E D & F MAN CAPITAL MARKETS LIMITED v COME HARVEST HOLDINGS LIMITED

A participant in an unlawful means conspiracy need not know the precise method used by co-conspirators or the victim’s precise identity. It is enough that the participant shares the common object, intends injury as an end or means, and knows that a victim will necessarily suffer through the unlawful conduct.

In deceit, an onward sub-sale and a later settlement concerning that separate transaction may be res inter alios acta. The fraudster cannot claim their benefit when damages are assessed.

Rescission revests beneficial ownership sufficiently to support proprietary tracing. It does not retrospectively create knowing-receipt liability for assets received before any constructive trust existed. A claimant tracing mixed funds also cannot arbitrarily select payments to one third-party recipient while disregarding equivalent payments to others.

The claimant financed purchases of nickel from two companies through sale and repurchase transactions. The sellers supplied 92 counterfeit warehouse receipts derived from colour-scanned copies of genuine receipts. The genuine receipts and the metal remained under the control of the tenth defendant, Straits, or its financiers.

The claimant alleged that the first four defendants perpetrated the fraud and that Straits knowingly facilitated it by supplying scanned receipts and supporting letters, using sham repo documentation, concealing the location of the originals and misleading warehouses and Western financiers. It claimed approximately US$284.5 million in deceit, procuring breach of contract and unlawful means conspiracy. It also sought rescission, knowing-receipt relief and proprietary declarations.

The central issues included Straits’ knowledge and intention, the required mental and instrumental elements of unlawful means conspiracy, the effect of onward sales and a settlement with the claimant’s financier on damages, and the proprietary consequences of rescission.

1. Judgment for the claimant on the principal claims. The first four defendants were liable in deceit. They knowingly represented, expressly and impliedly, that the sellers owned the nickel and that the warehouse receipts were genuine. The claimant relied on those representations when paying for the metal. The third and fourth defendants also procured the sellers’ breaches of contract.

2. Straits was liable with the first four defendants for unlawful means conspiracy. Its senior personnel had actual knowledge, before the claimant received the first forged receipt, that the scanned receipts and supporting letters were being used to obtain finance by falsely representing ownership of metal. Straits supplied the essential documents, used sham repo contracts, concealed the truth from the warehouse and financiers, and participated in agreed cover stories. It therefore shared the common object and acted in concert with the principal fraudsters.

3. The intention required for unlawful means conspiracy does not include a separate requirement to target a specifically identified claimant. Applying OBG Ltd v Allan [2008] 1 AC 1, injury must be intended as an end or as a means to an end; foreseeable injury alone is insufficient. Necessary injury inseparably linked to the conspirator’s gain also satisfies the requirement. In any event, Straits knew that the claimant was an intended victim.

4. The instrumentality requirement is one of causation. The unlawful means must cause the claimant’s loss rather than merely provide its occasion. A conspirator need not know the precise unlawful method employed by others. Forgery and deceit were the means that caused the loss here.

5. The claimant’s onward transactions with its financier were separate principal-to-principal transactions. The sub-sales and the later settlement were res inter alios acta. They did not reduce the damages directly flowing from the fraudulent purchases. After credit for other settlements, damages were US$282,736,139.22.

6. The claimant validly rescinded the purchase and corresponding sale contracts. Rescission revested beneficial ownership sufficiently to support proprietary tracing, but it did not retrospectively create a trust for the purpose of knowing receipt. The knowing-receipt claims therefore failed because the recipients had not received trust property in breach of an existing trust.

7. The claimant could not selectively treat payments to Straits from mixed accounts as applications of its money while disregarding payments to other recipients. The methodology in the first tracing report applied. Straits was nevertheless not a bona fide purchaser for value without notice. A declaration was granted that the claimant’s net payments and their traceable proceeds were held on constructive trust by the first four, ninth and tenth defendants, with quantum reserved.

This was a first-instance trial in the Commercial Court. The judgment records that the Court of Appeal had previously dismissed Straits’ jurisdiction challenge, but no citation or further details of that decision are stated.