Khaled Naser Hamoud Al-Sabah & Juan Jose Folchi Bonafonte v Grupo Torras SA (2000)
The trial judge had wrongly dismissed the first appellant's explanation that he was the innocent recipient of moneys that were part of a fraudulent transaction. Given the judge's findings of fact in relation to the culpability of the second appellant, any theoretical differences between Spanish law and English law were immaterial. * Leave to appeal to the House of Lords refused.
Consolidated appeals by the 53rd defendant ('KAS') and the ninth defendant ('F') from the decision of Mance J that each had been complicit in one or more of several frauds that had been perpetrated upon the claimant ('GT'). In the case of KAS it was admitted that he had been the recipient of a sum of US$20 million, which sum was derived from one of the frauds. The trial judge rejected as inherently implausible KAS's case that that sum had not been paid to him as part of a fraudulent conspiracy in which he was an active participant, but rather as an attempt by the fraudsters to gain a "hold" over him. On the appeal GT sought to contend, on a point that had not been pleaded, that KAS was, in his capacity as a director of GT, liable in any event for the full amount that GT had been defrauded by the principal fraudsters, who were his co-directors, by virtue of Art.133(2) Spanish Companies Law 1989. In the case of F, the judge concluded that he had been dishonest in relation to four of the frauds. In a lengthy judgment the judge also held, however, that F had been deceived by the other conspirators into believing that the transactions in which he was participating or assisting were in the best interests of GT. On the appeal F contended that: (a) in light of the latter finding the judge had been wrong to find him guilty of dishonesty; and (b) the judge had failed to have regard to the appropriate principles of Spanish law in relation to the claim of dishonest assistance against F, it being F's case that under Spanish law he would be liable only for loss caused by breaches of his contractual duty to GT, and not as the consequence of any accessory liability for the wrongdoing of the principal fraudsters.
(1) KAS's explanation that money had been paid to him in an attempt to compromise him was not, as the judge appeared to think, inherently implausible. Unless it was clear on the evidence that that assertion was not true, the finding of dishonesty against him could not stand. Having regard to the totality of the evidence against KAS, the court could not be satisfied that his explanation was untrue. Consequently, his appeal would be allowed. (2) The point about Spanish company law and the vicarious liability of directors had never been pleaded. This meant that the judge had not dealt with the point, and KAS had been deprived of the opportunity of bringing contribution proceedings against his co-directors. In all the circumstances it would be wrong to allow the point to be advanced against him at this stage. (3) With regard to F, the judge's apparently inconsistent findings were reconcilable on the basis that he had found F guilty of so-called "blind eye" dishonesty. It could only have been by turning a blind eye that F could have sustained his belief that what he was doing was in the best interests of GT, when any objectively reasonable person would have appreciated that what F was doing involved a most fundamental breach of fiduciary duty. (4) Whatever the theoretical differences between English and Spanish law, the judge's findings of fact were clearly that F's involvement in all the transactions was crucial, and that without him they could not have taken place as they did. In those circumstances, the case against F on causation was plainly made out.
Appeal by KAS allowed. Appeal by F dismissed.
* The House of Lords refused an application by Bonafonte for leave to appeal in this case on 20 June 2001.