Foolish and incompetent lawyer escapes liability for money laundering

05/08/2008

A recent Court of Appeal decision has overturned a finding of dishonest assistance against two solicitors, holding that the lower court has made several misdirections and errors on the basis of the evidence and arguments put before it.

The Attorney General of Zambia commenced proceedings against a number of defendants for various corrupt practices resulting in defrauding the Zambian state during the former president's term in office. While allegations of fraud and conspiracy to defraud were laid at the feet of the more culpable defendants, allegations of dishonest assistance were brought against two solicitors which were the subject of the recent case.

Large sums of Zambian money were deposited into the client account of a firm of solicitors, of which M and D were the only two partners. These funds were paid in on behalf of one of the defendants, K. K then instructed M as his solicitor to pay the funds out for the personal benefit of K and other defendants.

The judge was of the view that M could not be held liable unless he had actual knowledge or suspicion that he was handling stolen monies and that K's conduct was dishonest. However, the judge found that M had been dishonest in a "blind-eye" or "Nelsonian" way which basically equates to wilful ignorance of what was going on. M's partner D was found liable on the basis of vicarious liability under the Partnership Act 1890.

On appeal, M successfully argued that there was no evidence of dishonesty or motive on his party. The facts that were easily ascertainable were not in dispute and the only issue was his state of mind. The crux of his argument was that he had no idea what had been happening and could not be found liable for dishonest assistance in the circumstances. It was held that the judge had erred in attributing Nelsonian knowledge to M on the basis of the facts of the case and that M's conduct, while foolish and incompetent, particularly in his professional duties to comply with warnings about money laundering, was honest. The orders against M and therefore also against D were set aside and the claims dismissed.

([i]Attorney General of Zambia v. Meer Care & Desai (A firm) & ors [2008] EWCA Civ 875)

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