Concept Oil Services Ltd v En-Gin Group L & Ors

A representation made in a commercial transaction may continue to operate while the representee acts upon it. When circumstances make it false, the representor must correct it if he knows of the reliance and that further dealings may occur. Deliberate failure to do so may constitute deceit.

Persons are joint tortfeasors where they tacitly combine pursuant to a common design, even if only one makes the relevant representations. The court may grant relief under Insolvency Act 1986, section 423 where a transaction at an undervalue has the substantial purpose of putting assets beyond a claimant’s reach. The validity of a purported continuation of an English company is governed by English law as the law of its place of incorporation.

The claimant financed the purchase and refining of oil by companies within the defendants’ corporate group. It relied on representations that an English company ultimately owned the refinery and that the structure would not change unless that company sold its interest.

The defendants subsequently moved the holding company to Anguilla, transferred the refinery to another company for no consideration and diverted assets and products. The claimant alleged deceit, conspiracy, rescission and transactions defrauding creditors. The defendants did not attend the trial. The central issues were whether the representations were continuing, whether the individual defendants were jointly liable, whether the corporate transfers were effective, and what relief followed.

1. Judgment and damages. The claimant succeeded. The court awarded US$11,657,187.82 for deceit against the third, fourth and sixth defendants and for conspiracy against the first to eighth defendants, with interest at 1% over LIBOR from 31 January 2011. The Tax Loan Agreement was rescinded against the ninth defendant, with recovery of US$682,944.
2. Deceit. The elements were a false representation, dishonesty, an intention that it be relied upon, and actual reliance. The representations concerning ownership of the refinery and the corporate structure were continuing representations. They remained operative while the claimant continued making advances. Once the structure changed, the representations became false, and the deliberate failure to correct them was dishonest. Further positive misrepresentations were made at a meeting with BNP and in contractual documents.
3. Joint tortfeasorship and conspiracy. Applying the common-design principle in Unilever Plc v Gillette (UK) Limited and MCA Records Inc v Charly Records Ltd, the second individual defendant was liable although the first individual defendant made the representations. Their coordinated control of the companies, common benefit and adoption of the false account demonstrated a tacit common design. The unlawful-means conspiracy was established because the defendants combined to cause loss using deceit. No express agreement was required, and a conspirator need not personally commit every unlawful act.
4. Corporate transfer and insolvency relief. The purported continuation of the English company in Anguilla was ineffective under English conflicts rules. English law, as the law of incorporation, did not recognise the purported continuation or transfer of assets and liabilities. The transfers were therefore nullities, with a presumed resulting trust in favour of the English company. Alternatively, they were transactions at an undervalue under section 423 of the Insolvency Act 1986. Their substantial purpose was to put assets beyond creditors’ reach and prejudice the claimant. Relief under sections 423 and 425 was granted, including revesting orders.
5. The defendants were ordered to pay the claimant’s costs. The freezing injunction was continued until further order.