10/03/2022

Commercial Court issues judgment in commodities trading fraud claim

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

The claim concerned allegations of fraud and unlawful means conspiracy relating to forged nickel warehouse receipts. In 2016, the Claimant, MCM, had purchased those warehouse receipts from two Hong Kong companies, Come Harvest and Mega Wealth, for US$284 million. MCM then sold those warehouse receipts to ANZ.

This case raises four interesting points of law:

• First, as to the intention to injure requirement in unlawful means conspiracy. The Judge held that the tort of unlawful means conspiracy does not require the defendant to intend to injure a specific claimant, but rather that there is sufficient intention if the defendant is aware that its conduct, by its very nature, would be harmful to one of a class of persons (which includes the claimant).
• Second, as to the ‘indeed the means’ requirement in unlawful means conspiracy. The Judge determined that it was not necessary for a defendant in an unlawful means conspiracy claim to intend (and therefore know of) the ‘specific means’ by which harm is inflicted on the claimant.
• Third, as to knowing receipt. The Judge concluded that the constructive trust which arises upon rescission of a contract for fraudulent misrepresentation claim has retrospective effect only for the purposes of tracing but not so as a platform for personal claims. In consequence, assets transferred before the rescission are not received in breach of trust, as the trust does not yet exist, and there can be no knowing receipt claim in respect thereof.
• Fourth, as to tracing. The Judge analysed the extent to which a claimant could trace transfers of monies by a wrongdoer from a mixed account (i.e. holding the claimant’s traceable funds as well as the wrongdoer’s own funds) to third party recipients that were 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 claimant could not cherry pick individual transfers it wished to trace from such a mixed account.

David Lewis QC, Andrew Dinsmore, and Manuel Casas acted for the Tenth Defendant, who is seeking permission to appeal from the Court of Appeal.