England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		04/05/2007

EXECUTIVE SUMMARY

OUTLINE

1. The purpose of this document is to outline briefly the decision handed down as a result of the trial heard over the above dates. It is not intended to replace the Main Judgment. If there is any inconsistency between this Summary and the Main Judgment the latter shall prevail. This summary is merely intended to identify in a convenient way the main findings and consequent liabilities.
2. The figures set out below against any particular Defendant are headline figures and are subject to adjustment after further argument when the main judgment is handed down. There are several potential bases for possible adjustment and a full account will be found by referring to the main judgment and the orders and determinations made in the light of submissions made at hand down.

BACKGROUND

3. 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 them.
4. 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. It is 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".

THE DEFENDANTS

5. The details of the individual Defendants are set out in the Table below.

"Meer Care"("MCD")	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, 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" ("CM")	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.

6. The Defendants fell into 3 categories. First there were the Defendants who were based in Zambia ("The Zambian Defendants"). These were FJT, XFX, FK, SC, Francis K and AC. Second there were the Defendants who participated fully in the trial ("The Participating Defendants"). These were IM, MCD, ND, BT, CM, BBT, and AS. Third there were other Defendants who did not take part in the trial (or in some cases did not participate in the action at all ("The Non Participating Defendants"). These were Mr Soriano, IK, and Boutique Basile ("Basile").
7. There had been claims against other Defendants in respect of the control of Jarban which in turn held shares in a Belgian company. It owned a residential Hotel complex in Brussels. That part of the Claim was heard in August 2005 and was compromised during the course of the trial with the Defendants handing the Hotel over to AGZ together with a significant sum of money. It has featured in this case in respect of method of acquisition and the beneficial ownership of the Jarban shares.

NON PARTICIPATION OF ZAMBIAN DEFENDANTS

8. The Zambian based Defendants did not participate in the Trial. This was despite special arrangements being made to deal with their position. They did participate earlier in the action some serving Witness Statements and Defences.
9. Their main participation was to seek a stay/dismissal of the action. There were said to be 2 bases for this.
10. First it was said that the trial should be postponed until after any criminal trial that might take place in Zambia. It was said that such a trial would be unfair if the civil action in London had already taken place as they would be required to give evidence then and reveal their Defences which they might wish to deploy in the criminal trial. Thus it was said their right to silence was being infringed.
11. This was dealt with by making a ring fencing order which prohibited the release or use of any material (including evidence) revealed in the civil trial for any other purpose without the permission of the Court. To secure this provision AGZ gave undertakings to abide by the order and surrendered any diplomatic immunity.
12. The Zambian based Defendants appealed that decision. The Court of Appeal dismissed their appeal and the House of Lords refused permission to appeal.
13. The second basis for challenge was the fact that they could not attend trial in London. This was because the terms of their bail required them to remain in Zambia. AGZ was rightly not inclined to relax that provision; XFC had fled Zambia for example. It was relaxed on humanitarian grounds to enable FJT to obtain medical treatment in South Africa (something not of course available to the vast majority of Zambians) for his illnesses which was apparently not obtainable in Zambia.
14. This was addressed by sitting in Zambia as a Special Examiner to hear the evidence of the Zambian based Defendants. Special arrangements were made for this together with a live video link and daily transcripts for the rest of the evidence heard in London. The cost of this exercise was considerable. It was done primarily for the benefit of the Zambian Defendants who spurned it. It did however enable AGZ to reduce the number of Zambian witnesses who needed to come to London.
15. The Zambian based Defendants appealed that decision. Their appeal against that decision was dismissed also.
16. It is necessary to set out what the Zambian Defendants did and did not say about these arrangements. First they acknowledged that the trial would have to take place in one place only. They never said the decision to hear the trial in London was wrong. In 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".
17. That observation 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 and sitting as a Special Examiner in Zambia were 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. None of this is true; it is a bogus excuse to avoid giving evidence for no real or credible reason.
18. 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.
19. 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 the Main Judgment will have been delivered before the hearing.
20. 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 set out above when they challenged the 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 to sit as a Special Examiner in Zambia. Indeed the Zambian Law Society has confirmed that it is appropriate so to act and that it has occurred in a number of previous cases.
21. 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 were inexplicable 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 this Court 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.
22. FJT broke the ring fencing order which was in place for his and the other Defendants' benefit on the first day of the trial. The Zambian based Defendants therefore deprived themselves of an opportunity to put their case forward without any risk. They did not do so. In so acting they failed to explain themselves to the Zambian people also. They owed it to the Zambian people to explain everything given its extensive coverage in the press. They failed to do that as well.

THE TRIAL

23. The trial opened in London on 31st October 2006. Sitting as a Special Examiner in Zambia took place from 29th November 2006 to 15th December 2006 and the trial resumed in London from 11th January 2007 to 27th February 2007.
24. AGZ called 47 witnesses of fact. 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. However the results 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 beyond the Zamtrop conspiracy. They did not investigate either the OOP payments or the Permase General Account. Their report established however that the bulk of the monies received into the Zamtrop account could be traced back to the Ministry of Finance. They have also substantially traced the funds out of the Zamtrop Account. AGZ's concession limiting his claim to traced amounts also extended to sums which he could establish were Government monies. Whilst his argument on a statutory right has failed he was successful on his submission 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.

THE PRESIDENT'S CLOTHES.

25. The most telling example of corruption was the clothing acquired by FJT.
26. He had a worldwide reputation as being a smart and expensive dresser. He had his own stylish suits with his initials (FJT) monogrammed on them, a large number of specially made signature shoes and literally thousands of monogrammed shirts. As President he earned about $105,000 over 10 years. Yet an exclusive shop in Switzerland (Basile) received $1,200,000. AGZ established the entirety of this was stolen from the Republic mostly via the use of the secret Zamtrop Account which had been set up and controlled by XFC under the personal supervision of FJT. This was at a time when the vast majority of Zambians were struggling to live on $1 a day and many could not afford more than 1 meal a day.
27. Just under $500,000 was apparently spent on clothes for the FJT; the rest is completely unaccounted for. FJT had the benefit of this largesse at the expense of the people of Zambia. He still wears some of the clothes.
28. He has had numerous opportunities to explain this to the Zambian people but he has failed to do so. There is no evidence to show FJT had the personal wealth to buy these clothes. Nor is there evidence contrary to statements he made to the press that it was funded by gifts paid into the Zamtrop account. It was simply stolen from the Republic.
29. The people of Zambia should know that whenever he appears in public wearing some of these clothes he acquired them with money stolen from them.

OTHER EXPENDITURE

30. By the misappropriation of monies via the Zamtrop Account and by receipts under the BK Conspiracy the Zambian based Defendants spent millions of dollars on significant personal items of expenditure, ranging from personal payments to XFC's and FJT's children, paying for their education and residence abroad, to large amounts of expenditure on 5 Star hotels, expensive restaurants, clothing and jewellery, motorcycles and properties all round the world.

FINDINGS

31. After considering all the evidence and the submissions of all Defendants the following conclusions have been arrived at.
32. The Zambian Defendants have been adjudged to have conspired to misappropriate a headline figure of $25,000,000 under the Zamtrop Conspiracy and $21,000,000 under the BK Conspiracy. They have also been adjudged to have broken their fiduciary duties which they owed to the Republic (FJT, XFC and SC) or dishonestly assisted in such breaches (FK and AC). The conspiracy was effected because of the intimidation of government employees by SC and maintaining that there should be no challenge to what was going on because it was all "secret operations" of the Government Security Arm ZSIS. None of this was true; the Zamtrop Account was set up as part of the conspiracy to steal. It was operated under the Financial Charter 1970 to hide what was going on and to inhibit legitimate queries. By operating under that regime FJT and XFC were able to restrict investigation of the operation of the Zamtrop Account to them. The only other person who could have intervened was the former Auditor General but for reasons that were not clear he did not do so. There was no lawful reason for this operation; it was the vehicle for the fraud. There was equally no legitimate basis for the payments out under the BK Conspiracy. There were no genuine arms sales to justify the payments nor would the Republic have entered into the arrangements it did if it had been properly advised. This too was merely a vehicle for their fraudulent removal of government money by the Zambian based Defendants (save Francis K).
33. Francis K was adjudged to have received $62,000 approximately knowing it was taken from the Republic in breach of trust.
34. The participating Defendants (save ND and BBT) have been adjudged to have dishonestly assisted the Zambian Defendants in their misconduct and conspired to misappropriate monies from the Republic. All of them were found liable under the Zamtrop Conspiracy (save ND and BBT) and all save AS (who was not alleged to have participated), ND and BBT in the BK Conspiracy. ND and BBT were found liable as partners in MCD and CM respectively for the acts and defaults of IM and BT respectively as partners in MCD and CM under Section 10 PA 1890.
35. In their case the headline figures are limited to government monies which passed through their hands.
36. The MOFED claim against AS, Nebraska and MISSL has been dismissed as has the claim against IK (subject to further arguments of behalf of AGZ in respect of IK).
37. Basile has been adjudged to have provided dishonest assistance to the Zambian based Defendants in the misappropriation of the $1,000,000 transferred to him. Alternatively he was adjudged to have received the same sum knowing it was government money taken in breach of fiduciary duties by FJT, XFC and SC.
38. Mr Soriano has been adjudged to have fully participated in the BK Conspiracy and to be liable in the sum of $21,000,000 approximately.

LIABILITIES OF EACH DEFENDANT

39. The precise headline figures are below (references are to paragraphs in the Main Judgment).

ZAMTROP CONSPIRACY LIABILITY

XFC

40. 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 in the judgment (paragraph 440).

FJT

41. His liability is the same as that of XFC (paragraph 470).

SC

42. Her liability is the same as that of XFC (paragraph 485).

FK

43. 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).

AC

44. His liability is the same as that of FK (paragraph 503).

Francis K

45. His liability is for $62,279 for knowing receipt only.

IK

46. 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).

BASILE

47. His liability is for $1,209,400 for dishonest assistance and conspiracy. He receives no credit for the "value" of the President and XFC's clothes (paragraph 539).

IM/MCD/ND

48. 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.

BT/CM/BBT

49. 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).

AS

50. 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. The question of conspiracy liability given the observations on the pleadings in the Main Judgment remains open.

MOFED

51. For the reasons given earlier there is no liability (paragraph 1053) and the claim against AS under this head is dismissed.

BK CONSPIRACY

52. Mr Soriano is liable for the full amount $20,200,719 (paragraph 1058) and $1,000,000 personally received by him (paragraph 1091).
53. FJT (paragraph 1100), XFC (paragraph 1098), SC (paragraph 1102) and FK (paragraph 1106) are also liable for the same sums. Credit is to be given for the Harptree receipt.
54. IM, MCD and ND are liable for the sums actually received ($1,299,456.70) (paragraph 1107) less the Harptree receipt.
55. BT, CM and BBT are liable for $452,043.03(paragraph 1114).