KAR Oil Refining Ltd & Anor v Frion Ltd & Ors

On an application for default judgment, the claimant is entitled to judgment for relief supported by its pleaded statement of case, provided the pleaded facts establish the relevant causes of action. A properly pleaded case in deceit, fraudulent misrepresentation, conspiracy and knowing receipt may support damages, equitable compensation, an account and a constructive-trust declaration. Sums lost through the fraud and consequential transaction costs may be recovered, with interest. Where a defendant has refused to engage with the proceedings, indemnity costs and an interim costs award may be appropriate.

The claimants alleged that a facility agreement requiring a $10 million advance payment was an advance-fee fraud. They claimed that the defendants made fraudulent representations concerning the financing, the value and security of a medium-term note, and the financial substance of the relevant entities. They also alleged conspiracy and knowing receipt of proceeds of the fraud.

Alternative service was authorised for the seventh defendant. The claimants established that service had occurred and that the defendant had neither acknowledged service nor served a defence. They applied for default judgment under Civil Procedure Rules 1998, rules 12.3 and 12.4(2). The issue was whether the pleaded case sustained the relief sought.

1. The seventh defendant was in default. The claimants were therefore entitled to such judgment as could be sustained on their statement of case under Civil Procedure Rules 1998, rules 12.3 and 12.4(2).
2. The pleaded facts, if proved at trial, established properly pleaded causes of action in deceit, fraudulent misrepresentation, conspiracy and knowing receipt. The court accepted that the pleaded representations and alleged fraudulent scheme supported those causes of action.
3. The seventh defendant was required to account as constructive trustee for sums actually received. If he had received further sums falling within the pleaded case, those sums would also be subject to the account.
4. The claimants were entitled to recover the pleaded loss of $10 million and the sterling equivalent of £136,206 in transaction costs. Both sums were to carry interest at 8 per cent.
5. The defendant’s failure to engage in the litigation, together with the nature of the pleaded case, justified costs on the indemnity basis. An interim costs award of £50,000 was appropriate against the preliminary costs schedule.

Judgment was entered in the form sought.