E D & F Man Capital Markets Limited v Come Harvest Holdings Limited & Ors.

In assessing deceit damages, the court must identify the transaction which caused the loss, the benefits obtained from it, and whether any loss was later avoided. The legal form of linked contracts is important but may be outweighed by their commercial substance. Principal-to-principal contracts can therefore form one composite transaction where they are an integrated package understood by all participants.

A benefit is collateral only if it arose independently of the circumstances giving rise to the loss. A settlement between participants which truly discharges the liability constituting the loss reduces recoverable damages. However, an agreement which preserves recovery proceedings, requires pursuit of wrongdoers, and allocates recoveries is a reorganisation of litigation arrangements. It does not itself avoid the loss.

MCM paid approximately US $284 million to acquire purported original warehouse receipts from Come Harvest and Mega Wealth. The receipts were colour-scanned copies and gave no rights to the nickel. MCM passed most of them to ANZ, which paid MCM approximately US $291 million. MCM consequently incurred liability to ANZ and entered into a complex settlement agreement with it.

At first instance, Calver J held Straits liable for unlawful means conspiracy and assessed damages on the basis that MCM's purchase contracts and onward contracts with ANZ were separate: [2022] EWHC 229 (Comm). Permission to challenge liability was refused. Straits appealed the quantum decision, contending that the transactions formed one transaction and that MCM's settlement with ANZ had reduced its loss.

1. Appeal dismissed. Males LJ, with whom Popplewell and Nugee LJJ agreed, upheld the damages outcome, although on reasoning different from the judge's. The applicable compensatory principle was that the victim of deceit recovers all financial loss directly flowing from the induced transaction. The principles in [1996] UKHL 3 provide flexible guidance where property has been acquired; they do not exhaust the law of damages.
2. The court adopted a structured approach. It must first identify the relevant transaction, then identify benefits received from that transaction, and finally ask whether any resulting loss has been avoided. Collateral benefits are excluded at the final stage because they arise independently of the circumstances causing the loss.
3. The relevant transaction was not confined to MCM's principal-to-principal contracts with Come Harvest and Mega Wealth. That form was important and will often be decisive, but it was outweighed by the substance of the arrangements. The contracts with ANZ were an integrated package deal involving identified nickel, concurrent contracting, and payment through MCM as an effective middleman. MCM and ANZ were both victims of the same fraud. Treating the onward sale as irrelevant would create an unacceptable risk of double recovery against Straits.
4. At the transaction date, MCM had received US $291 million from ANZ but had incurred a corresponding liability to ANZ. Its loss was therefore, in substance, that liability less its US $7 million profit, subject to whether the liability was later avoided. Had the settlement simply compromised ANZ's claim for a lesser fixed sum, it would have reduced MCM's recoverable loss and would not have been collateral.
5. That was not the effect of this Settlement Agreement. Its future payment was subject to deductions for recoveries, including recoveries from Straits. It required MCM to pursue the fraudsters and allocated the proceeds of litigation between the parties. It was therefore a reorganisation of the arrangements for litigation, rather than a settlement which avoided or reduced MCM's loss. The court also refused permission for Straits to advance a new ground inconsistent with its concession at trial.

• Court of Appeal (Civil Division) — Straits' appeal against the quantum award was dismissed. The court upheld the result on a composite-transaction and no-avoided-loss analysis.
• High Court (Commercial Court) — Calver J held Straits liable for unlawful means conspiracy and adopted the separate-transactions analysis: [2022] EWHC 229 (Comm).