Judgment for bank in fraud case

Judgment for bank in fraud case

THE Commercial Court in London has given judgment for Berliner Bank in proceedings against several shipowners and their agents in respect of a sophisticated shipping fraud arising out of the bank's financing of five Romanian newbuildings in the early 1990s.

Judgment was handed down after a seven-week trial before Mr Justice Cresswell. The bank succeeded on all its claims and was awarded damages of over $20m for fraudulent conspiracy and knowing receipt against the defendants, Ares Emmanuel, Elias Lemos, Philip Makris, Dimitris Lemos and John Lemos, who were well-known operators in the London shipping market in the 1990s. The bank also obtained judgment for fraudulent conspiracy against Rom Car Limited, a company with strong Romanian connections which had brokered the deal, and judgment for knowing receipt against Michael Harvey, a solicitor who had received part of the loan money.

The fraud involved the fabrication of contracts and long-term charters which misled the bank as to the terms on which the vessels were purchased and their employment. There were a number of dramatic twists during the trial itself which involved the judge finding that one of the defendants, Ares Emmanuel, had concocted documents to bolster his case and then lied about the documents on oath. The truth emerged from subpoenaed telephone records which showed that the telephone numbers appearing on the forged letterhead had not existed when the letters were purportedly signed.

A private investigator was also engaged to produce video evidence proving that Emmanuel had been in contact with Elias Lemos during the trial, contact which Emmanuel had strongly denied on oath. The judge passed the papers to the Director of Public Prosecutions to consider perjury charges against Mr Emmanuel.

The case is likely to be an important authority on the recovery of payments made under mistake of fact and the law concerning knowing assistance and knowing receipt liability.

The judgment of Cresswell J condemned the conspirators in forthright terms. The case shows that determined action by banks and their advisers can secure recovery against even the most resourceful fraudsters.
(Watson, Farley & Williams)

Cargo damage and reservation clause

IN an action filed before the Dubai courts, the court of cassation has held that neither the carrier nor cargo insurers are responsible for loss of or damage to goods shipped in a sealed container if there is a reservation clause on the front of the bill of lading.

Furthermore, the reservation clause on the front of the bill of lading is considered to be part of the contract of carriage entered into between the carrier and the shipper, and is valid from the date of issue, including against the consignee who is not a party to the original contract. Therefore, the consignees cannot claim that the terms and conditions set out on the front of the bill of lading should not apply to them.
(Al Tamimi)

Economic loss too remote
P&O Scottish Ferries Ltd v The Braer Corporation

SECTION 1 of the Merchant Shipping (Oil Pollution) Act 1971 was clear in its terms and did not require to be interpreted with the assistance of the underlying International Convention on Civil Liability for Oil Pollution Damage, signed in Brussels in 1969.

So held Lord Gill, sitting in the Outer House of the Court of Session, in dismissing an action of damages by P&O Scottish Ferries Ltd against the Braer Corporation and others.

P&O Scottish Ferries was seeking compensation under the 1971 act for damage to its passenger/ferry service between Shetland and the mainland following oil contamination from the wreck of the tanker Braer. There were seven heads of claim: loss of passenger revenue; loss of onboard sales; loss of commercial trailer traffic revenue; loss of land-based trailer traffic on Shetland; advertising costs; costs of loss assessors in preparing the claim; and increased agents' commission.

Essentially, the claim was that parties which would otherwise have entered into contracts with P&O failed to do so, and the operation of P&O's business became less profitable than it otherwise would have been. In essence, the losses were an indirect consequence of adverse publicity affecting the image of the Shetlands.

The Braer Corporation, meanwhile, argued that the claims were based on purely relational economic loss and were, properly analysed, too remote.

Lord Gill found that the scope of the 1971 act was such as to exclude P&O's claims for relational economic losses caused when the Shetlands were subject to adverse publicity consequent on the Braer spill. Such losses as were caused were not proximate to the casualty.
(The Times)

Limitation of liability and the jurisdictional skirmish
The Ming Galaxy and Herceg Novi (1998, 2 LLR -454)

THE House of Lords has recently upheld a decision of the Court of Appeal which will have widespread consequences in proceedings where forum is an issue.

The Ming Galaxy and the Herceg Novi were involved in a collision within Singapore territorial waters resulting in the loss of the Herceg Novi. The owner of the Ming Galaxy immediately started proceedings in Singapore with the service of an in rem writ on the mast of the sunken Herceg Novi which, at certain times, protruded above the level of the sea. The writ was served in order to claim the benefit of limitation under the 1957 Limitation Convention as applicable in Singapore.

Shortly afterward, the Herceg Novi instituted proceedings in England to take advantage of the higher limitation regime under the 1976 Limitation Convention. Under the 1957 convention, the Ming Galaxy's limit of liability was approximately $2.9m. Under the 1976 statute, it was approximately $5.8m. The owners of the Ming Galaxy applied for a stay of the English proceedings.

One of the questions before the court was whether the owner of the Herceg Novi was deprived of a legitimate juridical advantage if required to proceed in Singapore rather than in England. The English high court held that Singapore was the appropriate forum to determine liability but that the higher 1976 limits applicable under English law could represent a legitimate juridical advantage, the benefit of which it might be wrong to deprive the Herceg Novi of.

The judge, Mr Justice Clarke, was influenced by the support given to the 1976 convention by, among other, IMO. As a result, the court granted a temporary stay allowing the owner of the Herceg Novi to bring the matter back before the court following determination of liability and related issues in Singapore, and once it was known whether the competing limits of the two conventions would be an issue. The owner of the Ming Galaxy appealed.

The Court of Appeal found that the fact that the 1976 convention was supported by IMO was irrelevant. If IMO approval was taken to be decisive then, whenever a foreign state applied the 1957 convention, the claimant could instead start limitation proceedings in England under the 1976 convention, thereby depriving the foreign state of effective use of its own law.

It was noted that neither convention was more just than the other, the decision of a state to ratify either convention reflecting each individual state's commercial and other interests. It was also impossible to say that substantial justice would not be available to the owner of the Herceg Novi in Singapore.

The Court of Appeal therefore ruled that the case should be resolved by the Singapore courts where the lower limit applied. The owner of the Herceg Novi petitioned the House of Lords for leave to appeal. This permission has now been refused.