Commercial court hands down judgment in commodity trading fraud complaint

0

Judge Calver delivered judgment in ED&F Man Capital Markets Limited v Come Harvest Limited [2022] EWHC 229 (Comm) on February 16, 2022, after a five-week trial in October-November 2021.

The complaint related to allegations of fraud and conspiracy of unlawful means regarding false nickel warehouse receipts. In 2016, plaintiff MCM purchased these warehouse receipts from two Hong Kong companies, Come Harvest and Mega Wealth, for US$284 million. MCM then sold these warehouse receipts to ANZ.

This case raises four interesting points of law:

  • First, as to the requirement of intent to injure in conspiracy by unlawful means. The judge found that the tort of conspiracy by unlawful means does not require the defendant to intend to injure a specific plaintiff, but rather that there is sufficient intent if the defendant is aware that its conduct, by its very nature, would harm a class of people (which includes the plaintiff).
  • Second, with regard to the requirement of “good means” in the conspiracy of illegal means. The judge determined that it was not necessary for a defendant in a claim of conspiracy to unlawful means to intend (and therefore know) the “specific means” by which harm is inflicted on the plaintiff.
  • Third, as to knowledge of reception. The judge concluded that the constructive trust that arises from the termination of a contract for claim of fraudulent misrepresentation has retroactive effect only for the purposes of research, but not as a platform for claims personal. Accordingly, property transferred prior to the cancellation is not received in breach of the trust, since the trust does not yet exist and there can be no claim to knowingly receive it.
  • Fourth, as to tracing. The judge analyzed the extent to which a plaintiff could trace transfers of funds by a criminal from a mixed account (i.e. holding the plaintiff’s traceable funds as well as the tortfeasor’s own funds) to third party recipients who are not acting in good faith. He concluded that transfers to third parties by the wrongdoer could not be considered analogous to successful investments, with the effect that a plaintiff could not select the individual transfers he wished to trace from such a mixed Account.
Share.

Comments are closed.