Summary

A person could know, and could certainly suspect, that he was assisting in a misappropriation of money without knowing that the money was held on trust or what a trust meant.

Facts

The appellant company (C), in liquidation, appealed against a decision that the second respondent (H) was not liable for dishonestly assisting C in the misappropriation of funds invested in a fraudulent offshore investment scheme. C had operated the scheme. The money received by C was either held on trust for the investors or was subject to fiduciary duties on the part of the directors. Some of the investors' funds were paid through bank accounts administered by an offshore financial services company. The scheme later collapsed and the director of C was convicted. In separate proceedings, the deemster held, inter alia, that H was liable for dishonestly assisting C in the misappropriation of sums in relation to three transactions. H's appeal against that finding was allowed by the Court of Appeal on the basis that there was no evidence upon which the deemster could have made a finding that H had grounds for suspicion, which he consciously ignored, that the disposals in which he had participated involved dealings with misappropriated funds. The Court of Appeal found that the evidential basis for the finding of suspicion stemmed from the deemster's disbelief of H's oral testimony coupled with the inferences she drew from it.

Held

The deemster had correctly applied the principles of liability for dishonest assistance, Twinsectra Ltd v Yardley (2002) UKHL 12, (2002) 38 EG 204 (CS) applied. The deemster's findings had not stemmed wholly from her disbelief of H's evidence. She had said that as a matter of H's subjective state of mind, he suspected that the funds disposed of were misappropriated money. A person could know, and could certainly suspect, that he was assisting in a misappropriation of money without knowing that the money was held on trust or what a trust meant, Brinks Ltd v Abu-Saleh (1995) 1 WLR 1478 disapproved. Further, it was not necessary to know the "precise involvement" of one of C's principal associates in the company's affairs in order to suspect that neither he nor anyone else had the right to use C's money for speculative investments of their own. There was abundant evidence on which the deemster was entitled to make the findings of fact that she did about the disposal of the sums in relation to the first transaction. By the time of subsequent transactions, H had even more reason to be suspicious. In particular, he had been informed that the director of C and an associate were misappropriating clients’ money. There was no evidence that H had made inquiries into those allegations. The deemster was fully justified in concluding that that was the result of a deliberate and dishonest decision. In the circumstances, the decision of the deemster was restored.

Appeal allowed.