Background
East-West United Bank made a loan facility available to New Century Distribution GmbH, part of Vladimir Gusinski’s New Media Group. After default, the Bank accelerated the debt and demanded US$9,596,920.60 from the borrower and guarantors. It then commenced an LCIA arbitration against five guarantor companies. GSC Solicitors LLP, with consultant Barry Samuels handling the matter, represented the guarantors.
While the arbitration was pending, GSC received approximately US$5.2 million for New Media Distribution Company SEZC Ltd following its successful litigation against a third party. The arbitral tribunal later ordered staged payment, including an immediate US$4.75 million payment, but the award was not paid and NMDC entered liquidation. The Bank alleged that Gusinski had conspired with group companies to delay or avoid payment and that GSC and Samuels joined that conspiracy. It also advanced claims concerning the handling of the litigation proceeds, alleged dishonest assistance and knowing receipt, and Gusinski’s alleged procurement of contractual breaches. Gusinski was debarred from defending but the Bank still had to prove its case at trial.
The Court’s Holding
Mr Justice Rajah dismissed every claim against all three defendants. The Bank did not prove the alleged pre-existing conspiracy involving Gusinski and another person, nor did it establish that GSC or Samuels combined with Gusinski with the specific intention of injuring the Bank. The court found that Samuels and GSC were acting professionally for their clients, not participating in an unlawful scheme. The arbitration defence and cross-claim had not been proved legally unarguable, and the solicitors were entitled to rely on leading and junior counsel who drafted and signed it.
The court also found that the representations concerning the US$4.75 million were clear and did not mislead the Bank or the tribunal. The Bank had no proprietary interest in the relevant funds, and GSC’s challenged payments were lawful. The judgment separately rejected the remaining trust, fiduciary-duty, dishonest-assistance, and knowing-receipt claims, as well as the claim that Gusinski procured contractual breaches. On procurement, the Bank had not proved that the relevant companies could pay but were induced by Gusinski not to do so, or that any proved loss resulted.
Key Takeaways
- Debarment from defending does not relieve a claimant of proving its case on the balance of probabilities at trial.
- A solicitor’s knowledge of a client’s financial and litigation strategy does not, without proof of combination and the required intent, establish participation in an unlawful means conspiracy.
- Allegations that lawyers advanced an unarguable or bad-faith case require cogent proof; reliance on counsel who drafted and signed the pleading was not reckless on these facts.
Why It Matters
The decision illustrates the demanding evidential requirements for imposing conspiracy liability on lawyers acting for a client in contentious proceedings. Awareness of insolvency measures, payment difficulties, or aggressive litigation positions is not enough without proof that the lawyers joined an unlawful plan and possessed the requisite intention to injure.
It also underscores that a claimant must present and prove its case at trial even against a debarred defendant. Pleadings verified by a statement of truth and findings made during interim proceedings do not substitute for admissible trial evidence and submissions applying the law to that evidence.