Inter Export LLC v Townley & Anor

This case is about the alleged failure by a company formerly known as Nerida Trading Limited (and since 5 June 2013 known as Nemetona Trading Limited) (“NTL”) to pay the sum of US$1,203,099 to the claimant, a Ukrainian company, for a consignment of 1,028.29 metric tonnes (“mts”) of sunflower oil in October 2012. The oil was delivered to a Ukrainian port, Berdyansk Commercial Port, (“BCP”), by the claimant and then exported out of BCP by NTL. NTL was in the business of buying and selling commodities, principally sunflower seed oil and steel pipes. The claimant underwent an arbitration in Ukraine in respect of the cargo of oil against NTL, which is in liquidation, but now sues a director (the second defendant) and shareholders (both defendants) of NTL directly in fraud. The claimant says the first defendant is a shadow or de facto director of NTL.

Fraudulent misrepresentations by directors of companies which they intend to be relied upon are actionable against them personally in deceit if the elements of the tort can be shown against them: Standard Chartered Bank v. Pakistan National Shipping Corporation [2003] 1 AC 959. As Lord Herschell said in Derry v. Peek (1889) 14 App Cas 337 (at 376),

“First, in order to sustain an action in deceit, there must be proof of fraud and nothing short will suffice. Secondly, the fraud is proved when it is shown that a false representation has been made (i) knowingly, (ii) without belief in its truth, or (iii) recklessly, carelessly whether it be true or false.”

In AIC Limited v. ITS Testing Services (UK) Limited (“The Kriti Palm”) [2006] EWCA Civ 1601, Rix LJ said at [251],

“The elements of the tort of deceit are well known. In essence they require (1) a representation, which is (2) false, (3) dishonestly made, and (4) intended to be relied on and in fact relied on.”

It is notable that by paragraph 2 of an order dated 31 October 2016 Warren J refused permission to amend (and by paragraph 4 ordered that the claimant pay 95% of the defendants’ costs of the claimant’s application to amend) to plead,

Mr Oleg Karachevtsev, a director of the claimant, says that he would not have entered into the contract with NTL had the second defendant not made the representations relied on. Mr Miller says that there are no operative representations because pre-contractual representations were true at the time and post-contractual representations were not relied on. I do not agree: see paragraphs 10, 11, 12 a., c. and e and 67-69 of the Amended Particulars of Claim. Mr Jory QC said that the claimant must show that the representation was made with the intent that it should be acted upon and that it did act upon it. What the victim of deceit is not required to show is that it believed the representation, merely that it was influenced by it: see Hayward v. Zurich Insurance Company Plc [2016] UKSC 64.

Contractual damages, not tortious damages, are claimed according to Mr Miller and the claim should fail for that reason. In Smith New Court Securities Limited v. Scrimgeour Vickers (Asset Management) Limited and Anor [AC] 254, Lord Steyn (with whom Lords Browne-Wilkinson, Keith and Slynn agreed) said at 281-282,

“…in Doyle v. Olby (Ironmongers) Ltd [1969] 2 QB 158… Lord Denning MR explained, at p. 167:

“In contract, the damages are limited to what may reasonably be supposed to have been in the contemplation of the parties. In fraud, they are not so limited. The defendant is bound to make reparation for all the actual damages directly flowing from the fraudulent inducement. The person who has been defrauded is entitled to say: ‘I would not have entered into this bargain at all but for your representation. Owing to your fraud, I have not only lost all the money I paid you, but, what is more, I have been put to a large amount of extra expense as well and suffered this or that extra damages.’ All such damages can be recovered: and it does not lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen.”

Winn and Sachs LJJ expressed themselves in similar terms.

The logic of the decision in Doyle v. Olby (Ironmongers) Ltd justifies the following propositions. (1) The plaintiff in an action for deceit is not entitled to be compensated in accordance with the contractual measure of damage, i.e. the benefit of the bargain measure. He is not entitled to be protected in respect of his positive interest in the bargain. (2) The plaintiff in an action for deceit is, however, entitled to be compensated in respect of his negative interest. The aim is to put the plaintiff into the position he would have been in if no false representation had been made. (3) The practical difference between the two measures was lucidly explained in a contemporary case note on Doyle v. Olby (Ironmongers) Ltd: G H Treitel, “Damages for Deceit” (1969) 32 MLR 556, 558-559. The author said:

“If the plaintiff’s bargain would have been a bad one, even on the assumption that the representation was true, he will do best under the tortious measure. If, on the assumption that the representation was true, his bargain would have been a good one, he will do best under the first contractual measure (under which he may recover something even if the actual value of what he has recovered is greater than the price).”

“(4)

Concentrating on the tort measure, the remoteness test whether the loss was reasonably foreseeable had been authoritatively laid down in The Wagon Mound… Doyle v. Olby (Ironmongers) Ltd settled that a wider test applies in an action for deceit. (5) The dicta…, as well as the actual calculation of damages in Doyle v. Olby (Ironmongers) Ltd, make clear that the victim of the fraud is entitled to compensation for all the actual loss directly flowing from the transaction induced by the wrongdoer. That includes heads of consequential loss. (6) Significantly in the present context the rule in the previous paragraph is not tied to any process of valuation at the date of the transaction. It is squarely based on the overriding compensatory principle, widened in view of the fraud to cover all direct consequences. The legal measure is to compare the position of the plaintiff as it was before the fraudulent statement was made to him with his position as it became as a result of his reliance on the fraudulent statement.”

The aim is to put the claimant in the position he would have been in if no false representation had been made, that is to say, as if the contract had never been performed. Thus, says Mr Miller, such matters as the cost of the TK Urozai LLC (“TKU”) contract, the cost of transportation, the costs of refining, the penalties suffered by the claimant, the cost of the seeds and the damage to the claimant should have been claimed, less the amount which the claimant received from selling meal which is another by-product of the refining process and which Mr Karachevstev said under cross-examination that he sold.

Mr Jory QC said that Doyle v. Olby (Ironmongers) Limited was a buyers’ case, not a sellers’ case, and distinguishes it for that reason. However, while I agree that Lord Browne-Wilkinson’s analysis could well be read as applying just to buyers, Lord Slynn’s analysis (with which all the Law Lords save Lord Mustill agreed; see p.260 and p. 269) is of general application, applying both to buyers and sellers.

Mr Jory QC says that Mr Miller is wrong in saying that the loss is the cost of seed, the cost of processing and the cost of transport. The representations continued throughout the process of turning the seed into oil, through to 22 October when the ship sailed. If the claimant had stopped the export the oil would have been returned and the claimant could have sold it. The claimant is therefore compensated for the direct consequences of continuing to act upon the misrepresentations that the money had been sent by SWIFT. The value of the oil is therefore the value of the oil in the market at the time, namely (according to the Lauffer SA and the Lauffer Group (“Lauffer”) and the claimant), US$1,203,099.30: see Parabola Investments Limited v Browallia Cal Limited (formerly Union Cal Ltd) [2011] QB 477.

In effect, says the claimant, NTL got this sunflower oil from the claimant for free and then sold it on. What the claimant lost was its oil and the market value of that oil is what should be compensated for: see Christopher Clarke LJ at [39] of OMV Petrom SA v. Glencore International [2016] EWCA Civ 778.

Mr Jory QC also says that the value of the oil was what NTL agreed to pay for it, cross-referenced to the purchase of the same commodity from Lauffer at the same price. The value, he says, incorporated the cost of delivering it to the terminal, so that it is appropriate to order payment of US$1,203,099.30. The Particulars of Claim at paragraph 78 pleaded the loss of the oil, “which at full market value was worth US$1,203,099.30”.

Mr Karachevtsev admitted that sunflower meal was sold elsewhere. His valuation was US$160 per tonne “in today’s market”. He said he could not remember what it was in 2012. Today it is US$200 per tonne. However I make no deduction for the sunflower meal as the claimant could have sold that anyway. If the claimant has converted its seed into oil, I find that it is entitled to claim for its losses in the period when it could have been making the seed into oil and selling it elsewhere if it had not been the victim of fraud.

I value the oil at the valuation placed on it by the claimant and make no deduction for the meal.

However, contractual interest payments are also claimed (by paragraph 78 (2)). Mr Jory QC does not now claim contractual interest but only interest “in the usual way”, presumably interest pursuant to [79] of the Amended Particulars of Claim. I do not think that contractual interest payments are allowed under the Doyle v. Olby (Ironmongers) Limited rule, but interest pursuant to [79] of the Amended Particulars of Claim is.

The defendants are former partners, in the sense that they used to be married. They apparently separated in April 2014 and are recently divorced. The defendants are each a 50% shareholder of NTL. Prior to its administration and liquidation, NTL was run by the second defendant (the first defendant resigned as a director on 1 August 2010) and its trading was financed by a company called Arkley (UK) Limited (“Arkley”). Arkley made three loan agreements (which have not been produced- they are apparently in the hands of the liquidators- see below) dated 2012 with NTL, which was represented for this purpose by the second defendant. The first defendant was the sole director of Arkley from 1997 until 13 March 2013 and was during that period a signatory of the bank accounts of both Arkley and NTL. Chelpipe Plc, which owned the shares in Arkley, is owned by Mr Andrey Komarov, a wealthy Russian businessman, as to 70%. The second defendant says that Mr Komarov is not concerned with “small people” such as the defendants. The second defendant’s parents founded Agro-Klass LLC (“AK”) and FLAS&K LLC (“Flask”), both of which are registered in Ukraine. AK owns the storage transhipment terminal at BCP and surveys the quality and quantity of the oil and Flask is the freight forwarder.

The first defendant distances himself from NTL, says the claimant, although he was married to the second defendant at the relevant time, and they shared the same small office for two days a week, although not the same room. The second defendant supports him in this.

From about 2009 until December 2011, NTL completed some five or six deals to purchase edible oils from the claimant, totalling about 3,000 metric tons. In 2012, the claimant says that NTL sought a much bigger deal- for 2000 tons. This was, says the claimant, later reduced to 1,000 tons as the claimant could not source such a large amount, although the defendants dispute this, saying that NTL was always asking for 1,000 tons. The contract was number NTL/01/13 and dated 21 September 2012.

At about the same time, NTL contracted with Lauffer, a Swiss company unrelated to either the claimant or the defendants, under contract number NL 25/09/12 dated 25 September 2012. The contract stipulated 2000 mts.

It is an important part of the defendants’ case that a contract (which is alleged to have disappeared) with Lauffer exists which did not originally stipulate 2000 mts, but rather 1000 mts. Lauffer roundly denies this.

The second defendant points to the fact that there was evidence of an earlier agreement in the fact that the approved price of 11,170 per tonne showed that the total price added up to 1,500 mts. I do not understand this. In any event the defendants’ case is that the 1,000 mts was added to the Lauffer total under the second contract. That would not therefore have been 1,500 mts. The second defendant appeared to agree with the evidence of Mr Ignashkin that it was inserted in the contract in error. It is not therefore evidence of there having been a second contract.

The claimant says that Mr Karachevtsev wanted comfort about NTL’s ability to pay (the total was about US$2,340,000) so, the claimant alleges, the second defendant orally made various representations to him:

(1) and (2) were incorrect, the last part of (6) was also incorrect in that Mr Komarov was not concerned with a “small person” such as the first defendant. (7) was also incorrect. (4) is now incorrect but is the only instance where it could be said that the representation was true at the time.

The claimant also relies on various transactions via the SWIFT international payment network. Between 3 and 11 October 2012 the claimant raised three separate invoices with NTL, each representing the delivery to BCP of a separate batch of oil, and totalling US$1,203,099. A number of SWIFT messages purported to be issued by the London Branch of Nordea Bank Finland PLC (“Nordea Bank”) saying that significant sums had been transferred to the claimant. Both the claimant and the defendants say that all of the SWIFT transfers were forged; Nordea Bank has since disowned them and no money was transferred to the claimant. The claimant says that the SWIFT transfers were designed to give the impression that the defendants were making genuine payments to the claimant at a time when the defendants were arranging the export of the oil.

The oil had been delivered by 11 October 2012 and on 15 October 2012 the second defendant confirmed that it was of the correct quantity and quality. The forged documents were sent on 18 October 2012, and the claimant was unable to get confirmation from its own bank about whether the payments had been received until 22 October 2012, the same day that NTL exported the oil for its own purposes.

The defendants say that the forgeries, that is to say the emails purporting to come from the second defendant and the SWIFT transfers themselves, were perpetrated by the Medvedenko family (father and sons) in order that the claim could be made. Again, there is a further promise about payment in another email purportedly from the second defendant which she says is also forged. On 18 December 2012 the second defendant apparently forwarded an e-mail purporting to come from an employee at a Swiss bank, Banque Cramer. The e-mail contained an attachment in the form of a letter dated 18 December 2012 addressed to NTL, giving formal confirmation that NTL would soon be put in funds to pay for the oil. Again, Banque Cramer confirmed that it had not produced the letter and the signatures to the letter were forged. The same things are said about the e-mail as before, on both sides. Banque Cramer has reported the matter to the Swiss Prosecution Service to be investigated as a criminal offence committed against it.

It is striking that similar forgeries were perpetrated on Lauffer. A relevant difference between the Lauffer contract and the claimant’s contract was that Lauffer’s terms were prepayment only, that is to say, payment due three days after invoice, as opposed to the post-delivery payment arrangement with the claimant. On or about 25 September 2012, Lauffer issued an invoice in the total sum of US$1,111,500, representing a prepayment for 1,000 mts to be delivered to BCP during the period 1-10 October 2012, and on about 2 October 2012 NTL made a first payment of US$445,000. On 5 October 2012 three SWIFT documents were produced, purporting to come from Nordea Bank, referring to contract NL/25/09/12, and saying that three payments were made on 8 October 2012 totalling US$1,778,000, slightly over the price of 1,500 mts. Lauffer checked its online bank account and discovered that the SWIFT documents had not resulted in any payment. It is clear from the final paragraph of a letter sent to NTL on 11 October 2012 that Lauffer was losing confidence in NTL’s ability to fulfil its obligations to pay within the timescale set by clause 9 of the contract. On 12 October 2012 Lauffer received another payment from NTL of USD$665,000, so that the total payment related to some 948.72 mts. Against assurances of payment by 16 October 2012 Lauffer, influenced by the documents it had received, had delivered 1,159.72 mts which left on board MS Vindemia. Thus Lauffer only supplied half the quantity of 2,000 mts as it had not, under its prepayment terms, been paid for the balance. Lauffer did not supply the 2,000 due under its contract and by the time the ship left they had not received all that they were due for what it had actually delivered. The defendants have not proved that they were paid the outstanding sum.

The defendants’ case is that the claimant did not pay its processor, TKU, a company associated with Lauffer, so that the second defendant arranged for the claimant’s cargo to be shipped via Lauffer. Mr Ignashkin was asked to request of Lauffer the original of the document which evidenced the delivery of seeds to TKU and their receipt of payment. It was said that the copy was suspicious and of recent creation. However (a) it is the claimant’s case that there was a second agreement on the ground of not paying TKU, so it is for the defendants to make the case out and (b) the defendants do not show who they paid, how much they paid each party or that the payments accounted for all of the oil on board MS Vindemia after it left BCP on 22 October 2012. The defendants would have to show that they had paid Lauffer not only for the oil supplied under its contract, but also for the oil supplied under the contract with the claimant.

Mr Karachevtsev and two colleagues applied on 16 October 2012 for permits to visit BCP to deal with some unspecified problem, “for resolution of the production/administrative questions”. Mr Miller says this is consistent with the second defendant’s evidence that there was indeed a problem caused by the claimant’s failure to pay TKU. However, the evidence is at best slim and I place no weight on it. In any event, the second defendant said in her second witness statement in these proceedings (dated 5 May 2016) that,

“…on 22 October 2012 Mr Karachevstev knew that the sunflower oil was on board the Vindemia and was present in Berdyansk when it sailed”

whereas the ship had left its berth (but not BCP) on 20 October 2012. She says in effect that she was muddled as to the dates, which I do not accept.

Unknown to Flask, which completed the customs declaration, the claimant had, as the cargo way bills confirm, acquired a small portion of its oil from Investprom Agrobiznes (“Prom Agro”), a company not associated with Lauffer, which meant, says the claimant, that TKU’s connection with Lauffer was more tenuous. The second defendant said (having done research on the internet) first, that Prom Agro did not have a seed-crushing/processing plant in Stepanovka where it was based) and, secondly, that the amount of oil from Prom Agro was so small that TKU’s connection with Lauffer was the important thing. I do not find either response convincing. As to the first matter (even if the second defendant is correct -and there is only her word for it- about the fact that there was no seed-crushing plant in Stepanovka) it is possible to store oil without having a seed-crushing plant. As to the second matter I do not think that the claimant, if it had any oil outstanding from Prom Agro, would have agreed to a novation of the contract whereby Lauffer would receive the whole contract price.

One of NTL’s customers was Glencore Grain BV (“GGBV”) based in Rotterdam which purchased the disputed oil and was pressing for delivery. GGBV chartered a ship, MS Vindemia, which was fixed to load, “Part Cgo Min/Max 3000 mts”, according to RVB Shipbrokers BV. The shipbrokers said,

“There was a huge discussion with shippers [NTL] who did not have (sufficient) cargo in stock. Vsl arrived 02nd October and sailed 22nd October with only 2.188.01 mts onboard. Shippers were claimed by chtrs for both deadfreight 811,99 mts and demurrage”.

The standard Statement of Facts (recommended by Baltic and International Maritime Council (BIMCO) and Federation of National Associations of Ship Brokers and Agents (FONASBA)) for Flask contains, under the heading “Master’s remark”, his comments,

“-VESSEL IS LEAVING/SAILING BECAUSE NO MORE CARGO IS (illegible) OF SHIPPERS

-THE SECOND HOOSE’S [sic] CONNECTION/DISCONNECTION WITH (?) HOURS 90 (illegible) FROM 16/1600 AT 20/1000-

-ON 21 AT 1400 THE WEATHER IS IN GOOD CONDITION (illegible) OR CARRY THE DOCUMENTS ON BOARD-”

Unfortunately, the copy goes off the side (hence the illegibility) and neither party has the original, which is presumably in Flask’s possession. The claimant says that the failure to produce the cargo of 3,000 mts, taken together with the shipbrokers’ report, was the reason for the Master’s refusal to sign the Bill of Lading. This was followed by a dispute between NTL and GGBV which prevented the ship from leaving BCP on 17 October 2012, delaying its departure until 21 October by which time weather conditions were too bad to allow departure until 22 October.

The second defendant did not say what the reasons were for the dispute, confirming only that there was a claim for demurrage and dead freight. She did not produce the contract between NTL and GGBV or any evidence of what GGBV actually paid for the cargo. She said only that the documents were with NTL’s liquidators but gave no good reason for why she had not obtained copies of them from the liquidators.

The defendants say that the earlier contract between Lauffer and NTL was entered into on 25 September 2012, possibly unsigned, and the contract NL 25/09/12 bearing that date simply used the earlier date. The earlier contract with Lauffer was, say the defendants, increased by 1000 mts to 2000 mts to replace the 1000 mts that the claimant had agreed to supply because the claimant could not and did not pay its supplier TKU. They rely on the facts (a) that the total price for the cargo was US$ 1,755,000 +/- 5% under the contract NL25/09/12 and (b) that nothing has been produced to show that the claimant paid TKU. The second defendant says that just because one has a ship of 3,000 mts, one does not have to fill it. I find that it is likely, that is to say more likely than not, that the cargo for the MS Vindemia was indeed 3,000 mts, thus supporting the claimant’s case that the Lauffer load was in addition to the claimant’s load. The reason for this is because of RVB Shipbrokers’ letter and, so far as I can make them out, the Master’s remarks.

I confess that I have a strong feeling that no-one on either side of the record is telling the whole truth. However, I have to find the truth, not as it really is, looking into the hearts of the parties, but on the evidence. As Robert Goff LJ said in The Ocean Frost [1985] Lloyds Rep 1 at 57,

“Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to objective facts proved independently of their testimony, in particular by reference to documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives and to the overall -probabilities, can be of very great assistance to a Judge in ascertaining the truth.”

Applying these criteria, I have no doubt that the second defendant’s story does not hang together, for the following reasons,

The claimant claims that the first defendant, having been married to the second defendant, was kept abreast of all matters by the second defendant. The first defendant has much more in the way of assets than the second defendant, which is why, says the claimant, the defendants are so keen to distance the first defendant from the transactions.

Mr Miller relies on Fish & Fish Limited v. Sea Shepherd UK [2015] UKSC 10; [2015] AC 1229 and Vestergaard Ferandsen A/S v. Bestnet Europe Limited [2013] UKSC 31; [2013] 1WLR 1556 to show that Mr Townley cannot be a joint tortfeasor as the elements of the tort are not pleaded. In Fish & Fish Lord Toulson said (at [21]),

“To establish accessory liability in tort it is not enough to show that D did acts which facilitated P’s commission of the tort. D will be jointly liable with P if they combined to do or secure the doing of acts which constituted a tort. This requires proof of two elements. D must have acted in a way which furthered the commission of the tort by P; and D must have done so in pursuance of a common design to do or secure the doing of the acts which constituted the tort.”

At [39]-[44], Lord Sumption (in the minority but in agreement on the applicable principles as appears from the fact that Lord Neuberger adopts his analysis at [61]) said,

“The principal concern of the law in this area is to recognise a liability for assisting the commission by the primary actor of a tort, while ensuring that the mere facilitation of the tort will not give rise to such a liability, even when combined with knowledge of the primary actor’s intention…

What the authorities, taken as a whole, demonstrate is that the additional element which is required to establish liability, over and above the mere knowledge that an otherwise lawful act will assist the tort, is a shared intention that it should do so…”

And Lord Neuberger says, citing Vestergaard, (at [58]),

“There must be a common design between the defendant and the primary tortfeasor that the tortious act, that is the act constituting or giving rise to the tort, be carried out.”

In Vestergaard, he said (at [34]),

“…in order for a defendant to be party to a common design, she must share with the other party, or parties, to the design, each of the features of the design which make it wrongful. If, and only if, all those features are shared, the fact that some parties to the common design did only some of the relevant acts, while others did only some other relevant acts, will not stop them all from being jointly liable.”

The common design is that the four elements of the tort of deceit must be shared by both parties, see Bradford Building Society v. Borders [1941] 2 All ER 205 at 211: There must be a representation of fact made by words or conduct as mere silence does not support an action of deceit. The representation must be made with knowledge that it is false. It must be made with the intention that it is acted upon by the claimant in the manner resulting in damage. And it must be proved that the claimant acted upon the representation to his detriment. Thus mere knowledge is not enough, there has to be a shared intention.

The claimant relies on the decision of Flaux J in Concept Oil Services Limited v. En-Gin Group LLP [2013] EWHC 1897 (Comm) for the factors that the claimant has to establish to prove joint liability. However, (a) much depends on the facts, (b) I am bound by the decisions of the Supreme Court and (c) I am not sure (without deciding the point) that Concept is sound authority for the principle relied on by the claimant. First, the defendants in that case did not appear and were unrepresented. Secondly, Flaux J was not taken to more than two Court of Appeal authorities and thirdly, Flaux J said that the principle emerging from the cases is not dissimilar to that applicable in the criminal law, whereas in Fish & Fish (see [20] and [39]) and CBS Songs Limited v. Amstrad Plc [1988] 1 AC 1013 (see 1058) it was said that accessory liability in crime and tort is not at all the same.

However Mr Jory QC says that the facts giving rise to the intention are plain. Mr Miller relies on L’Oreal SA v. eBay International AG [2009] EWHC 1094 (Ch) in which Arnold J concluded that although eBay facilitated the infringement of L’Oreal’s trademarks, they knew that infringements had occurred and profited from the infringements, eBay were not joint tortfeasors. Mr Jory QC distinguishes the case on the grounds that in L’Oreal, eBay was only getting a small profit per sale, whereas in the case of a joint shareholder where NTL made excess profits they could be distributed and it is obvious that there was what Mr Jory QC called a “double act”. I do not find it obvious at all.

The first defendant’s arguments were as follows.

I am doubtful as to whether there is any hard evidence that the first defendant had anything to do with the actions in question. Moreover he gave his evidence in, as far as I could tell, a truthful manner.

I do not therefore find the first defendant liable to the claimant, nor for the avoidance of doubt do I find conspiracy. The claimant said that the first defendant gave his evidence in the same way that he ran NTL, behind the second defendant. However, it is not just that the second defendant made the representations; the first defendant had no contact with the claimant or Lauffer at all. Although it is true that the first defendant was a 50% shareholder in NTL, that the defendants raised a common defence and instructed the same solicitors, that there is no evidence from Nordea Bank to show that anyone other than the first defendant used their mandate to effect transactions on behalf of NTL, that Mr Ignashkin believed, in due diligence, that the first defendant was a director of NTL (“Taking into account the information which is given in due diligence, taking into account my conversation with Mr Karachevtsev, I had an impression that Mr Townley and Mrs or Miss Yaroslavna were acting together”), that Mr Ignashkin said at first (but later corrected the statements in oral evidence to payments by NTL) that the first payment of US$445,000 and a further payment of US$100,000 were made to Lauffer by the first defendant, that no evidence was obtained from Mr Wise or Mr Jordan as to NTL’s US$ bookkeeper or from the first defendant’s daughter about the documents supplied by ICAC, on the balance of probabilities the claimant has not made out its case against him. There is no evidence from which I can draw an inference that the first defendant set out with a common intention with the second defendant to fabricate and concoct emails. The claimant has merely made assertions and when the first defendant says, “I did not do any of that” the claimant accuses him of lying. It is hard to prove a negative.

The second defendant is a different matter. She accuses the Medvedenko family of concocting many documents in order to implicate her. She kept trying to score points off counsel. I find,

I find on the balance of probabilities that the second defendant forged the SWIFT documents and sent the relevant e-mails. The expert evidence concludes that the e-mails and their attachments did come from NTL. The handwriting experts agree, (that is to say, the defendants’ expert as well as the claimant’s expert) that despite the second defendant’s denials, the signature on the letter of 17 June 2013 is that of the second defendant. I also note the fact, already mentioned, that Lauffer received similar SWIFT documents to those received by the claimant.

I have said that the whole truth has not been accorded to me. This is because (a) another of Mr Karachevtsev’s companies apparently continued to do business with the second defendant and Flask. Also (b) the bank account number on the SWIFT payment was indeed the claimant’s bank account number, although Mr Karachevstev said in oral evidence that it was a totally bogus number, gibberish in fact.

Again (c) Mr Karachevstev said in his witness statement, in order to prove consequential loss, that he was involved in a contract with the Lugansk Pipe Plant. He said that the Lugansk Pipe Plant completed its structures for the claimant in May 2013 whereas it appeared to have closed in October 2012, laid off its work force in November 2012 and entered bankruptcy in January 2013, although there was no evidence of Ukrainian law to show that ongoing trading was not permitted in such circumstances. Mr Karachevtsev gave a roundabout explanation that it was a different company, a closed joint stock company. The company was the same entity (proved to my satisfaction) with the same company number. Although Warren J refused permission to plead these losses, Mr Karachevtsev had already disclosed documents which are said to evidence the loss. The allegation was that Mr Karachevtsev had invented a document and fabricated a stamp. He insisted that he did not forge any documents. I simply do not know.

Again (d) Mr Karachevstev said that they did not keep bank statements, and the bank in Donetsk was in a war zone and liquidated in 2015, whereas the former statement was contradicted by Mr Ivchenko, who said that he kept bank statements and did not leave until September 2013. Mr Ivchenko was interposed and Mr Karachevstev said that they kept the bank statements for three months until they produced accounts, but no accounts have been produced either.

Nor do I accept (e) that Mr Karachevtsev orally agreed with Flask that Flask needed a letter of permission from the claimant before customs clearance allowing the vessel to sail: see paragraphs 18 and 19 of the Amended Particulars of Claim. Mr Karachevtsev said in his first affidavit, “This was the position in law and as a matter of custom and practice”, but it is common ground that it had not been the position in law since May 2012. It was not contained in the contract and by clause 6.3 of the contract only variations to the contract in writing were of any effect.

However the second defendant said that the claimant could in practice have prevented the Vindemia from sailing by not paying the customs duty between 12 and 18 October 2012. I find that it was the fraudulent SWIFTs which stopped the claimants from doing so.

Mr Miller cross-examined the IT expert, Mr Carte about an e-mail exhibited to Mr Karachevtsev’s affidavit. He also cross-examined at length about another e-mail, No 7257. Mr Miller said the email exhibited to the affidavit was plainly a concocted document, there being a page break in a different place. Thus if one e-mail is concocted, the court cannot be sure of anything. The difficulty with this is (a) that Mr Carte found nothing sinister in the e-mail to suggest that it had been concocted (see his conclusions at 18 of his Report), (b) his firm conclusion (“strongly suggests”) was that, so far from the e-mails being hacked/manipulated, all the e-mails were legitimate emails. The defendants had the opportunity to obtain their own expert’s report on the e-mails (indeed the second defendant said in her fourth witness statement that the defendants would do so) but failed to do so, resulting in an undertaking not to procure one in response to an application for a debarring order.

I find Mr Medvedenko’s responses unconvincing to questions about Rumclift Limited (a company registered in Cyprus), Rabaul Trade Corporation (a company registered in the British Virgin Islands and which was a chocolate manufacturer) and Askela Capital Limited, appointed as official representative for the claimant in these proceedings. The companies are clearly related to the Medvedenko family. But I do not find him to be telling untruths materially or in general.

That explains why I have made my findings on the balance of probabilities.

Thus I find as follows: