Barclay Pharmaceuticals Ltd & Ors v Waypharm LP & Ors

A claimant alleging fraud in civil proceedings must prove the allegation on the balance of probabilities. The seriousness of the allegation may affect the court’s assessment of inherent probabilities, but it does not create a heightened standard of proof.

A party presenting documents under a letter of credit is in breach of an implied contractual obligation to make a good-faith presentation supported by genuine and truthful documents. A bank’s acceptance of documents as apparently conforming does not protect a party that knowingly presents fraudulent documents.

Clear and specific language is required to compromise unknown claims involving fraud. A person who personally commits fraudulent acts on behalf of a company remains personally liable for the resulting torts.

The claimants pursued claims arising from two presentations made by Waypharm under an irrevocable letter of credit. The presentations were supported by invoices and forwarding agents’ certificates of receipt relating to pharmaceutical and household goods.

The claimants alleged that the goods had not been ordered, were not present in Antwerp, and that the documents contained fraudulent representations. They claimed against Waypharm, Antoine Mekni and Best Financial for conspiracy, causing loss by unlawful means, inducing breach of contract, breach of implied contractual terms and restitution.

The defendants contended that the goods had been ordered or that Mr Mekni honestly believed they had been ordered. They also argued that later arrangements for substitute goods compromised or waived the claimants’ claims.

1. Fraud and contractual breach. The claimants proved on the balance of probabilities that the goods described in both disputed invoices had not been ordered and were not present at the Antwerp warehouse. The invoices and forwarding certificates falsely represented the existence of contractual orders, the presence and control of the goods, and their delivery or availability to the claimants.
2. Waypharm and Mr Mekni knowingly arranged and presented the false documents. The bank’s acceptance of the documents as conforming did not assist them where the documents were known to be fraudulent. Waypharm therefore breached the admitted implied terms requiring genuine, truthful and good-faith presentations under the letter of credit.
3. Compromise and waiver. The May and October 2006 arrangements were practical measures intended to reduce the claimants’ financial exposure. They did not compromise or waive the fraud or contractual claims. Clear and specific language would have been required to release fraud-based claims, applying Satyam Computer Services Ltd v Upaid Systems Ltd [2008] EWCA Civ 487.
4. Tortious liability. The fraudulent presentations constituted unlawful means because they induced NatWest to act under the letter of credit in circumstances where the bank’s conduct would have been actionable had it suffered loss. The requirements for causing loss by unlawful means identified in OBG Limited v Allan [2008] 1 AC 1 (HL) were satisfied. Waypharm and Mr Mekni intended to cause loss to BPL, even if they also intended to enrich themselves.
5. Best Financial was party to the conspiracy because it was used as a vehicle for dispersing the proceeds and Mr Mekni’s knowledge was attributable to it. A company and its controlling individual may be parties to a civil conspiracy, applying the persuasive reasoning in Taylor v Smyth [1991] IR 142. Mr Mekni was personally liable because he committed the fraudulent acts himself, applying Standard Chartered Bank v Pakistan Shipping Corporation (No 2) [2002] UKHL 43.
6. The claimants were entitled to damages of £8,745,464. Waypharm was additionally liable in restitution for the same loss, subject to a maximum recovery of that amount. The defendants were jointly and severally liable for the damages.

This was a first-instance decision of the High Court (Commercial Court). The judgment does not state any prior appellate decision in the same proceedings.