What States Should Know About Dishonest Assistance

Who can be sued? A state may bring a civil claim in dishonest assistance against a third party who has helped a corrupt public official breach a trust or fiduciary duty, provided that the third party was dishonest.

When is it available? The benefit of a dishonest assistance claim is that it is available against a wider range of participants in bribery, the theft of assets or other corruption. Typical defendants include family, friends, lawyers, bankers and corporate services agents who help to implement the corruption scheme, for example by holding, moving or concealing stolen funds or bribes.

What needs to be proved?  In order to succeed in a dishonest assistance claim against a third party, there must be:

• A breach of fiduciary duty by the public official. The range of fiduciary duties is broad, but is centred on the principle that the fiduciary (here the public official) owes unswerving loyalty to the principal (the state). Deviation from this loyalty constitutes a breach of duty. Examples include the theft of state assets, bribes paid for the award of contracts, and other situations where the public official creates a conflict of interest between his or her duties and personal interests.
• Assistance. The third party must (knowingly) induce or assist in the breach of fiduciary duty. There is no limit on the form that this assistance may take.
• Dishonesty. The test for dishonesty is objective.  The defendant must not act as an honest person would have done in the circumstances.  That hypothetical honest person will have the same skills and experience as the defendant, so those in the regulated sector will be held to higher standards.   Sometimes dishonesty is obvious; sometimes it is not straightforward, particularly when the defendants have incomplete knowledge of the circumstances.

What does not need to be proved? It is not necessary to show that the assistance itself caused loss.

What can be recovered? If successful, the state would be entitled to claim compensation or the profits made by the third party from participating in the wrongdoing. However, the amounts that can be recovered may be lower than those available against the principal wrong-doers:

• Equitable compensation. The court will assess the loss arising from the breach of duty with which the third party assisted. This may not include all breaches of duty and all losses that have arisen.  It is important to establish precisely what breaches a defendant assisted with. The state will be entitled to recover the losses that would not have been suffered "but for" the breaches of duty which the third party induced, or with which it assisted. 
• An account of profits is discretionary, and will not be ordered if the outcome would be "disproportionate" to the actions of the third party. Assessing what is and what is not proportionate may often be difficult in practice, particularly when the extent of the third party's involvement may not be well known

What are the advantages of this claim? It widens the cast of available defendants to lesser participants. This is particularly useful where the principal offender or the misappropriated assets are beyond the state's reach.

Please contact Sascha Grimm, at sgrimm@cooley.com or +44 (0)20 7556 4165, or Jamie Humphreys, at jhumphreys@cooley.com or +44 (0)20 7556 4419, if you require further assistance.

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