Lam Kwok Hing Lawrance v. Chan Ming Kwan & Another

DCCJ 10582/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 10582 OF 2001

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J U D G M E N T

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This is a claim by the Plaintiff against the 2nd Defendant on the basis that the Plaintiff was entitled to payment for the price of circuit board sold to Northstar Electronic Factory in Taiwan (hereinafter referred to as "Northstar"). The 1st Defendant, a trading company situated in Dong Guan, in the P.R.C. was the agent of the Plaintiff for the delivery of goods to the factory of Northstar in Dong Guan. The Plaintiff alleged that the 1st Defendant fraudulently and without their prior knowledge consent or approval unilaterally instructed Northstar to make payment to the bank account of the 2nd Defendant instead of to the bank account of the Plaintiff for the circuit boards sold by the Plaintiff. Northstar in Taiwan, pursuant to the instructions of the 1st Defendant remitted the sum of $215,910.00 to the 2nd Defendant's bank account. The Plaintiff at the trial of this action discontinued his claim against the 1st Defendant whom he had not managed to serve. He proceeded with his claim against the 2nd Defendant for the said sum of $215,910.00, on the basis of "knowing receipt" and or "knowing assistance or dishonest assistance".

The Undisputed Facts of the Case

2. It was not disputed that Northstar in Taiwan pursuant to the 1st Defendant's instructions remitted the sum of $215,910.00 to the bank account of the 2nd Defendant.

Plaintiff's Version of Facts

3. The Plaintiff Lam Kwok Hing, Lawrence, PW1 gave evidence. He stated that he started trading with the 1st Defendant, a firm located in Dong Guan in the P.R.C. since March 2000 when the 1st Defendant started to place orders on the Plaintiff for circuit boards. The Plaintiff's factory in Shenzhen manufactured circuit boards. However the 1st Defendant was only able to pay 2 batches of goods and there were sums outstanding from the 1st Defendant. After discussing with the 1st Defendant he was informed by the 1st Defendant that his customer insisted on making payment to him through their head office in Hong Kong as the customer was a Taiwanese Company. As the 1st Defendant did not have a head office in Hong Kong they could not receive payment from their customer. It was in the course of discussion between the Plaintiff and the 1st Defendant that it was decided that the Plaintiff would take orders from this customer of the 1st Defendant, namely Northstar, and the 1st Defendant would act as the agent of the Plaintiff to contact the customer and deal with aspects of delivery of goods. The Plaintiff would pay the 1st Defendant 3% commission on each order. Pursuant to such agreement, instructions were given to Northstar to ask them to remit the price of goods to the Plaintiff's bank account in Hong Kong. The instructions given are at page 166 of the Agreed Bundle of Documents.

4. The Plaintiff then pointed to pages 56, 64 and 65 of the Bundle of Document (BD) to show samples of purchase orders given by Northstar to the Plaintiff. However, there is no dispute that in the purchase orders at pages 64 and 65 of BD the name of the 1st Defendant was placed under that of the Plaintiff as recipient of the order and the telephone and fax numbers of the 1st Defendant were placed there. The Plaintiff stated that the 1st Defendant's name was placed there as agent of the Plaintiff. Monthly statements were then sent to Northstar. Pursuant to such monthly statements, Northstar remitted payments to the bank account of the Plaintiff for sums due on the monthly statements. Evidence of such remittance from Northstar in Taiwan is at pages 129 to 134 of the BD. The Plaintiff issued monthly statements to Northstar to effect payment. The monthly statements for the month of December 2000 is at page 57 and 58 of the BD. The amount due in the 2 statements for December 2000 total the sum of $195,856.80. At page 134 of the BD is the evidence of the remittance of this sum from Northstar. In respect of the sum claimed in this action, the monthly statement for the month of January reflects the purchase orders from Northstar for that month. This is at page 63 of the BD. The monthly statements were prepared by the bookkeeper of the Plaintiff. PW1 stated that the Plaintiff's factory in the Mainland would deliver the goods to the factory of the 1st Defendant first and the 1st Defendants would deliver them to the factory of Northstar in Dong Guan.

5. The Plaintiff's accountant, Chan Sau Wan PW2, became aware that the payment for the January monthly statement was overdue from Northstar. She telephoned Northstar and became aware that the 1st Defendant had instructed Northstar to remit the money for the purchase orders to the 2nd Defendant and remittance had been made on the 26 March to the bank account of the 2nd Defendant.

6. Northstar faxed to the Plaintiff the notice from the 1st Defendant to them at page 59 of the BD and also the details of the 2nd Defendant's bank account in Hong Kong faxed to them by the 1st Defendant at page 60 of the BD. The notice from the 1st Defendant at page 59 of the BD alleged that arising from restructuring in the company the request for the change in the recipient of the remittance was given. PW1 stated that there was no change in his company. PW1 stated that he did not authorize the 1st Defendant to give this instruction to Northstar on his behalf. The Plaintiff notified Northstar that there had been no restructuring in their company. The Plaintiff sent a fax to Northstar dated 17 April 2001 at page 71 of the BD informing Northstar that the 1st Defendant had all along acted as the Plaintiff's agent. That was why the price for the goods had been remitted to the Plaintiff. The Plaintiff asserted that they manufactured the goods and they were entitled to the price therefore.

7. Subsequently, the Plaintiff's accounts clerk, telephoned the 2nd Defendant several times but could not locate her. Eventually the 2nd Defendant was contacted and PW1 spoke to her. He told her that Northstar had wrongly remitted funds to their Company's bank account. The 2nd Defendant stated that she only received the funds on behalf of another company and did not know anything else.

8. The Plaintiff then reported this matter to the Police. His solicitors herein, also sent a letter to the 2nd Defendant dated 25 April 2001.

9. The 1st Defendant sent a fax to the Plaintiff to explain their action. The contents of their explanation is entirely inconsistent with the contents of their Notice to Northstar at page 59 of the BD requesting Northstar to remit the price of the goods to the 2nd Defendant. The 1st Defendant alleged therein that it was Northstar who requested details of a new bank account for remittance of funds. The 1st Defendant stated that as it happened in such a rush, he had forgotten to inform the Plaintiff of the request of Northstar. The 1st Defendant stated that he had received the amount due on the January monthly statement. He would fully account to the Plaintiff for this sum.

10. Despite what was said in the 1st Defendant's fax at page 70, the 1st Defendant had never paid the Plaintiff the sum stated that the 1st Defendant had received from the 2nd Defendant.

11. The Plaintiff found subsequently that the 1st Defendant had registered the cessation of business and their whereabouts were unknown to the Plaintiff. PW1 stated that the Plaintiff did not owe the 1st Defendant any commission.

12. Under cross-examination PW1 denied that Northstar was a client of the 1st Defendant, he denied that some of the purchase orders were placed in the names of the Plaintiff and the 1st Defendant. He explained that the name of the 1st Defendant was put there as agent. He denied that the monthly statements issued in the name of the Plaintiff to Northstar were issued by the 1st Defendant despite the fact that they contained the name of the 1st Defendant's accountant at the right bottom of the statement. Subsequently in evidence the Plaintiff's accountant PW2 explained that she had put in the monthly statements at pages 57, 58 and 61 the statement that they were prepared by the Defendant's accountant. The reason why she did so was because the 1st Defendant was responsible for the checking of accounts with Northstar. That was why she put the telephone and fax numbers of the 1st Defendant in those statements as well. She stated however that these statements were prepared by her.

Evidence of the 2nd Defendant

13. The 2nd Defendant Lee Fung Yee gave evidence. She stated that she was the sole proprietor of the 2nd Defendant firm. The firm had not taken on new business but had not ceased trading. She also assisted her husband in his factory which he had opened called Allway Equipments Co. Ltd.

14. She stated that Chan Ming Kwan (hereinafter referred to as "Chan"), of the 1st Defendant was the former staff of the 2nd Defendant company in Wei Yeung in Mainland China and is also her nephew. In mid November 2000, her nephew Chan telephoned her. He stated that he would be cooperating with his trade associates in Taiwan. The trade with his associates in Taiwan would increasingly prosper with a good prospect. He has difficulty in collecting payment for his goods from his trading associates in Taiwan. He asked whether she would be willing to receive the funds on his behalf from his client in Taiwan. The client is Taiwanese. There is exchange control. The bank has to check documentation to show a genuine transaction before they remit money. Further the Taiwan client cannot remit money freely into Mainland China for political reasons.

15. As Chan is a Mainland resident, he cannot open a bank account in Hong Kong. The client insisted on remitting the funds to Hong Kong.

16. She agreed to help Chan. Chan then issued to her the Authorization to receive funds on the 1st Defendant's behalf. This is at page 55. It is dated 16 November 2000. She issued the January monthly statement in her own company name at page 61 for the January accounts with Northstar. The 1st Defendant gave the information to her to prepare the statement. This statement is needed because the usual practice is for the parties to check the accounts between them. When they agree the accounts then an invoice is issued. After this statement was issued, she issued an invoice at page 62. The invoice is to enable Northstar to make remittance to her company. The invoice has to be in her company name because of the strict exchange control regulations. The bank would check the account to which money is sent with the issuing name of the invoice. It was clear that the contents of the January statement is identical to that issued by the Plaintiff for the January statement of account.

17. Northstar remitted the amount into her bank account at Overseas Trust Bank on the 27 January 2001. After deducting bank charges the amount came to $215,720.00. The relevant bank statement of the 2nd Defendant is at page 72 of the BD.

18. On the 28 March 2001, she checked her bank account and found this money had arrived. She informed Chan about this. Chan asked her to arrange to bring the money to him. She asked him whether he needed the money urgently. He said yes. She said that if it were urgently needed she would get her accountant in her factory to let him have the money provided there is money in her factory. The money of her factory belongs to her. She checked that there was money then she arranged for her staff to deliver the money to Chan. She asked Chan to prepare a receipt and her staff to prepare an invoice. Her staff delivered the money to Chan on the 2nd April 2001. The receipt at page 54 of the BD shows a receipt from the 1st Defendant dated 2nd April 2000, which should have been 2nd April 2001, for the sum of $215,720.00.

19. She received notification from Chan that he had received the money. She then withdrew the sum of $215,000.00 from her bank account and she in due course remitted this to her factory on the Mainland.

20. She received the letter from the Plaintiff's solicitors Messrs. W.K. To dated 25th April 2001 at page 73-74 of the BD. She could see the name of her nephew Chan. She telephoned him to ask him who Northstar was and who the Plaintiff was. She thought there was some problem. She telephoned the Plaintiff's solicitors. She thought that her nephew must be in the wrong and she asked him how he did business. Chan wrote her a letter to explain the situation. It is at pages 75 to 77. He also sent her the documents at pages from page 75 to 86 of the BD. The 1st Defendant informed her that Northstar was originally the 1st Defendant's client. He faxed page 78 to 86 of BD to prove this.

21. She then realized that her nephew did not deceive her nor did he do anything unlawful. She did not take any further action. She knew that her nephew had been trading in circuit board from her previous contact with him.

22. When she proposed the settlement referred to in paragraph 7 of her witness statement at page 49 of the BD, the terms of which were in a letter from her solicitors C.K. Mok & Co. to the Plaintiff's solicitors Messrs. W.K. To & Co. at page 88 of the BD, the money had already been given to the 1st Defendant, when she suggested that the money be returned to Northstar. She proposed this after she spoke to PW1 and before she received documentation from her nephew. She thought that if her nephew had done wrong then she would ask him to return the money back to her so that it could be returned to Northstar.

23. In relation to the visit of PW1 on the 29th May 2001 to her factory, she stated that she was going to accompany her husband to Malaysia to take a holiday on the 30th May 2001 when he would go to attend to business. But after PW1 came to her factory, he made a fuss and reported the matter to the Police. She was called by the Police to attend at the Police Station to give a statement. Hence she did not go for her holiday to Malaysia.

24. In response to the evidence of PW1 that when he attended at her business premises, he found that the premises belonged to another business, the Defendant stated that her business was small and she used the premises of her husband's business as the address of her factory in Hong Kong. She had factory premises in the Mainland.

The Issues

25. In my view there are 4 issues to be decided as follows: -

1. Who was entitled to receive the sum of $215,910.00, the Plaintiff or the 1st Defendant?

2. Was the 2nd Defendant guilty of "knowing receipt" of the sum of $215,910.00?

3. Whether the 2nd Defendant was guilty of "knowing or dishonest assistance"?

1st Issue

26. According to PW1, the Plaintiff was entitled to this sum as the Plaintiff was the factory on which Northstar placed the relevant purchase orders. PW1 stated that the 1st Defendant was the agent of the Plaintiff who had contact with customers and PW2, Chan Sau Wan stated that the 1st Defendant's accountant would go over the monthly statements with Northstar to check the sums. However the monthly statement shown by the Plaintiff at 57, 58 and 63 of the BD was issued in the name of the Plaintiff. The Plaintiff could show remittances from Northstar in Taiwan to themselves in respect of sums shown on the Plaintiff's monthly statements issued to Northstar as referred to earlier. It would seem that Northstar had been making payment direct to the Plaintiff.

27. PW1 stated that the money from the orders placed by Northstar on the Plaintiff was to be paid to the Plaintiff. He stated that the arrangement between himself and the 1st Defendant was that orders would be placed by Northstar on the Plaintiff and Northstar would remit payment to the Plaintiff as Northstar would not remit payment to Mainland China. He stated that the 1st Defendant merely acted as the Plaintiff's agent.

28. The 1st Defendant's ceased business and according to the Plaintiff, they could not be located by the Plaintiff. Based on the Plaintiff's evidence both oral and documentary, the rightful recipient of this sum is the Plaintiff.

2nd Issue

29. To establish this it has to be established (1) that the 2nd Defendant did not remit the whole or part of the amount received in the sum of $215,910.00 to the 1st Defendant; and (2) that she had knowledge that the assets received were traceable to a breach of trust or of fiduciary duty. The single test for which was whether the 2nd Defendant's state of knowledge was such as to make it unconscionable for her to retain the benefit of the receipt (Bank of Credit and Commerce International (Overseas) Ltd and another v Akindele [2001] Ch. 437 at Held (2)).

30. Plaintiff's Counsel has rightly pointed out that the standard of proof for fraud or dishonesty is higher than the standard of proof in civil proceedings. Halsbury's Laws of England Vol.17 4th Edition, paragraph 19 at page 16, states,

"In civil cases the standard of proof is satisfied on a balance of probabilities. However even within this formula variations in subject matter or in allegations will affect the standard required, the more serious the allegation, for example fraud, crime or professional misconduct, the higher will be the required degree of proof, although it will not reach the criminal standard."

31. I remind myself of this higher standard of proof in coming to my findings in relation to this issue.

32. The 2nd Defendant stated that she did deliver the entire sum of $215,720 to the 1st Defendant. The 1st Defendant provided a receipt for this sum at page 54 of the BD. The 1st Defendant also informed the Plaintiff in a fax at page 70 of the BD that he had received the money. There is no direct evidence to contradict the evidence of the 2nd Defendant and the documentary evidence from the 1st Defendant to the Plaintiff and to the 2nd Defendant.

33. The Plaintiff's Counsel states that there is discrepancy and inconsistency in the evidence of the 2nd Defendant related to the manner of delivery of the money to the 1st Defendant. In her witness statement and in her Police cautioned statement she stated that in early April, she entrusted people to bring the money to Dong Guan to deliver to the 1st Defendant (see paragraph 5 of page 48 of BD 109 paragraph 1). The Plaintiff's Counsel stated that she changed her version because she realized there were difficulties with her version of events. If she withdrew money from her bank account on the 3rd April 2001, she could not have had the money delivered to the 1st Defendant by the 2nd April 2001 from Hong Kong. Further she would have to bring forward as witness the person who delivered the money from Hong Kong to Dong Guan. Another point raised was that bringing such a large sum of money from Hong Kong to Dong Guan is dangerous.

34. The Plaintiff's Counsel further submitted that if her version were true, she must have bank withdrawal slips proving withdrawal of funds from the bank account of her factory in the Mainland to pay to the Plaintiff.

35. The Plaintiff's solicitor further submitted that paragraph 1 of the proposed settlement at page 88 in the letter from Messrs. C.K. Mok & Co. would suggest that she was holding the money. As it states that the 2nd Defendant would pay the Plaintiff $215,910.00 within 7 days upon the signing of the relevant settlement agreement.

36. Paragraph 5 of the 2nd Defendant's witness statement state that after her receipt of $215,910.00, she immediately informed the 1st Defendant of this fact and in early April of the same year she asked someone to bring this sum to Dong Guan to deliver to the 1st Defendant who had acknowledged receipt. In her Police statement at page 109 of the BD, the 2nd Defendant stated that after she received this sum she asked someone to bring this sum to Mainland China to deliver to Chan.

37. Under cross-examination she stated that her witness statement read as if she asked someone to deliver the money from Hong Kong to the 1st Defendant but in effect she asked her staff in her factory to deliver the money to the 1st Defendant. She stated that there was a lack of clarity in her Police statement but she maintained the truth of what she stated in her evidence-in-chief.

38. The 2nd Defendant stated that the money was withdrawn from the bank account of her factory not in one sum of $215,720.00 but by withdrawing several sums at different times as it was not possible to withdraw large sums from the bank at one go in the Mainland. She did not get the proof of withdrawal for the purpose of this trial as she does not look into the details of the accounts of her factory.

39. The 2nd Defendant explained the reason why she proposed the settlement term to pay the sum of HK$215,910.00. She did not want problems and thought that if the problems could be resolved she would ask her nephew to return this sum to her.

40. In considering the evidence of the 2nd Defendant related to the manner of delivery of the sum of HK$215,910.00 the inconsistencies do raise doubts on her veracity of the 2nd Defendant's evidence, certainly in relation to the manner in which the money was delivered to the 1st Defendant. However balancing the evidence of receipt of such sum by the 1st Defendant against the inconsistencies in the evidence of the 2nd Defendant, bearing in mind the standard of proof required being a higher standard as referred to aforesaid, I am not able to come to the finding that the money had not been delivered to the 1st Defendant.

41. Further, having considered all the evidence, there is no direct evidence that the 2nd Defendant had actual knowledge that the money was payment to which the 1st Defendant was not entitled. The 2nd Defendant stated that all that she did was to assist her nephew to collect funds. Until she received the letter from Messrs. W.K. To, she did not think there was anything wrong. Despite considering the terms of settlement proposed by her as referred to aforesaid where she stated that she would pay the sum of HK$215,910.00, I am of the view there is insufficient evidence for me to infer bearing in mind the higher standard of proof, that she knew that the money was money to which the 1st Defendant was not entitled.

42. I therefore find that the Plaintiff has not established a case against the 2nd Defendant of "knowing receipt".

3rd Issue

43. The liability for knowing assistance or dishonest assistance is summarized succinctly in the headnote to the case of Royal Brunei Airlines Sdn. Bhd. And Philip Tan Kok Ming [1995] 2A.C.378 at page 379 as follows'

"where a party dishonestly assisted a trustee to commit a breach of trust or procured him to do so, the third party would be liable to the beneficiary for the loss occasioned by the breach of trust, even though the third party had received no trust property and irrespective of whether the trustee had been dishonest or fraudulent; that in the context of such accessory liability honesty was to be judged objectively and acting dishonestly, or with a lack or probity, which was synonymous, meant not acting as an honest person would act in the circumstances and could usually be equated with conscious impropriety as distinct from inadvertent or negligent conduct or carelessness, although a third party might be acting dishonestly if he recklessly disregarded the rights of others; that the third party's conduct had to be assessed on the basis of his actual knowledge at the time not what a reasonable person would have known or appreciated, and regard could be had to his personal attributes including experience and intelligence and the reason for him acting in that way"

44. The evidence of the 2nd Defendant, states that the 2nd Defendant entered into this enterprise with a view to assist the 1st Defendant to collect money, which the 2nd Defendant thought belonged to the 1st Defendant. Her evidence was that she had no idea that the money did not belong to the 1st Defendant. She had to use her company name to prepare the monthly statement to Northstar as if the purchase orders were issued by her and she sent out an invoice to Northstar for the amount on the monthly statement amounting to $215,910.00. She had known that her company was not entitled to the payment of this sum. Yet she issued documentation as if her company was entitled to such a sum and to seek payment from Northstar. However, according to the 2nd Defendant, she thought that the 1st Defendant was entitled to payment of this sum and she had obtained an authority from the 1st Defendant to act on behalf of the 1st Defendant to collect funds from sources outside of China generated by the 1st Defendant's overseas trade at page 55 of the BD. She acted on behalf of the 1st Defendant when issuing such and she obtained information of the contents of the monthly statement and invoice from the 1st Defendant. She gave the reason for using her company name in the monthly statement and invoice in that because of exchange control regulations in Taiwan, the bank cannot only remit money to the bank account of the company that issued the invoice. She stated in evidence that she knew that there was a possibility of a problem when she agreed to help the 1st Defendant. She heard the Government warn citizens that if a party received money on behalf of another it could contravene the law. She had known that she should not lightly do this. She did not know that there would definitely be a problem. She considered that if it was purely that of collection of money and returning the money to him it is a simple matter. She further stated that she was an adult. She had been in business for a time. Each time when she does something she would think of the consequences. She would weigh up what the possible consequences of her action are and if after such weighing she thinks it is alright, then she would do it. At the time when she received the money, she believed the money belonged to the 1st Defendant. She thought that to collect money for the 1st Defendant and then to deliver the money to him was legal. The 2nd Defendant's Counsel submitted that it is reasonable for the 2nd Defendant to think that if the 1st Defendant could ask someone to pay money to her, there must have been some business relationship between the 1st Defendant and that party so that party would agree to remit money to her as instructed.

45. As I have stated there is no direct evidence that the 2nd Defendant knew that the money did not belong to the 1st Defendant. Paragraph 3 at page 418 of Law Relating to Trusts and Trustees by Underhill and Hayton (15th Ed.), there is stated to be 4 elements of "knowing" or "dishonest assistance" liability. These are:-

(1) a trust or other fiduciary relationship;

(2) a dishonest breach of fiduciary duty on the part of the fiduciaries;

(3) assistance by the defendant in that design; and

(4) knowledge of some dishonest design.

46. Here, it is clear that the first 3 elements exists. In relation to (1) of a fiduciary relationship existed between the 1st Defendant and the Plaintiff. The 1st Defendant is in a position of trust in relation to the purchase price of the goods. In relation to (2), the 1st Defendant had been in dishonest breach of the fiduciary relationship. (3) The 2nd Defendant had assisted in that design in the filtering of the purchase price of the goods to the 1st Defendant. In relation to the 4th element of 'dishonest' knowledge of some (specific or unspecific) wrongdoing, in a passage under that heading, at page 421, after going through the authorities, it is stated,

"Dishonesty will be revealed therefore when a defendant (i) has actual knowledge of wrongdoing or (ii) turned a blind eye when suspecting wrong-doing (Nelsonian knowledge) or (iii) when suspecting wrongdoing, deliberately or recklessly failed to make the inquiries an honest and reasonable man would have made (naughty knowledge). If the circumstances were such that an honest, reasonable man would have inferred that moneys were probably subject to a fiduciary relationship and were being misapplied, yet the defendant went ahead, then naughty knowledge will be inferred unless the defendant can produce rebutting evidence or explanation."

Further down on that page it is stated,

"His knowledge is judged in the light of all the circumstances known to him and any explanation actually given to him.. .

The defendant does not need to know exactly what is going on, so long as he suspects that something dishonest might be going on."

47. The evidence shows that the 2nd Defendant has prepared monthly statements of account falsely in the name of the 2nd Defendant. She has also prepared an invoice in the name of her company to collect purchase money when she knew that her company was not a trading partner with Northstar nor was she entitled to collect the purchase money from Northstar. The state of her mind can be disclosed in her reply when cross-examined whether she thought of the possibility of there being a problem in what she did. She said "yes". Under re-examination she stated, "the Government has warned that if one received money on behalf of another it could contravene the law and she should not lightly do this". However when asked by her Counsel in re-examination as to whether she knew there would definitely be a problem, she said, "No". She subsequently said when led in re-examination whether she believed the money belonged to the 1st Defendant, she stated that she thought the money belonged to the 1st Defendant. Again when led in re-examination as to whether she believed what she did was legal, she stated that she thought it was legal.

48. However, her state of mind was clear when she stated that she thought of the possibility of a problem and that she was well aware of Government warning that receiving money on behalf of others could contravene the law. Even though she stated she thought the money belonged to the 1st Defendant, it would seem that she did not have clear basis for such belief as she had been asked to prepare monthly statements and invoice in her company name.

49. In the judgment of Millet J in Agip (Africa) Ltd v Jackson and others [1990] Ch 265, [1992] 4 All ER 385, at 406h, reads,

"It is no defence for a man charged with having knowingly assisted in a fraudulent and dishonest scheme to say that he thought that it was "only a breach of exchange control or "only" a case of tax evasion. It is not necessary that he should have been aware of the precise nature of the fraud or even of the identity of its victim. A man who consciously assists others by making arrangements which he knows are calculated to conceal what is happening from a third party takes the risk that they are part of a fraud practiced on that party.

But it is not necessary to rest my decision on this ground. After Mr. Smyth's letter of 14 August 1984, the defendants cannot claim that the possibility of a fraud on the plaintiffs never crossed their minds; it was specifically drawn to their attention. Yet they never made any inquiries of the plaintiffs or took any steps to satisfy themselves that the arrangements had the plaintiffs' knowledge and approval. They comforted themselves with the fact that there was 'no clear case of fraud under English law'.

I am led to the conclusion that Mr. Jackson and Mr. Griffin were at best indifferent to the possibility of fraud. They made no inquiries of the plaintiffs because they thought that it was none of their business. That is not honest behaviour."

50. The 2nd Defendant had never made enquiries the 1st Defendant as to whether the purchase orders comprised in the monthly statement issued by her to Northstar were actually purchase orders placed on the 1st Defendant and the capacity in which the 1st Defendant acted in these purchase orders whether as the manufacturer or as the agent of the manufacturer. She had not sought to obtain copies of the purchase orders to ascertain this before preparing the monthly statement dishonestly stating that these purchase orders were placed on her knowing that they were not placed on her. She had not sought to make enquiries or obtain information from Northstar as to the rightful recipient of the sum. She had turned a blind eye to the possibility of dishonesty or fraud.

51. The 2nd Defendant was a business woman of experience and intelligence. She knew that what she did was plainly dishonest. Yet she failed to make the necessary enquiries of the possibility of fraud practiced on a 3rd party. In my view, she was well aware of the possibility of a problem and of illegality. What she was led to say under re-examination that she did not think of the possibility of illegality is plainly a white-wash on what she had already admitted that she had thought of the possibility of a problem arising from what she did. She had thought of Government warnings of illegality arising from such behaviour.

52. I was referred to this passage at page 390 paragraph G of the Royal Brunei Airlines case by the Plaintiff's Counsel,

"Acting in reckless disregard of others' rights or possible rights can be a tell-tale sign of dishonesty. An honest person would have regard to the circumstances known to him, including the nature and importance of the proposed transaction, the nature and importance of his role, the ordinary course of business, the degree of doubt, the practicability of the trustee or the third party proceeding otherwise and the seriousness of the adverse consequences to the beneficiaries. The circumstances will dictate which one or more of the possible courses should be taken by an honest person."

53. In my view, the 2nd Defendant has actual knowledge of wrongdoing in what she did related to the monthly statements and invoice. Alternatively, she turned a blind eye when the question is that there could be a problem crossed her mind. She was at best indifferent to the possibility of fraud. She made no inquiries when she should have done either of the 1st Defendant or of Northstar. I come to the finding that the 4th element of 'dishonest' knowledge of some (specific or unspecific) wrongdoing or dishonest design exists and that the 4 elements for 'knowing assistance' exist.

54. I give judgment for the Plaintiff against the 2nd Defendant in the sum of $215,910.00 together with interest thereon from date of Writ to date of judgment at judgment rate and thereafter at judgment rate until payment. I grant an order nisi for costs of the action to be paid by the 2nd Defendant to the Plaintiff to be taxed if not agreed with Certificate for Counsel.