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Penalties for Fraud (less than obvious)

The London High Court has clarified some matters relating to fraud, and conspiracy to defraud, in Zambia v Meer Care and Desai & Ors. [2007] EWHC 952 (Ch) (04 May 2007)
The court referred to the law on the issues laid down in Kuwait Airways Corporation v Iraqi Airways Corporation (nos 4 and 5) [2002] 2 AC 883.

In the instant case the African state of Zambia was the plaintiff. The defendants were numerous and included leading members of the former government of Zambia. The defendants had looted the state of Zambia and the issues were conspiracy, breach of fiduciary duty, dishonest assistance and limitation period relating to same. Meer Care and Desai were a firm of solicitors in London, through whose client account the African defendants had chanelled much of the stolen property.

The court said this in relation to the knowledge of a conspirator:

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.

In relation to a cover up the court stated:

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

(Needless to say, to engage in a cover up of a conspiracy is to join the conspiracy).

Because firms of solicitors in the UK and Ireland are all firms and incorporation as a company is not permitted, the court made the following remark:

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.

Predictably, the defendants pleaded the Statute of Limitations, to which the court replied:

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.

(President Mwanawasa SC was the honest successor to the (former) presidential defendant).

It will be seen that, for partnerships, the effects on a partner of a conspiracy to which his/her partner is a party are considerable. Time does not run until the conspiracy is discovered or can be discovered; even if the “innocent” party was not part of the conspiracy, s/he will be liable under partnership law for the actions of his/her partner.

To cover up a conspiracy is to join it.