High Court dismisses conspiracy and trust claims against solicitors: East-West United Bank S.A. v Gusinski & Ors

The dispute arose from a defaulted loan facility to a company in Mr Gusinski's New Media Group and a subsequent LCIA arbitration in 2018 against five guarantor companies. GSC acted for the guarantors in the arbitration and Barbara Dohmann KC appeared as the Bank’s leading counsel. In a claim brought in 2021, the Bank alleged that GSC and Mr Samuels had joined an unlawful means conspiracy orchestrated by their client, Mr Gusinski, to delay and ultimately avoid repaying the Bank. The Bank alleged that they did so principally by (i) advancing an allegedly unarguable Defence and Cross-Claim in the arbitration; and (ii) making representations on instructions to the arbitral tribunal about the availability of a US$5.2 million judgment sum held in GSC's client account. The Bank also claimed that submissions made in support of a staged payment award had given it a proprietary interest in US$4.75 million of that judgment sum and on that basis also brought claims for breach of trust, knowing receipt and dishonest assistance.

The Bank failed in all of its claims, with the Court finding that there was no conspiracy and the Bank had no proprietary interest in the monies in GSC’s client account. The Court found that GSC, Mr Samuels and the legal team had conducted themselves with appropriate professionalism throughout and the Bank was ordered to pay GSC and Mr Samuels’ costs on the indemnity basis from the point that the Bank received disclosure, and chose to nevertheless continue with serious but unfounded allegations of impropriety against professionals.

Conspiracy

The Bank alleged a single conspiracy, led by Mr Gusinski, to use lawful and unlawful means to delay and ultimately avoid repaying the Bank, and claimed that GSC and Mr Samuels joined it. Mr Gusinski had been debarred from defending the proceedings for failure to comply with an unless order, and the Bank’s solicitors spent very little time at trial on the conspiracy claim against Gusinski, and in closing submissions handed up an Appendix of bundle references which the Bank relied upon for the Judge to read to determine the case against Mr Gusinski. At the interim stage, Deputy Master Scher found that the iniquity exception to legal professional privilege was engaged (East West United Bank SA v Gusinski [2024] EWHC 2223), and so the communications between solicitors, counsel, and the client were disclosed. The Judge found that a finding of a prima facie case by DM Scher did not create a res judicata or relevant issue estoppel and is inadmissible opinion evidence [30] and that the Bank still had to prove its case against him on the balance of probabilities [29].

The Judge found that on the evidence presented, the claim against Mr Gusinski failed because each action the Bank relied upon Mr Gusinski having taken as part of the alleged conspiracy was also consistent with a genuine attempt by Mr Gusinski attempt to buy time to rescue the Group from financial difficulty in order to repay the Bank [145]-[146]. That finding was fatal to both lawful and unlawful means conspiracy.

As no underlying conspiracy was proved, the case that GSC and Mr Samuels had joined one necessarily failed. The Judge nonetheless went on to find that:

a. GSC and Mr Samuels had not combined with their client to injure the Bank and had no intention to do so, and were “simply doing their job” [179];

b. The Defence and Cross-Claim had not been shown to be unarguable (but instead reflected “the hard work and industry of the wider legal team” [65]) and in any event GSC and Mr Samuels were entitled to rely on counsel who signed it [175]; and

c. The representations to the Tribunal were clear and did not mislead anyone [182]-[183].

Of particular importance, Rajah J held that a solicitor or barrister who carries out a professional engagement by lawful means, in accordance with their instructions and professional obligations, is not party to any conspiracy with the client. The Judge held that in such a situation, even where the client has the intention needed for a conspiracy claim, there is no combination to injure, because the lawyer has only agreed to accept lawful instructions and provide professional services and the client's intention is not imputed to the lawyer [140].

Proprietary Claim

The Bank argued that the submissions made to the Tribunal had operated as an equitable assignment of US$4.75 million of the judgment sum, or had given rise to a constructive trust in its favour.

On assignment, the Judge held that no final and settled intention to assign could be objectively ascertained [128]. It was of some relevance that nobody at the time, including the Bank's own Chief Legal Officer or the Tribunal, thought an assignment had been made by the submissions to the Tribunal [122].

For there to be a constructive trust over the US$4.75 million, the Judge found that the Bank would need to have some existing proprietary interest, because English law did not recognise a purely remedial constructive trust [119]. As there was no equitable assignment of the sum, and Mr Gusinski’s company never intended to hold the monies on trust for the Bank and never assumed the role of trustee in favour of the Bank, there could be no institutional constructive trust [130].

With no proprietary interest established, the Bank's claims for breach of trust, breach of fiduciary duty, knowing receipt and dishonest assistance all fell away [131].

Costs

The Bank premised its case on serious allegations against professionals, which were comprehensively rejected. The Bank alleged that a solicitor and his firm knowingly joined an unlawful means conspiracy, misled an arbitral tribunal and acted recklessly in breach of their professional obligations. Those allegations were pursued over five years and put Mr Samuels, a very experienced solicitor, to “heavy criticism of his conduct, his professionalism and his honesty” at a public trial [23]. The Court found that Mr Samuels was an honest witness [23]; that he was “simply doing his job” [166], [179]; that the allegation of recklessness was “mere assertion … not supported by any cogent evidence” [177]; and that he conducted himself throughout the retainer “with appropriate professionalism” [178].

The Judge ordered that indemnity costs be paid from the point that the Bank received disclosure. He found that “Prior to that disclosure the claim may have looked very different, but after that disclosure the serious allegations of impropriety against professionals in particular were highly speculative and unsupported by the evidence, but were continued to a public trial. That is out of the norm and should be reflected by an indemnity costs order.”

Andrew George KC and Marlena Valles, instructed by Clyde & Co LLP, acted for GSC and Mr Samuels.

The judgment can be found here.