Accessory Civil Liability

Civil Conspiracy.

Under English law, an actionable conspiracy consists of a

combination or confederacy between two or more persons, formed

for the purpose of (a) committing an unlawful or criminal act,

(b) the commission of an act which is not in itself unlawful,

but where the means used to commit such act are unlawful in

themselves, or (c) the commission of an act - the

dominant purpose of which is to cause injury to a plaintiff.

Under Florida law, by way of contrast, the elements of

conspiracy are: (a) an agreement between two or more parties;

(2) to do an unlawful act or to do a lawful act by unlawful

means; (3) the doing of some overt act in pursuance of the

conspiracy; and (4) damage to the plaintiff as a result of the

acts done under the conspiracy.1

How do we frame an action against secondary facilitators of

a fraud - such as those who provide an obligor with

knowing assistance to hide his assets? The conspiracy which can

be alleged against facilitators in an asset concealment case is

their combination or confederacy with the main protagonist for

the purpose of 'concealing illicit profits.' For a

claim in conspiracy to stand, it must be alleged and proven

that the conspirators were combining for the purpose of

committing an illegal act (i.e. concealing funds which

rightfully belonged to another). Where the predominant purpose

of the act is not to harm the plaintiff, it is necessary

to show that the co-conspirators employed illegal means in

achieving the objective. The crime of money laundering or

violations of a fraudulent transfer statute spring to mind as

potential predicates.

In respect of framing a statement of claim or complaint

based on actionable conspiracy:

"The statement of claim should describe who the

several parties are and their relationship with each

other. It should allege the agreement between the defendants

to conspire, and state precisely what the purpose or what

were the objects of the alleged conspiracy, and it must then

proceed to set forth, with clarity and precision, the overt

acts which are alleged to have been done by each of the

alleged conspirators in pursuance and in furtherance of the

conspiracy; and lastly it must allege the injury and damage

occasioned to the plaintiff thereby."

If assets have been taken by virtue of a fraudulent joint

design of conspirators and remain traceable, then constructive

trust and equitable tracing remedies can be sought. Under

modern English law, many cases which used to be pleaded in

conspiracy may now be pleaded in joint design and constructive

trust.2 In pleading a case for damage suffered as a

result of a conspiracy, the following aspects must be

included:

An allegation that the individual defendants unlawfully

conspired to injure the plaintiff by unlawful means, namely

by [set out a precise description of the methods];

That in pursuance of the said conspiracy, the defendants

did [name the overt acts including dates and names];

and

A separate statement of particulars, giving the fullest

details possible with respect to the separate elements of the

conspiracy, being specific as to dates, transactions, means

used, statements made and amounts involved.

A party to a conspiracy need not understand the legal effect

of it. However, he must know the facts which give rise to a

legal conclusion that the combination, or confederacy, is

unlawful.3 It must be shown that the facilitators

were aware that there were some suspicions surrounding the

provenance of the funds provided by the main wrongdoer.

The question is how far the defendant was aware of the plan

and then "joined in the execution" of it.4

Restated, the question is whether a particular defendant,

having regard to his knowledge, utterances and actions, was

sufficiently a party to the combination and the common

design.5

There is some confusion in the law in relation to the need

to show that the defendant's "dominant purpose"

was to damage another. In some cases,6 this purpose

has been required of both conspiracy to injure

and conspiracy to use unlawful

means.7 The case of Canada Cement La Farge v.

British Columbia Lightweight Aggregate Limited8

laid down an "in the alternative" test in considering

whether the tort of conspiracy is present. The tort of

conspiracy was said to be present where:

the predominant purpose of the defendant's conduct is

to cause injury to the plaintiff (even where the means used

were lawful); or

where the conduct of the defendant is unlawful, the

conduct is directed towards the plaintiff (alone or together

with others), and the defendant should, given the

circumstances, know that injury to the plaintiff is likely to

and does result.

With respect to the second alternative, it is not necessary

that the predominant purpose of the defendant's conduct be

to cause injury to the plaintiff. However, this element of the

second way to formulate the wrong represents a constructive

form of intent which derives from the fact that the defendant

ought to have known that injury to the plaintiff would

result.

In many situations it will not be clear whether the

co-conspirators were actually aware of a dishonest design,

assuming that their purpose is not to injure the plainitff. The

Canadian case of Clairborne Industries Limited v. National

Bank of Canada et al9 provides an interesting

consideration of this problem. One of the defences put forward

in this action was that the defendant was not aware that

certain transactions were unauthorised or constituted illegal

acts. The Court analysed the transaction and found that the

Bank had sufficient information to put it on a duty to

inquire.

Although the trial judge in the case of Clairborne

found that the relief was based upon a finding of constructive

trust, the Ontario Court of Appeal found that the cause of

action sounded not only in constructive trust but also in

conspiracy. The facts of the case clearly showed that the

defendants were in possession of sufficient information to put

them under a duty to inquire and to impose upon

them the duty of a trustee de son tort (or a

constructive trustee). In other words they were willfully

blind, which does not provide a defence to a charge of civil

conspiracy.

The Court found that it had to be determined whether the

co-conspirators joined forces in a common design to commit

unlawful acts and whether damage to the plaintiffs was

foreseeable and occurred. If this was in fact the case, the

co-conspirators would each be responsible for those unlawful

acts of the others that were the probable consequences of the

original design.

One of the defences put forward in Clairborne was

that the defendant bank was not aware that certain public

company cheques were unauthorised and constituted thefts. The

trial judge analysed the transactions first within the context

of an allegation of conspiracy and then within the context of

breach of a constructive trust. Although the Judge did not find

that the bank was party to a conspiracy, he did however find

that the bank had sufficient information to put it under a duty

to inquire and to impose upon it the duties of a trustee of the

public company's accounts and securities.

On appeal, the appeal Court found that the factual findings

dealing with breach of trust were all supportable on the

evidence, and were also equally supportive of a finding of

conspiracy (which was not found by the trial Judge), or of a

continuation of the conspiracy and failure to withdraw.

The following is an interesting quote from the judgment in

Clairborne:

"My conclusion is that this was a situation in which

the bank closed its eyes and facilitated the happening of an

event which experience indicated would likely occur. In the

end result, there is no real difference between this finding

of continuing conspiracy and that of the trial judge who

imposed a constructive trust upon these shares. The bank

argues that the transaction was authorised in writing and

should not be questioned but this ignores contemporaneous

knowledge of the bank of how the proceeds were to be used;

the red flag - - public to private - - was written on the

ledger statement on January 16, 1975 and implicates the bank

in the outcome."

Above all, it is important to note that the conspiracy in

this case was based upon "a constructive intent derived

from the fact that the defendants should have known that injury

to the plaintiff would ensue."

There are, however, later English cases which appear to

cling to the 'predominant purpose' test. A difficulty

arises with respect to the proposition that a plaintiff who

frames his action as an 'unlawful means to achieve an

objective' conspiracy, must not only demonstrate that

unlawful means were used, but he must also show that he thereby

suffered damage. The case of Lonrho Limited v. Shell

Petroleum Co10 supported this proposition. This

decision was subsequently interpreted by Lord Diplock in

Metall und Rohstuff, AG v. Donaldson Lufkin and

Genrette as meaning that liability for the tort of

conspiracy...