if he had he would clearly have come to Court to explain that and produce the evidence.
- He is liable in knowing receipt for the $1,000,000 paid to him from the Zamtrop account on 10th March 2001. I am not clear however that all of the monies paid into the KBC and ABN-AMRO account can give rise to liability for knowing receipt. The test of knowledge is lower. Plainly Mr Soriano knew that these were Government monies and were not to be misapplied. It is nevertheless clear that some monies were not received by him beneficially.
- It seems to me that liability is established on the basis of the above in breach of fiduciary duty, dishonest assistance and conspiracy to defraud. The quantum under each head should extend to the entirety of the monies claimed in respect of both accounts less sums which were disbursed. It seems to me that I should not give liability under this head for the payments made to MCD or CM as these appear to be remittances back for the benefit of the other conspirators. I will hear what AGZ says about that when I deliver this judgment.
- As AGZ concedes a credit for the Harptree monies should be given.
- There is no difficulty about the breach of fiduciary duty, the dishonest assistance, the knowing receipt and the conspiracy in my view.
- XFC's direct involvement was as follows for example. First he directed Mr Zulu to pay $1,000,000 to Mr Soriano out of the Zamtrop account on 10th March 1999. He controlled the transfer of the Government money from the Zamtrop account and there is no explanation for this payment.
- He appointed Mr Soriano under the Letter of Intent which was the platform for the negotiation of the Sales Contract and he procured the initial payments to the ABN AMRO account. He was involved in pressurising Mr Mtonga to make payments to Mr Soriano and threatened Mr Mtonga with dire consequences from Zambia's point of view. All of this in my view was bogus.
- He received personally $130,000 from the KBC account and he was involved in the payment instructions from Mr Soriano on 23rd January 2001 for the Game Tracker Lodge transaction.
- The quantum is not indistinguishable from that of Mr Soriano.
- FJT's role is shown by Mr Mtonga's witness statement that he through Mr Silwamba caused him to sign the Facility Agreement. Mr Mtonga's evidence also shows that he encouraged the making of payments and telephoned him to ensure payments were made. This shows that FJT knew about the arrangements. He has not given evidence. If he believed the arrangements were genuine he would have done so. His absence from the trial is in my view corroborative evidence in favour of AGZ's claim.
- All of the claims are therefore established and the quantum is the same giving the credit of $843,338.46 retrieved from the Harptree ledger.
- She was clearly involved as she directed payments. She provided a misleading basis for the payments ("call on guarantee"). Her Defence asserts that she was merely performing her duties as custodian of the Loan Agreements. I reject that.
- Her liability is the same as the other Zambian based Defendants both as to principal and as quantum less the Harptree credit.
- FK was plainly involved dishonestly. He gave instructions for the transfer of funds from MCD to CM in November 2002 ($75,000). That was after his arrest in Zambia in June 2002.
- He gave IM instructions in relation to the disbursement of funds transferred from the KBC account to MCD and finally in this context he gave instructions to transfer $200,000 back to the BK facility. He provided the KBC details to BT.
- All of those show he was involved and all the actions were dishonest.
- In my view all of AGZ's claims against FK are made out. He has the same liability in my view as the other Zambian based Defendants.
- The claim against IM and MCD is limited to the amounts received. The amount received was $1,299,456.70 less the Harptree credit of $843,338.46 i.e. $456,118.24.
- IM's fatal difficulty in my view is his failure to question why Katumbi Betti was remitting these large amounts and why they could be disbursed on the instructions of FK. He never asked.
- For the reasons that I have set out in respect of the position against him under the Zamtrop conspiracy his failures are just as dishonest in this claim. He has therefore in my view dishonestly assisted FJT, XFC and SC in stealing Government monies. He has also participated in a lesser conspiracy which is the same as the conspiracy that I have found him liable under the Zamtrop claim.
- I reject AGZ's claim for knowing receipt on the same basis as I rejected it as against him under the Zamtrop claim. Therefore IM is liable as alleged by AGZ in the sum claimed.
- MCD is similarly liable.
- ND was equally aware of these matters in the sense that they were treated no differently. It is true that he did not sign all of the transfers but he did sign some significant ones (for example $75,000 paid to CM on 12th November 2002). I see no reason therefore for coming to any different conclusion under this head to that which I came to under the Zamtrop conspiracy.
- AGZ's claim again is limited to the amount of monies that were received by CM from the ABN-AMRO or the KBC account.
- The claims are again as in the Zamtrop conspiracy. It is submitted that BT allowed his USD account to be used for the dishonest purpose of stealing Government money. The amount is made up of $176,985 transferred direct from the KBC account to CM on 16th October 2001 and the sums of $200,000 and $75,058.03 transferred via MCD on 11th May 2001 and 12th November 2002 (total $452,043)(paragraph 1114). CM transferred $200,000 to the KBC account on 11th April 2002 on the instructions of FK (see above).
- BT's failure again involves his inability to explain why he did not question the receipts of money from the BK account nor why he was receiving monies from MCD. I have already rejected his explanation that he did not read his statements or ledgers. Given that rejection the inevitable conclusion again in my view is that AGZ's claim is made out in respect of his failure to question the monies that were remitted to him and their disbursement. This extends of course to the acquisition of Game Trackers when the source of the monies was not investigated by him. His actions or inactions are just as dishonest as in the Zamtrop conspiracy with the same conclusion as against him.
- Equally I see no reason to come to a different conclusion in respect of these transactions as against CM and BBT for the reasons that I set out in the part of the judgment relating to the Zamtrop conspiracy.
- There may be an argument as to credit in respect of the Game Tracker shares but I will hear submissions as to that. Subject to that point it seems to me that the liability as claimed by AGZ is established.
- In conclusion my determination against each Defendant is as follows:-
- His liability is the headline figure of $25,754,316 plus $600,000 damages for conspiracy. The breach of fiduciary figure is the same less $600,000. Credit will have to be given for the realisations and disallowances set out earlier in the judgment (paragraph 440).
- His liability is the same as that of XFC (paragraph 470).
- Her liability is the same as that of XFC (paragraph 485).
- He has the same liability as XFC for conspiracy and the liability in dishonest assistance is for the sums transferred to MCD ($7,021,020.17) and CM ($2,127,822) (paragraph 501).
- His liability is the same as that of FK (paragraph 503).
- His liability is for $62,279 for knowing receipt only.
- Her liability on the claim as pleaded is dismissed. On the basis that I permit AGZ to amend his claim at this very late stage her liability will be $387,557 (paragraph 527).
- His liability is for $1,209,400 for dishonest assistance and conspiracy. As I have said he receives no credit for the "value" of the President and XFC's clothes (paragraph 539).
- The liability is for $7,021,020.17 for conspiracy and dishonest assistance (paragraph 543) plus an additional sum calculated in accordance with paragraph 275 above.
- The liability is for $2,127,822 plus a further sum calculated in accordance with paragraph 275, $599,990 (OOP payments) plus £155,000 for Redcliffe for conspiracy and dishonest assistance (paragraph 874).
- His liability is for $2,938,701.58 (the traced items set out in paragraph 1026) and £96,938 (dishonest assistance). In addition there will be a further sum under paragraph 275. I leave open the question of conspiracy given my observations on the pleadings above.
- For the reasons given earlier there is no liability (paragraph 1053).
- Mr Soriano is liable for the full amount $20,200,719 (paragraph 1058) and $1,000,000 personally received by him (paragraph 1091).FJT (paragraph 1100), XFC (paragraph 1098), SC (paragraph 1102), FK (paragraph 1106) are also liable for the same sums. Credit is to be given for the Harptree receipt.
- IM, MCD and ND are liable for the sums actually received ($1,299,456.70) (paragraph 1107) less the Harptree receipt.
- BT, CM and BBT are liable for $452,043.03(paragraph 1114).
- There can only be one Harptree credit for all conspirators. It seems to me that the credit ought to be given against the three categories of Defendants pro rata i.e. those liable for $21,200,719, IM/MCD/ND and BT/CM/BT. If the parties agree I will leave them to work the figure out. If they disagree I will hear submissions on it.
- There will be presumably claims for interest and arguments about costs. In addition I assume there will be applications for some form of injunctive relief and questions in respect of the security given by AGZ. The ring fencing provisions will also need to be addressed.
- As I said in the opening part of this judgment I have been greatly assisted by the substantial contributions of both Counsel and Solicitors to the presentation of their cases. There will obviously be disappointments but I have no doubt that the presentation in this trial was of great assistance to me and generally reflects well on the professionalism of all aspects of the cases advanced. This extends right from the apparently menial tasks of those who are to ensure all bundles are correct and updated as the trial goes on, to the provision of the video conferencing, to the transmission of the documents to Zambia and their return, to the solicitors ensuring all bundles are correctly correlated indexed and updated and Counsel with their careful written arguments and well presented oral submissions.
- The trial would never have taken place I am quite sure but for the capable work of Peter Cole and the security provided to my clerk and me by the team led by Senior Superintendent Samuel Situmbeko in Lusaka.
- Finally I express again my gratitude to Miss Supriya Saleem. In addition to the tasks which she had to perform before and during the trial she had the difficult task of deciphering my dictation and (more dangerously) deciphering my handwriting on occasions. The judgment is a tribute to her efforts in converting my efforts into a readable form. This took long hours of her time extending into the Easter break. It was not merely a role of a copy typist. The decisions (and responsibility for all typing errors) were nevertheless of course all mine.
- I hope this judgment will be given the widest possible circulation in Zambia. It is a long judgment but that was unavoidable. I have in addition prepared an Executive summary, [2007] EWHC 952_2 (Ch) and I intend them both to be placed on the internet immediately after they are handed down.
Peter Smith J :
INDEX
| A | INTRODUCTION SECTION |
| 1 | The Case |
| 3 | Details of Defendants |
| 11 | Why the action is brought in London |
| 34 | Other Proceedings |
| B | ZAMBIA – SOME POINTS TO NOTE |
| 46 | The Allegations in their financial context |
| C | PROCEDURAL MATTERS |
| 57 | Unusual acquisitions |
| 59 | The President's clothes |
| D | ZAMTROP CONSPIRACY GENERAL MATTERS |
| 90 | Burden of Proof |
| 98 | How the conspiracy worked |
| 107 | Events that are not coincidental |
| 115 | MOU |
| 120 | AFSL obtains a licence |
| E | OPENING OF THE ZAMTROP ACCOUNT |
| 127 | Formalities for Zamtrop Account |
| 139 | Finance Charter 1970 |
| 145 | Significance of Finance Charter |
| F | CREDITS TO ZAMTROP ACCOUNT |
| 161 | Transfers into and out of the Zamtrop Account: Systems and Wilbain |
| 172 | Budgetary Approval |
| 204 | Further transfers out of the Zamtrop Account |
| G | EVENTS LEADING TO DISCOVERY |
| 218 | Open Pandora's Box and take the money |
| 222 | FJT's Presidency Ends |
| H | CRITICISMS OF AGZ'S EVIDENCE |
| 245 | Mr Hamunjele |
| 258 | Allegations made about veracity of Third Parties |
| I | ZAMTROP ACCOUNT MONIES ARE GOVERNMENT MONIES |
| 277 | Purposes for which payments used |
| 291 | Permase General |
| J | ACCESS FINANCIAL SERVICES LIMITED (AFSL) |
| 307 | Enock Mwale |
| K | LEGAL ISSUES |
| 314 | Conspiracy |
| 330 | Breach of fiduciary duty |
| 332 | Dishonest assistance |
| 372 | Limitation |
| 376 | Limitation generally |
| L | INDIVIDUAL DEFENDANTS: VARIOUS ISSUES |
| 427 | Xavier F Chungu (XFC) (D7) |
| 441 | Dr Chiluba (FJT) (D3) |
| 472 | Stella Mumba Chibanda (SC) (D6) |
| 486 | Faustin Kabwe (FK) (D9) |
| 503 | Aaron Chungu (AC) (D7) |
| 504 | Francis Kaunda (Francis K) (D11) |
| 519 | Irene Kabwe (IK) (D10) |
| 528 | Boutique Basile (Basile) (D12) |
| 541 | Iqbal Meer, Naynesh Desai and Meer Care & Desai (IM, ND & MCD) (D1) |
| 544 | Churchill Hotel Agreement |
| 593 | Harptree Holdings Ltd |
| 604 | Further evidence of dishonesty |
| 619 | Blue Card warnings |
| 644 | Naynesh Desai (ND) |
| 680 | Knowing receipt where no beneficial receipt |
| 685 | Cave Malik (CM) Bimal Thaker (BT) and Bhupendra Bhailal Thaker (BBT) (D2) |
| 716 | Claims against BT, BBT and CM |
| 719 | Background BT |
| 724 | Cave Malik & Co London (CM) |
| 753 | Commencement of association with FK/AFSL |
| 765 | CM begins to receive Zamtrop monies |
| 770 | Receipts from Redcliffe/Shansonga |
| 799 | ZCCM Consultancy |
| 813 | Deception of Habib Bank |
| 823 | BT Changes His Story |
| 836 | Office of President Payments (OOP) |
| 862 | Cash Payments of £30,000 to FJT |
| 866 | Payments 2002 |
| 869 | Conclusion as regards BT |
| 874 | Quantum against BT |
| M | BBT/CM |
| 876 | Two issues |
| N | ATAN SHANSONGA (AS) (D5) |
| 893 | Claims against AS |
| 895 | Brief summary of claims |
| 904 | AS's Case |
| 905 | A number of preliminary observations |
| 909 | GT's evidence concerning AS's receipts and expenditure |
| 911 | Basis for AS's involvement |
| 918 | AS's fundamental credibility failing |
| 926 | Redcliffe |
| 931 | AS's failure to keep records |
| 938 | Burden of Proof |
| 949 | AS comments on evidence generally |
| 960 | Zambian Lifestyle Yardstick |
| 964 | Payments to Stella Chibanda |
| 969 | Payments to CSW – Bob Standaert |
| 974 | Payments to Professor Mweene |
| 975 | Purchase of Motor Vehicles |
| 984 | Payments for School Fees etc |
| 990 | Credit Card Expenditure |
| 1001 | Other Credit Matters |
| 1003 | DGH Poly Products |
| 1026 | Conclusions as regards AS |
| O | MOFED |
| 1038 | AGZ's Case |
| P | THE BK CONSPIRACY |
| 1056 | Background |
| 1060 | Examination and Effect of Documents |
| 1072 | Fate of Government monies paid to ABN-AMRO and KBS accounts |
| 1074 | Payments to XFC |
| 1075 | Meer Care $1,299,456.70 |
| 1080 | Payments from KBC Account credited to Meer Care Ledger 3556/001 |
| 1085 | CM $176,985 direct and $275,058 indirect payments from KBC account |
| 1088 | Indirect payments from the KBC account to CM via MCD |
| 1089 | $200,000 Payment by CM to KBC account |
| Q | THE BK CASE: THE CLAIM AGAINST EACH DEFENDANT |
| 1090 | Mr Soriano |
| 1095 | Claim against XFC |
| 1100 | Claim against FJT |
| 1102 | Claim against SC |
| 1104 | Claim against FK |
| 1108 | Claim against IM/MCD |
| 1114 | Claim against BT/CM/BBT |
| R | CONCLUSION |
| Zamtrop Conspiracy Liability | |
| 1120 | XFC |
| 1122 | FTJ |
| 1123 | SC |
| 1124 | FK |
| 1125 | AC |
| 1126 | Francis K |
| 1127 | IK |
| 1128 | Basile |
| 1129 | IM/MCD/ND |
| 1130 | BT/CM/BBT |
| 1131 | AS |
| MOFED Claim | |
| 1132 | AS |
| BK Conspiracy | |
| 1133 | Soriano, FJT, XFC, SC and FK |
| 1134 | IM, MCD and ND |
| 1135 | BT, CM and BBT |
| 1136 | Harptree Credit |
| S | FINAL NOTES |
DRAMATIS PERSONAE - DEFENDANTS
| "Meer Care" | Meer Care & Desai, the First Defendant, is a firm of English solicitors now practising at 4th Floor, One Great Cumberland Place, London W1H 7AL. At all material times the partners are and have been Iqbal Meer and Naynesh Desai. Mr Meer is a qualified Zambian lawyer. Between about May 1996 and January 2003 it acted on behalf of Access Financial Services Limited ("AFSL") and others as appears hereafter. |
| "Cave Malik" | Cave Malik & Co, the Second Defendant, is a firm of English solicitors practicing at 4 Churchill Court, 58 Station Road, North Harrow. There are other businesses practicing in Lusaka under the name of Cave Malik ("CMZ") and Ndola ("CMN"), Zambia. Mr Bimal Thaker, the Eighth Defendant, is a partner in Cave Malik. Mr Bhupendra Thaker, the Eighth Defendant's father, has at all material times been a partner in Cave Malik. Between about January 1996 and January 2003 Cave Malik acted on behalf of the Access companies and for a number of the directors and/or shareholders of the Access companies in relation to matters concerning the affairs of the Access companies. Prior to 31.5.96, Bimal Thaker was a partner in the firm of Kehimker & Co. On 31.5.96; Kehimkar & Co changed its name to Cave Malik. |
| "FJT" | Dr Frederick Jacob Titus Chiluba, the Third Defendant, was President of the Republic of Zambia between 1991 and 2001. |
| "XFC" | Xavier Franklin Chungu, the Fourth Defendant, was at all material times to this action Permanent Secretary of the Office of the President ("OOP"), Special Division also known as Zambian Security Intelligence Services ("ZSIS") and Director General of ZSIS. |
| "AS" | Atan Shansonga, the Fifth Defendant, was employed during the 1990s by subsidiaries of the Zambian Consolidated Copper Mines ("ZCCM"), including Metal Marketing Company and Zal Holdings Ltd. Between 2000 and 2002, Mr Shansonga was the Zambian ambassador to the United States of America and to a number of additional countries in the Americas. |
| "SC" | Ms Stella Chibanda, the Sixth Defendant, was at all material times a Director in the Department of Loans and Investment in the Ministry of Finance of the Government of Zambia. |
| "AC" | Aaron Chungu, the Seventh Defendant, was at all material times from October 1995, the executive director of AFSL until AFSL was seized by the Bank of Zambia in January 2003. He was a 5% shareholder in AFSL from 1 January 1998 until his shares were seized by the Government of Zambia in January 2003. He was responsible for the day of day running of AFSL in respect of financial transactions undertaken by it. He was also a director of several Zambian companies including DGH Poly Products, Lusaka Trust and Corporate Services (also the manager) and Roan Investments. |
| "BT" | Bimal Thaker, the Eighth Defendant, is an English Solicitor, was also qualified to practice law in Zambia, and is a partner in Cave Malik. |
| "FK" | Faustin Kabwe, the Ninth Defendant, was at all material times the Chief Executive Officer of AFSL and a close friend and financial adviser to Dr Chiluba and XF Chungu. Faustin Kabwe holds a number of other directorships, including of Pigott Maskew Limited, Lusaka Trust and Corporate Services Limited, Zamdaell Limited (all Zambian registered companies) and Mining Industry Support Services Limited (an English registered company). Faustin Kabwe holds shares in a number of companies including Lusaka Trust and Corporate Services Limited, Mining Industry Support Services Limited, Syblis Limited. |
| "IK" | Irene Kabwe, the Tenth Defendant, is the wife of Mr Kabwe, and a 55% shareholder in AFSL. |
| "Francis K" | Francis Kaunda, the Eleventh Defendant, was a director and the Chairman of AFSL and ALL at all material times until the Bank of Zambia took possession of the Access companies in January 2003. He was a 10% shareholder in AFSL. Francis Kaunda was also the Chief Executive Officer of Zambia Consolidated Copper Mines and was Chairman of the Privatisation Negotiating Team ("PNT") set up by Dr Chiluba in relation to the privatization of the copper mines between about 1997 and 1999. He is also the beneficial owner of Epakor Investment SA. |
| "Boutique Basile" | Boutique Basile is the trading name of Antonino Basile, the Twelfth Defendant, who operates a tailor's shop from 2 Rue Sigismond Thalberg 1201, Geneva, Switzerland. |
| "Nebraska Services" | Nebraska Services Limited, the Thirteenth Defendant, is a company incorporated under the laws of the British Virgin Islands, the alter ego of which is Mr Atan Shansonga. |
| "MISS" | M.I.S.S.L. Associates Limited ("MISS"), the Fourteenth Defendant, is a company incorporated under the laws of the British Virgin Islands. MISS is owned and/or controlled by Atan Shansonga. Atan Shansonga holds a Power of Attorney on behalf of MISS and is its directing mind and will for all purposes material to this action. |
| "Hearnville" | Hearnville Estates Limited, the Fifteenth Defendant, is a company incorporated under the laws of the British Virgin Islands. Faustin Kabwe was concerned in the management of Hearnville Estates Limited. It is averred that at all material times in relation to this action, Faustin Kabwe and Bimal Thaker were the directing mind and will of Hearnville Estates Limited. |
| "Jarban" | Jarban SA, a company incorporated under the laws of Luxembourg and is owned and controlled by Faustin Kabwe. It is averred that at all material times in relation to this action Faustin Kabwe was the directing mind and will of Jarban. |
| "Soriano" | Raphael Soriano, also known as Katebe Katoto and also known as Emmanuel Katto, the Seventeenth Defendant, was a close associate of Dr Chiluba and XF Chungu. |
| Belsquare Residence N.V. | Belsquare Residence N.V. is a Belgian registered company holding the properties in Brussels at Rue des Atrebans 155 and Rue d'Escadron 8-10. |
Non-Defendant Companies and Individuals
| Access Companies | Access Financial Services Limited ("AFSL") and Access Leasing Limited ("ALL") are non-bank financial services companies incorporated under the laws of Zambia. AFSL owns 99% of the shares in ALL. The directors of AFSL are Francis Kaunda (Chairman), Irene Kabwe, Aaron Chungu (Executive Director), Jean-Pierre Rozan, Swathulani Munthali and Edward Shamutete (non-executive directors). The shareholders of AFSL are Aaron Chungu (5%), Irene Kabwe (55%), Francis Kaunda (10%) and Jean-Pierre Rozan (via his companies SCMM and Comecin) (30%). Faustin Kabwe was the Chief Executive Officer. The shareholding of Aaron Chungu has been seized by the State on the grounds that the same was purchased using stolen Government monies. |
| Astra Fire | Astra Fire Systems Limited is a company incorporated in England under company number 020402399. Mr Shansonga was appointed a director of the company on 25.10.92. |
| Atlas Trading Limited | A company incorporated in England under company number 02934534. The company's directors include (from April 1998) Mohamed Iqbal Meer, members of the Shamutete family, and (between 1998 and 2002) Faustin Kabwe. Atlas Trading Ltd made payments to Meer Care which were recorded in the AFSL ledger account. |
| Bennett, Elaine | Manager of Operations at Zanaco Bank London from July 1995. |
| Cavemont | Cavemont Plc is a Zambian company associated with Cavemont Merchant Bank. AFSL held an account at Cavemont and Meer Care made payments to Cavemont and Cavemont Merchant Bank. |
| Chansongo, Esnart | Employed by AFSL between April 1996 and January 2003, executive assistant to Faustin Kabwe and Mr Aaron Chungu. |
| Chibanda, Kombe Regis | Kombe Regis Chibanda is the son of Stella Chibanda. |
| Chocoland Zambia Limited | Chocoland Zambia Ltd is a company incorporated in Zambia. The principal shareholder and managing director is XF Chungu's sister, Celestine Chungu. |
| Chungu, Celestine | Sister of XF Chungu, principal shareholder and managing director of Chocoland Zambia Ltd. |
| Chungu, Mr PR | Peter Rowland Chungu, the husband of Celestine Chungu, brother in law of XF Chungu and business partner of Faustin Kabwe in Garden Plumbers Limited. |
| Comecin | Believed to be a company incorporated in France of which Jean-Pierre Rozan is a director; made payments to the AFSL ledger account in Meer Care. |
| DGH Poly Products Limited | A Zambian company whose directors and shareholders were De Garnier Holdings (99%) and Mr Atan Shansonga (1%). De Garnier Holdings is a BVI company. The directors of DGH Polyproducts Limited were Atan Shansonga, Aaron Chungu and Sebastian Mathew. Atan Shansonga has stated in his Affidavit of Means that he is the beneficial owner of De Garnier Holdings Limited. Faustin Kabwe and Aaron Chungu have stated that DGH Polyproducts Limited was beneficially owned by XF Chungu. DGH Polyproducts Limited purchased the business and some of the assets of Polypackers Limited from the Receiver of Polypackers Limited using sums advanced by AFSL which are stolen Government monies. |
| Dulatite Properties Limited | A Zambian company established by Aaron Chungu and Faustin Kabwe and of which they were both directors and (at least initially) shareholders. The shareholdings were later transferred to Mrs I C Shamutete and Mr Chainda M Shamutete. |
| Epakor Investment SA | A company registered in Panama and owned beneficially by Francis Kaunda. Cave Malik acted on behalf of Epakor. |
| Fernhurst Holdings Limited | Cave Malik made and received payments for Fernhurst Holding through the AFSL ledger. The company appears to have been set up as a vehicle to purchase property and is believed to have been owned beneficially by XF Chungu. |
| Fountain Estates Limited | A company incorporated in Zambia of which Mr Bhupendra Bhailal Thaker, the father of Mr Bimal Thaker, was a director until 07.09.01. The company was owned in trust by Cave Malik & Co, Ndola. |
| Goldman, Mr | Stephen Goldman, a director of Wilbain. |
| Harptree Holdings | Meer Care acted on the incorporation of Harptree Holdings Limited on the apparent instructions of Mr Kabwe and maintained a ledger account for the company. F M Kabwe is a/the shareholder. The formation costs of £3,000 were paid to Meer Care out of the ledger on the Meer Care $ account entitled FM Kabwe/Commercial. |
| Hazida Motors | The company was involved in the sale and purchase of the lease and the business of Nkamba Bay Lodge in 2001 (the real estate itself being owned by Zambian Wild Life). The Task Force has seized this property. |
| Hi-Pro | Hi-Pro Limited is an English company which received a payment from Meer Care in January 1999. |
| Industrial Equipment Limited | A company registered in Zambia which made payment to the AFSL ledger in Cave Malik. The money was then transferred on to Irene Kabwe in New York on the instructions of Mr Kabwe. |
| Jaigees | Jaigees Limited is a Zambian construction company which at material times was performing work on XF Chungu's private property. |
| Kaluba, Beauty | General Manager at Zanaco Bank, London, at all material times from September 1995. |
| Kalumba, Katele | Katele Kalumba was at all material times Minister of Finance of Zambia. |
| Katumbi, Betti | Betti Katumbi is the wife of Moses Katumbi and sister in law of Raphael Soriano (a/k/a Katebe Katoto). She held an account at KBC Bank in Belgium into which the Ministry of Finance transmitted funds in excess of US$20 million. |
| Kaunda, Mr C | Chad Herbert Mwape Kaunda is the brother of Mr F Kaunda. Mr C Kaunda owned the business premises of the Access Companies in Lusaka. |
| Koshy, Thomas | A recipient of funds from AFSL ledger on Meer Care account. |
| Lonrho | Lonrho Properties Zambia Ltd. |
| Lubbock Fine | Lubbock Fine is an English firm of Chartered Accountants based in London and Jersey. It made to payments to the Zamtrop account, the Meer Care $ account and the Cave Malik $ account. |
| Lungu, John | John Lungu (now deceased) was an official in the Office of the President. |
| Mareus CC | Received payments from AFSL in connection with the Epakor loan facility. |
| Matthew, Sebastian | Assistant to Aaron Chungu at AFSL. |
| Motor City | Motor City Limited, a company incorporated in Zambia and now seized by the Task Force. The shares were held by Faustin Kabwe on trust for XF Chungu. |
| Mtonga, Mr | James Mtonga, Permanent Secretary in the Ministry of Finance. |
| Mulenga, Sinkala | Chief Accountant at the Ministry of Finance, Financial Management Division, Accountant General, in 1999 and 2000. In late 2000 he was transferred as Chief Accountant to External Resources Mobilisation, where he was signatory to ERM accounts. He authorized payments to Systems Innovation. |
| Munthali, Swathulani | A director of AFSL and of Zynex Telekom Limited. |
| Musonda, Mr | Ministry of Finance Official who authorized payments to Wilbain. |
| Musonda, Samuel | Managing Director of Zambia National Commercial Bank in Lusaka from 13.12.1996 to 19.06.2002. He is currently being prosecuted in Zambia on corruption charges. |
| Mutale, Bonaventure | Bonaventure Mutale was at all material times Attorney General of Zambia. |
| Mwale, Enock | Finance Manager (Head of Treasury) at AFSL from 1998. |
| Mwale, Mr | Mr C Z Mwale, Accountant General in the Ministry of Finance. |
| Mwanakaoma, Ms | Bridget Mwanakaoma, (deceased) former Treasury Counsel in the Ministry of Finance. |
| Mwansa, Mr | Mr J Mwansa, Deputy Director of the Budget in the Ministry of Finance. |
| Mweene, Professor | Professor Benjamin Mweene, Secretary to the Treasury in the Ministry of Finance during the presidency of Dr Chiluba between 30 May 1996 and 29 June 1999. Currently facing prosecution in Zambia for corruption offences under section 29(1) of the Anti-Corruption Commission Act No 42 of 1996 relating to the erection of a house on his property by way of reward for participation in the release of money to the Zamtrop account by the Ministry of Finance by way of "overpayments" ostensibly for making payment to Systems Innovations and Wilbain. |
| Nebraska Limited | A company incorporated in the British Virgin Islands on 05.02.99. Its company secretary was Corporate Secretaries Limited. A vehicle company set up for the purpose of receiving misappropriated government funds at the instigation of XF Chungu and with the assistance of Mr Shansonga who was its director. |
| Nkumbula, Stanley | At all material times Mr Nkumbula was the First Secretary, Protocol Department, at the Zambian High Commission in London. |
| Nonde, Mr | Boniface Nonde, a Director in the Budget Department in the Ministry of Finance. |
| Nyangulu, Mr | Darius Dustin Nyangulu, First Secretary at the Zambian High Commission in London between November 1992 and January 1996. |
| Patel, Mr BD | The Patel brothers received payments from Meer Care on instructions from Faustin Kabwe. The payments were made by separate cheques mailed to Paresh Patel's address in the UK. |
| Patel, Mr P | Paresh Patel, the Patel brothers received payments from Meer Care on instructions from Faustin Kabwe. The payments were made by separate cheques mailed to Paresh Patel's address in the UK. |
| Redcliffe | Redcliffe Limited, a company incorporated in England on 23 June 1995 under company number 3072120 at the instigation of XF Chungu. A vehicle company set up for the purpose of receiving misappropriated government funds at the instigation of XF Chungu and with the assistance of Mr Shansonga. Its offices were based in the offices of Kehimkar & Co (later Cave Malik). Valerie Edwards (a friend of Mr Shansonga) was appointed a director of Redcliffe but it was, at all material times, controlled and operated by Mr Shansonga and XF Chungu. Struck off the Companies Register on 19.08.97 pursuant to section 652(5) of the Companies Act 1985 and dissolved on 26.08.97 by notice in the Gazette. |
| River Properties Overseas Limited | A company whose registered office is at the offices of Cave Malik in North Harrow. The company secretary is Cave Malik Secretarial Ltd, the director is Cave Malik Nominees Ltd, and the share capital comprises two issued ordinary shares held by Cave Malik Nominees which were acquired on 26.10.01. Mr Kabwe has stated that AFSL acted as local representative and oversaw the management of the property owned by River Properties at No 12B Serval Road, Kabulonga, Lusaka, which is currently lived in by Dr Chiluba. |
| Sakala, Mr | Reuben Sakala, First Secretary at the Zambian High Commission in London from October 1996 and January 2000. |
| Sammanco | Sammanco International, an American company owned and managed by Mr Wills. |
| Saveco | A company of which Faustin Kabwe was a director. |
| Sham & Meer | An associated law firm of Meer Care based in South Africa. |
| Shamutete, Edward | A director of AFSL and director of ZCCM. The beneficial owner of Shengo Holdings and also believed to be the owner of Roan Investments Ltd. |
| Sharpe, Nicola | Lawyer who carried out a lot of conveyancing work for the Access companies. Married to Irene Kabwe's nephew. |
| Skyjet Travel | Skyjet Travel Limited is a Zambian company that was at material times owned by Mr Stanley Tampiyappa. |
| Southern Cross Management LLC | An entity based in New York which received a payment debited to the AFSL ledger at Meer Care on the instructions of Faustin Kabwe. |
| Syblis Limited | A Zambian company owned by Faustin Kabwe (60%) and Swathulani Munthali (40%). The company was ostensibly created to provide maintenance work for System Innovations in relation to security installations in Zambia. |
| System Innovations | Systems Innovations, Inc, a company chartered under the laws of the Commonwealth of Virginia, USA. |
| Tampiyappa, Mr | Stanley Tampiyappa, at material times owned Skyjet Travel Limited. In addition Mr Tampiyappa was a joint owner of Tedworth Properties, a Panamanian company which acquired blocks of flats in Zambia. He was a close associate of XF Chungu and Dr Chiluba. The blocks of flats purchased in the name of Tedworth Properties have been seized by the State on the grounds that they were purchased using stolen Government monies. The seizure has been challenged. |
| Task Force | The Task Force on Corruption established by the Government of the Republic of Zambia. |
| Tedworth Properties | Tedworth Properties Inc is a Panamanian company which owns properties in Zambia. The beneficial interest in Tedworth is hidden but its accounts show it to be a shell company whose main source of funds is convertible loan stock, the loan documents for which are not accountable. Faustin Kabwe has stated that the directors of Tedworth are Mr Tampiyappa and XF Chungu and that the properties are held for the Office of the President. Faustin Kabwe was appointed the chairman of local directors on Tedworth's registration as a foreign company in Zambia. |
| Villa Lux Property | Villa Lux Properties Limited, a real estate company incorporated in Zambia. The directors and shareholders of the company are Pule Mutati, Stephen NyikaMutambo and Joyce Malunga. |
| Wilbain | Wilbain Technology Inc., a company incorporated in Delaware, USA. |
| Wills, Mr | Jim Wills, Managing Director and owner of Wilbain. |
| Zamdaell Farm | Zamdaell Farm is a property in Zambia which is believed to be owned by Zamdaell Limited. |
| Zamdaell Limited | Zamdaell Ltd is a company registered in Zambia. 99% of its shares are owned by Zamdell International Ltd, a company incorporated in the British Virgin Islands. Zamdaell International Ltd was acquired by XF Chungu in about 1996 for the purpose of undertaking property investments in Zambia. 1% of the shares in Zamdaell Ltd are owned by Faustin Kabwe. The directors of Zamdaell Limited are Aaron Chungu and Faustin Kabwe. |
| Zanaco | Zambian National Commercial Bank. |
| Zarkham | Received a payment from the Harptree ledger account in Meer Care. |
| ZSIS | Zambia Security Intelligence Services, also known as Office of the President, Special Division. It is a department of the Government of Zambia which is entrusted with performing security intelligence work on behalf of the Government of Zambia. |
| Zulu, Mr | Mr Wilson Yotam Zulu, a Director of ZSIS. |
| Zynex Telekom | Zynex Telekom Limited, a Zambian company the directors of which are believed to include Faustin Kabwe, Aaron Chungu and a Mr Swathulani Munthali. |
Principal Bank accounts
| "Zamtrop account" | The US Dollar account number 58C/40/70185/01 entitled "Zamtrop" held at the London branch of the Zambian National Commercial Bank by the Zambian Government in the name of ZSIS. |
| "the Meer Care $ account" | US Dollar client account number 02/02507404 held by Meer Care at the National Westminster Bank, North Audley Street branch. |
| "the Meer Care £ account" | £ Sterling Solicitors Reserve account number 04527704 held by Meer Care at the National Westminster Bank, North Audley Street branch. |
| "the Cave Malik US$ account" | US Dollar client account number 20311-333-103743 held by Cave Malik at Habib Bank at its branch at Moorgate, London. |
| "the Cave Malik £ account" | £ Sterling account number 7-1-20311-103751 held by Cave Malik at Habib Bank at its branch at Moorgate, London. |
| "AFSL United Bank account" | AFSL's bank account numbers 200053-52 & 200053-28 at United Bank of Zambia, Lusaka |
| "the Shansonga BB account" | Mr Shansonga's bank account numbers 70-83-9809 & 70-83-9083 held at Barclays Bank, Portman Square, London. |
| "the Shansonga First Direct account" | Mr Shansonga's bank account number 21673270 held at First Direct, Millshaw Park Lane, Leeds, LS98 1FD. |
| "the Redcliffe account" | Account number 0101970179 held in the name of Redcliffe at Zanaco Bank, London. The mandate for the account provided for any two signatories to sign and identifies the signatories as Valerie P Edwards – Director; Chandrika J Patel – Secretary and Atan Shansonga – Consultant. |
| "the Nebraska account" | US$ account number 39214641 held in the name of Nebraska at HSBC Midland Bank at St Clement Danes Branch. Mr Shansonga was the sole signatory on the account. |
| "the BK bank accounts" | US$ account number 474-7401180-20 held under the name "BK" at KBC Bank, at Gistelse Steenweg, 144-Brugge-2, Belgium and US$ account no. B105064 Salomon Schweiz held at ABN-AMRO Bank Basel, Suisse |
| "Permase General" | A number of ZSIS accounts initially at Findeco later moved to Head Office at Cairo Road |
(A) INTRODUCTION SECTION
THE CASE
DETAILS OF DEFENDANTS
WHY THE ACTION IS BROUGHT IN LONDON
OTHER PROCEEDINGS
(B) ZAMBIA – SOME POINTS TO NOTE
THE ALLEGATIONS IN THEIR FINANCIAL CONTEXT
(C) PROCEDURAL MATTERS
UNUSUAL ACQUISITIONS
UNUSUAL ITEMS (SOME EXAMPLES) |
| ITEM | RECIPIENT | AMOUNT | SOURCE |
| Clothes (Basile) | FJT, XFC ($471,597 is unaccounted for) |
$1,029,400 | Zamtrop |
| Clothes (Basile) | FJT, XFC | $180,000 | CM |
| Cash | FJT | £30,000 | Zamtrop (collected by BT) |
| 12B Serval Road | FJT | $450,000 | CM |
| Various cash payments | FJT or at his direction (annex 49) Payments to FJT's children or for education or accommodation for them | $308,255.54 | Zamtrop |
| Cash | FJT (the Picture Payments) (annex 50) | $64,726.58 | Zamtrop (3rd party credits) |
| Cash | Former Chief Justice Ngulube & family | $91,664.01 | Zamtrop |
| Cash | Churches in America at direction of FJT | $179,000 | Zamtrop |
| Cash | FJT (more details set out below) | $660,000 | Standaert via Zamtrop |
| Repayment of credit card debts for personal expenditure | XFC | £341,520 | AS/Redcliffe |
| Payments for school fees | XFC | £181,000 | AS/Redcliffe |
| Cash | XFC (taken from Zamtrop account in person) | $371,149.80 | Zamtrop |
| Cash | XFC (annex 53) (delivered by Nkumbula to XFC or wife) | $453,940 | Zamtrop |
| Cash | XFC (delivered by AS) | $250,000 | Zamtrop |
| Cash | SC | $35,000 | AS/Redcliffe |
| Payment for spectacles 27/5/98 | FJT and others | £295 | AS/Redcliffe |
| Cash | Professor Mweene | £5,400 | AS/Redcliffe |
| Cash | Professor Loveless (spouse of Professor Mweene) | $10,000 | AS/Redcliffe |
| Honda motorcycle and clothing | XFC | BF590,934 | AS/Redcliffe/Standaert |
| Beauty Therapy Course | Rita Parkinson | £6,295 (plus accommodation) | AS |
| Jewellery (Fine Jewellers Washington GT34) | XFC | $30,000 | Zamtrop |
| Jewellery | XFC via Barclays Premier card in name of AS 12/10/98 | £1,319.71 | AS |
XFC DISBURSEMENTS (SOME EXAMPLES) |
| AMOUNT | DATE | PURPOSE | SOURCE |
| £45,000 | 26/06/00 | Used by XFC to repay a temporary loan and payments for Beauty Kaluba and his children | Zamtrop |
| $25,000 | 26/06/00 | Cash payment to BB Mphande | Zamtrop |
| $50,000 | 08/01/99 | Cash payment to Moses Katumbi | Zamtrop |
| $30,000 | 28/03/01 | Mrs C Willems (Mrs Standaert) | Zamtrop |
THE PRESIDENT'S CLOTHES
"Question: How do you explain the payments to your children and Basile Boutique?
Answer: The Controlling Officer of the account Mr Chungu is in a better position to explain
Question: Did you receive any money through the Zamtrop account in London?
Answer: Only the Controlling Officer would know"
"The Zamtrop Account as it is called in this claim, historically is an account set up by the Government of Zambia in or about 1963 for the operations of the Zambian Intelligence Services. This account was operated overseas so that in the event of internal conflict there would be an external account for use to fund operations in times of emergency. This account was also to be deployed for certain Defence and security spending of a highly classified nature. I do not accept that this account was set up for the purposes of fraud. I as the President of Zambia certainly did not authorise its use for anything else other than what it was created for. This was an account entirely under the control of the intelligence service of Zambia within the operational ambit of the Director General who enjoys wide powers and discretion under Zambian law in matters concerning national security".
(D) ZAMTROP CONSPIRACY GENERAL MATTERS
BURDEN OF PROOF
"…the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence … Ungoed-Thomas J expressed this neatly in In re Dellow's Will Trusts [1964]1 WLR 451, 455: "The more serious the allegation the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it"
Further I accept the principle that if explanations are put forward by Defendants (especially 3rd parties accused of assisting) a finding of liability involves rejecting those explanations as being inherently improbable see Grupo Torras SA v Al-Sabah (No 5), [1999] EWHC 300 (Comm), [1999] CLC 1469 at 1541 (affirmed CA [2001] Lloyds Reports Bank 36).
"It is the Claimant's case that on a date or dates unknown to the Claimant each of the Defendants (or any two or more together) together with others as hereinafter pleaded wrongfully and with intent to injure the Claimant and/or to cause loss and damage to the Claimant by unlawful means conspired and combined together to defraud the Claimant by the fraudulent misappropriation of its monies, in breach of trust, and to conceal such fraud and the proceeds of such fraud from the Claimant. In particular, it is the Claimant's case that each of the Defendants (or any two or more together) together with others as hereinafter pleaded, conspired and combined together to misappropriate the Claimant's monies using the vehicle of the Zamtrop $ account to obtain such funds from the Zambian Ministry of Finance and/or by extension and/or variation of the said conspiracy directly from the Office of the President (being an office of the Zambian Government) and that thereafter they conspired and combined together to dispose of such misappropriated monies and to conceal such misappropriation and dissipation by various means and, in particular, by laundering a substantial part of the same through the Meer Care $ account and/or the Cave Malik $ account and/or the Shansonga BB account and/or the Redcliffe account and/or the Nebraska account ("the Zamtrop Conspiracy")."
HOW THE CONSPIRACY WORKED
EVENTS THAT ARE NOT COINCIDENTAL
MOU
AFSL OBTAINS A LICENCE
(E) OPENING OF THE ZAMTROP ACCOUNT
FORMALITIES FOR ZAMTROP ACCOUNT
"RE: (ZAMTROOP) LONDON
"Your recent audit and check carried out at the London Special Account (ZAMTROOP) will help to introduce its special feature of security which is hitherto been lacking.
"In this regard I accept your suggestion that the Special Accounts at all our Missions abroad be kept under the Finance Charter of 1970 being the most appropriate instrument applicable
Yours sincerely
(signed FJT)"
FINANCE CHARTER 1970
SIGNIFICANCE OF FINANCE CHARTER
(F) CREDITS TO ZAMTROP ACCOUNT
TRANSFERS INTO AND OUT OF THE ZAMTROP ACCOUNT: SYSTEMS AND WILBAIN
| Trial bundle reference | Date | Payee | Amount / US$ |
| 2/21 | 8.1.96 | System Innovations & Wilbain | 798,000 |
| 2/26 | 21.6.96 | System Innovations & Wilbain | 825,000 |
| 2/27 | 28.6.96 | Wilbain | 475,000 |
| 2/28 | 19.7.96 | System Innovations | 300,000 |
| 2/29 | 19.7.96 | System Innovations | 222,032 |
| 2/30 | 27.2.97 | Wilbain | 475,000 |
| 2/32 | 27.3.97 | System Innovations | 650,000 |
| 2/35 | 29.4.97 | System Innovations | 650,000 |
| 2/37 | 27.5.97 | System Innovations | 650,000 |
| 2/38 | 16.7.97 | System Innovations | 650,000 |
| 2/39 | 16.7.97 | System Innovations | 650,000 |
| 2/40 | 11.8.97 | System Innovations | 50,000 |
| 2/41 | 12.8.97 | Wilbain | 250,000 |
| 2/42 | 12.8.97 | System Innovations | 650,000 |
| 2/43 | 12.9.97 | Wilbain | 250,000 |
| 2/44 | 16.9.97 | System Innovations | 650,000 |
| 2/45 | 8.10.97 | Wilbain | 250,000 |
| 2/46 | 8.10.97 | System Innovations | 650,000 |
| 2/47 | 6.11.97 | Wilbain | 250,000 |
| 2/48 | 6.11.97 | System Innovations | 650,000 |
| 2/49 | 10.12.97 | Wilbain | 250,000 |
| 2/50 | 10.12.97 | System Innovations | 650,000 |
| 2/52 | 20.1.98 | System Innovations | 650,000 |
| 2/56 | 20.1.98 | Wilbain | 250,000 |
| 2/59 | 4.2.98 | System Innovations | 650,000 |
| 2/62 | 4.2.98 | Wilbain | 250,000 |
| 2/65 | 2.3.98 | System Innovations | 650,000 |
| 2/68 | 2.3.98 | Wilbain | 250,000 |
| 2/71 | 19.3.98 | System Innovations | 650,000 |
| 2/74 | 19.3.98 | Wilbain | 250,000 |
| Trial bundle reference | Date | Payee | Amount / US$ |
| 2/107 | 24.9.98 | System Innovations | 650,000 |
| 2/111 | 24.9.98 | Wilbain | 250,000 |
| 2/114 | 21.10.98 | System Innovations | 650,000 |
| 2/117 | 21.10.98 | Wilbain | 250,000 |
| 2/120 | 23.11.98 | System Innovations | 650,000 |
| 2/123 | 23.11.98 | Wilbain | 250,000 |
| 2/126 | 4.12.98 | System Innovations | 650,000 |
| 2/129 | 4.12.98 | Wilbain | 250,000 |
| 2/131 | 20.1.99 | System Innovations | 650,000 |
| 2/132 | 20.1.99 | Wilbain | 250,000 |
| 2/133 | 4.2.99 | System Innovations | 650,000 |
| 2/141 | 9.2.99 | Wilbain | 250,000 |
| 2/144 | 1.3.99 | System Innovations | 650,000 |
| 2/147 | 1.3.99 | Wilbain | 250,000 |
| 2/150 | 24.3.99 | System Innovations | 650,000 |
| 2/153 | 24.3.99 | Wilbain | 250,000 |
| 2/159 | 28.4.99 | System Innovations | 650,000 |
| 2/162 | 28.4.99 | Wilbain | 250,000 |
| 2/165 | 27.5.99 | System Innovations | 750,000 |
| 2/168 | 27.5.99 | Wilbain | 250,000 |
| 2/171 | 1.7.99 | System Innovations | 750,000 |
| 2/174 | 1.7.99 | Wilbain | 250,000 |
| 2/177 | 9.8.99 | Wilbain | 250,000 |
| 2/180 | 9.8.99 | System Innovations | 750,000 |
| 2/183 | 31.8.99 | Wilbain | 250,000 |
| 2/186 | 31.8.99 | System Innovations | 750,000 |
| 2/189 | 1.10.99 | System Innovations | 750,000 |
| 2/192 | 1.10.99 | Wilbain | 250,000 |
| 2/195 | 24.10.99 | System Innovations | 750,000 |
| 2/198 | 29.10.99 | Wilbain | 250,000 |
| 2/201 | 30.11.99 | System Innovations | 750,000 |
BUDGETARY APPROVAL
"In the 19th century it was held that the court could not enquire into a sovereign act done within the territory of the foreign state, and this principle was expressed by the United States Supreme Court in a much quoted dictum which was in turn adopted by the Court of Appeal in England:-
"Every sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment of the acts of the Government of another done within its own territory"
This principle is sometimes used on alternative ground for a result that can also be reached by the application of the ordinary rules of the conflict of laws. Thus the executive seizure of property by a foreign sovereign within its territory will not give rise to an action in torte in England either on the basis of this general principle or because the act was lawful by the law of the place when it was committed and thus afforded a Defence under the rule in Philips v Air. Nor can a former owner challenge title to property acquired from a foreign Government which has been confiscated within its own territory, again either on the basis of the general principle or on the basis of the rule that the validity confiscatory transfer of title depends on the lex situs".
"In Buttes Gas and Oil Co v Hammer (Nos 2 and 3), The House of Lords held that the act of state cases are part of a more general principle but the courts will not adjudicate on the transaction of foreign sovereign states"
"It would not be difficult to elaborate on these considerations, or to perceive other important inter-state issues and/or issues of international law which would face the court. They have only to be stated to compel the conclusion that these are not issues upon which a municipal court can pass. Leaving aside all possibility of embarrassment in our foreign relations (which it can be said not to have been drawn to the attention of the court by the executive) there are - to follow the Fifth Circuit Court of Appeals - no judicial or manageable standards by which to judge these issues, or to adopt another phrase (from a passage not quoted), the court would be in a judicial no-man's land: the court would be asked to review transactions in which four sovereign states were involved, which they had brought to a precarious settlement, after diplomacy and the use of force, and to say that at least part of these were "unlawful" under international law. I would just add, in answer to one of the respondents' arguments, that it is not to be assumed that these matters have now passed into history, so that they now can be examined with safe detachment.
"317 In our judgment, these authorities indicate that English law is seeking to balance (at least) three separate insights as to the appropriate role of national courts when faced with reliance on foreign legislative or executive acts by way of Defence to what might otherwise be a wrong for which those courts are called upon to provide a remedy.
318 First, there is the prima facie rule that a foreign sovereign is to be accorded that absolute authority which is vested in him to act within his own territory as a sovereign acts. This rule reflects concepts of both private and public international law as to territorial sovereignty. As such, we think that the rule is founded primarily on a view as to the comity of nations, rather than on concern as to giving offence to the foreign sovereign or as to the absence of judicial standards: see Buck v Attorney General [1965] Ch 745, 770 per Diplock LJ. We say this because, if the sovereign purports to act outside his territory, or even if he acts within it in a penal or discriminatory way and a claimant then seeks to found his claim on that sovereign act, the English court arrogates to itself the right in the first case not to recognise and in the second case not to enforce it. This shows that embarrassment about sitting in judgment on the acts of a foreign sovereign is not per se the cause of judicial restraint in this context. Rather, each sovereign says to the other: "We will respect your territorial sovereignty. But there can be no offence if we do not recognise your extraterritorial or exorbitant acts."
319 The second insight, however, is that, whether the sovereign acts within his own territory or outside it, there is a certain class of sovereign act which calls for judicial restraint on the part of our municipal courts. This is the principle of non-justiciability. It is or leads to a form of immunity ratione materiae. It may not be easy to generalise about such acts, and the application of the principle may be fact sensitive. Guidance, however, is to be found in such considerations as whether there are "judicial or manageable standards" by which to resolve the dispute, whether the court would be in "a judicial no-man's land", or perhaps whether there would be embarrassment in our foreign relations, at any rate if that possibility was drawn to the court's attention by the executive. Sensitive issues involving diplomacy between states, or uncertain or controversial issues of international law, may be other examples of situations calling for judicial restraint. The distinction which has been developed in the analogous area of sovereign immunity between situations where the sovereign acts by way of sovereign authority (acta jure imperii) and where he acts in the commercial sphere (acta jure gestionis) may also be of some assistance, because with the development of the restrictive theory of sovereign immunity there has come the realisation that it is not every impleading of a sovereign that requires judicial restraint or gives rise to a legitimate fear of giving offence. In essence, the principle of non-justiciability seeks to distinguish disputes involving sovereign authority which can only be resolved on a state to state level from disputes which can be resolved by judicial means.
320 The third insight is that the rule whereby there is a principle of judicial restraint in so far as a sovereign acts within his own territory is only a prima facie rule. It is subject to certain exceptions. One exception we have already mentioned is that a penal or discriminatory act of a foreign sovereign cannot be made the basis of a claim in our courts. This is perhaps one aspect of a general exception to the effect that these courts will not recognise the act of a foreign sovereign which is contrary to English public policy. The existence of this exception is not in doubt. But how far does it extend, and what is meant by English public policy in this context? The width of the exception is uncertain both because the concept of public policy is itself not hard edged and also because it has to take into account the abhorrence of outrageous acts on the one hand and on the other hand the concerns which give rise to the first and second insights to which we have referred. This is the route by which it is possible to say that discriminatory breaches of fundamental human rights will not be recognised, even in a sphere which is as much a matter for individual sovereign choice as a person's nationality.
"In these circumstances, there was nothing precarious or delicate, and nothing subject to diplomacy, which judicial adjudication might threaten; there could be no embarrassment to diplomatic relations, no casus belli, and nothing to vex the peace of nations in judicial investigation. On the contrary, the Security Council resolutions had made clear to all its member states that they were not to recognise Iraq's attempt to annex Kuwait, that that annexation was null and void, and that Iraq bore responsibility for loss caused by its invasion. Moreover, the Berman letter provided an opportunity for the executive branch of government to make known to the judicial branch any concern it might have felt about the non-justiciability of the issues raised by KAC's claim, and to do so against the background of the speech of Lord Wilberforce in the Buttes Gas case [1982] AC 888. In the event the letter emphasised Her Majesty's Government's commitment to its obligations under the UN Resolutions"
"24 On behalf of IAC Mr Donaldson submitted that the public policy exception to the recognition of provisions of foreign law is limited to infringements of human rights. The allegation in the present action is breach of international law by Iraq. But breach of international law by a state is not, and should not be, a ground for refusing to recognise a foreign decree. An English court will not sit in judgment on the sovereign acts of a foreign government or state. It will not adjudicate upon the legality, validity or acceptability of such acts, either under domestic law or international law. For a court to do so would offend against the principle that the courts will not adjudicate upon the transactions of foreign sovereign states. This principle is not discretionary. It is inherent in the very nature of the judicial process: see Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888, 932. KAC's argument, this submission by IAC continued, invites the court to determine whether the invasion of Kuwait by Iraq, followed by the removal of the ten aircraft from Kuwait to Iraq and their transfer to IAC, was unlawful under international law. The courts below were wrong to accede to this invitation.
25 My Lords, this submission seeks to press the non-justiciability principle too far. Undoubtedly there may be cases, of which the Buttes case is an illustration, where the issues are such that the court has, in the words of Lord Wilberforce, at p 938, "no judicial or manageable standards by which to judge [the] issues":
"the court would be asked to review transactions in which four sovereign states were involved, which they had brought to a precarious settlement, after diplomacy and the use of force, and to say that at least part of these were 'unlawful' under international law."
This was Lord Wilberforce's conclusion regarding the important inter-state and other issues arising in that case: see his summary, at p 937.
26 This is not to say an English court is disabled from ever taking cognisance of international law or from ever considering whether a violation of international law has occurred. In appropriate circumstances it is legitimate for an English court to have regard to the content of international law in deciding whether to recognise a foreign law. Lord Wilberforce himself accepted this in the Buttes case, at p 931D. Nor does the "non-justiciable" principle mean that the judiciary must shut their eyes to a breach of an established principle of international law committed by one state against another when the breach is plain and, indeed, acknowledged. In such a case the adjudication problems confronting the English court in the Buttes litigation do not arise. The standard being applied by the court is clear and manageable, and the outcome not in doubt. That is the present case.
27 Against this background I return to the question whether as a matter of public policy an English court ought to decline to recognise RCC Resolution 369 as effectual to divest KAC of its title to its aircraft. Mance J and the Court of Appeal said that an English court should so decline. I agree with them.
"The second ground for the Court of Appeal's decision on Resolution 369, although not directly supported by any earlier precedent, is much stronger. It invoked public policy as a justification for not applying otherwise applicable principles of private international law. The foundation of it is that the annexation of Kuwait, and Resolution 369, was a flagrant breach of international law. If any proof was required, the Security Council Resolutions establish this fact beyond doubt. In any event, the Iraqi state unequivocally accepted that in annexing Kuwait and passing Resolution 369 it had acted in breach of international law. This is the context against which IAC argued, relying on Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888, that "the issues" are not justiciable. Counsel for IAC relied on what he described as an absolute rule in the Buttes case that courts in England will not adjudicate upon acts done abroad by virtue of sovereign authority: p 932E-F, per Lord Wilberforce. For my part this is too austere and unworkable an interpretation of the Buttes case. There were rival claims by rulers to part of the continental shelf and there was a dispute about the motives of a foreign ruler: p 937C-H. Lord Wilberforce found that there were "no judicial or manageable standards by which to judge these issues" and "the court would be in a judicial no-man's land": p 938B. He added "it is not to be assumed that these matters have now passed into history, so that they now can be examined with safe detachment": at p 938C. Buttes was an unusual case decided on a striking out application and without the benefit of a Foreign Office certificate. But reading Lord Wilberforce's judgment as a whole I have no doubt that counsel for IAC is wrong in seeking to derive from it the categorical rule put forward. In any event, in the present case there is no difficulty in adjudicating on Iraq's gross breaches of international law. There is no relevant issue: Iraq accepted the illegality of the annexation and of Resolution 369. In agreement with the Court of Appeal I would reject the argument based on non-justiciability."
"Justiciability
135 Important questions of principle are raised by the highly unusual facts of this case. There is no doubt as to the general effect of the rule which is known as the act of state rule. It applies to the legislative or other governmental acts of a recognised foreign state or government within the limits of its own territory. The English courts will not adjudicate upon, or call into question, any such acts. They may be pleaded and relied upon by way of Defence in this jurisdiction without being subjected to that kind of judicial scrutiny. The rule gives effect to a policy of "judicial restraint or abstention": see Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888, 931F-934C per Lord Wilberforce. As the title to moveable property is determined by the lex situs, a transfer of property effected by or under foreign legislation in the country where the property is situated will, as a general rule, be treated as effective by English law for all relevant purposes.
136 It would clearly be possible for a "blue pencil" approach to be taken to Resolution 369, by reading it down so that it applied only to the property of KAC that was situated at the time of the resolution within its own territory. The normal rule is that legislative action applied to property within the territorial jurisdiction will be internationally recognised, despite the fact that it has been combined with action which is unenforceable extraterritorially. If this approach is adopted, that part of Resolution 369 which vested title in the aircraft in IAC will provide IAC with a complete Defence to this action. Its legality in international law will not be justiciable in these proceedings.
137 IAC accepts however that the normal rule is subject to an exception on grounds of public policy. The proposition which it accepts is that the exception applies if the foreign legislation constitutes so grave an infringement of human rights that the courts of this country ought to refuse to recognise the legislation as a law at all: Oppenheimer v Cattermole [1976] AC 249, 278, per Lord Cross of Chelsea. The proposition which it disputes is that the public policy exception extends to breaches of international law. IAC's argument is presented as one of principle. Arguments directed to breaches of international law are non-justiciable. The public policy exception must be tightly restricted. The only exception that has been judicially recognised is the human rights exception. As that exception is not invoked in this case, it has a complete Defence to these proceedings under the act of state rule.
138 It is clear that very narrow limits must be placed on any exception to the act of state rule. As Lord Cross recognised in Oppenheimer v Cattermole [1976] AC 249, 277-278, a judge should be slow to refuse to give effect to the legislation of a foreign state in any sphere in which, according to accepted principles of international law, the foreign state has jurisdiction. Among these accepted principles is that which is founded on the comity of nations. This principle normally requires our courts to recognise the jurisdiction of the foreign state over all assets situated within its own territories: see Lord Salmon, at p 282. A judge should be slow to depart from these principles. He may have an inadequate understanding of the circumstances in which the legislation was passed. His refusal to recognise it may be embarrassing to the executive, whose function is so far as possible to maintain friendly relations with foreign states".
"It is not open to the court to go behind what has been enacted by the legislature, and to enquire how the enactment came to be made, whether it arose out of incorrect information or, indeed, by actual deception by someone on whom reliance was placed by it. The court must accept the enactment as the law unless and until the legislature itself alters such enactment, on being persuaded of its error".
FURTHER TRANSFERS OUT OF THE ZAMTROP ACCOUNT
| DEFENDANT | BANK | CASH |
| Meer Care & Desai | 7,422,489 | - |
| Cave Malik | 2,127,822 | - |
| Dr Chiluba | 140,847 | 11,000 |
| Xavier Chungu | 164,775 | 90,453 |
| Atan Shansonga | 1,372,379 | 43,383 |
| Stella Chibanda | 16,847 | - |
| Aaron Chungu | - | - |
| Bimal Thaker | 3,770 | - |
| Faustin Kabwe | 27,129 | 18,962 |
| Irene Kabwe | 327,512 | - |
| Francis Kaunda | 121,822 | - |
| Boutique Basile | 879,400 | - |
| Nebraska Services Ltd | 99,990 | - |
| MISSL Associates Ltd | - | - |
| Hearnville Estates Ltd | - | - |
| Jarban SA | 700,244 | - |
| Raphael Soriano | - | - |
| Belsquare Residence NV | - | - |
| Roland Cracco | - | - - |
| Robert Standaert | 391,138 | - |
GT altered those figures for MCD, CM and AS in the light of further questions put to Miss Pincott. The revised figures are $7,021,020.17 (MCD), $2,127,822 (CM) and $1,415,762 (AS).
(G) EVENTS LEADING TO DISCOVERY
OPEN PANDORA'S BOX AND TAKE THE MONEY
FJT'S PRESIDENCY ENDS
(H) CRITICISMS OF AGZ'S EVIDENCE
MR HAMUNJELE
ALLEGATIONS MADE ABOUT VERACITY OF THIRD PARTIES
(I) ZAMTROP ACCOUNT MONIES ARE GOVERNMENT MONIES
(1) The Wilbain transfers of $643,966.
(2) The Office of the President transfers of $743,819.
(3) The Citibank transfers totalling $1,230,000.
The latter transfers are significant because they were used to fund a cash sum of $250,000 paid to AS on 30th January 1997, a cash payment of $200,000 to Mr Zulu and $500,000 paid to MCD on 3rd March 1997.
(4) The MCD transfer of $323,968. Of that $99,968 were used to fund the payment to Basile. The bulk of the balance was used to restore the Zamtrop account from its overdrawn level of $270,947.
(5) The CM transfer of $449,995.
(6) The Lubbock Fine transfers of $599,982.
PURPOSES FOR WHICH PAYMENTS USED
"it is always open to a court, even after the kind of prolonged inquiry with a mass of expert evidence which took place in this case, to conclude, at the end of the day, that the proximate cause of the ship's loss, even on a balance of probabilities, remains in doubt, with the consequence that the ship-owners have failed to discharge the burden of proof which lay upon them" (Rhesa Shipping Co S.A. v Edmunds [1985] 1 WLR 948 at 951 see per Lord Brandon)
PERMASE GENERAL
(J) ACCESS FINANCIAL SERVICES LIMITED (AFSL)
ENOCK MWALE
(K) LEGAL ISSUES
CONSPIRACY
"106. The judge held that all three defendants were liable for the tort of conspiracy to injure by unlawful means. He held that under English law they were parties to a single actionable conspiracy wrongly to misappropriate the claimants' assets and that the damage caused by that conspiracy extended to the whole of the losses suffered by the claimants, save that Captain Stafford was not liable for the losses before September 1986 because he did not join the conspiracy until then. Mr Brodie submitted that the judge made a number of errors in his approach to the principles governing the tort of conspiracy to injure. He accepted that the tort of conspiracy is known to English law, but submitted that it was subject to important limitations.
107. It is common ground that there are two types of actionable conspiracy, conspiracy to injure by lawful means and conspiracy to injure by unlawful means. The first is sometimes described simply as a conspiracy to injure and the second as a conspiracy to use unlawful means (see eg Clerk and Lindsell on Torts (17th edn, 1995) pp 1267–1268, paras 23–76). In our view they are both conspiracies to injure and their ingredients are the same, with one crucial difference. In both cases there must be conspiracy to injure the claimant, but in the first case (in which the means employed would otherwise be lawful) the predominant purpose of the conspiracy must be to injure the claimant whereas in the second case, although the defendant must intend to injure the claimant, injury to the claimant need not be his predominant purpose.
108. We shall treat them as different torts, although, as it seems to us, they are better regarded as species of the same tort. It matters not. For present purposes we would define them as follows. (1) A conspiracy to injure by lawful means is actionable where the claimant proves that he has suffered loss or damage as a result of action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him, where the predominant purpose of the defendant is to injure the claimant. (2) A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the predominant purpose of the defendant to do so. We shall call them a 'lawful means conspiracy' and an 'unlawful means conspiracy' respectively.
109. Those principles seem to us to be consistent with the authorities, including in particular Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1981] 2 All ER 456, [1982] AC 173 and Lonrho plc v Fayed [1991] 3 All ER 303, [1992] 1 AC 448, which analyse the leading cases. (See also for example Rookes v Barnard [1964] 1 All ER 367 at 400, [1964] AC 1129 at 1209 where Lord Devlin drew a clear distinction between the two types of conspiracy.)
110. It is important to note that the tort of conspiracy to injure by unlawful means is different in significant respects both from the crime of conspiracy and from the law of contract. A criminal conspiracy is in essence an agreement to commit a crime and, as such, is complete when the agreement is made, whether or not it is carried out. For this reason care must be taken in considering decisions in criminal cases where (as here) the question is whether the tort of conspiracy was committed. Lord Diplock put it in this way in the Shell Petroleum case:
'Regarded as a civil tort, however, conspiracy is a highly anomalous cause of action. The gist of the cause of action is damage to the plaintiff; so long as it remains unexecuted, the agreement, which alone constitutes the crime of conspiracy, causes no damage; it is only acts done in execution of the agreement that are capable of doing that. So the tort, unlike the crime, consists not of agreement but of concerted action taken pursuant to agreement.' (See [1981] 2 All ER 456 at 463, [1982] AC 173 at 188.)
In that passage Lord Diplock appears to have been referring to both types of conspiracy. The essence of the unlawful means conspiracy is injury to the claimant as a result of an unlawful act or acts where two or more people have combined to cause the injury. It is not necessary that every overt act is done by every conspirator, but the act must be done pursuant to the conspiracy or combination.
111. A further feature of the tort of conspiracy, which is also found in criminal conspiracies, is that, as the judge pointed out (at p 124), it is not necessary to show that there is anything in the nature of an express agreement, whether formal or informal. It is sufficient if two or more persons combine with a common intention, or, in other words, that they deliberately combine, albeit tacitly, to achieve a common end. Although civil and criminal conspiracies have important differences, we agree with the judge that the following passage from the judgment of the Court of Appeal Criminal Division delivered by O'Connor LJ in R v Siracusa (1990) 90 Cr App R 340 at 349 is of assistance in this context:
'Secondly, the origins of all conspiracies are concealed and it is usually quite impossible to establish when or where the initial agreement was made, or when or where other conspirators were recruited. The very existence of the agreement can only be inferred from overt acts. Participation in a conspiracy is infinitely variable: it can be active or passive. If the majority shareholder and director of a company consents to the company being used for drug smuggling carried out in the company's name by a fellow director and minority shareholder, he is guilty of conspiracy. Consent, that is agreement or adherence to the agreement, can be inferred if it is proved that he knew what was going on and the intention to participate in the furtherance of the criminal purpose is also established by his failure to stop the unlawful activity.'
Thus it is not necessary for the conspirators all to join the conspiracy at the same time, but we agree with the judge that the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the acts complained of. In a criminal case juries are often asked to decide whether the alleged conspirators were 'in it together'. That may be a helpful question to ask, but we agree with Mr Brodie that it should not be used as a method of avoiding detailed consideration of the acts which are said to have been done in pursuance of the conspiracy.
112. In most cases it will be necessary to scrutinise the acts relied upon in order to see what inferences can be drawn as to the existence or otherwise of the alleged conspiracy or combination. It will be the rare case in which there will be evidence of the agreement itself. Curiously this is such a case, although it appears to us that in crucial respects it is also necessary to draw inferences as to the extent of the agreement from what happened after it. Thus the essential nature of the agreement can be seen in part from the evidence of Mr Al Bader and Captain Stafford, although, especially in the case of Captain Stafford, the extent of the agreement will depend upon inferences to be drawn both from the surrounding circumstances and subsequent events."
(1) Each conspirator was a party to the alleged combination or common design.
(2) Unlawful means were used.
(3) There was an intention to injure but that need not be the dominant purpose.
(4) It is not necessary to show that there is anything in the nature of an express agreement whether formal or informal. It is sufficient if two or more persons combine with a common intention albeit tacitly to achieve a common end.
(5) It is usually quite impossible to establish when or where there was an initial agreement and when or where other conspirators were recruited.
(6) Participation in a conspiracy is infinitely variable:- it can be active or passive. Also consent can be inferred if it is proved that a person knew what was going on and thus the intention to participate in the furtherance of the criminal purpose is also established by his failure to stop the unlawful activity. I observe that in my view that is particularly important as regards MCD, CM, AS.
(7) Scrutiny of all acts relied upon in order to see what inference can be drawn is essential. I have already emphasised in this judgment of the need to consider the actions of all the Defendants separately in the light of their knowledge and be wary of applying hindsight.
"In the case of most conspiracies to injure by tortious means it will be clear from the acts of the conspirators that they must have intended to injure the Claimant. In the case of a conspiracy to defraud by wholesale misappropriation it would be absurd to argue that the conspirators did not intend just that".
"On the Judge's findings of fact the Defendants' principal purpose was no doubt to line their own pockets, but they cannot be heard to say that they did not intend to injure the Claimants or that their acts were not aimed at the Claimants".
"132. For these reasons we reject the submission that the claimants were not entitled to claim damages for conspiracy, but we stress that that does not mean that their case must not be properly proved. That involves proving each of the elements in the tort, including the nature of the agreement, the unlawful means alleged, each unlawful act relied upon as causing loss and the fact that each such "
[2000] 2 All ER (Comm) 271 at 320
act was carried out pursuant to the conspiracy. The authorities show that the claimants must indeed prove those facts (see eg Bird v O'Neal [1960] 3 All ER 254, [1960] AC 907 and Huntley v Thornton [1957] 1 All ER 234, [1957] 1 WLR 321). In the former case Lord Tucker said that the defendants might have been held liable—
'by looking to see what part, if any, each appellant had played in connexion with each specific incident when threats or intimidation had been used and then considering whether such part necessarily compelled the inference that the particular respondent was party to a conspiracy to use unlawful means to further the object of the picketing and thereby create a nuisance.' (See [1960] 3 All ER 254 at 260, [1960] AC 907 at 920–921.)
In Huntley v Thornton Harman J said:
'No doubt it is not necessary that all the conspirators should join at the same time, but it is, I think, necessary that they should know all the facts and entertain the same object.' (See [1957] 1 All ER 234 at 251, [1957] 1 WLR 321 at 343.)
133. It does not follow from the above that each defendant must personally take part in every act so long as it is done pursuant to the agreement. Moore-Bick J put the matter in this way (at p 126):
'Of course, as in any case of this kind, it is necessary to examine the evidence with care to see whether each defendant was involved in each fraudulent transaction, but once one reaches the conclusion that the defendants combined to steal from their employer by whatever means might present themselves, the question in relation to any particular scheme or enterprise in which only one or some of them can be shown to have directly participated is whether that enterprise fell within the overall scope of their common design. If several people agree to enable each other to steal from their employer, lending their support in different ways at different times and taking different shares of the proceeds (or even each retaining for himself what he takes), each of them is party to the agreement pursuant to which all the thefts take place. In those circumstances there is in my judgment no need for each to be fully aware of the circumstances of each theft in order for him to be liable as a conspirator provided that the theft in question falls within the scope of their agreement.'
We agree with those conclusions but stress the need for proof to the relevant standard at every stage.
136. The judge approached the matter correctly in principle. He considered what agreement was made at the outset, partly by reference to the evidence about what was said at the time and partly by inference from what happened thereafter. He then asked himself whether each of the transactions which made up the four schemes was carried out pursuant to the conspiracy and concluded that the defendants were all parties to a single actionable conspiracy. He then considered whether Captain Stafford at any stage left the conspiracy. In our judgment that was the correct approach, although (as explained below) we have reached the conclusion that in one important respect the judge did not correctly identify the true nature of the conspiracy and that the question whether Captain Stafford left the conspiracy did not have to be considered. We do not consider that there was any unfairness in the way that the judge approached the case or, indeed, in the way in which it was advanced at the trial. The defendants had no doubt at each stage what case they had to meet.
"147. He considered the principles relevant to withdrawal from a conspiracy of this kind (at pp 136–139) and then concluded that Captain Stafford had not effectively withdrawn in these terms (at pp 139–140):"
'There is no evidence that Captain Stafford received any money after he left Kuwait other than the sum of $US25,000 which he was paid for the assistance he gave to KOTC at the time of the Iraqi invasion, but he has continued to maintain close links with Mr Al Bader who has funded his Defence to this action and it would hardly be surprising if someone with as much knowledge as he had of a dishonest conspiracy continued to receive some benefits from it. The evidence does not enable me to make a finding that he has done so, but equally, I am unable to go so far as to make a positive finding that he has not. The frauds based on falsified Brown & Root invoices continued for a few months after his departure, but they were merely a continuation of a method which had already been in use for a year and did not involve any departure from the plan as it had by then developed. The main frauds which occurred after his absence involved the purchases of additional second-hand tankers and the four new buildings (scheme II) and the diversion of the war risk premium rebates to Clarksons (scheme III). All
[2000] 2 All ER (Comm) 271 at 326
those frauds were within the contemplation of the original conspiracy, but even if there were any doubt about that, they were certainly within the contemplation of the conspiracy as it had developed by September 1989. It is not necessary for Captain Stafford to have taken an active role in order for him to have remained a party to the conspiracy, much less for him to remain liable for the loss which the plaintiffs have suffered as a result of its continuing implementation by Mr Al Bader and Mr Qabazard. It is sufficient that he should have continued to play a part by keeping silent and later by helping to protect Mr Al Bader and Mr Qabazard when Mr Al Roumi's investigations began, despite the fact that he had the means to disclose both the existence of the conspiracy and much of what had been done pursuant to it. For these reasons I have reached the conclusion that Captain Stafford did not effectively withdraw from the conspiracy when he retired to Australia. His active participation between September 1986 and September 1989 together with his subsequent silence remained as one of the effective causes of the loss which the plaintiffs suffered as a result of its continued implementation by Mr Al Bader and Mr Qabazard.'
148. It is plain from that passage that the judge held that Captain Stafford was liable after he left Kuwait because he had not withdrawn from the conspiracy. It follows that his liability in this regard depended crucially upon the finding that the agreement or conspiracy was to defraud the claimants whenever the opportunity arose. Thus, however long into the future a particular defendant committed an act defrauding the claimants, all the defendants were liable for the loss sustained as a result because the act was committed pursuant to the conspiracy. We have reached the conclusion that this part of the judge's reasoning cannot be supported. In our judgment, neither the evidence of the agreement in September 1986 (or indeed in December 1985) nor the inferences which could properly be drawn from subsequent events justified the conclusion that Captain Stafford agreed that he would continue to take any part in the conspiracy after he had left Kuwait and the employment of KOTC.
154. In these circumstances we have reached the conclusion that none of the facts relied on by Mr Malins supports the conclusion that Captain Stafford ever agreed to help in defrauding the claimants after he left Kuwait. We do not think that silence or subsequent cover-up rendered him liable as a conspirator in the absence of evidence that he either played a part in, or received the proceeds of, any later acts of misappropriation on the part of Mr Al Bader or Mr Qabazard. The conclusions reached by the judge in the passage quoted in para 147 show that there was no such evidence."
155. It follows that we need not concern ourselves further with a general consideration of the doctrine of 'withdrawal' from a common enterprise which has given rise to difficulty in the field of criminal law and does not readily
[2000] 2 All ER (Comm) 271 at 328
transpose into the field of civil actions for conspiracy. It also follows that Captain Stafford's appeal must be allowed in part unless there is new evidence sufficient to support the judge's conclusion that he should be liable in respect of losses sustained by the claimants after he left Kuwait. Mr Malins submitted that there is such evidence, to which we now turn".
"In my judgment, no honest lawyer would have implemented the instructions which Mr Folchi recounts in this transaction unquestioningly and uncomprehendingly in the manner which Mr Folchi did. There can be no question about Mr Folchi's competence. An honest lawyer in his position would, to safeguard himself and his clients, have insisted on obtaining a proper understanding and assurances regarding the situation (quite possibly in writing despite the supposed confidentiality of what was occurring). If his clients would not give him this, he would have refused to become involved. I do not on the material before me conclude that Mr Folchi became knowingly party to the scheme to injure GT or THL. But I do conclude that Mr Folchi received and complied with instructions which conflicted, on their face and in the most obvious way, with the most fundamental of fiduciary duties, to keep private and corporate affairs and monies separate. Despite any confidence Mr Folchi may have had in his clients and the distinction of the officers whose accounts were in question and despite the prevalence of complementary payments, I cannot view it as honest conduct for any lawyer to facilitate indirect payments from one's client company's accounts to unknown accounts in the names of the client company's directors, without any clear understanding why this should be necessary or appropriate. Any other conclusion would be an invitation to fraud. Directors of previously impeccable reputation can succumb to the temptations of their stewardship. Any lawyer in Mr Folchi's position must be taken to be aware of this risk, and I have no doubt that Mr Folchi was as aware of it."
BREACH OF FIDUCIARY DUTY
DISHONEST ASSISTANCE
"In Barlow Clowes, Lord Hoffmann explained that the majority in Twinsectra considered that a solicitor in those circumstances who had failed to appreciate that the undertaking had given rise to a trust had nevertheless complied with objective honesty standards, while Lord Millett considered that the solicitor had been objectively dishonest not withstanding the failure to realise the legal implications of the transaction. If that is right, it was unsporting of the majority to have let Lord Millett waste so many pages arguing against a straw man"
"(A trustee's responsibility) may no doubt be extended in equity to others who are not properly trustees, if they are…actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But …. Strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a court of equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees."
"A liability in equity to make good resulting loss attaches to person who dishonestly procures or assists in a breach of trust or fiduciary obligation. It is not necessary that, in addition, the trustee or fiduciary was acting dishonestly, although this will usually be the case where the third party who is assisting him is acting dishonestly" [1995] 2 AC 378, 392.
"This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety."
However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another's property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour.
In most situations there is little difficulty in identifying how an honest person would behave. Honest people do not intentionally deceive others to their detriment. Honest people do not knowingly take others' property. Unless there is a very good and compelling reason, an honest person does not participate in a transaction if he knows it involves a misapplication of trust assets to the detriment of the beneficiaries. Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless. However, in the situations now under consideration the position is not always so straightforward. This can best be illustrated by considering one particular area: the taking of risks."
"In my opinion Lord Nicholls was adopting an objective standard of dishonesty by which the Defendant is expected to obtain the standard which would be observed by an honest person placed in similar circumstances. Account must be taken of subjective considerations such as the Defendant's experience and intelligence and his actual state of knowledge at the relevant time. But it is not necessary that he should actually have appreciated that he was acting dishonestly; it is sufficient that he was".
That seems to me to be right because otherwise one allows a party to set his own test for dishonesty.
"… the simple fact of it seems to be that those who thought that the majority in Twinsectra interpreted the test for dishonesty as a combined test, had misunderstood the majority's decision. It might equally be said that the majority and minority in Twinsectra had also misunderstood what each other meant:- Lord Hutton and Lord Hoffmann misunderstood what Lord Millett held and vice versa. Everyone agreed that the test was an objective one i.e. the test did not require any inquiry into the Defendant's subjective assessment of standards of honesty".
I agree with his conclusions "the test is an objective one, but an objective one which takes account of the individuals in questions characteristics". I agree (as he really said) it is not appropriate to draw analogies with other areas. He went on to say "it is a test which requires a court to assess an individual's conduct according to an objective standard of dishonesty. In doing so, the court has to take account as to what the individual knew; his experience, intelligence and reasons for acting as he did. Whether the individual was aware that his conduct fell below the objective standard is not part of the test".
"i) A dishonest state of mind on the part of the person assisting is required in the sense that that person's knowledge of the relevant transaction had to be such as to render his participation contrary to normally acceptable standards of honest conduct.
ii) Such a state of mind may involve knowledge that the transaction is one in which he cannot honestly participate (eg a misappropriation of other people's money), or it may involve suspicions combined with a conscious decision not to make enquiries which might result in knowledge.
iii) It is not necessary for the Claimants to show that the person assisting knew of the existence of a trust or fiduciary relationship between the Claimants and the First to Third Defendants and/or the Claimants' monies to Trusty International via the [Bank] involved a breach of that trust or fiduciary relationship."
" First, that a Defendant had the requisite knowledge; secondly, that, given that knowledge, the Defendant acts in a way which is contrary to normally acceptable standards of honest conduct (the objective test of honesty or dishonesty); and thirdly, possibly, that the Defendant must in some sense be dishonest himself (a subjective test of dishonesty) which might, on analysis, add little or nothing to knowledge of the facts which, objectively, would make his conduct dishonest."
"(1) It is for the court to determine what are the normally acceptable standards of honest conduct.
(2) The fact that a Defendant genuinely believes that he has not fallen below the normally acceptable standards of honest conduct is irrelevant"
That decision did not have the benefit of the Court of Appeal's observations in Abacha. I note that Abacha was delivered on the first day of the hearing of the case before Kitchin J.
LIMITATION
LIMITATION GENERALLY
"32.(1)… Where in the case of any action for which a period of limitation is prescribed by this Act, either –
"(a) the action is based upon the fraud of the Defendant; or (b) any relevant fact to the Plaintiff's right of action has been deliberately concealed from him by the Defendant;…
the period of limitation shall not begin to run until the Plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it."
"References in this subsection to the Defendant include references to the Defendant's agent and to any person through whom the Defendant claims and his agent."
"(2) For the purpose of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty".
(1) Is AGZ's claim based on fraud?
(2) Has the cause of action been deliberately concealed?
(3) When did the Republic discover it?
(4) Could the Republic have discovered it earlier than the date they rely on (January 2002) with reasonable diligence?
"I only wish to add that I would not adopt Crane J's suggested amendment of what Millett LJ said in [Paragon]…[He] may possibly have overlooked that Millett J's observation about exceptional circumstances was, in substance, a double negative. Whether that is the correct explanation or not, I would not agree with what Crane J said". Aldous LJ agreed.
"…It is inherent in Section 32 (1) of the 1980 Act, particularly considering the way Millett LJ expressed himself in [Paragon] that there must be an assumption that the Claimant desires to discover whether or not there has been a fraud…..further, the concept of "reasonable diligence" carries with it, as the Judge said, the notion of a desire to know, and, indeed, to investigate"
I observe that Neuberger LJ's judgment was a dissenting judgment. Kay and Carnworth LJ decided the case on the basis that no limitation issue arose.
"I accept that one must be very careful about implying words into a statutory provision, and it can be said that the Judge's first step involves doing just that. However, it appears to me that the Judge was not seeking to imply words, for a new concept, into the statutory provision. He was explaining what was involved in the process of deciding whether a Claimant could, with reasonable diligence, have discovered the fraud which it now seeks to plead"
"[commenting on Millett LJ's observations in Paragon] With respect, it appears to me that the word "exceptional" should be omitted: it raises the standard too high, as both Counsel now agree. Otherwise these were remarks, although made obiter are of great assistance"
(L) INDIVIDUAL DEFENDANTS: VARIOUS ISSUES
(1) All the main actors appear at the outset namely April – October 1995.
(2) Cover was provided for the operation in terms of the Wilbain/Systems memorandum of 6th June 1995 and the blanket of security. It gave an apparent contractual justification for making payments but discouraged challenge and/or investigation under the cloak of ZSIS security.
(3) All Defendants (save BT) accept that they were aware they were dealing with Government money.
(4) A means of obtaining Government authority for the payment of funds in the terms of Mr Penza's consent was secured.
(5) A relationship was formed between XFC and the newly established AFSL.
(6) The Zamtrop account was reconstituted to receive large sums of money and effectively operated under the sole control of XFC. That account was largely fed by MOF money and SC ensured there was no serious investigation as to the justification for payments into that account.
(7) The account was placed by the President under the Finance Charter which limited security scrutiny to himself, XFC and Mr Siame the Auditor General. He was completely passive.
(8) AS and the two solicitors were recruited in order to disguise the source of the money.
XAVIER F CHUNGU (XFC) (D4)
DR CHILUBA (FJT) (D3)
STELLA MUMBA CHIBANDA (SC) (D6)
FAUSTIN KABWE (FK) (D9)
AARON CHUNGU (AC) (D7)
FRANCIS KAUNDA (FRANCIS K) (D11)
"[for the purpose of establishing liability for knowing receipt] the Plaintiff must show, first a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipt by the Defendant of assets which are traceable as representing the assets of the Plaintiff; and thirdly knowledge on the part of the Defendant that the assets are traceable to a breach of fiduciary duty".
IRENE KABWE (IK) (D10)
BOUTIQUE BASILE (BASILE) (D12)
IQBAL MEER, NAYNESH DESAI AND MEER CARE & DESAI (IM, ND & MCD) (D1)
CHURCHILL HOTEL AGREEMENT
(1) XFC asked him to act for AFSL who would be performing various services for ZSIS in the receipt and disbursement of Government monies.
(2) He assumed involvement of MCD was required for reasons of discretion in the conduct of the affairs of ZSIS although he does not suggest he was given any explanation for using MCD.
(3) He agreed to assist AFSL (and thus the Republic he believed) in the receipt and disbursement of these monies.
(1) He kept no record of the meeting despite its importance and despite the obvious need to protect himself.
(2) There was no correspondence or letter of instruction from XFC or FK. It could be said that that was because of the secrecy but I do not accept that. There is no reason why there cannot be written communications without going into the detail but which confirm the position.
(3) IM concealed the Churchill Hotel Agreement from ND.
(4) He never questioned FK's instructions as to how the money was disbursed and does not assert that any of the disbursements had any underlying legal purpose (save the Jarban acquisitions) and even then the acquisition was suspicious in the manner it was carried out.
(5) He never asked why any particular transfer was being effected.
(6) He never explained with any specificity when ND was asked to sign authorisations what the purpose of the transactions were.
I shall arrive in London on December 7th, 1995 and plan to leave for Harare on the evening of the 8th. I hope you will be in London at the time so we can meet".
HARPTREE HOLDINGS LTD
FURTHER EVIDENCE OF DISHONESTY
"have advised [CM] that Harptree is our client and not Access and we will act on the instructions of FK who is authorised on behalf of Harptree and will act in accordance with his instructions dated 15th October 2002".
BLUE CARD WARNINGS
"In these circumstances, Mr D'Cruz submitted that to describe Mr Faronbi's laxity in opening the Trusty International account or permitting its early operation merely as inefficiency or oversight was simply to fly in the face of the suspicions entertained by Mr Faronbi as to the essential honesty of Messrs Ibrahim and Saminu at the time.
In my judgment, these are powerful submissions. It seems to me that once Mr Faronbi suspected Trusty International's directors of participating in money laundering, on the basis of the judge's clear findings of what Mr Faronbi was aware of, the distinction which the judge then drew between Mr Faronbi's suspicions of the business in general and his ignorance about the particular transactions in question in this case becomes a thin line whose value for the purposes of insulating Mr Faronbi and thus the Bank from the necessary complicity is highly uncertain. It is one thing to be negligent in failing to spot a possible money launderer, providing the negligence does not extend to shutting one's eyes to the truth. It is another thing, however, to have good grounds for suspecting money laundering and then to proceed as though one did not. Money laundering is a serious crime, for the very reason that ex hypothesi its subject matter is the proceeds of crime. It is true that such proceeds are not necessarily those of a breach of trust – they could be the proceeds of drug dealing. But I am doubtful that that possibility provides any protection where there is a breach of trust. It is also true that the growing concern now experienced about money laundering and the international precautions now taken against it must be viewed in the context of public policy rather than on the level of an equitable tort designed to provide remedies in the civil law against knowing assistance in breach of trust. Nevertheless, I do not see why a bank which has, through its managers, a clear suspicion that a prospective client indulges in money laundering, can be said to lack that knowledge which is the first element in the tort".
(1) Unusual settlement requests. A solicitor was urged to be careful about payments by third party, cheque or money transfer.
(2) Unusual instructions. Solicitors were urged to take care in dealing with a client who has no discernable reason for using the firm's service e.g. clients with distant addresses who could find the same service nearer their home base.
(3) Large sums of cash. Solicitors were urged to be cautious when requested to hold large amounts of cash in their client account either pending further instruction from the client or for no other purpose than for onward transmission to a third party.
(4) The secretive client. A person or client is reluctant to provide details of his identity should be carefully considered.
NAYNESH DESAI (ND)
"The ledger account is entitled "Systems Innovations Inc/General" although the hard copy file is entitled "Systems Innovations Inc re General/Access" it was of course AFSL and not Systems Innovations that was my client, and the title of both the hard copy file and the ledger account is somewhat misleading"
IM also had to explain how FK referred to Systems as "your clients" [i.e. IM's client] he had done that with Harptree (see above). IM apparently missed the significance of this and attempts to put it down to FK's difficulty with the English language (paragraph 62). This account was reduced to zero (although further credits came in later) on 31st May 2000 as a result of an instruction from FK addressed to IM to pay £30,000 to AS. The instruction is "please make the following payment on behalf of your clients SYSTEMS INNOVATIONS INC". Both IM and ND authorise that on 1st June 2000. The remitter is identified as MCD. The remitter on IM's evidence was actually AFSL if his evidence above is accepted. According to the ledger the remitter ought to have been Systems. IM could not satisfactorily in my view explain why an AFSL ledger account was given the name of Systems. Nor was his explanation as to the misuse of language by FK satisfactory. There has been no explanation to why Systems had a client account with MCD. It is plain in my view that FK intended Systems to have a ledger account hence his instructions to make transfers on behalf of Systems. IM unquestioningly accepted FK's instructions to deal with the Systems ledger payments. He was unable (T33/19) to explain why Systems was remitting £30,000 to AS save it was on the instructions of FK.
"MR UDDIN: So when all these monies were coming in- $7,500,500 – you did not know which belonged to Access and which belonged to the State Intelligence Services
MR MEER: They all belonged to Access.
MR UDDIN: You would not be able to identify…..
MR MEER: We wouldn't be able to, no.
MR UDDIN: So you disbursed them as and how Mr Kabwe wanted.
MR DESAI: The only person who would know is Access because the money belonged to Access. Access would then say right, we want X to go here, Y to go somewhere else, because it is their money. At the point they receive it, it is their money"
"Where, by wrongful act or omission of a partner acting in the ordinary course of the business of the firm, or with the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable for the same extent as the partner so acting or omitting to act"
"[21] However, this latter fact does not of itself mean that the firm is exempt from liability for his wrongful conduct. Whether an act or omission was done in the ordinary course of a firm's business cannot be decided simply by considering whether the partner was authorised by his co-partners to do the very act he did. The reason for this lies in the legal policy underlying vicarious liability. The underlying legal policy is based on the recognition that carrying on a business enterprise necessarily involves risks to others. It involves the risk that others will be harmed by wrongful acts committed by the agents through whom the business is carried on. When those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged.
[22] This policy reason dictates that liability for agents should not be strictly confined to acts done with the employer's authority. Negligence can be expected to occur from time to time. Everyone makes mistakes at times. Additionally, it is a fact of life, and therefore to be expected by those who carry on businesses, that sometimes their agents may exceed the bounds of their authority or even defy express instructions. It is fair to allocate risk of losses thus arising to the businesses rather than leave those wronged with the sole remedy, of doubtful value, against the individual employee who committed the wrong. To this end, the law has given the concept of 'ordinary course of employment' an extended scope.
[23] If, then, authority is not the touchstone, what is? Lord Denning MR once said that on this question the cases are baffling: see Morris v C W Martin & Sons Ltd [1966] 1 QB 716, [1965] 2 All ER 725, 724 of the former report. Perhaps the best general answer is that the wrongful conduct must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm or the employer to third parties, the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm's business or the employee's employment. Lord Millett said as much in Lister v Hesley Hall Ltd [2001] UKHL 22, [2002] 1 AC 215, [2001] 2 All ER 769, 245 of the former published report. So did Lord Steyn, at pp 223-224 and 230. McLachlin J said, in Bazley v Curry (1999) 174 DLR (4th) 45, 62:
"the policy purposes underlying the imposition of vicarious liability on employers are served only where the wrong is so connected with the employment that it can be said that the employer has introduced the risk of the wrong (and is thereby fairly and usefully charged with its management and minimization)". (Emphasis added)
To the same effect is Professor Atiyah's monograph Vicarious Liability in the Law of Torts, (1967) p 171:
"The master ought to be liable for all those torts which can fairly be regarded as reasonably incidental risks to the type of business he carried on". (Emphasis added)
[24] In these formulations the phrases "may fairly and properly be regarded", "can be said", and "can fairly be regarded" betoken a value judgment by the court. The conclusion is a conclusion of law, based on primary facts, rather than a simple question of fact.
[25] This "close connection" test focuses attention in the right direction. But it affords no guidance on the type or degree of connection which will normally be regarded as sufficiently close to prompt the legal conclusion that the risk of the wrongful act occurring, and any loss flowing from the wrongful act, should fall on the firm or employer rather than the third party who was wronged. It provides no clear assistance on when, to use Professor Fleming's phraseology, an incident is to be regarded as sufficiently work-related, as distinct from personal: see Fleming, The Law of Torts, 9th ed (1998), p 427. Again, the well-known dictum of Lord Dunedin in Plumb v Cobden Flour Mills Co Ltd [1914] AC 62, 67, draws a distinction between prohibitions which limit the sphere of employment and those which only deal with conduct within the sphere of employment. This leaves open how to recognise the one from the other.
[26] This lack of precision is inevitable, given the infinite range of circumstances where the issue arises. The crucial feature or features, either producing or negativing vicarious liability, vary widely from one case or type of case to the next. Essentially the court makes an evaluative judgment in each case, having regard to all the circumstances and, importantly, having regard also to the assistance provided by previous court decisions. In this field the latter form of assistance is particularly valuable."
"[34] With this illustrative guidance I turn to consider on which side of the line is the present case. In drafting the consultancy agreements was Mr Amhurst acting solely on his own behalf? Or was he acting, although misguidedly, on behalf of the Amhurst firm? Had the claims against Mr Amhurst and the firm been tried to a conclusion the judge would have made findings of fact on what Mr Amhurst did, how he conducted his relevant business dealings with Mr Salaam and others, whether his conduct was dishonest, and whether he was acting for the firm or solely in his own interests. The court would have looked overall at all the circumstances. The court, and this House, would then have been properly equipped with the appropriate factual material with which to answer these questions. As it is, the only relevant plea in the particulars of claim is the compendious allegation that in doing what he did Mr Amhurst was acting in his capacity as a partner. In so far as this allegation is an allegation of fact, it is assumed to be correct.
[35] This is a factually meagre basis on which to decide a question of vicarious responsibility for assumed dishonest conduct. But there is no other factual material available. Perforce the House must do its best with this material. Proceeding on this footing, in this context 'acting in his capacity as a partner' can only mean that Mr Amhurst was acting for and on behalf of the firm, as distinct from acting solely in his own interests or the interests of others. He was seeking to promote the business of the firm.
[36] On this assumed factual basis, I consider the firm is liable for Mr Amhurst's dishonest assistance in the fraudulent scheme, the assistance taking the form of drafting the necessary agreements. Drafting agreements of this nature for a proper purpose would be within the ordinary course of the firm's business. Drafting these particular agreements is to be regarded as an act done within the ordinary course of the firm's business even though they were drafted for a dishonest purpose. These acts were so closely connected with the acts Mr Amhurst was authorised to do that for the purpose of the liability of the Amhurst firm they may fairly and properly be regarded as done by him while acting in the ordinary course of the firm's business".
"[40] I must also mention a passing dictum of Lord Herschell sitting in the Court of Appeal in Mara v Browne [1896] 1 Ch 199, 208, to the effect that it is not within the scope of the implied authority of a partner in a firm of solicitors that he should so act to make himself a constructive trustee, and thereby subject his partner to the same liability: see also A L Smith LJ at p 212, and Rigby LJ at p 214.
[41] These dicta do not assist the Respondents in the present case. The claim against Mr Amhurst is that he dishonestly procured or assisted Mr Livingstone to commit a breach of the fiduciary duty he owed Dubai Aluminium. Such misconduct by Mr Amhurst gives rise to a liability in equity to make good resulting loss: see: Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, [1995] 3 All ER 97, 392 of the former report. The liability of a firm of solicitors in respect of acts of a partner which render him liable in this way depends upon an application of the ordinary principles relating to vicarious liability. There is no special rule of law applicable to this head of equitable liability.
[42] I do not think Lord Herschell or the other members of the Court of Appeal can be taken as suggesting otherwise. Their statements in Mara v Browne should not be so read. In so far as Vinelott J did so read these statements, or did so decide, in In re Bell's Indenture [1980] 3 All ER 425, [1980] 1 WLR 1217, 1230 of the latter report, I respectfully consider he fell into error. The statements in Mara v Browne were directed at a different question: whether acting as a trustee, although not having been so appointed, can be regarded as conduct within the scope of the business of a solicitor. Whether the views expressed by the Court of Appeal on this question are still good law, having regard to later developments in the principles relating to vicarious liability, is a matter I prefer to leave for another occasion.
KNOWING RECEIPT WHERE NO BENEFICIAL RECEIPT
"Turning to the authorities on the Criminal Justice Act, there are several which make it clear that a conspirator who acts as the collector or banker for the other conspirators will be regarded as having obtained a benefit in the total sum passing through his hands. In one of the earlier cases to this effect, Currey [1995] 16 Cr. App. R (S) 421, Lord Taylor CJ emphasised that benefit "does not mean that he has retained property, simply that he has obtained it." (page 424)
In Patel [2002] 2 Cr App R (S) 10, [2001] EWCA Crim 2580, a sub-postmaster guilty of conspiracy was held to have benefited in the full amount obtained by using stolen benefit books, even though he had paid half the proceeds to an accomplice. Likewise in Metcalfe [2001] EWCA Crim 1343 this court expressly applied the decision in the drug trafficking case of Simpson (ante) so as to hold that benefit was what passed into the Defendant's possession, whether or not he then retained it: paragraphs 12 and 13"
"(4) for the purpose of this Part of this Act a person benefits from an offence if he obtains property as a result of or in connection with his commission and his benefit is the value of the property so obtained"
CAVE MALIK (CM) BIMAL THAKER (BT) AND BHUPENDRA BHAILAL THAKER (BBT) (D2)
"Q. Cave Malik & Co, can you explain to his Lordship what that comprised as that time, in October 1995?
A. Cave Malik & Co has been in existence in Zambia for about 30 years now. I started the London office having acquired an initial practice and then changed its name to Cave Malik in 1993/1994.
Q. How many partners were there in Cave Malik London?
A. There have only been 2 partners, that is myself and my father…."
CLAIMS AGAINST BT, BBT AND CM
BACKGROUND BT
CAVE MALIK & CO LONDON (CM)
"I ….. wish to change the name of that practice [Kehimker & Co] to [CM] …. The reason for doing so is my client base is derived from an overseas connection and in furtherance to the operations of Messrs Cave Malik & Co in Ndola, Zambia. Although the two practices will not be related save for the respective partners appearing as consultants on each others letter head for continuity and client connections, I feel that the usage of the above name may assist greatly..…."
"the position is that I have changed the trading name of this practice to that as mentioned above. In order to attract a wider client base I have considered it appropriate to include father's name as a salaried partner with no other entitlement to the practice equity or otherwise. This continues for all other purpose to be my own practice. In other words I could have put father's name under the heading of Consultant"
"I refer to your approach in regard to our professional activities in Zambia and append below a brief profile of the firm (emphasis added) which may be useful at your end
This firm is the only multinational practice with its office in Ndola and a branch in Lusaka and London (emphasis added) it has been in existence for over 40 years and has a substantial part of that period been actively involved in providing legal services to [ZCCM]……"
This letter is possibly supportive of there being one Cave Malik firm with 3 distinct offices. More significantly it shows in my view strongly that BBT was at the very least a partner in CM and furthermore was aware of what its activities were. However it is the only evidence which could support AGZ's contention there was one firm. All other evidence in my view is contrary to that, the Zambian and UK notepaper, the UK accounts and the various transactions show BT sometimes having a role in CMZ but as a consultant not a partner in one firm. There is no evidence showing a connection with CMZ which appears to have been run independently. I reject AGZ's case therefore that there was one firm with three offices in the UK and in Zambia. However this does not have any impact so far as I can see because of my finding that BBT was a partner in CM throughout its operations.
COMMENCEMENT OF ASSOCIATION WITH FK/AFSL
"I did not review it that way. My position was that I was a new practice, I was trying to generate some business, this was my first transaction. I was told it was part of a commission, and it was the commission, and on that basis I took those instructions knowing it was to be distributed"
CM BEGINS TO RECEIVE ZAMTROP MONIES
RECEIPTS FROM REDCLIFFE/SHANSONGA
ZCCM CONSULTANCY
DECEPTION OF HABIB BANK
"I will only act for a client providing he/she is known to me personally. I carry out all the necessary due diligence as is required through my regulatory authorities, the Law Society, before I enter in to any transaction…."
On 27th March 2001 he had a meeting with Mr Dayel and Mr Sheikh at the Bank. He reiterated apparently that the monies were received in respect of genuine sales in respect of properties, mines, copper etc in Zambia done through his firm. That appeared to mollify Habib Bank. It was not true. He did not act as he suggested he would on any occasion. However in November 2001 (see below) when BT received $399,995 from OOP (being the second OOP payment) Habib Bank reported that transaction to NCIS.
"[After referring to the receipt of $500,000… following changes in off shore legislation, it is now essential for the bank to be fully aware of the nature of all entries passing through customers accounts and we should therefore be grateful if you could provide full details on the above transaction…. "
Barclays are therefore concerned as to money laundering. There are manuscript notes on the letter "BB Thaker" "proceeds of property sales". On 17th July 2000 Mr Whale at Caversham replied. In that letter he said that the monies had been received on behalf of a new client and they were in the process of completing their due diligence. By way of background it drew to Barclays' attention that the remitter was MCD a UK firm of solicitors who had transferred the funds following the sale of a property. I observe that no property transaction has been identified and monies in the Harptree account were supposed to be Government monies. The letter carried on that the monies were added to the funds already in the account and they will be used as security for borrowings made to a second offshore company which will total $1,000,000. The client was introduced to Caversham by BT who was stated to be well known both to Caversham and the bank.
BT CHANGES HIS STORY
OFFICE OF PRESIDENT PAYMENTS (OOP)
"As I believed AFSL to be the agent of the beneficial owner of [River Properties] I understood that I could (and did) act upon the instructions of Mr Kabwe. I did not know who, in fact, was the beneficial owner of [River Properties] and I did not ever ask"
CASH PAYMENT OF £30,000 TO FJT
PAYMENTS 2002
CONCLUSION AS REGARDS BT
QUANTUM AGAINST BT
(M) BBT/CM
(N) ATAN SHANSONGA (AS) (D5)
CLAIMS AGAINST AS
(1) Dishonest assistance: $3,339,890 and £96,938. Of that amount the final GT produced figures (which were supplied to me at my request after the hearing) show $1,347,993 as being received by AS directly from the Zamtrop account and traced by GT. In addition there were transfers of $918,206.60 into the Shansonga BB account. GT have traced $725,754 of that and in addition have traced $53,495.60 cash. There were transfers from Zamtrop to Redcliffe's account at ZANACO London. GT has traced £811,457.98 but the total amount received from Zamtrop amounted to £1,215,447.21. It is stated that the $ equivalent is $2,001,766. Nebraska received $100,000 from the Zamtrop account on 15th November 1999. GT traced the full amount in GT 43 but has not allocated it in full to AS. Finally AS received into his Barclays account indirectly from the Zamtrop account £30,200 from CM and £60,000 from MCD and £6,738.05 from XFC. None of these payments and receipts by AS is disputed.
(2) Knowing receipt: as for dishonest assistance plus $302,000.
(3) Breach of fiduciary duty: $180,000 alternatively $170,000 (GT traced).
(4) Conspiracy: $25,754,316.
BRIEF SUMMARY OF CLAIMS
AS'S CASE
(1) He believed all monies paid to Redcliffe were Government monies
(2) With one exception he believed that all sums he is alleged to have received from Redcliffe and Zamtrop were Government monies save £4,946.90 paid into his Barclays Bank account on 7th July 1999. This was a bonus paid to him by ZAL.
(3) AS did not know that any of the money was Government money and does not know now that it was Government money. He requires AGZ to prove it.(He has done so in my view)
(4) AS did not know the sum of K398,520,000 was Government money and he did not knowingly receive it in breach of trust.
(5) It is not accepted that any of the money he (or Redcliffe or Nebraska) received was paid by XFC in breach of trust.
(6) AS's case is that payments made to Redcliffe, Nebraska and himself and the expenditure he made was on the instructions of XFC (given initially after meetings that took place between AS and XFC) and he believed was honestly made and that he AS was entitled to receive and make the payments. The belief was based on conversations he had with XFC.
(7) There is no evidence that these meeting did not take place or that they were not in the terms alleged by AS.
(8) Thereafter AS was asked to and did perform specific tasks from time to time and it is his belief that he was acting in a perfectly lawful way. On any view some of the expenditure was on goods and services that were intended to be and were demonstrably for the benefit of the Republic.
(9) He queried his instructions where appropriate and received satisfactory answers. When so acting he honestly believed on reasonable grounds that the expenditure was properly made because of (a) the nature of the expenditure (b) the circumstance in which it was made and (c) the oral reassurance given to him by XFC (d) the reassurance by the course of dealings with XFC.
(10) AS contends a running account evolved. This involved him, or where appropriate Redcliffe or on one occasion Nebraska receiving funds to make expenditure on XFC's instructions.
A NUMBER OF PRELIMINARY OBSERVATIONS
GT'S EVIDENCE CONCERNING AS'S RECEIPTS AND EXPENDITURE.
BASIS FOR AS'S INVOLVEMENT
"[XFC] told me that he could not tell me about the activities of ZSIS. He said that he was very sure that whatever ZSIS and he did in the United Kingdom was closely monitored by British Secret Intelligence Agencies, that they would know (and take action) if what was done was contrary to the United Kingdom law and that he would never ask me to do anything that was illegal. He said he was not asking me to spy for them or for Zambia" (paragraph 151)
AS'S FUNDAMENTAL CREDIBILITY FAILING
"and as we have seen, you are a person who would want to ensure that everything was done absolutely properly?
Yes, my Lord
And you would not act in an improper manner, even if requested or required to do so by [XFC]
Yes, my Lord
If you had cause to be concerned about [XFC's] instructions, you would no doubt satisfy yourself, would you that it was appropriate for you to continue to act?
Yes. If I was not clear about something I would ask for clarity, my Lord
If you were not satisfied as to the appropriateness, the propriety of what you were being asked to do, you would cease acting? Is that right?
That is correct my Lord"
REDCLIFFE
AS'S FAILURE TO KEEP RECORDS
BURDEN OF PROOF
(1) That any monies were paid in breach of trust on the instructions of XFC to AS, Redcliffe or Nebraska.
(2) That AS received the monies dishonestly.
(3) That AS spent the monies dishonestly.
(4) That AGZ has proved that AS received the monies in breach of trust or pursuant to conspiracy.
(5) Assuming AGZ establishes the above is AS entitled to any credit.
AS COMMENTS ON EVIDENCE GENERALLY
ZAMBIAN LIFESTYLE YARDSTICK
PAYMENTS TO STELLA CHIBANDA
PAYMENTS TO CSW- BOB STANDAERT
PAYMENTS TO PROFESSOR MWEENE
PURCHASE OF MOTOR VEHICLES
PAYMENTS FOR SCHOOL FEES ETC
CREDIT CARD EXPENDITURE
OTHER CREDIT MATTERS
DGH POLY PRODUCTS
"When you told Mr Hamunjele that, were you telling him the truth?
A: Yes my Lord, I was.
Q: You thought the money came from [XFC]?
A: He said that the money – my Lord, what I don't understand what this sentence means
Q: I asked you if it was true what you said to Mr Hamunjele and you told his Lordship it was. Why didn't you disclose the involvement of [XFC] in funding the purchase price in your Defence?
A: My Lord, [XFC] had nothing to do with this. What transpired, when the investigations commenced, my Lord, in Zambia, it transpired that money had come from Meer Care to fund the purchase of DGH. When I got this information, I went to confirm to [FK]. He agreed to come to my house and I asked him what the position was and he told me now that Access has no limits. The money that was lent to me was beyond their limits and how was I to know (inaudible) said nothing like that to me. And then he said they got the money from the Intelligence, my Lord and this was new to me at this time (inaudible) my Lord"
CONCLUSIONS AS REGARDS AS
(O) MOFED
AGZ'S CASE
"On or before 9 October 2000 the said Directors, [AS] and MISS itself, wrongfully and with intent to injure MOFED and/or the Claimant and/or to cause loss to MOFED and/or to the Claimant by unlawful means conspired and combined together to defraud MOFED and/or the Claimant and/or to cause loss to MOFED and to the Claimant by unlawful means ….. by the misappropriation of monies belonging to MOFED and/or to the Claimants in fraud of MOFED and/or the Claimant ….. and to conceal such fraud and the procedure of such fraud from MOFED and/or the Claimant by using the Management Agreement as a façade to conceal such wrongful misappropriation".
(P) THE BK CONSPIRACY
BACKGROUND
EXAMINATION AND EFFECT OF DOCUMENTS
| Number | Date of transfer by MoF in Zambia | Amount and bank to which funds transferred | MoF payment instruction | Transfer from MoF bank account | Transfer to ABN-AMRO/ KBC Bank | BK account statements |
| 1. | 7 December 1999 | $1.771 million/ ABN-AMRO Bank |
10/9 | 1.1/104, 10/168 | N/A | |
| 2. | 21 June 2000 | $1 million/ ABN-AMRO Bank |
10/16 | 10/14, 1.1/230 | 10/195, 10/196, 10/197, 10/199, 10/200 | N/A |
| 3. | 8 September 2000 | $1 million/ KBC Bank |
10/19, 10/21 | 1.1/126, 10/170-1 |
10/201, 10/202, 10/203, 10A/114, 10A/115 | 10A/33 |
| 4. | 11 September 2000 | $0.5 million/ KBC Bank |
10/19, 10/21 | 1.1/126, 10/170-1 | 10/205, 10/206, 10/207, 10/208,10A/116, 10A/117 | 10A/33 |
| 5. | 20 October 2000 | $1.2 million/ KBC Bank |
10/28 | 1.1/127-128, 10/172-173 | 10/209, 10/210, 10A/122, 10A/123 | 10A/33 |
| 6. | 24 November 2000 | $1.148 million/ KBC Bank |
10/34 | 1.1/130, 10/174-175 | 10/214, 10/215, 10/138, 10A/133, 10A/134 | 10A/34 |
| 7. | 13 December 2000 | $1,327,173.91/ KBC Bank |
10/36 | 1.1/131, 10/176-177 | 10/139, 10A/136 | 10A/45 |
| 8. | 19 January 2001 | $454,545.45/ KBC Bank |
10/38-39 | 10/217, 10/186, 10/187-188 | 10/218, 10A/156 | 10A/34 |
| 9. | 15 March 2001 | $1.3 million/ KBC Bank |
10/43 | 10/189, 10/190-191, | 10/219, 10/220, 10/140, 10/221, 10/222, 10/224, 10/225, 10/226, 10A/160, 10A/161 | 10A/34 |
| 10. | 18-27 July 2001 | $3 million/ KBC Bank (completed in five instalments of 1x $1m then 4x $0.5m) |
10/61 | 10/60, 10/67-68, 10/182-183, 10/178-179 | 10/142, 10/230, 10/141, 10/145, 10/232, 10/146, 10/149, 10/234, 10/148, 10/147, 10/233-234, 10/236, 10/155, 10/156, 10/238, 10/153, 10A/176, 10A/177, 10A/178, 10A/180, 10A/188, 10A/189, 10A/194, 10A/195, 10A/196, 10A/197 | 10/35 (instalments 1 and 2); 10A/36 (instalments 3-5) |
| 11. | 31 July 2001 | $2 million/ KBC Bank |
10/70, 10/72 | 10A/198, 10A/199 | 10A/36 | |
| 12. | 16 August 2001 | $4 million/ KBC Bank (completed in two instalments of $1.9m and $2.1m) |
10/61 | 10/60, 10/182-183, 10/178-179, 10/67-68, |
10/157, 10/240, 10/158, 10/241, 10/160, 10A/201, 10A/202, 10A/203 | 10A/36 |
| 13. | 13-16 November 2001 | $1.5 million/ KBC Bank (completed in four instalments of $0.5m, $0.3m, $0.2m and $0.5m) |
10/73 | 10/270, 10/184-185, 10/180-181, | 10/271, 10/273, 10/275, 10/276, 10/277, 10/278, 10/281, 10/280, 10A/233, 10A/234, 10A/238, 10A/239, 10/240, 10A/241, 10A/242, 10A/243 | 10A/39 (instalments 1 and 2); 10A/40 (instalments 3 and 4) |
FATE OF GOVERNMENT MONIES PAID TO ABN-AMRO AND KBC ACCOUNTS
(1) $7,637,999 (in total) withdrawn in cash from KBC's USD account 1 and 2 on Mr Soriano's signature or on the signature of Jean Francois Chabala. Some of these withdrawals ($1,380,000 on 13th September 2000) in cash are very large. The debit slips have a code against them and code "518" means cash withdrawal.
(2) $129,900 to XFC on 24th October 2000.
(3) $100,000 to Mr Moses Katumbi on 21st December 2000 (he also received a payment from XFC's sterling account on 7th December 1999 of £12,121.21).
(4) $1,299,456.70 (in total) to MCD in 4 transfers between 22nd December 2000 and 23rd March 2001. These payments are traceable to MOF money paid into the KBC account. IM has accepted this in correspondence.
(5) $176,985 (in total) by 3 payments to CM between 10th October 2001 and 12th November 2002. These too are traceable to MOF money paid into the KBC account but that has not been acknowledged by CM/BT. In addition a further $200,000 was also paid by CM to the KBC account on 12th April 2002.
PAYMENTS TO XFC
MEER CARE $1,299,456.70
PAYMENTS FROM KBC ACCOUNT CREDITED TO MEER CARE LEDGER 3556/001
CM $176,985 DIRECT AND $275,058 INDIRECT PAYMENTS FROM KBC ACCOUNT
INDIRECT PAYMENTS FROM THE KBC ACCOUNT TO CM VIA MCD
$200,000 PAYMENT BY CM TO KBC ACCOUNT
(Q) THE BK CASE: THE CLAIM AGAINST EACH DEFENDANT
MR SORIANO
CLAIM AGAINST XFC
CLAIM AGAINST FTJ
CLAIM AGAINST SC
CLAIM AGAINST FK
CLAIM AGAINST IM/MCD
CLAIM AGAINST BT/CM/BBT
(R) CONCLUSION
ZAMTROP CONSPIRACY LIABILITY
XFC
FJT
SC
FK
AC
Francis K
IK
BASILE
IM/MCD/ND
BT/CM/BBT
AS
MOFED
BK CONSPIRACY
(S) FINAL NOTES