Mrs Justice Gloster:
Introduction
The Parties
- The claimants in this action, Barclay Pharmaceuticals Limited ("BPL"), AAH Pharmaceuticals Limited ("AAH") and AAH Limited ("AAHL") (collectively, "the claimants") are companies registered in England and Wales. They are part of a group of companies ultimately owned by Celesio AG, a German registered company. At the relevant times, all three claimants operated, or had previously operated, as importers and wholesalers of pharmaceutical products and household products. Throughout the evidence, branded pharmaceutical products were referred to as "ethicals", and other products, intended for retail sale in chemists shops "over-the-counter", were referred to as "OTCs" or "OTC goods". The ethicals part of BPL's business traded under the name of "Trident", and the OTC part under the name "Enterprise".
- The first defendant, Waypharm LP ("Waypharm") is a limited partnership registered in England and Wales. Its business was at all material times the wholesale sourcing and supply of pharmaceutical products, household products and foodstuffs. Until early-2006, it had enjoyed a mutually profitable trading relationship with the claimants. The evidence showed that the second defendant, Antoine Mekni ("Mr. Mekni"), a qualified pharmacist, and a French national, effectively owned, controlled and ran Waypharm, and that its business was operated in accordance with his instructions. In particular, he was responsible for, and in control of, Waypharm's relationship with BPL. In his witness statement, Mr. Mekni stated that "… from about March 2004, Waypharm took over as the key vehicle through which I traded". Although it may, from time to time, have had employees, Waypharm was, in fact, a "one-man" entity.
- There were various corporate entities who were, at various times, general or limited partners in Waypharm, including the fifth defendant, Kenneth Marketing ("KM"), a company incorporated under the laws of the British Virgin Islands. It was the only limited partner in Waypharm from 11 March 2005 onwards. The claimants originally alleged that KM was an alter ego of the third defendant, David Condliffe ("Mr. Condliffe"), who was: a director of BPL from 24 June 1993 to 28 February 2004; an employee of AAHL and/or BPL from 16 September 1997 to 28 February 2004; and a consultant to BPL (and/or one of the other claimants) for a two-year period from 1 March 2004 to 28 February 2006. Until he ceased working as a consultant, Mr. Condliffe acted as the claimants' relationship manager with Mr. Mekni. However, the evidence demonstrated, and by the end of the trial the claimants accepted, and, indeed, asserted, that, in reality, Mr. Mekni was the beneficial owner of KM at all material times. At all material times, Mr. Mekni was also the beneficial owner and sole director of Kreuzberg Trading GmbH ("Kreuzberg"), which was the general partner of Waypharm.
- The fourth defendant, Best Financial Services Corporation ("Best Financial") was at material times a company registered under the laws of Samoa. There was no dispute that it was owned and controlled by Mr. Mekni, at least until the end of 2008. It appears to have performed some sort of treasury function within the group of companies owned and controlled by Mr. Mekni.
- The sixth defendant, Waypharm SAS ("Waypharm SAS") was at material times a French-registered company, the shares in which were beneficially owned by Mr. Mekni, although nominally held, from time to time in the names of, inter alios, KM and Mr. Condliffe. An administrator was appointed over Waypharm SAS by the Court of Versailles, on or about 3 September 2009. Following an application by the administrator to the court, it was placed in insolvent liquidation in September 2009.
The original claims
- The original claims made by the claimants at the start of the trial fell into two main categories:
i) first, claims that Waypharm, Mr. Mekni, Mr. Condliffe and Best Financial perpetrated frauds on BPL, by means of the presentation, in December 2005 and February 2006, of fraudulent documentation under an irrevocable Letter of Credit ("the Letter of Credit"), issued on 10 February 2002 by National Westminster Bank plc ("NatWest"), BPL's banker in Manchester, of which Waypharm was the beneficiary;
ii) second, claims that Mr. Condliffe had breached his fiduciary duties to the claimants by obtaining secret commissions from Mr. Mekni and his companies, and that Mr. Condliffe, Mr. Mekni, Waypharm, Best Financial, KM and Waypharm SAS were, as a result, obliged to account for and/or pay damages and/or compensation to the claimants in respect of such commissions.
- The proceedings were issued on 10 March 2008. Waypharm served a defence on 19 May 2008, but from January 2010 was unrepresented, and played no part in the proceedings at trial. At no time did Best Financial, KM or Waypharm SAS play any part in the proceedings. They served no defence, provided no disclosure and took no part in the trial.
- The trial started on 28 February 2011. On 3 March 2011, the claimants settled the entirety of their claims against Mr. Condliffe (who was represented by solicitors and counsel) on terms that were confidential to the parties. Mr. Condliffe also discontinued contribution proceedings which he had brought against Mr. Mekni.
- Subsequently, on 23 March 2011, the claimants agreed to discontinue their secret profits claim as against Waypharm, Mr. Mekni, Best Financial, KM and Waypharm SAS. Mr. Mekni signed the consent order giving effect to such discontinuance not only on his own behalf, but also purportedly on behalf of Waypharm, Best Financial and KM.
The claims made at trial by BPL
- Accordingly, the claims which were pursued at trial were BPL's claims against Waypharm, Mr. Mekni and Best Financial in relation to the alleged fraudulent presentations made by Waypharm under the Letter of Credit.
- In summary, BPL's factual case is that, in the course of each of the December 2005 and February 2006 presentations under the Letter of Credit, Waypharm, acting by Mr. Mekni, dishonestly presented to UBS AG in Zurich ("UBS") (the confirming bank under the Letter of Credit, and which was also Waypharm's bank), for onward transmission to NatWest, a false invoice (specifically invoice 85 GCSA in December and invoice 88 GCSA in February) and a false "Forwarder's Certificate of Receipt" ("FCR"), purporting to be signed, in Antwerp, by a freight forwarder operating there. BPL further alleges that the invoices and the FCRs purported to relate to goods which were represented to be present in Antwerp, and/or held to the order of the consignee, BPL, at the relevant date, but which were not in fact present in warehouses there, or held to the order of BPL as consignee.
- BPL also alleges that the goods invoiced were never ordered by BPL, that only a very small quantity of the relevant goods were subsequently delivered, and that only a small fraction of the sums drawn down by Waypharm and debited to BPL under the Letter of Credit were repaid, pursuant to an agreement concluded in October 2006 ("the October 2006 Agreement").
- The legal bases for BPL's claims against Waypharm, Mr. Mekni and Best Financial, as formulated in BPL's closing submissions, were as follows:
i) a claim in "fraud" or deceit as against Waypharm, Mr. Mekni and Best Financial (see paragraphs 5, 50 and 446 of BPL's closing submissions); this claim in deceit had, however, been deleted from the claimants' Particulars of Claim by means of a re-re-amendment dated 3 March 2011, so I do not consider it appropriate to consider the claim in deceit further;
ii) a claim in conspiracy by unlawful means also as against Waypharm, Mr. Mekni and Best Financial;
iii) a claim for causing loss by unlawful means also as against Waypharm, Mr. Mekni and Best Financial;
iv) a claim against Waypharm for breach of contract on the basis that there was an implied term in the contract between the parties that Waypharm would:
a) only present genuine documentation containing truthful statements; and
b) only draw down payment following such a good faith presentation; and
v) a claim for inducing breach of contract by Waypharm, as against Mr. Mekni and Best Financial;
vi) a claim against Waypharm in restitution for monies had and received on the grounds that BPL had paid monies under the December 2005 and February 2006 presentations, but had not received in return the goods the subject matter of the presented invoices or any full repayment of the monies paid.
- BPL also contends that the direction and control exercised by Mr. Mekni renders him personally liable for the tortious acts of Waypharm.
- Since the claims against Mr. Condliffe, Waypharm and Mr. Mekni in relation to alleged secret commissions paid by Waypharm to Mr. Condliffe were not pursued at trial, I disregard the evidence relating to such matters and approach the case on the basis that Waypharm/Mr. Mekni had a proper, in the sense of non-corrupt, trading relationship with Mr. Condliffe, as Mr. Mekni invited me to do.
The quantum of BPL's losses
- There is no dispute that under the Letter of Credit, BPL's bank, NatWest, paid Waypharm's bank UBS:
i) £2,445,546.30, on 2 November 2006, as a result of the December 2005 presentation; and
ii) £9,665,372.58 on 21 December 2006, as a result of the February 2006 presentation.
Nor is there any dispute that BPL duly reimbursed NatWest in respect of such sums. What is in dispute is the amount of credit to which BPL is entitled in respect of cash and goods which it received from Waypharm as a result of various negotiations between the parties.
- BPL's case is that it received goods and cash worth a total of £3,365,454, which comprised:
i) £3,331,704 as originally set out in a Scott Schedule prepared by the claimants during the course of the hearing; and
ii) £33,750, for additional product called Optium, the receipt of which was discovered in the course of the trial.
- Accordingly, BPL claims that its loss was £8,745,464 which, it contends, it is entitled to recover by way of damages, or as money had and received.
Overview of Mr. Mekni's defence
- In summary, Mr. Mekni's defence, although it changed over time both before and during the course of the trial, was as follows:
i) Invoices 85 GCSA and 88 GCSA were proper invoices relating to genuine orders by BPL of the goods listed in them. This was supported by the fact that, for many months, the claimants acknowledged that they had ordered the goods in question.
ii) The freight forwarding agent, F J Tytherleigh Belgium NV ("Tytherleigh") prepared (although it did not sign) the FCRs as agent for MYK Commerces et Services SARL ("MYK"), which was the company which signed the FCRs.
iii) Waypharm's bank, UBS, called for, and approved, the use of MYK to sign the FCRs because the bank did not wish Tytherleigh to sign them - a defence which Mr. Mekni advanced for the first time at trial.
iv) Mr. Mekni did not see the FCRs before they were presented, as they were forwarded direct from Tytherleigh to Mr. Georges Muller ("Mr. Muller") in Zurich, and by Mr. Muller to MYK. Mr. Muller was an accountant who worked for Mr. Mekni and various of Mr. Mekni's companies. (However, this was contrary to his pleaded case in the Response to BPL's Request for Further Information, which stated that Mr. Mekni forwarded the FCRs to MYK.)
v) Mr. Muller presented the documents to UBS in Switzerland, not Mr. Mekni.
vi) Tytherleigh must have mistakenly entered the incorrect number of pallets on the FCR submitted with the February 2006 presentation.
vii) BPL, under its new management, after the departure of Mr. Condliffe, wrongly refused to take delivery of the two consignments of goods which it had ordered. After trying unsuccessfully to arrange swaps for goods which BPL had ordered, the new management finally sought the only route left to them, namely to allege fraud against Mr. Mekni and Waypharm.
viii) The relevant goods were in existence in Antwerp at the time of the two presentations.
ix) The FCRs and the certificate of insurance in respect of the relevant goods provided strong evidence as to the existence of the goods. The claimants never inspected the premises at Tytherleigh at the time of the presentations, and never inspected the ethicals which were the subject of invoice 85 GCSA at all.
x) Even if the relevant goods did not exist, or were not held by Tytherleigh, Mr. Mekni genuinely believed that the goods existed.
xi) Liability had to attach to Mr. Mekni (if it attached at all) at the time of the presentations under the Letter of Credit as there was no claim against him in respect of any subsequent conduct on his part.
xii) BPL was responsible for instigating the double payment mechanism (i.e. the draw-down under the Letter of Credit and the payment by transfer, with subsequent refunding), which had nothing to do with Waypharm or himself.
xiii) As a result of an agreement concluded in May 2006 and/or varied in or concluded by the October 2006 Agreement, and the substitution of invoice 113 GCSA for invoice 85 GCSA, and invoice 92 GCSA for invoice 88 GCSA, it was agreed that the issues as between BPL and Waypharm in relation to the disputed invoices would be resolved by substantial deliveries. The effect of those agreements was that all claims based on the December 2005 and February 2006 presentations were compromised or waived.
xiv) Mr. Mekni did not have any dishonest intention or involvement in the relevant transactions. He would have had no motive in perpetrating frauds on BPL, since this would have risked killing the "golden goose" of Waypharm's trading relationship with BPL. The claimant had not discharged the heavy legal and evidential burden of proving the serious allegations of fraud and dishonesty against Mr. Mekni to the requisite standard.
xv) In any event, Mr. Mekni had no liability to BPL because, on the running account between Waypharm and BPL, BPL in fact owed Waypharm the sum of £843,830 in respect of stock delivered, cash refunded and other matters.
History of the proceedings
- On 7 March 2008, Flaux J granted freezing injunctions against Waypharm, Mr. Mekni and Mr. Condliffe, which, with certain variations, were continued until trial. On 10 December 2009, Burton J, on the claimants' application, appointed a receiver over, and a freezing order in respect of, certain assets on the basis that they were to be treated as the assets of Mr. Mekni. These included shares in companies called, respectively, Brookmill Ltd, Coppelia Investments Ltd, and Pegassus Securities Ltd and their respective assets, and undertakings, including their respective interests in SCI Les Deux Villages and SCI Le Montfort.
- The claim form was issued on 10 March 2008. The trial before me began on 28 February 2011. Only Mr. Mekni appeared at trial. None of the other defendants appeared or were represented. The trial ran for 14 days until 23 March 2011. Six witnesses gave evidence on behalf of the claimants, including Mr. Condliffe. The claimants gave hearsay notices in relation to various documents and reports. Mr. Mekni gave evidence on his own behalf, but called no witnesses. There was a substantial amount of documentary evidence and numerous accounting schedules were prepared on both sides. The case then adjourned, at the parties' request, until 15 June 2011, not only for the preparation and service of closing submissions, but also because Mr. Mekni wanted to adduce further evidence, which I allowed him to do. The trial resumed on 15 and 16 June, and both Mr. Mekni and the claimants adduced further evidence. There was a further hearing on 24 June 2011, in relation to certain issues arising in the receivership.
- Although Mr. Mekni had from time to time been represented by various firms of solicitors and counsel in the period leading up to the trial, shortly before the trial started he became unrepresented, and conducted his case at trial in person. However, he received help from counsel with the preparation of his closing submissions, although they were signed by him, and not by counsel. He conducted and presented his case courteously and as efficiently as he could, despite the considerable difficulties which he faced, not only as a litigant in person in a very document-heavy case, but also because of the undoubted stress which he suffered during the course of the trial in dealing with the allegations of fraud made against him. He told me he was on medication. He was given every assistance by the court and considerable leeway in being permitted to adduce late evidence, both documentary and oral, as recognised in paragraph 3 of his closing submissions.
- The claimants were represented by Ms Barbara Dohmann QC, Mr. Ian Smith and Mr. Tom Mountford of counsel, and Charles Russell, solicitors.
Background to the claimants' trading relationship with Waypharm
- It is relevant to set out a summary of the background to the claimants' trading relationship with Waypharm and a predecessor company, Global Care SA, ("Global Care") which supplied OTC goods to BPL until late 2003.
- There was a dispute as to whether Global Care was owned by Mr. Mekni during the period in which it traded with BPL, Mr. Mekni contending that it was owned and controlled by a Mr. Georges Muller in this period, and that Mr. Mekni merely earned commission from orders which he negotiated on its behalf. The evidence showed that Mr. Muller, a Swiss resident, carried out various accounting functions for Mr. Mekni's companies. However, it was common ground that Mr. Mekni owned and controlled Global Care from late-2003.
- Both BPL and AAH operated in the wholesale ethicals market, to an extent in competition, although they apparently had different customer bases. BPL had two head buyers, one for each of its businesses. Thus, the OTC buyer was originally Mr. Condliffe and subsequently Mr. Dale Gibson. The ethicals buyer was first Gary Winkle, and then Jason Yates. The ethicals buyer at AAH was Daljit Birdi ("Mr. Birdi"), who stopped working for AAH in about March 2010. The evidence given by all witnesses suggested that the business ethos within the claimants' organisations was very profit-driven.
- The relationship between the claimants and Mr. Mekni's companies started in 2002. In late 2002, Mr. Condliffe, then BPL's OTC Buying Director, recommended that the claimants should commence a trading relationship with Global Care, and that this should be financed by a letter of credit, rather than using normal credit terms.
- Mr. Condliffe had been introduced to Global Care by Sabir Tayub ("Mr. Tayub") a Director of Crown Crest (Nottingham) Plc ("Crown Crest"). BPL's relationship with Crown Crest, which dated back to at least 2001, was managed by Mr. Condliffe. It was proposed that BPL would buy OTC goods from Global Care and immediately re-sell these to Crown Crest. Crown Crest subsequently provided a written commitment to BPL dated 5 December 2002 that it would buy all goods delivered by Global Care to BPL for Crown Crest. Crown Crest had been purchasing OTC products from Global Care for some time, and the relationship had worked successfully. However, Crown Crest was unhappy about Global Care's requirement that it should be paid for goods "up-front" (i.e. prior to delivery). Mr. Tayub's suggestion was that BPL might act as a middleman for the purchase of the goods on the basis that BPL would be prepared to operate on the basis of providing Global Care with a letter of credit to secure payment for the goods.
- Mr. Condliffe agreed the terms of an initial letter of credit with Mr. Mekni and Mr. Tayub. It related to a specific order of OTC household goods from Global Care of a value exceeding £2 million. The letter of credit for this transaction was issued by NatWest on 20 December 2003. Mr. Mekni was recorded in this letter of credit as the contact at Global Care. The presentation conditions required Tytherleigh to certify that it had inspected the relevant goods. However, on the instruction of Mr. Condliffe, who wrote "OUT" beside this provision in a marked up copy of the letter of credit, BPL instructed the bank to remove the inspection condition for the purposes of this transaction.
- Soon after BPL's relationship with Global Care was established, Mr. Condliffe recommended that BPL should expand its relationship with Global Care to include ethicals. Although Mr. Condliffe was an OTC goods buyer rather than a buyer of ethicals, Mr. Condliffe was permitted by the claimants to develop the relationship with Global Care in this way. Mr. Condliffe provided a draft letter of credit based on the one in use for the OTC goods bought and supplied to Crown Crest. However, because of the risk that ethicals could be diverted (destined for countries outside the EU but then diverted to the EU) or might be counterfeit, BPL insisted on the inclusion of a condition in the letter of credit that they be inspected by a BPL employee. This was accepted by Global Care. Mr. Mekni provided a draft letter of credit, which draft Mr. Condliffe then asked Adrian Paddock ("Mr. Paddock"), then BPL's financial controller, but from January 2003 its Finance Director, to request from the bank. The resulting letter of credit was issued by NatWest on 28 January 2003.
- This letter of credit was, however, never used. Instead, in April 2003, Mr. Condliffe asked Mr. Paddock to amend it so that it could be used for OTC household goods. This amended letter of credit and others in broadly the same form were then used for the purchase by BPL from Global Care of OTC goods during 2003.
- Throughout 2003 BPL also developed a significant trade with Mr. Mekni (acting through Global Care) for the purchase of ethicals. Unlike the OTC products at that time these goods were paid for by BPL by funds transfer.
- About £9 million of business was carried out during the course of about 20 transactions. It represented a significant contribution to BPL's trading figures for the year. All the product appears to have been successfully delivered. No allegations of fraud against Mr. Mekni were made by the claimants in respect of this period.
The change to Waypharm
- In the middle of 2003 BPL asked Mr. Mekni to change the entity used to supply goods to a UK entity with a Wholesale Dealer's Licence ("WDL"). This request originated with David Gittins ("Mr. Gittins"). Mr. Gittins was a "Responsible Person" for BPL for the purposes of The Medicines Act 1968, and had a regulatory responsibility to ensure the integrity of supply. Pharmaceuticals could only be supplied to BPL by an entity that had a relevant WDL. There also appears to have been a concern that a non-UK company might be more prone to deliver illegal, diverted stock.
- Mr. Mekni responded by switching the billing to two entities. The first, Pharma Direct Ltd, which had a WDL, was used for supplies of ethicals. The second, Waypharm, was used for the bulk of the remaining orders (including some products ordered by the ethicals buyer which did not require a WDL). However, from about November 2003 onwards, all trading, both of OTC and ethicals, took place with Waypharm. Waypharm subsequently obtained its WDL on 23 February 2004.
The January 2004 Letter of Credit
- Towards the end of 2003, Mr. Mekni requested that Waypharm and BPL move to a different system of payment. On 2 November 2003, the proposal was discussed by the Enterprise board of BPL. On 13 November 2003, Mr. Mekni sent Mr. Condliffe a draft of a type of demand bank guarantee in the sum of £10 million, saying that he needed "…. more resource to shop for [BPL] and expand the range to other vendors". He said that this would enable his bank, UBS, to "… give more money in view of [BPL's] PO", and that it would be cheaper than a letter of credit. He also said that he could "… cover the expenses if you decide to open the guarantee". He sent a further email on 19 November making a similar request.
- By 9 December 2003, the request had altered into a request for the issue of a standby letter of credit in the sum of £6 million, "with two automatic renewals". In that email, sent to Mr. Condliffe, and forwarded to Mr. Paddock, Mr. Mekni said "… as everybody knows we will never recourse to this bloody LC". On 10 December 2003, Mr. Paddock had a meeting with RBS/NatWest to discuss the letter of credit options. RBS/NatWest sent an email advising that a revolving letter of credit, rather than a standby letter of credit, would suit BPL best.
- On 22 December, the Enterprise board met again and agreed to implement a revolving £15 million letter of credit facility "for the financing of purchases" from Mr. Mekni. Mr. Paddock was put in charge of implementing the relevant credit.
- On 9 January 2004, Mr. Paddock emailed Mr. Condliffe, for onward transmission to Mr. Mekni, proposals for the contents of the letter of credit. These included a requirement that the documents presented would include:
i) a goods received advice signed by BPL representatives; and
ii) a copy invoice signed by two BPL directors.
- On 9 January 2004, Mr. Mekni rejected this proposal as looking like "a normal LC" which "… would not help [him] at all". What he wanted was a standby letter of credit which he described as:
"… a security for the sole purpose that I will deliver more goods on an open account up to the amount of the standby LC.
…
Cashing the stand by LC is an extraordinary event whereby Barclay has received the goods from Waypharm LP, accepted them and does not pay in the agreed period of time."
He counter-proposed a letter of credit where the only required document would be an unpaid Waypharm invoice. He reiterated that all charges would be for Waypharm's account.
- On 14 January 2004, Mr. Mekni made a modified proposal:
"… in order to have a fire wall as requested by [Mr. Paddock] against mis-use of the standby LC in case someone goes crazy at Waypharm."
He proposed that an additional document be added at presentation, namely a signed FCR, evidencing that the goods had been consigned to BPL.
- Mr. Paddock referred this to RBS/NatWest for their comments. They identified various risks inherent in the arrangement that Mr. Mekni sought, including:
i) that the proposed FCR did "… nothing more than suggest that goods have been dispatched to your premises";
ii) that it did not require proof of delivery, and that goods might thus never be delivered;
iii) that, although the invoices might have been paid, draw down might still be made under the letter of credit; and
iv) that the goods might not be of satisfactory quality.
NatWest proposed the insertion of further protections for BPL, such as a requirement for a certificate of inspection for the goods.
- On 28 January 2004, Mr. Paddock and his co-director Mr. Gittins applied for a £10 million standby letter of credit requiring presentation of a signed invoice, an FCR marked "freight paid" and evidencing goods placed at the disposal of the consignee, BPL, and proof of delivery certificates signed by one of two named BPL representatives. A documentary credit in those terms was issued by NatWest on 30 January 2004.
- Mr. Mekni rejected this in an email on 4 February 2004, saying that the beneficiary address was completely wrong, and that the letter of credit was invalid. He asked BPL to issue a "normal" letter of credit in accordance with a draft which he attached. This was a letter of credit in the sum of £10 million which proposed that only the following documents be required on presentation:
"1. Signed invoice 1 original and 2 copies …
2. Signed forwarder certificate of receipt CONFIRMING goods delivered, ACCEPTED and placed at the disposal of the consignee namely [BPL] …."
The proposal also stated that the place of "Loading on Board/Disp/Taking in at/fm" should be Antwerp, Belgium, and that the period for presentation of the documents should be "… 21 days after date of shipment".
- Because the revised draft did not require Waypharm to confirm that the invoices were outstanding, Mr. Paddock remained concerned that Waypharm would be free to use such letter of credit despite Mr. Mekni's statement that this would not happen. Mr. Paddock discussed this with Mr. Condliffe, who explained why such terms were apparently necessary for Waypharm, and reassured Mr. Paddock that, if the letter of credit were issued in this form, Waypharm would not exploit its terms.
- On 5 February 2004, Mr. Paddock applied to NatWest for a letter of credit to be issued in the terms proposed by Mr. Mekni. It is clear that, despite the risk to BPL which he had identified, in coming to his decision, Mr. Paddock was motivated by the margins that were being achieved by BPL on Waypharm stock, and that he felt under some pressure to accept the proposal, given the "profit-driven culture of BPL".
- A subsequent Waypharm briefing document also records that Paul Forster-Jones ("Mr. Forster-Jones"), BPL's purchasing director from April 2002 to April 2006, also supported the decision to accede to Waypharm's request to have a letter of credit in the terms suggested by Mr. Mekni, because Mr. Forster-Jones viewed:
"… the flow of product being sourced as essential to hitting profit targets."
It was clear, therefore, that a business decision was taken by BPL to go along with a letter of credit in the terms proposed by Mr. Mekni although it did not provide the protection which BPL had been advised might be desirable.
- On 10 February 2004, NatWest issued documentary credit number TFPMCK512386 (already defined as the Letter of Credit), subject to the "Uniform Customs and Practice for Documentary Credits, 1993 Revision, International Chamber of Commerce, Paris, France, Publication No. 500". Although the value of the Letter of Credit was later extended (on 16 February 2006), from its initial £10 million to £40 million, and the maturity date (initially 60 days from the date of the FCR) was extended to 180 days from the date of the FCR, the terms of the Letter of Credit otherwise remained unchanged. These included terms that:
i) the Letter of Credit was irrevocable;
ii) the beneficiary was Waypharm, whose contact was named as "George Muller";
iii) UBS was to act as confirming and presenting bank;
iv) documents presented had to include:
a) signed invoices, in quadruplicate (the signature being one on behalf of Waypharm);
b) an insurance certificate (or a specified alternative to that);
c) and "a signed forwarding agents certificate of receipt showing goods consigned to [BPL], marked 'notify Tytherleigh Belgium NV 2030, Antwerp' also marked freight paid", and confirming that "goods delivered, accepted and placed at the disposal of the consignee namely [BPL]";
v) the place of taking in charge, despatch from or receipt of the goods was Antwerp, Belgium (this was as per Field 44A as contained in the MT 700 Field specifications which applied);
vi) "documents must be presented within 21 days after taking in charge date as evidenced on [FCR]";
vii) that all banking charges (except the Letter of Credit opening charges) were for Waypharm's account.
The terms of the Letter of Credit were the same as, or at least consistent with, those requested by Mr. Mekni in his email dated 4 February 2004.
The ordering process within BPL in relation to ethicals
- In dealings with their other suppliers of ethicals, the claimants would raise a purchase order which identified the required products, quantity and price, and then send the purchase order, with a designated purchase order number, to the wholesale supplier (for example, Procter & Gamble, or Johnson & Johnson). With Waypharm, the process was different and more informal. AAH's ethicals buyer, Mr. Birdi, would produce a spreadsheet which represented a "wish list" or "forecast" of the products and quantities that AAH was prepared to take, usually representing 10% of AAH's overall purchase of the relevant product. BPL's ethicals buyer, Mr. Yates, would then also add to or amend the list. It would then be emailed to Mr. Condliffe, who would forward it to Mr. Mekni. Mr. Mekni would then attempt to source the products and email Mr. Condliffe when he had done so. The message would then be sent on to BPL's ethicals buyer. Mr. Blundell (who was head of regulatory affairs for the claimants), gave evidence that he had reviewed the operational procedures of the dealings between the claimants and Waypharm. He said that a purchase order would only actually be generated by the claimants once the stock was delivered by Waypharm to the claimants. He said that the "… paperwork would be tied up on receipt", in the sense of "… generating goods-inwards notes and a payment order for payment purposes". This may be the reason why no relevant purchase orders had been disclosed by the claimants; it may be that they were in electronic format, and were subsequently deleted, or otherwise not available. Mr. Condliffe gave a slightly different account of the method of raising purchase orders, so far as dealing with Waypharm was concerned. He said that once Mr. Mekni had confirmed to him that he had the stock referred to in a wish list or forecast, then a purchase order would be raised in specific quantities, and a purchase order number would be allocated and would be entered into BPL's system. He would communicate the purchase order number to Mr. Mekni, who would, on occasions, put it on the invoice. No stock deliveries could be made without purchase order numbers, as the warehouse would book the stock in against the purchase order number.
- Mr. Mekni's case was that no purchase orders had ever been faxed to him or Waypharm, in accordance with what some of the claimants' witnesses said was the normal operating practice. I do not consider that this is an issue which I need to decide. The point is that, as Mr. Mekni suggested, BPL's dealings with Mr. Mekni were characterised by an informality not present in its dealings with its other suppliers. However, contrary to Mr. Mekni's evidence, the dealings were not so informal that he/Waypharm would supply goods to BPL as and when the former wished, provided only that some sort of "wish list" had previously been submitted, and that the price did not exceed the amount of the Letter of Credit. I accept Mr. Condliffe's evidence that a specific order had to be raised by BPL, and a purchase order number given to Waypharm, even if only orally by Mr. Condliffe, and even if Waypharm was not sent an actual purchase order before delivery.
The operation of the Letter of Credit prior to the December 2005 presentation
- In the period from the issue of the Letter of Credit in February 2004 to the first alleged dishonest presentation in December 2004, the trading relationship between Waypharm and BPL operated in a relatively satisfactory manner. Waypharm would present the documents required under the Letter of Credit (namely, three copies of the original invoice, an FCR confirming that the goods had been consigned to BPL and a certificate of insurance to UBS in Zurich). UBS would then present the documents to NatWest's documentary credits department, in Manchester, which would then confirm to UBS whether the documents conformed to the requirements of the Letter of Credit. NatWest then would notify UBS whether it (NatWest) considered the documents to be conformant, whether discrepancies had been identified, and whether BPL had waived any such discrepancies. NatWest would notify BPL that a presentation had been made, and copies of the documents presented would be provided to BPL. If discrepancies had been identified by NatWest, it would ask BPL whether it was prepared to waive such discrepancies. Provided that the documents were conformant, UBS would permit Waypharm to discount the Letter of Credit with it, prior to the Letter of Credit's maturity date, so as to enable Waypharm to obtain funds to purchase stock from its suppliers, or for other purposes. During the month or so following the presentation, Waypharm would deliver the stock detailed in the presentation invoice in batches, and BPL would pay Waypharm by bank transfer in respect of each of the batches of stock on delivery. On the maturity date of the particular presentation (180 days thereafter), NatWest would pay the amount drawn down under the Letter of Credit to UBS. Waypharm then refunded to BPL the amount which had been paid to UBS on maturity, under the Letter of Credit (via UBS). In effect, the Letter of Credit was being used as a financing facility for Waypharm, to enable it to draw down funds from UBS upon presentation, and prior to the delivery of goods. Whether or not Mr. Condliffe knew of Waypharm's discounting of the Letter of Credit was not explained in evidence. Others at BPL did not appear to have known that the Letter of Credit was being discounted by Waypharm, though they came to suspect it later.
- In greater detail, the system worked as follows: from the end of February to the end of April 2004, Mr. Condliffe placed orders with Waypharm for product, and these were paid for by BPL by bank transfer following delivery, with no utilisation of the Letter of Credit. On 30 April 2004, Waypharm made a presentation under the Letter of Credit, and discounted the Letter of Credit with UBS. Mr. Paddock raised concerns about this with Mr. Condliffe, who explained that Waypharm's bank wanted to see the Letter of Credit in operation to see that it provided the right level of security, and reassured Mr. Paddock that, if he waited until maturity of the Letter of Credit, he would see that Waypharm would immediately refund the amount received by them under the Letter of Credit. This occurred, and Mr. Paddock was reassured. The relevant FCR, in accordance with the terms of the Letter of Credit, confirmed that "… goods had been delivered accepted and placed at the disposal of the consignee, namely BPL", and purported to have been signed in Antwerp on 23 April 2004 by MYK.
- On 28 September 2004, Waypharm made another presentation under the Letter of Credit. Again, BPL paid by bank transfer for the goods duly delivered to it, and the amount which NatWest paid out on maturity of the Letter of Credit was immediately refunded to BPL by Waypharm. Again, the FCR contained a similar confirmation, and purported to have been issued by MYK in Antwerp on 22 September 2004. Following the September 2004 presentation, presentations under the Letter of Credit, and this method of double payment by BPL and refunds by Waypharm became the norm in the trading relationship between the parties. Relations continued in an apparently satisfactory manner until February 2006, when Waypharm was late in the repayment of the sum of £8,493,047.11, which had matured due under a presentation made by Waypharm under the Letter of Credit in September 2005 ("the September 2005 presentation"), and in respect of which BPL had previously paid by bank transfer for the goods delivered.
The December 2005 presentation
- On 13 December 2005, Waypharm presented documents under the Letter of Credit to UBS. On or about the same date, UBS, in turn, presented the documents to NatWest. There is no dispute that the presentation was done on the instructions of Mr. Mekni, although the actual physical presentation to UBS would probably have been done in Zurich by Mr. Muller, an accountant or associate of Mr. Mekni, acting on Waypharm's behalf. On 13 December 2005, Waypharm discounted the Letter of Credit with UBS in the normal way, thereby receiving the discounted sum of £2,390,095.38 (less charges) from UBS. On the same date, Waypharm transferred the sum of £2,378,623.02 to Best Financial's account with UBS Zurich. The documents which accompanied the presentation included:
i) an invoice designated 85 GCSA dated 1 December 2005 which listed various ethical products in the total sum of £2,445,546.30;
ii) an FCR which stated (or purported to state) that:
a) it had been issued by MYK at Antwerp, Belgium on 1 December 2005;
b) that it related to 33 pallets of pharmaceutical, toiletry, household and food products;
c) that BPL was the consignee and Tytherleigh Belgium was the party to be notified;
d) that MYK confirmed that the goods had been delivered, accepted and placed at the disposal of the consignee;
e) that the goods and instructions were accepted and dealt with subject to the General Conditions printed on the reverse;
f) that MYK certified that it had assumed control over the consignment in external apparent good order and conditions, with irrevocable instructions to be forwarded to the consignee;
g) that the forwarding instructions could only be cancelled or altered if the original FCR was surrendered to the signatory (i.e. MYK).
- The original maturity date of the December 2005 presentation was 30 May 2006, but it was subsequently extended to 2 November 2006.
- The goods the purported subject matter of invoice 85 GCSA were not delivered, as set out below.
The February 2006 presentation
- On or about 24 February 2006, Waypharm presented documents under the Letter of Credit to UBS, and on or about the same date UBS presented the documents to NatWest. There is no dispute that the presentation was done on the instructions of Mr. Mekni, although the actual physical presentation would probably have been done in Zurich by Mr. Muller, acting on Waypharm's behalf. On or about the same date, Waypharm discounted the Letter of Credit with UBS in the normal way, thereby receiving the discounted sum (less charges) of £9,444,249.44 from UBS. On the same date, Waypharm transferred the sum of £9,419,259.62 to Best Financial's account with UBS Zurich. The documents which accompanied the presentation included:
i) an invoice designated 88 GCSA and dated 20 February 2006 which listed various household and OTC products in the total sum of £9,665,372.58;
ii) an FCR which stated (or purported to state) that:
a) it had been issued by MYK at Antwerp, Belgium on 20 February 2006;
b) that it related to 169 pallets of pharmaceutical, toiletry, household and food products;
c) that BPL was the consignee and Tytherleigh Belgium was the party to be notified;
d) that MYK confirmed that the goods had been delivered, accepted and placed at the disposal of the consignee;
e) that the goods and instructions were accepted and dealt with subject to the General Conditions printed on the reverse;
f) that MYK certified that it had assumed control over the consignment in external apparent good order and conditions, with irrevocable instructions to be forwarded to the consignee;
g) that the forwarding instructions could only be cancelled or altered if the original FCR was surrendered to the signatory (i.e. MYK).
- Again, the goods the subject matter of invoice 88 GCSA were not delivered to BPL, as set out below.
The issues
- The main issues which have to be determined by the court, as they emerged prior to and during trial, can be summarised as follows:
The December 2005 presentation
i) Was the December 2005 presentation under the Letter of Credit a fraudulent presentation? In particular:
a) had BPL in fact ordered the goods described in invoice 85 GCSA dated 1 December 2005;
b) if they had not been so ordered, did Mr. Mekni know that they had been ordered by BPL, or did he honestly believe that they had been ordered;
c) had the FCR dated 1 December 2005 been signed by or on behalf of MYK at Antwerp;
d) did the FCR and/or the invoice contain fraudulent representations as to the existence of the goods, their presence at Tytherleigh in Antwerp on 1 December 2005, and as to whether MYK had "… assumed control of the goods …" in "… apparent good order and condition" with irrevocable instructions to forward them to BPL?
e) did Mr. Mekni know that the goods did not exist (if that were the case) or did he honestly believe that they did exist?
f) did Mr. Mekni cause the relevant documents to be presented to UBS and thereafter to NatWest?
The February 2006 presentation
ii) Was the February 2006 presentation under the Letter of Credit a fraudulent presentation? In particular:
a) had BPL in fact ordered the goods described in invoice 88 GCSA dated 20 February 2006;
b) if they had not been so ordered, did Mr. Mekni honestly believe that they had been ordered by BPL;
c) had the FCR dated 20 February 2006 been signed by or on behalf of MYK at Antwerp;
d) did the FCR and/or the invoice contain fraudulent representations as to the existence of the goods, their presence at Tytherleigh in Antwerp on 20 February 2006, and as to whether MYK had "… assumed control of the goods …" in "… apparent good order and condition" with irrevocable instructions to forward them to BPL?
e) did Mr. Mekni know that the goods did not exist (if that were the case) or did he honestly believe that they did exist?
f) did Mr. Mekni cause the relevant documents to be presented to UBS and thereafter to NatWest?
Alleged compromise of claims
iii) Did BPL compromise all claims arising out of invoice 85 GCSA (including fraud claims against Waypharm and Mr. Mekni) by agreeing, in the October 2006 Agreement, that Waypharm could supply the household goods listed in invoice 113 GCSA in place of the pharmaceutical goods set out in invoice 85 GCSA?
iv) If, by about May 2006, Waypharm had agreed to supply the pharmaceutical products referred to in invoice 92 GCSA in place of the household products detailed in invoice 88 GCSA, did BPL thereby compromise all claims arising out of invoice 88 GCSA, including fraud claims against Waypharm and Mr. Mekni?
Liability of defendants
v) In the light of the factual findings in relation to the above issues, are Waypharm, Best Financial and/or Mr. Mekni liable in tort for conspiracy, causing loss by unlawful means and/or inducing breach of contract?
vi) Is Waypharm liable for damages for breach of the implied terms that it would only make "good faith" presentations under the Letter of Credit.
vii) Is Waypharm liable to a claim in restitution for money had and received?
viii) What is the quantum of BPL's claims against: a) Waypharm; and b) Mr. Mekni?
- As may be seen below, I have slightly reordered the sequence and structure of the way in which I have decided these issues.
Approach to the evidence
- It was common ground that the burden of proof lay on the claimants to establish on the balance of probabilities that fraudulent presentations had been made under the Letter of Credit, and that Waypharm, Mr. Mekni and Best Financial were liable in tort in respect of them. It was also common ground that, as summarised in Noble Resources SA v Gross [2009] EWHC 1435 (Comm) at paragraphs 40 – 48, the standard of proof in fraud cases is the same as in other civil proceedings: the balance of probabilities test of whether an alleged event is more likely than not to have occurred. As Lord Hoffmann stated in B (Children) (Sexual Abuse: Standard of Proof) [2009] 1 AC 11, at 15:
"There is only one rule of law, namely that the occurrence of the fact in issue must be proved to have been more probable than not. Common sense, not law, requires that in deciding this question, regard should be had, to whatever extent appropriate, to inherent probabilities."
- The claimants accept that in applying the standard of the balance of probabilities the court should have regard to the seriousness of the allegation and the probability that such a serious breach of duty has occurred. However, as Mr. Mekni's closing submissions rightly pointed out:
"… there is no necessary connection between the seriousness of an allegation and the improbability that it has taken place. The test is the balance of probabilities, nothing more and nothing less." S-B (Children) (Care Proceedings: Standard of Proof) [2009] UKSC 17.
The probability that Mr. Mekni would have perpetrated frauds on the claimants
- Mr. Mekni submitted that, when the facts alleged to constitute the frauds were placed in the context of the trading relationship between the parties, it was inherently highly unlikely that he would have acted in the manner alleged by BPL.
- Mr. Mekni sought to rely, inter alia, on what he asserted were the following features of the parties' relationship:
i) Before 1 December 2005 and 10 February 2006, Waypharm had a good trading relationship with the claimants. For all its informality the claimants made very large profits and regarded the relationship with Waypharm as extremely important. Waypharm regarded the claimants as an important client for whom it would source goods.
ii) After 1 December 2005 and 10 February 2006, the claimants did not initially ask for the goods or challenge Waypharm as to the basis upon which the goods were said to have been ordered.
iii) The claimants, instead of contacting the police or commencing an action, engaged in discussions to swap the goods for other goods.
iv) Rather than run away, in a manner consistent with there being a fraud, Mr. Mekni was in constant contact with the claimants seeking to continue the business relationship and seeking to obtain agreement as to alternative goods to satisfy the claimants' new and changed requests.
v) Waypharm was a limited partnership in respect of which the claimants had carried out no due diligence as to its financial status, creditworthiness or the sources of the products it was selling. There was a policy of "don't ask, don't tell" until the claimants sought to demand provenance in respect of the goods invoiced to 85 GCSA.
vi) BPL bought over £35 million of ethical and OTC products from Waypharm without ever raising a purchase order. If there were documented purchase orders, then they had not been produced.
vii) Mr. Mekni was given estimates, forecasts and "wish lists". He was, in effect, tasked to go and acquire goods which the claimants wanted. There was no formality in terms of placing orders with Mr. Mekni for any goods whatsoever.
viii) The culture of the claimants was driven by profit and no questions, or at least very few questions, were asked of Mr. Mekni, provided he was in a position to sell the goods at the price they wanted.
ix) Even after the allegedly fraudulent presentations in December 2005 and February 2006 the claimants did not immediately complain. It would have been extremely surprising if the claimants had continued a relationship with a supplier whose financial worth was at best unknown, who had abused letters of credit and obtained approximately £12 million if they had really considered there was even a chance a fraud had been committed. The reality was that, after considering the position, assessing the business practices and obtaining information from Mr. Condliffe and all other relevant sources the claimants correctly came to the view that there was no fraud and the goods had been ordered.
x) The letter of credit was extended on 16 February 2006 to £40 million.
- These are all matters which I have taken into account in coming to my conclusions as set out below.
The credibility of Mr. Mekni
- In addition to relying on the matters which I have summarised above, Mr. Mekni sought to present himself to the court as a witness of truth. Unfortunately, I have difficulty in accepting this characterisation of Mr. Mekni as a witness. Despite the courteous way in which he gave his evidence to the court, I found him to be a self-contradictory and evasive witness, who, when documents, or facts, which did not fit with his version of events, were put to him in cross-examination, was quick to change his story or to come up with an entirely different explanation, and one which was often wholly contradictory to the version which he had previously given in his Defence or witness statements.
- Apart from the manner in which he gave his evidence relating to the live issues in the case, and the nature of that evidence, there were other matters which gave me reason to doubt the extent to which I could rely on Mr. Mekni's version of events. These included the following.
- Mr. Mekni drafted and submitted to the US National Institute(s) of Health an application dated 20 April 2008 for a licence in relation to public service inventions on behalf of Waypharm SAS . The application was signed by Mr. Mekni. It claimed that Waypharm SAS :
i) started operating its business in 1990;
ii) was a manufacturer;
iii) held several supply agreements;
iv) had supplies from at least twenty suppliers;
v) had 140 staff members and 10 freelance staff;
vi) submitted financial statements to Dun & Bradstreet and others in the financial community;
vii) had a turnover of £357 million in 2006, £495 million in 2007 and a forecast turnover of £540 million in 2008.
Those representations were to a large extent materially false, when considered in the light of the evidence which Mr. Mekni himself gave at trial. Thus, for example, in his witness statement, Mr. Mekni said that he only acquired Waypharm/Waypharm SAS in 1999, and there was no evidence of any previous business. In his oral evidence, Mr. Mekni said that Waypharm/Waypharm SAS had a turnover of "50/60" in 2006 (he was clearly referring to "millions") and that Waypharm/Waypharm SAS had a total of three members of staff, who were all self-employed; he asserted that the twenty suppliers listed in the application were not suppliers to Waypharm/Waypharm SAS but suppliers to "my companies"; he admitted that Waypharm/Waypharm SAS had no supply agreement with, for example, Pfizer. He had no good answer to why his application had contained such wildly inflated turnover figures. There was no evidence to support the representation that Waypharm/Waypharm SAS manufactured anything, nor that it held any supply agreements, nor that it supplied financial information to Dun & Bradstreet.
- The evidence also showed that Mr. Mekni's business career prior to the present dispute had been a chequered one. In summary:
i) By a judgment dated 23 May 1995, the Cour de Cassation, Chambre Criminelle, dismissed Mr. Mekni's appeal against his conviction by the Versailles Court of Appeal, 9th Chamber, dated 18 March 1994, which had sentenced him to a suspended term of imprisonment for 18 months and a fine of €100,000 for unlawfully opening an establishment for the preparation and sale in bulk of pharmaceutical products, putting adulterated medicinal substances up for sale, and using a forged certificate. This last aspect of the conviction involved the court finding that Mr. Mekni had deliberately and knowingly used a certificate of origin of goods, that was forged "both in terms of its form and its content".
ii) In 1994, a number of companies with which Mr. Mekni was involved as owner and controller, went into liquidation. Following the collapse of his business, he was made bankrupt in 1996.
iii) On 8 April 2004, the Tribunal Correctionnel de Versailles found Mr. Mekni guilty of four criminal charges. These were:
"1) for having, … at some time between October 1991 and October 1992 …, deceived the company OCP-Répartition by the use of fraudulent manœuvres, namely, by combining normal commercial operations with the issue of invoices and miscellaneous documents relating to fictional transactions, in order to convince it of the existence of an imaginary credit in the form of invoices payable in the future and issued symmetrically on the instructions of the director of OCP-Boulogne for sales between OCP-R and Texa on the one hand, and bogus companies (sales of July and August 1992 to the English companies Fan Fox and Magport Limited) on the other, and for having thus caused it to deliver funds to him of about FRF 35 million.
2) for having, … in the course of October 1992, fraudulently falsified the truth in a document the effect of which was to prove the existence of a right or fact having legal consequences, namely by establishing nine receivables of the company La Médicale Equiplex, of which he was the legal representative, against the company OCP-Répartition, which in all respects were identical to those issued on the same dates and for the same amounts by the company Texa, or which he was a de facto director, against the same debtor OCP-Répartition, by listing them in two statements of Dailly [sic] assignments of business receivables, and by having them used in full knowledge of the facts, namely by assigning them to the Les Essarts du Roi branch of Crédit Agricole, when he knew that OCP-Répartition would refuse to pay these forged invoices a second time.
3) For having, … at some time between 1991 and 1993 … being Chairman and Chief Executive Officer of the sociétés anonymes (public limited companies) Ovax, Diatech, and La Médicale Equiplex, made use in bad faith of the assets or credit of those companies which he knew to be contrary to their interests, for personal purposes or in order to promote another company in which he was directly or indirectly interested, namely, in particular, by granting himself excessive remuneration having regard to the indebted financial situation of Ovax SA, and by granting substantial unjustified advances of funds to other companies in the 'Ovax Group' in the absence of consideration and without justification, to the Tunisian company Texa of which he was the de facto manager, and to foreign companies.
4) for having, … in the course of 1993 and 1994, … while managing the companies Ovax, Diatech, LME, Distrial, Umco and Ovax International, been guilty of the offence of fraudulent bankruptcy at the time of the opening of administration proceedings on 8 and 22 February 1994, and then of the compulsory liquidation proceedings on 1 and 29 March and 13 December 1994, by having misappropriated all or part of the company assets, and in particular by having, in May, June and July 1993, made massive transfers of fixed assets (installations and miscellaneous equipment on the site at Les Essarts du Roi) to the company Texa through the agency of the companies Distrial and LME, for a total of FRF 60 million, when the aforementioned companies had been in a state of cessation of payments since 1 April 1993."
- The court sentenced Mr. Mekni to a suspended sentence of 18 months, with three years' probation, and to a fine of €46,000. The court also made an order banning him for a period of ten years, until 2014, from directing, managing, administering or controlling, whether directly or indirectly, any commercial, artisan or agricultural business, or any legal entity.
- Mr. Mekni did not appeal against these criminal sanctions. The Tribunal Correctionnel also imposed civil compensation orders on Mr. Mekni, which required him to pay €10,197,875.19 by way of damages to OCP-Répartition and €826,067.86 by way of damages to Crédit Agricole as the victims of his criminal conduct. Subsequently, Mr. Mekni successfully appealed against the civil compensation orders to the Versailles Court of Appeal. The sole ground on which the court held that the appeal should be allowed was that the legal effect of Mr. Mekni's personal bankruptcy had been to extinguish the civil claims which the parties had brought against him. That decision was subsequently confirmed by a decision of the Cour de Cassation dated 10 May 2007.
- Whereas these previous criminal convictions are, of course, not direct evidence of Mr. Mekni's fraud in connection with the December 2005 and February 2006 presentations, they demonstrate that he is no stranger to the use of fraud, forged instruments and fictitious transactions in connection with the obtaining of credit in commercial transactions to which he, or his companies, are party. They also provided further reason why I should treat Mr. Mekni's evidence with caution.
- In addition, Mr. Mekni made certain allegations to the effect that Waypharm had made deliveries to BPL of ethical products worth over £3.7 million under invoices numbered 71 GCSA and 72 GCSA, which I deal with below. Once the evidence was examined, it was clear that this allegation was wholly without foundation. It followed an earlier allegation that Waypharm had mistakenly paid £6,008,374.07 to BPL in respect of invoice 63 GCSA, an allegation which was then withdrawn in Mr. Mekni's Amended Defence. The fact that these ill-founded allegations, in relation to such large sums, were made by Mr. Mekni did not give me confidence that I could rely on his evidence where it was not otherwise supported.
- In coming to my assessment of Mr. Mekni's credibility, I took into account the fact that, as a litigant in person, defending himself against serious allegations of fraud, he was subject to stress during the course of the trial, and therefore, perhaps, more likely to give unconsidered answers or make unsubstantiated allegations.
Credibility of the claimants' witnesses
- The claimants called six witnesses at trial. These were the third defendant, Mr. Condliffe, Mr. Mark James ("Mr. James"), a Commercial Director of AAH, Mr. Dale Gibson ("Mr. Gibson"), Head of OTC Buying at BPL, Mrs. Rachel Davies ("Ms. Davies"), Head of Project Financing at AAH, Mr. Paddock, and Mr. Melvyn Redfern ("Mr. Redfern"), who was Director of Financial Control at AAH from April 2002 to November 2008, and from November 2008, Director of Financial Management. Since 2005, his role had included overall financial management for treasury functions at BPL, and as such he had had frequent involvement with BPL's affairs since early-2006, when its relationship with Waypharm began to deteriorate.
- Because of the claimants' settlement with Mr. Condliffe, no allegations of misconduct in relation to secret profits were put to him by BPL during the course of his evidence. Nor did Mr. Mekni cross-examine Mr. Condliffe to the effect that there was anything improper or inappropriate in relation to the substantial sums that were paid to Mr. Condliffe by Mr. Mekni, or by companies controlled by Mr. Mekni, whether for Mr. Condliffe's own use, or for onward transmission to Mr. Mekni or companies controlled by him. In cross-examination, Mr. Mekni invited Mr. Condliffe to confirm the contents of many paragraphs of his (Mr. Condliffe's) witness statement dated 14 January 2011. In that witness statement, Mr. Condliffe accepted that he had received sums in excess of £300,000 for his personal use from Mr. Mekni/Waypharm (according to Mr. Condliffe, by way of loan), as well as other sums to discharge personal expenses at a time when he was acting as a consultant to the claimants. He also accepted that he had been a conduit for the transfer of funds into, and out of, various of Mr. Mekni's companies. He denied that there had been anything inappropriate in his dealings with Mr. Mekni.
- In the absence of any hostile cross-examination from either party, I clearly do not know the full history of, or reason for, these payments. That fact notwithstanding I consider that, in relation to the matters which I have to decide in these proceedings, namely whether the December 2005 and the February 2006 presentations were dishonest, Mr. Condliffe's evidence can be relied upon. He gave his evidence in relation to these matters in a straightforward and frank matter. Whatever reservations I may have had as to Mr. Condliffe's financial dealings with Mr. Mekni, at a time when he was a consultant to the claimants, did not affect my findings as to his evidence insofar as it related to the issues which I have to decide.
- So far as the other witnesses called on behalf of the claimants were concerned, they were all clearly trying to do their best honestly to recollect events which occurred some time ago. Whilst, as employees of the claimants, they were, perhaps naturally, keen at times to present the evidence in the best light, not only to support the claimants' case, but also to support their own conduct as employees, I do not consider that any of them either bordered on the unfairly partisan, or coloured their evidence to protect their employer's or their own interests. I came to that conclusion notwithstanding that they personally might have felt responsible for the informality in the dealings with Waypharm which contributed to BPL's loss. In particular, I found Mr. Redfern, who was meticulous in his attention to detail, and readily accepted, or corrected, errors in the figures or dealings, where these were pointed out, to be a reliable witness. He only became significantly involved in dealings with Waypharm shortly after the February 2006 presentation.
Implied terms of the contract between Waypharm and BPL
- It was common ground on the pleadings as between Waypharm, Mr. Mekni and the claimants, that there was an agreement between BPL and Waypharm regarding the sale of goods by Waypharm to BPL under the Letter of Credit which contained implied terms that Waypharm would:
i) only present genuine documentation containing truthful statements for the purposes of a good faith presentation under the Letter of Credit; and
ii) only draw down payments following such good faith presentation.
Mr. Mekni's admission was also applicable to Best Financial.
- At trial, Mr. Mekni argued that, because NatWest was satisfied that the FCRs were conforming documents, Waypharm was entitled to rely on the FCRs being conforming documents. That, of course, could not, and would not, be the case in circumstances where Waypharm, through the knowledge of Mr. Mekni, knew that the documents presented to NatWest were non-conforming and contained fraudulent misrepresentations.
Issues for determination:
i) Were the goods the subject matter of the December 2005 and February 2006 presentations ever ordered by BPL?
a) The goods purportedly the subject matter of invoice 85 GCSA and the December 2005 presentation
- Logically, the first issue which I have to decide is whether the goods which were the purported subject matter of invoice 85 GCSA and the December 2005 presentation were ever ordered by BPL. The goods listed on the invoice consisted of Pfizer and (to a very small extent) Bayer ethical products (i.e. pharmaceutical goods).
- Mr. Mekni gave various conflicting accounts as to the way in which he alleged that the order for the goods listed in invoice 85 GCSA had been made. First, he said that he had spoken to Mr. Condliffe in November 2005, and the latter had agreed to purchase the goods. Second, and in the alternative, he said that there was a system based on forecasts, whereby, either under an "umbrella agreement" or by way of separate agreement on each occasion, BPL's submission of "forecasts" to Mr. Mekni would give rise to an obligation on BPL to purchase any corresponding goods obtained by Waypharm, up to the maximum value under the Letter of Credit.
- For example, in his witness statement, Mr. Mekni said:
"The forecasts themselves were provided by BPL (Mr. Daljit Birdi) and these contained details of the ethicals required by BPL and the price that BPL was willing to pay. Upon receipt of the forecast I would make enquiries of my usual suppliers to see if I could secure not only the specific product, but also the product at the right price. I would then contact BPL to discuss the forecast and exactly what I could get and for how much and if the price was accepted by BPL I would proceed to source the relevant stock. I should point out that I only supplied a percentage of BPL's specific requirement that I was prepared to supply. The reason for this is that I was concerned that supplying ethicals at the level required to fulfil BPL's entire requirements could damage my relationship with my suppliers and adversely affect my ability to source ethicals from those suppliers at the prices I then enjoyed in the future.
…
In or about late November 2005 I telephoned Mr. Condliffe to say that I was going to securing a large quantity of Pfizer goods... We discussed the goods and he confirmed that BPL would want the goods provided that they came within BPL's forecasts (which they did). Accordingly, I arranged for Tytherleigh to prepare the necessary FCR so that funds could be drawn down under the letter of credit and the goods moved on. Invoice 85 was issued on 1st December 2005. There is no question that all the Pfizer goods comprising invoice 85 were at Tytherleigh ready for delivery to BPL at its behest."
- I reject Mr. Mekni's evidence that the goods the subject matter of invoice 85 GCSA were ordered by BPL. As Mr. Mekni accepted in his oral evidence, Mr. Condliffe was the only person who ever ordered goods on behalf of BPL from Waypharm. Mr. Condliffe gave clear evidence (both in his witness statement and orally at trial) that he had not ordered the relevant goods from Mr. Mekni. To some extent that evidence was supported by Mr. Mekni in cross-examination, where, after some prevarication, he eventually accepted that purchase orders were an inherent part of the process, that "… he always phoned Mr. Condliffe for a purchase order …" and that "… normally [Mr. Condliffe] gave me some of them not all of the times …". Despite the relative informality in the arrangements between BPL and Waypharm, there was no evidence to support the existence of the "umbrella agreements", or contractual obligations arising merely based on submission of a wish list or forecasts, as the case put forward by Mr. Mekni suggested. Moreover, it would be commercially absurd to suppose that Waypharm was free to deliver, and BPL was obliged to accept, goods up to a value of £40 million without a corresponding purchase order, or at least a request by BPL. Or that Mr. Mekni/Waypharm could simply invoice BPL for whatever goods it unilaterally decided to sell BPL, and BPL would be obliged to pay for, and take delivery of, such goods. In this context, I refer to my findings at paragraph 50 above.
- The contemporaneous documentary evidence did not support Mr. Mekni's case. Apart from the absence of any purchase order number assigned to invoice 85 GCSA, a statement produced at that time by Mr. Condliffe, for the purpose of recording relevant delivered business with a view to calculating the bonus to which he was entitled from BPL for the period 1 January to 31 December 2005, makes no reference to invoice 85 GCSA. I find it highly unlikely that Mr. Condliffe would have excluded so large an order from his bonus claim.
- Nor do any of the other contemporaneous documents upon which Mr. Mekni sought to rely support his case. For example, he attempted to rely on a forecast dated 28 April 2005. But that forecast barely covered half of the goods listed on invoice 85 GCSA. On Mr. Mekni's own case that forecast was superseded by a forecast which Mr. Mekni said was produced in September 2005, and which did not include any Pfizer goods. There was no evidence to support his suggestion that the forecasts related to the goods listed in, and purportedly ordered under, invoice 85 GCSA.
- The evidence relating to the conduct of the parties subsequent to the December 2005 presentation also strongly supported BPL's case.
- As part of his case that BPL had indeed ordered the goods the subject of invoice 85 GCSA, Mr. Mekni alleged, in his Defence, that BPL had unlawfully reneged on its obligation to purchase the goods that were the subject of the December 2005 presentation because BPL thought that taking delivery of those goods would harm its chances of becoming an exclusive distributor for Pfizer. He further alleged that, in January 2006, Mr. Birdi had told Mr. Mekni that BPL no longer wanted the pharmaceutical products which it had bought pursuant to invoice 85 GCSA. In his witness statement, Mr. Mekni also alleged that, at a meeting on 7 February 2006, between himself and the claimants' representatives, Mr. Blundell had:
"made it quite clear that BPL did not want Pfizer goods due to talks that were ongoing between BPL and Pfizer, regarding BPL [becoming] Pfizer's sole agent."
- During the course of his oral evidence, Mr. Mekni changed his story yet again. He said that on 1 or 2 December 2005, Mr. Bellemans or Mr. Ceulemans, employees of Tytherleigh at the time, called him to say that BPL did not want the goods the subject of invoice 85 GCSA. Mr. Mekni alleged that he then telephoned Mr. Birdi to ask him what was going on and received two answers:
"(a) we do not wish to inward goods in December because we are heading the year end and we don't want to have stock, (b) It is not the right moment as discussions are ongoing for the moment..."
- Mr. Mekni later said that he spoke with Mr. Birdi in January 2006 (reverting to the account given in his Defence).
- I reject Mr. Mekni's defence that BPL had wrongfully cancelled the order, or refused to accept delivery of the goods. His account in relation to this allegation frequently changed over the course of the trial, not merely from his pleaded position, but also from earlier oral evidence. His account, in whatever version, was implausible. Apart from the internal inconsistencies of Mr. Mekni's own account, the reasons I reject this allegation can be summarised as follows:
i) I accept the evidence of Mr. James, that there was no mention of invoice 85 GCSA, its cancellation or any issue in relation to the receipt of Pfizer goods under the December 2005 presentation at a meeting which took place between BPL and Mr. Mekni on 7 February 2006.
ii) Indeed, contrary to what Mr. Mekni said in his witness statement, and at various stages in his oral testimony, he finally admitted in cross-examination that BPL had not declined to take the goods listed in invoice 85 GCSA.
iii) It was commercially highly unlikely that Mr. Birdi would have told Mr. Mekni that popular Pfizer goods were not wanted by BPL in December 2005. As Mr. Redfern's evidence showed, Pfizer goods were strongly in demand, and BPL would have had no problem in selling them on. There was nothing in BPL's commercial agreement or negotiating stance with Pfizer that prevented BPL from purchasing "grey" or "parallel import" stock from Waypharm, and BPL would clearly have wanted a steady stream of these products.
iv) I accept the claimants' evidence that the meeting on 7 February 2006 was to talk about general regulatory issues and not about specific services or deliveries. Mr. Mekni admitted that he did not take invoice 85 GCSA or any invoice with him to the meeting.
v) If Mr. Mekni had indeed been told by Mr. Birdi that BPL was not going to take delivery of the goods the purported subject-matter of invoice 85 GCSA, then it is inconceivable that Mr. Mekni would not have complained about that fact at the meeting on 7 February 2006, and about the fact that Waypharm was not going to be paid. His evidence was that he did not complain to BPL about the fact that Waypharm was not going to get paid by bank transfer for the goods listed in invoice 85 GCSA because payment was not "an issue" for him. But if Waypharm had indeed paid for and delivered the goods purportedly the subject of invoice 85 GCSA, and these had been consigned to BPL, Waypharm would have wanted to be paid for those goods as soon as possible. Having discounted the Letter of Credit, Waypharm would have been paying interest to UBS on those discounted funds, and it would have clearly been in its interests to secure prompt payment from BPL. Payment would very much have been an "issue".
vi) I can only conclude that the reason that Mr. Mekni did not complain about the alleged cancellation of this order, and the likely non-payment of the invoice is that Mr. Mekni knew that no order had been raised by BPL, knew that it had not been "cancelled", and was hopeful that somehow, he could, retrospectively, secure such an order, given the known demand for the goods.
vii) Nothing in the evidence supports Mr. Mekni's allegation that the claimants subsequently acknowledged ordering the goods in question. BPL's subsequent conduct when the problem was discussed was directed at trying to obtain the supply of alternative goods from Waypharm which would be supplied in satisfaction of the sums which had been debited as a result of the December 2005 presentation.
- It follows that, on this issue, I find as a fact that the goods purportedly the subject matter of invoice 85 GCSA had never been ordered by BPL. I reject Mr. Mekni's explanation that the reason for their non-delivery was a cancellation of the order, or a refusal on the part of BPL to take delivery of the goods.
- I should also say that I do not accept Mr. Mekni's criticism of the claimants' failure to call Mr. Birdi as a witness. Mr. Birdi no longer worked for the claimants; Mr. Mekni knew his address, and could himself have taken steps to secure his attendance at trial in relation to an issue (the alleged cancellation of the order) in respect of which the evidential burden fell on him, not the claimants.
- Nor do I accept Mr. Mekni's alternate case, that he honestly believed that the goods purportedly the subject of invoice 85 GCSA were the subject matter of a contract between BPL and Waypharm. I find that he must have known perfectly well that, until such time as he confirmed with Mr. Condliffe that Waypharm had sourced actual goods of the type listed on the wish list or forecast, and Mr. Condliffe had raised an order whether orally and/or by giving Mr. Mekni a specific order number, there was no order from BPL capable of acceptance by Waypharm, or of giving rise to a contractually binding agreement between the parties. Mr. Mekni must have known that he could not simply make a presentation under the Letter of Credit using a so-called invoice which listed product selected by Waypharm in circumstances where there had been no order raised or confirmed by Mr. Condliffe on behalf of BPL, and no contract concluded between the parties.
- It follows that I find that Waypharm was in breach of the implied term of its contract with BPL only to present genuine documentation containing truthful statements for the purposes of good faith presentation under the Letter of Credit. Invoice 85 GCSA, which falsely represented that a contract existed between the parties in respect of the listed goods was not a genuine or truthful document. Nor was the presentation of such an invoice a good faith presentation of documents.
b) The goods purportedly the subject matter of invoice 88 GCSA and the February 2006 presentation
- The second issue which I have to decide under this head is whether the goods which were purportedly the subject matter of invoice 88 GCSA and the February 2006 presentation were ever ordered by BPL.
- The goods listed in invoice 88 GCSA were household goods and toiletries (i.e. OTC goods) with a stated invoice price of £9,665,372.58. Mr. Paddock's evidence (which I accept) was that the quantity of OTC was alarming, as was the make-up of the goods supplied (namely Kenco and Maxwell House coffee, Nivea, Mr. Muscle and Durex).
- I cannot accept Mr. Mekni's evidence that BPL ever placed an order for £9,665,372 worth of goods that were purportedly the subject matter of invoice 88 GCSA. Nor can I accept his alternate case, that he honestly believed that an order had been placed.
- In his Defence, Mr. Mekni's primary case was that there was an "umbrella agreement" under which forecasts would be agreed on by the parties, pursuant to which Waypharm was obliged to use reasonable endeavours to source goods listed on the forecasts, and BP would be obliged to buy those goods if Waypharm could source them. Mr. Mekni's alternative case was that there was an agreement on each occasion that Waypharm submitted a forecast, with an oral agreement reached between BPL and Waypharm as to the goods required. Mr. Mekni also alleged that there was an oral agreement that BPL would buy OTC goods for onward sale to Crown Crest and that this was subject to the express or implied limitation that:
i) the amount supplied would not exceed the current limit of the letter of credit;
ii) the OTC goods were to be the subject of a purchase order between Crown Crest, Global Care and/or Oxet SA, alternatively an estimate or forecast agreed between Crown Crest, Global Care and/or Oxet SA.
- He also sought, in the course of his evidence, to rely on the letter from Crown Crest to BPL dated 5 December 2002.
- He further alleged, in his witness statement:
"The way in which the sale to BPL of the goods referred to in invoice 88 GCSA came to be agreed was as follows. The goods had been purchased by Waypharm prior to 20 February 2006. Prior to invoice 88 GCSA being raised, in or about January 2006, Mr. Mekni on behalf of Waypharm, telephoned to Mr. Condliffe and offered the goods for sale to BPL. Mr. Condliffe stated that BPL did want to purchase the goods and agreed, on behalf of BPL, to buy them [deletion in pleading] that BPL was committed to buy those goods referred to in invoice 88 GCSA either for its own use or for Crown Crest in accordance with the previous practice and Mr. Condliffe agreed on behalf of BPL to take delivery of them. During a meeting at Waypharm's Margaret Street offices held on 7 February 2006... Mr. James confirmed that BPL wanted to purchase the goods which were later sold to BPL pursuant to invoice 88 GCSA. Mr. James expressly agreed during the meeting that the delivery should take place, the letter of credit would be increased and the business relationship between BPL and Waypharm would continue".
and
"BPL unlawfully reneged on its obligations to purchase the goods that were the subject of the February Presentation because of the sharp fall in the prices of those OTC and food goods and/or the unwillingness of Crown Crest (Sert UK Plc) to acquire such goods at the price BPL sought".
- However, none of the contemporaneous documents or emails between the parties were consistent with any umbrella, or specific, agreement in relation to the OTC goods listed in invoice 88 GCSA. There was no evidence that any forecast or wish list for the OTC goods listed in invoice 88 GCSA had ever existed, or indeed for any order for OTC products. This was confirmed by Mr. Condliffe.
- Moreover, Mr. Condliffe's commission statement made no reference to invoice 88 GCSA or the £9.6 million of OTC goods detailed thereon. In his oral evidence he said that if he had placed, or even known about, such an order, he would certainly have sought to obtain the resulting commission from BPL. I have no doubt that such was the case.
- Mr. Condliffe's evidence (which I accept) was that he had nothing to do with the placing of such an order for OTC goods, and certainly had not spoken to Mr. Mekni about such an order. Nor was he made aware that anyone in BPL (or in the other claimants) had placed an order for £9.6 million of household goods. He had never placed an order of such magnitude in his life. There was no purchase order number that was attached to the goods. If he had ordered the goods, he would have provided Mr. Mekni with a purchase order number.
- Mr. James' evidence was also to the effect that he know nothing about such an order for OTC goods, nor was anyone else in the organisation aware of it. He did not discuss invoice 88 GCSA or the OTC products at the meeting on 7 February 2006.
- Nor was Mr. Gibson aware of any such order having been made. He certainly had not placed such an order with Waypharm. The old arrangement, whereby BPL had acted, effectively, as an intermediary making a margin on Waypharm sales to Crown Crest had been discontinued. Nor had Crown Crest placed any such order with BPL. Moreover, as Mr. Redfern pointed out, if stock of such quantity had been ordered, somebody in BPL or the other claimants would have known about it, would have attributed a purchase order number to the transaction, and would have lined up a customer to whom to on-sell the goods.
- I find as a fact that there was no order placed by BPL (or, indeed, any of the other claimants) and no contract for the supply of the goods listed in invoice 88 GCSA at the time of the February 2006 presentation. I also find as a fact that Mr. Mekni did not believe that any such order had been placed.
- What appears clear from the claimant's analysis of the timing of the presentations made by Waypharm under the Letter of Credit, the subsequent discounts of the Letter of Credit with UBS and Waypharm's refunds (see Annex B to the claimants' closing submissions) is that, in February 2006, Waypharm needed the sums discounted from UBS as a result of the February 2006 presentation in order to meet its liability to refund BPL under the double payment mechanism in respect of the September 2005 presentation (as previously defined) in a sum of £8,493,047.11, supported by invoice 80 GCSA. The maturity date of the September presentation was 21 February 2006. The sums discounted as a result of the February 2006 presentation were used by Waypharm to refund (albeit late) the monies due in respect of the September 2005 presentation, which it did by means of four payments made in March 2006.
- Accordingly, I find as a fact that BPL has clearly established that no order was ever placed by BPL for the goods listed to invoice 88 GCSA, that neither Waypharm nor Mr. Mekni honestly believed that it had, and that, accordingly, Waypharm was in breach of the implied term of its contract with BPL only to present genuine documentation containing truthful statements for the purposes of good faith presentation under the Letter of Credit. Invoice 88 GCSA, which falsely represented that a contract existed between the parties in respect of the listed goods was not a genuine or truthful document. Nor was the presentation of such an invoice as part of the February 2006 presentation a good faith presentation of documents.
ii) Did the FCRs and invoices 85 GCSA and 88 GCSA presented in support of the December 2005 and February 2006 presentations contain fraudulent misrepresentations?
- The next issue which I determine is whether the documents contained fraudulent misrepresentations (apart from the fact that the invoices fraudulently represented that orders had been placed for the listed goods when in fact no such orders had been placed).
- It is convenient to deal together with the evidence relating to the documents presented, respectively, as part of the December 2005 and February 2006 presentations, as much of the evidence is common to both sets of documents.
- The evidence at trial clearly demonstrated that the FCRs respectively accompanying the December 2005 and February 2006 presentations were not genuine FCRs, and that they, and the accompanying invoices, contained numerous fraudulent misrepresentations. Moreover, I find as a fact that Mr. Mekni and Waypharm were knowingly involved in the dishonest presentation of the FCRs and the invoices in connection with both presentations.
The false representations made in the December 2005 presentation
- Invoice 85 GCSA, an insurance certificate dated 1 December 2005 and the December 2005 FCR were presented to NatWest in Manchester (via UBS) by Waypharm as part of the December Presentation as purportedly genuine documents entitling Waypharm to be paid for goods under the Letter of Credit. I hold that the documents made the following false representations.
i) The FCR represented that the goods to which it related were pharmaceutical goods and toiletry, household and food products. That was a false representation as invoice 85 GCSA purported to specify only pharmaceutical products.
ii) The submission of invoice 85 GCSA represented that the goods listed in it had been ordered by BPL, and that it had an obligation to pay for them. As I have held above, that was a false representation, as the goods were not the subject matter of any order, and BPL had no contractual obligation to pay for the goods.
iii) The FCR, purportedly signed by MYK, stated that MYK confirmed that the goods had been "… delivered, accepted and placed at the disposal of the consignee". However, as Mr. Mekni accepted in evidence, MYK had no presence in Antwerp and was in no position to attest to the status of the goods, or to accept them in Antwerp, and MYK had not in fact done so.
iv) The FCR stated that MYK certified that it had assumed control of the consignment in external apparent good order and condition. MYK could not have, and had not, assumed control of the goods as MYK had no operation in Antwerp, where the goods were stated to be. Furthermore, and, for the same reason, MYK had no way of checking the external condition of the goods.
v) The FCR stated that it was signed by MYK at Antwerp on 1 December 2005. On Mr. Mekni's own case, this was false, as Mr. Mekni asserted that the FCR was forwarded to MYK in Tunisia for signature.
vi) The effect of the FCR was to represent that the goods the subject matter of invoice 85 GCSA were, at the date of the FCR, held to BPL's order by, and under the control of, the freight forwarder in Antwerp. That was false, because, as I hold below, no such goods were in fact held to BPL's order, whether by Tytherleigh or MYK.
The false representations made in the February 2006 presentation
- Invoice 88 GCSA, an insurance certificate dated 20 February 2006 and the February 2006 FCR were presented to NatWest in Manchester (via UBS) by Waypharm as part of the February 2006 presentation as purportedly genuine documents entitling Waypharm to be paid for goods under the Letter of Credit. I hold that the documents made the following false representations.
i) The FCR represented that the goods to which it related were 169 pallets of pharmaceutical, toiletry, household and food products. That was a false representation as the goods detailed in invoice 88 GCSA purported to specify only OTC goods and did not include any pharmaceutical goods.
ii) The submission of invoice 88 GCSA represented that the goods in it had been ordered by BPL, and that it had an obligation to pay the invoice price for them. As I have held above, the goods were not the subject matter of any order, and BPL was under no contractual obligation to pay for the goods.
iii) The FCR stated that the goods to which it related were on 169 pallets. Mr. Redfern gave evidence that the coffee listed on invoice 88 alone would have exceeded approximately 936 pallets. The amounts listed in invoice 88 were very large and patently in excess of 1000 pallets.
iv) The FCR, purportedly signed by MYK, stated that MYK confirmed that the goods had been "… delivered, accepted and placed at the disposal of the consignee". However, as Mr. Mekni accepted in evidence, MYK had no presence in Antwerp and was in no position to attest to the status of the goods, or to accept them in Antwerp, and MYK had not in fact done so.
v) The FCR stated that MYK certified that it had assumed control of the consignment in external apparent good order and condition. As set out above, MYK could not have assumed control of the goods as MYK had no operation in Antwerp, where the goods were stated to be. Furthermore, and for the same reason, MYK had no way of checking the external condition of the goods.
vi) The FCR stated that it was signed by MYK at Antwerp on 20 February 2006. On Mr. Mekni's own case, this was false, as Mr. Mekni asserted that the FCR was forwarded to MYK in Tunisia for signature.
vii) The effect of the FCR was to represent that the goods the subject matter of invoice 88 GCSA were, at the date of the FCR, held to BPL's order by and under the control of the freight forwarder in Antwerp. As I hold below, no such goods were in fact held to BPL's order, whether by Tytherleigh or MYK.
- The principal evidence upon which I based the above conclusions can be summarised as follows.
- It was common ground on the pleadings that the FCRs purported to be signed by MYK in Antwerp. It was also common ground that MYK did not carry on business as a freight forwarder in Antwerp (although Mr. Mekni stated that it did "… a lot of freight forwarding in Tunisia"). In their defence, Mr. Mekni and Waypharm alleged that:
"MYK did not operate as a freight forwarder in Antwerp. MYK's role, for which Tytherleigh acted as its agent, was to check that the goods held in Tytherleigh's warehouse in Antwerp conformed to those ordered and to sign the FCR as confirmation that the goods described in the FCR had been delivered, accepted and placed at the disposal of the consignee".
- In response to a request for further and better information, Mr. Mekni and Waypharm stated that, to the best of their knowledge and belief, the December 2005 FCR:
"… was obtained by Patrick Bellemans [of Tytherleigh] and completed by him up to the signature box. Mr. Bellemans forwarded the same to Mr. Mekni who forwarded it to MYK for signature." (my emphasis)
- MYK was a company that had been registered in Tunisia in 2000, and was put into liquidation on 17 January 2007. It had some connection with Mr. Mekni, as it owned 30% of a similarly-named Tunisian company called MYK International Commerce et Services, the other 70% of which was owned by a company controlled by Mr. Mekni, Orient Distributors Limited. Mr. Mekni, in his oral evidence, stated that MYK operated in Tunisia and did not see, or take control of, any of the goods the subject of the disputed invoices.
- Mr. Mekni's various accounts of how the FCRs were prepared were internally inconsistent, and inconsistent with the further information which he and Waypharm had provided as quoted above. Thus, in his witness statement, he said that he approved the draft FCRs as produced by Mr. Bellemans or another employee of Tytherleigh, and that he himself arranged for Tytherleigh to prepare the necessary FCRs for the goods listed in invoice 85 GCSA. On another occasion, he said that FCRs were sent by Tytherleigh by mail to Mr. Muller to be checked before presentation, and that Mr. Muller would then forward the FCRs to MYK in Tunisia, who would then sign and return them. When it was pointed out that this contradicted the information given in his own further information, he said that he had signed the statement without reading it. On yet another occasion, he said that Tytherleigh:
"… made this FCR and inform[ed] not me, but inform[ed] MYK, or MYK to call him to check whether everything is in order and they sign."
- He admitted that no-one paid MYK as far as he knew, but that that was a matter between MYK and Tytherleigh. Waypharm had not been invoiced by MYK, and Tytherleigh had not invoiced Waypharm for the services of MYK.
- When asked why MYK was involved in the process at all, Mr. Mekni attempted to suggest, for the first time, in his oral evidence, that UBS and Tytherleigh had come up with the proposal that MYK should be used as freight forwarders for the purposes of signing the FCRs under the Letter of Credit. This was said to be because Tytherleigh were signing FCRs under another letter of credit in favour of Pfizer, one of Waypharm's suppliers, and UBS and Tytherleigh were concerned that there might be a conflict of interest. I found this explanation incredible. It had not featured in any previous pleadings, witness statements or skeleton argument. There was no documentary evidence to support it (in the shape of correspondence with UBS or Tytherleigh). If, indeed, it had been a bank requirement, it is inconceivable that UBS would have approved an arrangement under which Tytherleigh apparently prepared the FCR, but MYK, an entity in Tunisia, signed the FCR having never seen the goods on forms that should only have been used by a licensed Belgian freight forwarder (as outlined below). There was no shortage of freight forwarders in Antwerp at the relevant time. Nor was there any conceivable reason why MYK needed to be used to sign the FCRs relating to OTC goods, where Pfizer was not involved as a supplier.
- Furthermore, the alleged risks to UBS which Mr. Mekni attempted to identify were not credible in the light of the evidence which Mr. Mekni gave about what he said were the purchases from Pfizer of the goods which were the subject matter of invoice 85 GCSA, by Oxet Corporation (another of Mr. Mekni's associated companies, of which he was, at all material times, the sole director and controller). On Mr. Mekni's account, 13 April 2005, Oxet Corporation had purchased the Pfizer goods for invoice 85 GCSA, and these goods had been shipped by Tytherleigh to Oxet Corporation in Switzerland before being brought back to Tytherleigh for onward sale to BPL in December 2005. If this was the case then, even if there had been a link between Pfizer goods coming in and going out of Tytherleigh's warehouse, the link was a tenuous one. Any purchases by Oxet Corporation of Pfizer goods under individual letters of credit would have been entirely separate transactions from BPL's purchase of Pfizer goods from Waypharm.
- The overwhelming inference that I draw from the evidence is that Mr. Mekni chose to have the FCRs signed, or purportedly signed, by MYK because he knew there was no genuine order for the goods, and no goods corresponding to the invoice at Tytherleigh's premises, and that Tytherleigh would not sign an FCR if it had not actually taken control of the goods or had not consigned them.
- The evidence also showed that the FCR forms used in the December 2005 and February 2006 presentations were in the FIATA (the International Federation of Freight Forwarders Association) format, and as such, should only have been issued to, and used by, licensed freight forwarders affiliated via the Confederation of Belgian Freight Forwarders. The Freight Forwarders' Association of Antwerp ("VEA") confirmed, in a letter dated 4 March 2008, that the FCR lodged in support of the December 2005 presentation was issued to a firm called Wijngaard Natie Transport NV ("Wijngaard") (a Belgian freight forwarder associated or connected at the relevant time with Tytherleigh) on 30 November 2004, and that it should only have been issued by Wijngaard. Likewise, although VEA had not be able to check to whom the FCR in support of the February 2006 presentation had been issued, it was not to MYK, which was not a licensed freight forwarder in Belgium. Moreover, VEA stated that both forms were out of date at the time they were used, since all forms had been replaced in 2005, and that, in VEA's view, the FCRs had been improperly issued.
- On 14 March 2008, the Antwerp Commercial Court, on the petition of BPL, appointed two "experts" to examine, inter alia: the transport, accounting and contractual documents relating to the December 2005 and February 2006 presentations; to examine stock held by Tytherleigh; to prepare a description of the movements and use of the goods referred to in such documents; and to determine the role of Tytherleigh in the process of issuing the FCRs.
- One of the experts was an accountant, Paul de Weerdt, a partner in PKF Auditors CVBA; the other was Captain Hugo Vereecken, a member of the Nautical Commission of the Court ("the experts"). Their reports, which record the results of their factual investigations, rather than expressing any expert opinions, are dated March 2008. They visited the premises of Wijngaard on several dates in March 2008. Tytherleigh stored goods in its charge at Wijngaard's warehouse, not apparently having its own warehouses. The experts interviewed a director of Tytherleigh, Mr. Peter van den Eynde, as well as Mr. Ceulemans, another director, who no longer worked on a day-to-day basis for the company, and a staff member, Miss Cop. Tytherleigh produced, and the experts inspected and reviewed, all Tytherleigh's records and files (which were in hardcopy format) relating to stock movements for Waypharm at the relevant time, as well as the actual stock held by Tytherleigh for Waypharm. The experts were told that, apart from the stock which they inspected, Tytherleigh neither held nor stored elsewhere, any other goods on behalf of Waypharm.
- Mr. de Weerdt asked Mr. van den Eynde if he knew of the firm MYK, or if he recognised the signature on the FCRs. Mr. van den Eynde denied knowing MYK or recognising the signatures on the FCRs. Mr. Ceulemans (who was, according to Mr. Mekni, one of the directors dealing with Waypharm at the material time) does not appear to have been asked that question, or, if so, his answer is not recorded in the report of either expert.
- Mr. de Weerdt (with whose report Captain Vereecken agreed) recorded the conclusions of his investigations as follows:
i) Tytherleigh's files in relation to the FCRs used in support of, respectively, the December 2005 and February 2006 presentations did not contain documents relating to transport or storage of goods (whether of the goods listed in the relevant invoices or otherwise), and there was no "clear link" to another file.
ii) According to Mr. van den Eynde, the goods relevant to, and identified in, the two presentations "… had not been stored" by Tytherleigh.
iii) He stated as follows:
"Neither F J Tytherleigh nor Wijngaardnatie signed the FCRs. Therefore, I cannot determine their role with certainty.
It appears from the explanation provide by Tytherleigh/Wijngaardnatie and from the documents in my file that these FCRs were most probably granted to Wijngaardnatie.
Tytherleigh prepared the FCR at the request of the instructing party.
With regard to the contested FCRs, no direct stock movements can be inferred from the files examined. Files showing stock movements did not contain FCRs. The document only appears in settlement files, limited to correspondence charges, administration and insurance costs.
F J Tytherleigh apparently was involved in these files as an agent to execute an insurance policy and invoiced the insurance costs to Waypharm.
The FCR was probably issued since it was expected that the goods would be sent via Tytherleigh, which does not necessarily mean this occurred. This matter is not clear, as the working procedure is not standard.
Furthermore, it could be that all or part of the goods were sent via Tytherleigh under other file numbers in the period from 2005 until 2008. This could not be established with certainty, but the complete list of stock movements for goods held on behalf of Waypharm is attached hereto in Annex 1.
Since I cannot make a direct link between the FCRs and related stock movements, I am of the opinion that it is advisable to extend the assignment to 'the study of movements and the handling of goods held on behalf of Global Care between 2005 and 2008'. Global Care is mentioned as a party in this file and also worked via Tytherleigh/Wijngaardnatie in this period."
iv) None of the goods held in the warehouse for Waypharm at the date of inspection corresponded with the goods referred to in the documents presented under the December 2005 and February 2006 presentations.
v) Captain Vereecken additionally recorded that:
a) they "… could not locate at Tytherleigh clear movements of goods which correspond to the description and/or volume of goods indicated in the FCRs" and
b) "… if Tytherleigh had stored the goods they would have signed the documents [i.e. the FCRs] according to Mr. van de Eynde".
- Mr. Mekni's attempts to distance himself from any involvement in, or responsibility for, the preparation of the FCRs, and to shift blame on to Tytherleigh and/or MYK were wholly unconvincing. First they were wholly inconsistent with his witness statement, where he said that he had arranged for Tytherleigh to prepare the necessary FCRs so that funds could be drawn down under the Letter of Credit, and with the statement in his Further Information, that he saw the FCRs prepared by Tytherleigh. Second, the suggestion that Mr. Mekni would have approved the FCRs without seeing them is unreal. Likewise, Mr. Mekni's suggestion that MYK (the principal according to Mr. Mekni) received its irrevocable instructions from Tytherleigh (MYK's agent, according to Mr. Mekni) was fanciful. On Mr. Mekni's case, Tytherleigh was the agent of MYK. Similarly absurd is the suggestion that Mr. Mekni did not know if or how MYK was paid. The truth was that if MYK had been genuinely involved at all then Mr. Mekni must have arranged for its instruction (to sign the FCRs) and for payment for its services. In fact, there was no evidence that MYK had done or been paid anything at all, apart from (possibly, but even this is doubtful) signing the FCRs.
- Articles 5, 14, 15 and 17 of the General Conditions to which the FCRs were subject, made clear that the role of the forwarding agent was strictly limited to the instructions received from the principal and that the forwarding agent bore no responsibility for the correctness of the instructions or information received from the principal, nor was the agent under any obligation to carry out an inspection of the cargo without explicit instructions to this effect. Thus, for example, Mr. Mekni's view, that the representation made in the FCR lodged in support of the February 2006 presentation, that the goods amounted to 169 pallets, was a discrepancy attributable to Tytherleigh and was not his or Waypharm's mistake, is untenable. As Article 17 of the General Conditions makes clear, the principal was under an obligation to examine "carefully" any documents sent to him by the forwarding agent and to:
"… advise him immediately of any discrepancies or errors so that the forwarding agent can make the necessary corrections. If the principal fails to do so the forwarding agent shall be cleared of all responsibility."
Thus, the responsibility for the type, quantity and good order of the goods purportedly delivered to Tytherleigh under invoices GCSA 85 and GCSA 88 remained with Waypharm at all times.
- Given the terms of the Letter of Credit, that the FCRs had to be signed by a freight forwarder in Antwerp, I find that Mr. Mekni must have known that the FCRs he arranged to be presented would not have passed controls at either UBS or NatWest, had those FCRs purported to state that they had been signed by a freight forwarder in Tunisia who had not examined the goods in Antwerp.
- Other than Mr. Mekni's account, there is no independent or documentary evidence that the FCRs were ever forwarded to MYK for signature on its behalf. In fact anybody could have signed them purportedly on behalf of MYK. Mr. Mekni chose not to call any witness from MYK to give oral evidence or even to provide a written statement in support of his case, contrary to what was indicated in an earlier witness statement of his former solicitor, Christopher Sorrell of Pannone LLP, submitted on behalf of Mr. Mekni on 27 July 2010.
- Although the precise role played by Tytherleigh was not clear, the conclusion which I have reached, based on inferences that can be legitimately drawn for all the evidence, is that Mr. Mekni obtained the FCR forms from someone at Tytherleigh (who had in turn obtained them from out-of-date stock held by Tytherleigh or Wijngaard), and Mr. Mekni arranged for and instructed their completion by a person who either actually was signing on behalf of MYK, or someone who was purporting to do so.
- I also have no hesitation in concluding that Mr. Mekni, and therefore Waypharm, knew full well that the documents presented contained false representations and that they were dishonest in allowing such presentations. As Mr. Mekni admitted in cross-examination, and as was clear from the evidence and the contemporaneous documents, Mr. Mekni was "at the heart" and "the core" of the various companies, and of Waypharm's dealings with BPL. It is inconceivable that anyone other than he would have been responsible for making the arrangements for the involvement, or purported involvement, of MYK, in the FCRs, or than anyone other than he would have decided what form documents presented to NatWest (via UBS) should take.
iii) Were the goods the subject of invoices GCSA 85 and GCSA 88 at Tytherleigh's (i.e. Wijngaard's) warehouse premises in Antwerp at the respective dates of the December 2005 and February 2006 presentations?
a) At the date of the December 2005 presentation
- BPL alleged, in its Particulars of Claim, that at the time of the December 2005 presentation, the pharmaceutical goods referred to in invoice 85 GCSA had not (contrary to the representations made in the FCR) been delivered to MYK or Tytherleigh.
- In their Defence, Waypharm and Mr. Mekni contended that
"The pharmaceuticals referred to in invoice 85 GCSA had been delivered to Tytherleigh's warehouse in Antwerp prior to the invoice being raised and, from 1 December 2005, were available to be delivered to BPL. Title in those pharmaceuticals passed to BPL on or by 1 December 2005".
Likewise, in his witness statement, Mr. Mekni stated:
"There is no question that all the Pfizer goods comprising invoice 85 were at Tytherleigh ready for delivery to BPL at its behest."
- At the start of the trial, Mr. Mekni asked for a number of Pfizer invoices to be placed in the core bundle of documents. With the exception of one invoice (dealt with below) these invoices had the following characteristics:
i) they were all Pfizer International Corporation invoices (c/o Pfizer Service Corporation BVBA, Belgium) for pharmaceutical products;
ii) the invoices were addressed to Oxet Corporation, Geneva, (which, as I have already said, was a company controlled by Mr. Mekni);
iii) the values on the invoices had been redacted.
- There were 24 of these Pfizer International Corporation invoices, of which: five have 2003 dates; fourteen have 2004 dates; five have 2005 dates no later than 6 June 2005.
- A further Pfizer invoice which Mr. Mekni also asked to be placed in the bundle was different. This appeared to be an invoice from a Pfizer entity to Pfizer International Corporation, Panama. The customer number given on this invoice was different from all other invoices.
- The invoice relied on by Mr. Mekni in support of his assertion that Waypharm had the stock available to deliver the goods referred to in invoice 85 GCSA purported to be an invoice from Oxet Corporation to Waypharm dated 30 November 2005. It listed the types and quantities of goods which were listed on invoice 85 GCSA but with different prices for those goods. The price on the Oxet Corporation invoice was £2,026,759.26 after a 30% discount was applied to the "Rate" for each item and after sales tax of 17.5% had purportedly been added. Mr. Mekni adduced no evidence that Oxet Corporation, which is registered in the British Virgin Islands, had ever paid such VAT, whether to the UK tax authorities or elsewhere.
- In his oral evidence, however, when describing the arrangements for purchasing, invoicing, logistics and cash management as between Oxet SA (a Swiss company, which Mr. Mekni said was under Mr. Muller's control, but which I hold to have been controlled by Mr. Mekni, so far as the evidence before me showed), Oxet Corporation, Global Case and Orient Distributors, Mr. Mekni said: "… we do not invoice internally" i.e. as between the companies. Later, however, he suggested that there were indeed invoices between the various companies.
- On 18 March 2011 (Day 11 of the trial), Mr. Mekni produced to the court and to the claimants (for the first time) a stock position sheet purporting to set out the position of Oxet Corporation, Waypharm and his stock "before they had invoice[d] BPL". On Day 10, Mr. Mekni had been asked whether such a document existed, and had stated that it existed and was with his former solicitors. After producing the document, first of all, Mr. Mekni suggested that the stock position sheet had been in existence in October 2005; then he suggested that it had been brought into existence by Mr. Muller in October 2006, as part of a year-end exercise. He explained, on Day 11 of the trial, that it had not been produced previously as part of disclosure because, when he had previously handed it over to his solicitor, the solicitor: "… didn't think it was of interest to give in disclosure". Subsequently, on Day 14, when being asked about a similar document (which he admitted had been produced in the course of preparing for the litigation) relating to the goods the subject matter of invoice 88 GCSA, he went on to say that, in the document purporting to state the stock position as at October 2005, the first four columns had been created by Mr. Muller in 2006, but that the fifth column, headed "sold and invoiced to BPL under 85 GCSA dated 1/12/2006" had been added in April/June 2008.
- Mr. Mekni gave various conflicting explanations as to how the goods were purchased from Pfizer. First, he said that Oxet Corporation had purchased the goods and then sold them to Waypharm; then he said that Oxet SA had done so. He explained the physical movement of Pfizer goods as follows:
"Pfizer Belgium deliver the goods to Tytherleigh. Tytherleigh export them to Oxet Corporation in Switzerland. Then these goods they are re-imported by Waypharm, Custom cleared and then sold to BPL, delivered at Tytherleigh warehouse. This is how we worked for all the transactions we had with Pfizer."
His explanation as to how the internal ledgers between the various companies (including Best Financial) were said to work was equally confusing.
- When asked about the purported Oxet Corporation invoice dated 30 November 2005, to Waypharm, he said:
i) he could not remember whether there was a letter of credit used for the purchase of these goods;
ii) the goods listed in the invoice "... should be in transit, either between Pfizer and Oxet or between Oxet and Waypharm" and:
"They should be in Switzerland, they could be in Belgium, I don't know exactly where when, but they are between the two companies somewhere in between either Switzerland or Belgium, I don't know exactly".
"... you cannot see a movement of funds between Waypharm and Oxet, it is Best Financial who is taking care of it ...";
iii) there were ledgers as between Oxet Corporation and Waypharm and [Best Financial] maintaining the inter-company credits and debits and:
"... we have all the invoices between the companies, the internal invoices between the companies..."
"This invoice is an invoice to custom clear the goods between Switzerland and Belgium."
"It is more an intention to clear the goods and make them available to BPL, rather than making the movement between Waypharm and Oxet Corporation, since Best Financial is taking care of that"
and
"In fact it doesn't show in the accounts between Waypharm and Oxet."
"... Best Financial debits Waypharm and pays Oxet Corporation, and legally the owner of these goods, because it sold them, is Waypharm".
- I was not convinced by any of this evidence adduced by Mr. Mekni in his attempt to support the contention that Waypharm had sufficient Pfizer stock immediately prior to 1 December 2005 for the stock listed in invoice 85 GCSA to have been present in Antwerp, and held to BPL's order.
- First of all, the report from the experts appointed by the Antwerp Commercial Court quoted above, showed that Tytherleigh's files relating to the FCR supplied in support of the December 2005 presentation contained no documents relating to the storage or transport of any stock as listed in the FCR. Moreover, the analysis of stock movements from 2005 showed no movements of stock, in or out, in respect of the FCR used in the December 2005 presentation. The only related entry was in respect of an insurance invoice related to the FCR which noted "… no stock movement".
- Mr. Mekni sought to suggest that because the experts had not (as their report records) examined Tytherleigh's files for Global Care (or, indeed, any other Mekni company) that meant that the report could not be regarded as reliable or conclusive, as to the presence of goods at Tytherleigh's premises. I reject that suggestion. The relevant files relating to Waypharm clearly did contain reference to the relevant FCRs and insurance documents. The experts clearly reviewed and analysed the relevant stock movements. If the goods the subject matter of the FCRs had indeed been stored at Tytherleigh, but held to the order of an associated company such as Oxet Corporation, it is hard to see why there would have been no reference to such fact on the files which were reviewed.
- Furthermore, Mr. Mekni's evidence on this aspect was incredible. If the stock listed in invoice 85 GCSA had indeed been ready at Antwerp at the relevant times, as Mr. Mekni claimed, whether held to Waypharm's order, or to the order of another company controlled by Mr. Mekni, one would have expected that Mr. Mekni would have been able to produce a large number of third-party documents to support that contention. These would have included: invoices from the original suppliers of the goods; documents showing the transport of the various goods to Antwerp, including the collection and delivery of the goods; and customs documents; and storage documents. None of this type of documentation was produced.
- However, the only third-party documents which Mr. Mekni was able to produce during the course of the trial were documents such as the invoices from Pfizer, which either originated from Pfizer many months, and sometimes years, before the December 2005 presentation, or which (as in the case of the latest invoice dated June 2005) was not recorded in Mr. Mekni's purported stock position document. Mr. Redfern's analysis confirmed that it was highly improbable that any of the stock listed in invoice 85 GCSA was present at the date of the December 2005 presentation.
- The purported invoice dated 30 November 2005 from Oxet Corporation to Waypharm was clearly not an outside supplier's invoice. In his skeleton argument dated 27 February 2011, which he adopted as containing his further factual evidence, Mr. Mekni stated that there were no invoices passing between the companies he controlled and that Waypharm did not buy products. If this were true, then it is difficult to see what was the function of the purported invoice from Oxet Corporation. When Mr. Mekni was challenged that his own evidence to the effect was that such a document would not exist, Mr. Mekni claimed that the document was created for customs clearance purposes. However, neither Waypharm nor Mr. Mekni have ever disclosed any documents evidencing the movement of these goods through any "customs" on or about 30 November 2005, or any other time. If the goods had passed through any customs one would have thought that Waypharm would have held, or Mr. Mekni would have been able to have obtained from other companies under this control, copies of relevant documents such as transport manifests, customs clearances and receipts into warehouses. No such documents were produced and there was no evidence that any such movement occurred. Mr. Mekni could not point to any financial record which showed that Waypharm paid Oxet Corporation for these goods.
- Mr. Mekni's explanation that his former solicitors considered that the purported stock position document was not of sufficient interest to disclose during the litigation was inherently implausible and I reject it. The document does not appear to be a normal ledger showing a running total of stock in and out but is devoted solely to the goods listed in invoice 85 GCSA. The conclusion which I reached, on the basis of Mr. Mekni's conflicting evidence as to when it was prepared, and the content of the document itself, is that, far from being in fact produced in October 2006, it is highly probable that it was produced, as Mr. Mekni indeed at one stage admitted, during the life-time of this case. His attempt to rely on it, as he did at one stage, as having been produced in October 2005 or 2006 was dishonest.
- Furthermore, the evidence demonstrated that the Pfizer goods were "very fast-moving products" and in demand by BPL and other purchasers, and that Waypharm had a number of opportunities to supply these goods to BPL prior to December 2006. In those circumstances, it is not credible that Mr. Mekni would have chosen to hold these goods in stock for many months rather than supplying them to BPL when he had an opportunity to do so later in 2006, or supplying them to another purchaser, particularly given the financing costs of retaining the goods, including insurance and storage costs.
- Moreover, if Pfizer goods had indeed been present in Antwerp at Mr. Mekni contended, then it is difficult to understand why they were not delivered pursuant to invoice 85 GCSA.
- I am satisfied that the claimants have established on the balance of probabilities that the goods the subject matter of invoice 85 GCSA were not present at Tytherleigh's premises in Antwerp at the time of the December 2005 presentation, and available to Waypharm to fulfil invoice 85 GCSA. Even if I were wrong in that conclusion, it is clear on the evidence that they were not, as the FCR falsely represented, held to BPL's order or placed at its disposal as consignee as at that date.
b) At the date of the February 2006 presentation
- BPL also alleged in its Particulars of Claim that, at the time of the February 2006 presentation, the goods referred to in invoice 88 GCSA had not (contrary to the representations made in the FCR) been delivered to MYK or Tytherleigh in Antwerp.
- Waypharm and Mr. Mekni, in their Defence, contended that:
"The goods referred in invoice 88 GCSA were delivered to Tytherleigh's warehouse in Antwerp prior to 20 February 2006 and were held there on behalf of BPL. Title in those goods passed to BPL on or by 20 February 2006."
- The evidence relating to the issue whether the goods were at Tytherleigh as at the date of the February 2006 presentation was extensive. I do not propose to rehearse or summarise it all.
- According to the experts' report, the Tytherleigh files relating to the relevant FCR did not record any transport or storage of goods that were the subject matter of the FCR. Likewise, Annex 1 to Mr. de Weerdt's report which he described as "... the complete list of stock movements for goods held on behalf of Waypharm" showed no entries in respect of stock movements in or out in respect of the FCR (numbered 358568) used in the February 2006 presentation. Mr. Mekni adduced in evidence a copy of Tytherleigh's Invoice dated 28 February 2006. That invoice bore the file number "6000284" given in Annex 1 to Mr. De Weerdt's Report. The invoice charges Waypharm just over €16,000 in respect of an insurance policy as well as very small amounts for courier and administration fees. The invoice made no charges for container handling, storage, transportation, loading, customs formalities, freight or security which were present on other invoices adduced by Mr. Mekni not connected to his dealings with BPL, but which related to a shipment of office supplies to Miami. Once again, the strong inference from this evidence was that the goods had not been present at Tytherleigh's warehouse at the date of the February 2006 presentation.
- Ms. Davies gave evidence to the effect that, on Mr. Redfern's instructions, she had carried out a stock take on 16 November 2006 of OTC products held by Tytherleigh, on behalf of Waypharm, which were stored in three warehouses in Antwerp. Ms Davies was a careful and precise witness, and I accept her evidence. The purpose of her visit was: first, to verify the quantities of the products being held by Waypharm as at that date; second to check the expiry dates of the products; third to check the provenance of the stock; and fourth to check the condition of the stock. She was not shown any ethical products. She physically inspected all the OTC stock and compiled her own list, in spreadsheet form, rather than simply using a list which had been provided to her by Tytherleigh on her arrival. She clearly carried out a very thorough stock take. The visit took placed in the aftermath of the conclusion of the October 2006 agreement between BPL and Waypharm, during which it had been agreed that Waypharm would supply certain household stock in substitution for the stock listed in invoices 85 GCSA (for which BPL had paid) ("the Replacement Goods") and Waypharm agreed to try and sell both the Replacement Goods and the goods the subject matter of invoice 88 GCSA to third parties on BPL's behalf. On 13 October 2006, Mr. Redfern confirmed that BPL had wanted to take physical control of all the household goods, pending their resale to third parties.
- Ms. Davies said that after her visit and inspection she had reviewed invoice 88 GCSA, but she had not taken it with her to the warehouse premises.
- It was clear from Ms. Davies' account of her visit to the warehouses in November 2006, that she had expected to see far larger quantities of Waypharm OTC stock than that which she inspected at the warehouses. Her evidence, which I accept, established that:
i) Such quantities of Maxwell House and Kenco coffee as were stored in the warehouses had been delivered to Tytherleigh approximately ten days before her visit on 6/7 November 2006, and therefore could not have been present at Tytherleigh's premises at the time of the February 2006 presentation. Moreover, Mr. Bellemans (after telephoning Waypharm) refused Ms. Davies' request to see the source and shipping documentation for this stock.
ii) The only quantity of Nivea products which she was shown were exclusively "Nivea exfoliating scrub". Although product of this type was listed to invoice 88 GCSA, there were only three pallets, which was much less than that which had been listed on invoice 88 GCSA. Moreover, the product did not look to her like product which was produced for the UK market at the time. The stock was labelled "Produced in France for Beiersdorf Australia".
iii) None of the relatively small quantities of Mr. Muscle goods which she inspected conformed to the descriptions of the Mr. Muscle goods listed in invoice 88 GCSA.
iv) She was not shown any Durex contraceptives stock held by Tytherleigh to Waypharm's order.
- Mr. Redfern, in his evidence, carried out an analysis of the documents which Mr. Mekni produced in support of his attempt to show that the goods the subject matter of invoice 88 GCSA were in fact present at Tytherleigh's warehouse at the date of the February 2006 presentation.
- As Mr. Redfern's analysis suggested, the strong inference to be drawn from Ms. Davies' evidence was that, at the date of the February 2006 presentation, none of the goods listed in invoice 88 GCSA were held at Tytherleigh's premises, since the only sale (or purported sale) of stock of which BPL was notified by Waypharm in the period February to December 2006 was a sale of coffee and Durex in the sum of £153,525 to Global Care in December 2006.
- Mr. Mekni sought to rely on a purported invoice from Global Care to Waypharm dated 19 February 2006. It was an "internal" invoice as between the two companies which listed goods, quantities and prices in exactly the same amounts as those on invoice 88 GCSA (subject to an across the board price discount of 14% appearing in the former). I was not satisfied that the Global Care invoice had been produced at the date which it bore, or that, even if it had, it could be relied upon as evidence of the goods being present in Antwerp at the date of the February 2006 presentation.
- In his oral evidence, Mr. Mekni asserted that the goods were, and had to be, in Antwerp before Waypharm could present documents under the Letter of Credit. He then suggested that an FCR could be completed and Waypharm permitted to make a presentation under the Letter of Credit as and when:
i) Waypharm had received or had control of the stock purchased from its supplier, including where Waypharm had opened a letter of credit in favour of its supplier;
ii) the freight forwarder signing the February 2006 FCR had "control" or "knowledge of the availability of the stock" for BPL, which could have been in Switzerland or "on the road", including en route from Antwerp to Switzerland if under the control of Tytherleigh;
iii) goods were still in the name of Oxet SA, Oxet Corporation or MYK during custom clearance.
- When asked if the goods the subject matter of invoice 88 GCSA were in fact assembled in one place at one point in time, Mr. Mekni replied: "It can be on one place, it can be in different warehouses and as far as I know, Tytherleigh has about five or six warehouses in Antwerp".
- Mr. Mekni stated that he would expect Tytherleigh to send a confirmation that it had assembled all the goods but that he, Mr. Mekni, did not have access to that. Mr. Mekni stated that he had planned to assemble the goods listed on invoice 88 GCSA many months before February 2006. He gave evidence that his various companies had been stockpiling OTC stock. However, he did not have a particular plan but "I have a particular order to ship whatever I can assemble to BPL for onward sale to Crown Crest".
- Mr. Mekni's answer as to how he knew that he had assembled the goods listed on invoice 88 GCSA was that this was documented by Waypharm's "stock position", namely the excel sheet he had adduced at the start of trial, entitled "Waypharm LP v Barclay Pharmaceutical Limited". But, although Mr. Mekni had earlier in his oral evidence sought to say that this was a document created on 20 February 2006 for the purpose of stock record keeping, when the title of the document was pointed out to him, he later admitted that this had indeed been produced in the course of preparing the litigation. He said that he used the same process for all goods delivered to Tytherleigh in Belgium, namely they were exported to Switzerland before being re-imported to Tytherleigh and made available for sales to BPL.
- He went on to say that the goods listed in invoice 88 GCSA were physically in a warehouse in Antwerp on "The day the FCR has been made by Tytherleigh and submitted to MYK for signatures" but then suggested that the FCR could have been completed earlier but could not have been completed later than when all the goods were assembled in Antwerp.
- As to the documents produced by him at the start of the trial, Mr. Mekni stated that they were merely examples of documents showing that Waypharm had access to and could buy goods from MYK, Oxet SA and Oxet Corporation rather than a complete set of documents showing the purchase of all the goods listed on invoice 88 GCSA. At one stage, Mr. Mekni claimed that a particular Tytherleigh invoice related to goods to be shipped to BPL but when it was pointed out to him that it in fact related to a shipment of office supplies to Miami, he agreed, and agreed that it had nothing to do with his trading with BPL. This was typical of the unsubstantiated assertions made by Mr. Mekni in the course of his evidence.
- If, as Mr. Mekni contended, all the goods listed in invoice 88 GCSA were at Tytherleigh or under its control and consigned to BPL as of 20 February 2006, the fact that Tytherleigh showed Ms. Davies no such goods in November 2006 is inexplicable. Mr. Mekni's suggestion in his evidence that Tytherleigh must have made a mistake when showing Ms. Davies BPL's stock, (in other words, Tytherleigh somehow failed to show her some £9.6 million of household goods said to be consigned to BPL) is not capable of belief. The goods which Mr. Mekni alleges were present at Tytherleigh would have occupied a large number of pallets, and taken up a large volume of warehouse space. Mr. Redfern estimated that the coffee alone would have taken up approximately 936 pallets. This volume of goods would clearly have been detectable from warehousing records and other documents, as well as physically. Although Mr. Mekni suggested to Ms Davies in cross-examination that her stock inspection had not been accurate, I have no doubt that she carried out her inspection carefully and with precision.
- Mr. Mekni produced various documents in his attempt to show how Waypharm had accumulated the goods listed in invoice 88 GCSA. I very much doubt whether the internal stock records which he adduced in evidence at the start of the trial were genuine, contemporaneous documents. Even if they were, as Mr. Mekni admitted in cross-examination, they did not show availability of all stock listed in invoice 88 GCSA.
- On 19 April 2011, Mr. Mekni produced for the first time:
i) a number of invoices, dated variously from 4 April 2005 to 10 April 2006, issued by Oxet SA to Global Care purporting to show the purchase by Global Care of the household goods the subject matter of invoice 88 GCSA. Mr. Mekni asserted that these documents demonstrated that goods the subject matter of invoice 88 GCSA were available to Waypharm;
ii) a "Lettre de Voiture", "trucking bill" or CMR, dated 20 October 2005, showing the despatch of 40 pallets of office supplies, apparently from France to Belgium; Mr. Mekni suggested that this trucking bill showed receipt of Nivea on Waypharm's behalf in sufficient quantities to satisfy the requirements of invoice 88 GCSA. It did not do so;
iii) a packing list dated 11 January 2006 evidencing the delivery of Nivea from Beiersdorf East Africa Ltd, Kenya, to the final destination of Oxet SA Liberia; it did not persuade me that Tytherleigh had present in its warehouses, as at the date of the February 2006 presentation, the Nivea stock held to the order of BPL as consignee.
- I am left with a considerable degree of scepticism as to Mr. Mekni's attempts to rebut the evidence of the experts and Ms. Davies that no goods were held to BPL's order, as at the date of the February 2006 presentation, to meet Waypharm's obligations under invoice GCSA, on the assumption that a genuine order had been placed.
- In particular, I find that Mr. Mekni's attempted reliance on the purported invoice from Global Care SA to Waypharm dated 19 February 2006 to substantiate his assertion that the goods listed in invoice 88 GCSA were delivered to Tytherleigh is incredible and I reject it. On both invoice 88 and the purported invoice from Global Care SA to Waypharm dated 19 February 2006, there is an identical anomaly. In both documents the Durex Gossamer products are listed at a rate of £155.00 for 12 packs of 6 (i.e. a trade price of £12.91 per pack of 6), while the Durex Extra Safe are listed at a rate of £15.50 for 12 packs of 6 (i.e. trade price of £1.29 per pack of 6), and the Durex Featherlite are listed at a rate of £16.20 for 12 packs of 6 (i.e. a trade price of £1.35 per pack of 6). This was clearly an error of transcription, where the figure £155.00 should have been £15.50. The effect of this was to inflate invoice 88 GCSA by £669,600 before tax. It is clear that the price for the Durex Gossamer in invoice 88 GCSA and the purported invoice from Global Care to Waypharm was wrong, as the email from Mr. Paddock to Mr. Mekni and Mr. Redfern dated 20 December 2006 confirmed. If these had been genuine invoices, it is highly unlikely that an error of such magnitude (inflating the price of the product tenfold contrary to the pricing of adjacent similar products) would have been made twice. The repetition of the error suggests that the purported invoice from Global Care SA is a fabrication and was carefully produced to reflect invoice 88.
- Other explanations offered by Mr. Mekni as to Waypharm's inability to supply the stock listed in invoice 88 GCSA do not bear scrutiny. The correspondence between Mr. Mekni and Mr. Redfern and others at BPL, in 2006 and 2007, shows BPL constantly asking for remittances of cash or supplies of goods in the face of a variety of excuses from Mr. Mekni, mostly concerning alleged logistical issues. If the stock had been present in Antwerp in February 2006, or otherwise available, as Mr. Mekni maintains, then it is surprising that it was not delivered. At no time, did Mr. Mekni say in that correspondence that he could not deliver stock because it had either been sold to Oxet SA or returned to MYK (without corresponding payment from MYK to Waypharm). Nor did he ever mention that the Mr. Muscle stock was the wrong kind for sale and would need to be returned to its manufacturer SC Johnson - another explanation given in his evidence for non-delivery.
- I accept Ms. Dohmann's submission that it is highly unlikely that Mr. Mekni would have returned stock to a company in liquidation such as MYK and have expected that company to be able to return it to its manufacturer a very long time after its purported purchase. It is equally incredible that Mr. Mekni preferred to subject Waypharm (and himself) to liability to BPL rather than deliver goods to BPL which it was pressing him to deliver.
- If one stands back from the detail, the reality of these transactions is that if the stock listed in invoice 88 GCSA had indeed been available at Antwerp at the date of the February 2006 presentation, as Mr. Mekni claims, Waypharm and Mr. Mekni would have been able to produce documents demonstrating that such was these case. These documents would have included: invoices from the original suppliers of the goods; documents showing the transport of the various goods to Antwerp, including the collection and delivery of the goods; customs documents; and storage documents.
- Mr. Mekni did not produce any of these documents. Instead, he produced, at different stages of the litigation, a number of documents which were of unknown provenance and doubtful authenticity.
- Moreover, if Mr. Mekni were right and the goods listed in invoice 88 GCSA had indeed been with Tytherleigh at Antwerp (or at least under Tytherleigh's control at the date of the February 2006 presentation), then, absent written instructions from BPL to release those goods on the instructions of Mr. Mekni, and the surrender and return of the original FCR to MYK in accordance with the express conditions of the FCR, Tytherleigh could not lawfully have released those goods. Mr. Mekni's explanation (given for the first time in his oral evidence) that he showed Tytherleigh correspondence from BPL concerning the October 2006 Agreement which satisfied Tytherleigh that it could permit such release I find to be inherently implausible. That is because:
i) after the October 2006 Agreement, BPL had in fact asked Tytherleigh to establish an account in AAH's name and to contact Mr. Birdi for his written authorisation to release any stock on behalf of AAH,;
ii) BPL gave no instructions to Tytherleigh in respect of the release of goods;
iii) if goods had existed which had been consigned to BPL, Tytherleigh would have wanted instructions from BPL as to their disposal rather than instructions from Mr. Mekni.
- In the circumstances, I am satisfied that BPL has established, on the balance of probabilities that the goods listed in invoice 88 GCSA were not present at Tytherleigh's warehouse premises as at the date of the February 2006 presentation. Even if I were wrong in that conclusion, they certainly were not, as the FCR falsely represented, held by MYK, under its control, or to the order of BPL as consignee as at that date. I am also satisfied that Mr. Mekni, and therefore Waypharm, were well aware of that fact.
iv) Alleged compromise of claims
- The next issue which I have to determine is whether, as Waypharm and Mr. Mekni contend, the fraud claims against them were compromised or waived as a result of an agreement reached in May 2006, and/or as varied or compromised by the October 2006 Agreement, and the subsequent substitution of invoice 92 GCSA for invoice 88 GCSA, and invoice 113 GCSA for invoice 85 GCSA.
- It is relevant to set out chronologically a brief summary of the dealings between the parties following the December 2005 presentation.
- On 15 December 2005, Mr. Paddock of BPL was notified by NatWest that the December 2005 presentation had been made. He assumed that goods the subject matter of invoice 85 GCSA had been ordered by Mr. Condliffe. However, the goods the subject of the invoice were never delivered.
- On 23 January 2006, Mr. Mekni, by letter to Mr. Paddock (copied to Mr. Condliffe), requested an increase in the value of the Letter of Credit from £30 million to £40 million.
- Following the resignation of Mr. Forster-Jones, in January 2006, Mr. James instructed Mr. Blundell to review the relationship between BPL and Waypharm. This led to the meeting of 7 February 2006, between Mr. Mekni, Mr. Blundell and Mr. James, to which I have already referred, where regulatory concerns were discussed in relation to the nature and provenance of Waypharm's ethical products, as well as Mr. Mekni's request for an increase in the amount of the Letter of Credit.
- A decision was subsequently taken by BPL to increase the amount to a figure of £40 million and NatWest gave effect to these directions on 17 February 2006.
- On 21 February 2006 the September 2005 presentation matured. But by 28 February 2006, BPL had not received from Waypharm repayment of the sum of £8,493.047.11, although that sum had been debited from BPL's account on the maturity date, and BPL had already paid on delivery for the relevant goods (by bank transfer). This gave rise to concerns at BPL.
- On 28 February 2006, Mr. Condliffe's consultancy expired, and was not renewed. It was immediately following Mr. Condliffe's departure that major problems with Waypharm started to emerge.
- On 2 March 2006, BPL was notified by NatWest of the February 2006 presentation in the sum of £9,665,372.58, supported by invoice 88 GCSA. Mr. Paddock was surprised, not only by the large quantity of stock, but also by the fact that it was OTC products, rather than ethicals. Mr. Birdi told Mr. Paddock that Mr. Mekni had told him (Mr. Birdi) that Mr. Condliffe had ordered the stock.
- Waypharm finally made a refund in the sum of £8.493.047.11 in respect of the September 2005 presentation (outstanding since 21 February 2006) by four payments on 3, 8, 14 and 31 March 2006. This Waypharm did after receipt of the discounted proceeds of the February 2006 presentation from UBS.
- Following the February 2006 presentation, Mr. James became concerned that the terms of the Letter of Credit apparently permitted Waypharm to make a presentation under the Letter of Credit in respect not only of ethicals, but also OTC stock, irrespective of whether BPL had actually placed an order or not.
- The evidence shows that, thereafter, attempts were made, in early- and mid-2006, by Mr. Birdi and others, to negotiate with Mr. Mekni to obtain his agreement that he would not deliver, or seek payment for, goods listed in invoice 88 GCSA, which BPL were asserting they had not ordered, and Mr. Mekni was insisting that AAH (via Mr. Condliffe) had ordered the stock. As I have already held, not only had Mr. Condliffe not ordered the stock, but also no-one at AAH or BPL was aware of the order, or had a purchaser lined up to buy the stock.
- The evidence shows that on 4 May 2006 a meeting was held between BPL (represented by Mr. Birdi) and Mr. Mekni, to discuss the December 2005 presentation.
- At that meeting, Mr. Mekni had confirmed that the stock he proposed to deliver in respect of the December 2005 presentation (i.e. the Pfizer and Bayer ethicals listed in invoice 85 GCSA) was not "diverted" stock, and that he could prove this. Agreement was reached as to the evidence BPL required in order to be satisfied that the ethicals to be supplied had not been diverted, but Mr. Mekni would not disclose the source of the stock, on commercial grounds. Mr. Mekni also sought an extension to the payment date for the December 2005 presentation, from 30 May 2006 to 2 October 2006, to give Waypharm time to provide pharmaceutical stock with the requisite proof that it was not diverted stock. This extension was granted on the basis that all stock would be delivered to BPL by 21 August 2006. Mr. Mekni led BPL to believe that deliveries of the ethical stock would start at the end of May 2006.
- By this time, Mr. Redfern was involved in managing BPL's relationship with Mr. Mekni.
- Following that meeting, Mr. Mekni agreed that the goods the subject matter of the February 2006 presentation and invoice 88 GCSA could be substituted with another invoice of approximately the same value, for ethical stock from BPL's established stock list. Accordingly, in early May 2006, Waypharm issued invoice 92 GCSA, dated 22 April 2006, which referred to ethical products, to be supplied to BPL, totalling £9,665,312.73, in place of invoice 88 GCSA, which was in the sum of £9,665,372.58.
- There was dispute between the parties, and it was not altogether clear from the evidence, whether the parties actually, and finally, agreed to the substitution of invoice 92 GCSA for invoice 88 GCSA, or whether they simply agreed that BPL would prefer to have delivered the ethical stock listed in invoice 92 GCSA. It is not an issue which I need to decide. Subsequently, as set out below, under the terms of the October 2006 Agreement, the parties agreed that the stock listed in invoice 88 GCSA would be supplied in satisfaction of the sums payable to Waypharm under the Letter of Credit upon the maturity date of the February 2006 presentation.
- Between April and December 2006, there were months of negotiation between BPL and Waypharm, during which Waypharm sought extensions of time under the Letter of Credit or variations to it, so that it could have more time to deliver the goods referred to in invoices 85 GCSA and 92 GCSA, or to comply with BPL's requirements as to certification about the provenance of ethicals. BPL became increasingly concerned about Waypharm's continued failure to deliver ethical stock as listed in invoices 85 GCSA and 92 GCSA (at a total price of £12,110.759.03), notwithstanding Mr. Mekni's assurance that deliveries would start at the end of May 2006, and further assurances that the stock could and would be supplied. Indeed, no stock at all was received in the second half of 2006, either in respect of the December 2005 presentation or in respect of the replacement invoice 92 GCSA. BPL's concerns regarding non-delivery, and concerns to minimise Waypharm's financial exposure under the Letter of Credit in respect of the outstanding maturities of the December 2005 and February 2006 presentations, led to a meeting on 11 October 2006 between Mr. Redfern and Mr. Birdi on behalf of the claimants, and Mr. Mekni and Mr. Frank Bagshaw, Waypharm's "Responsible Person", on behalf of Waypharm, followed by yet further email communications in the same month.
- It was, to a certain extent, common ground on the pleadings between Waypharm and BPL, and in the evidence, and I find as a fact, that, as a result of the meeting on 11 October 2006 and the subsequent correspondence, BPL and Waypharm agreed (already defined as the October 2006 Agreement) as follows:
i) Waypharm would deliver OTC products of the type listed in invoice 88 GCSA (i.e. the invoice presented as part of the February 2006 presentation) in substitution for the ethical stock listed in invoices 85 GCSA and 92 GCSA, up to the value of the total amount invoiced to BPL under the December 2005 and February 2006 presentations (£12,110,9018.88).
ii) Because BPL did not have the markets or expertise to sell such large volumes of stock, Waypharm would broker the sales of the OTC stock to third-party purchasers and remit the proceeds to BPL.
iii) Waypharm would complete all sales of the OTC stock by no later than 30 April 2007.
iv) It would do so at sales prices that were no less than the total value invoiced to BPL under the December 2005 and February 2006 presentations.
v) BPL reserved the right to inspect the stock, or to have it delivered to one of its UK warehouses at any time.
- Following the meeting, and a request from Mr. Redfern, Mr. Mekni supplied a revised, replacement invoice, 113 GCSA, in the sum of £2,445,562.30, dated 19 December 2006, which listed toiletries, household and food products, in substitution for invoice 85 GCSA.
- Thereafter, on 2 November 2006 (the maturity date of the December 2005 presentation) the sum of £2,445,546.30 was paid by NatWest to UBS under the Letter of Credit. On 21 December 2006 (the maturity date of the February 2006 presentation), the sum of £9,592,852.29 was paid by NatWest to UBS; this was an underpayment (made in error by NatWest as a result of deduction of commission), and accordingly, on 8 January 2007, a further sum of £72,490.29 was paid by NatWest to UBS. A total of £9,665,372.58 was subsequently debited to BPL's account with NatWest.
- In the months that followed, prior to the issue of proceedings, Mr. Mekni gave repeated assurances to BPL that stock would be delivered, that sales would be made, and/or that repayments would be made to BPL in satisfaction of:
i) the sums of £2,445,546.30 which had been paid by NatWest to UBS on 2 November 2006 in respect of the December 2005 presentation; and
ii) the sum of £9,665,372.58 that had been paid by NatWest to UBS on 21 December 2006 and 8 January 2007 in respect of the February 2006 presentation;
both which payments had been subsequently debited to BPL's account.
Additionally, Mr. Mekni made numerous excuses for the failure to deliver the goods the subject matter of the invoices.
- However, prior to the issue of proceedings, only small and sporadic deliveries of stock and/or reimbursement of monies owed were made by Waypharm, the quantum of which I will address in the next section of this judgment.
- In my judgment, there is nothing in the terms or the circumstances of: i) the arrangements made in May 2006; ii) the October 2006 Agreement; iii) any of the dealings between the parties after that date, or in the period leading up to the issue of proceedings; or iv) in the substitution of new invoices, which could be regarded as a release, discharge, settlement, waiver or compromise of BPL's claims in tort against Mr. Mekni, Waypharm or Best Financial, or, indeed, of BPL's contractual claim for breach of an implied term against Waypharm in relation to the December 2005 or the February 2006 presentations.
- First, as Ms. Dohmann submitted, in a compromise agreement, clear language is required to include claims of fraud: see Satyam Computer Services Ltd v Upaid Systems Ltd [2008] EWCA Civ 487.
- At paragraphs 79 - 87, Lawrence Collins LJ (as he then was) said:
4. Whether the Settlement Agreement prevented Upaid from bringing (a) unknown claims which arose after the date of the Settlement Agreement and/or (b) unknown claims involving an allegation of fraud against Satyam's employees
79 This question only arises if the claims are caught by the language of the release and covenant not to sue in the Settlement Agreement. Bank of Credit and Commerce International (in liquidation) v Ali [2001] UKHL 8, [2002] 1 AC 251 was a case involving claims ('stigma claims' - claims by employees in respect of disadvantage on the labour market) which were unknown at the time of the release. It was held that there were no special rules of interpretation applicable to a general release, which was to be construed in the same way as any other contract. The question was what the intention of the parties was, construed objectively in the context of the circumstances in which the release had been entered into: at [8]–[10], [19] per Lord Bingham, [26] per Lord Nicholls. It was held by a majority (Lord Hoffmann dissenting) that the general release was not intended to cover such claims.
80 The decision was not concerned with claims based on fraud, but it was considered in the context of fraud-based claims in MAN Neufahrzeuge AG v Ernst & Young [2005] EWHC 2347 (Comm), affd on other aspects sub nom MAN Neufahrzeuge AG v Freightliner Ltd [2007] EWCA Civ 910. In that case the release related expressly to future claims, and the question was whether it applied to claims based on fraud. Moore-Bick LJ (as he had become) expressed the view (obiter, because the point did not in fact arise) that the release did not apply to claims based on fraud because neither party had the possibility of fraud in mind, and fraud was a thing apart because parties contract with one another in the expectation of honest dealing: at [209], citing HIH Casualty & General Insurance v Chase Manhattan Bank [2001] EWCA Civ 1250, [2001] 2 Lloyd's Rep 483, at [155] (a case on exclusion clauses).
81 Flaux J applied these decisions, and took the view that the wording of clauses 2.3 and 2.4 of the Settlement Agreement, drafted with the particular disputes between the parties which were then outstanding in mind (which by definition did not include an unknown future dispute about intellectual property rights), should not be construed as depriving Upaid of those future rights to claim damages for breach of the Assignment Agreement or for alleged fraud in relation to documentation produced pursuant to the third paragraph of that Agreement. He held that it would only be through the use of the clearest possible specific language that parties to a settlement agreement would be taken to have excluded fraud-based claims. The principle extended to causes of action of which dishonesty was not a necessary ingredient but which had been committed dishonestly.
82 Where the claims in question were based on fraud or involved allegations of dishonesty, very clear and specific language in a settlement agreement was required to settle such claims or exclude their subsequent pursuit, a fortiori if they were unknown at the time that the settlement agreement was entered into. The claims in Texas (whether ultimately they proved well-founded or not) involved allegations of fraud and forgery against Satyam. The wording of clauses 2.3 and 2.4 of the Settlement Agreement, even if otherwise capable of applying to claims arising under the Assignment Agreement, was not sufficiently clear or specific to exclude those claims.
83 Satyam's argument is that unknown claims (and claims based on the fraud of employees) may be compromised by clear words, and that the words in clause 4 were clear and forward-looking. Exclusion clauses are construed narrowly and the judge (as was Moore-Bick LJ in MAN Neufahrzeuge AG v Ernst & Young) was wrong to apply HIH v Chase Manhattan Bank to releases. It must have been intended to compromise unknown claims and fraud-based claims because this was a termination of the whole relationship (supported by the destruction of documents provision in clause 2.6). The release of vicarious liability for fraud accords entirely with fair, sensible commercial practice.
84 I do not accept this submission. I would agree that the exclusion clause cases should not be automatically imported into the area of releases, but that is not what either Moore-Bick LJ did in MAN Neufahrzeuge AG v Ernst & Young, or what Flaux J did in the present case. Lord Bingham said Bank of Credit and Commerce International (in liquidation) v Ali (at [10]) that 'a long and … salutary line of authority shows that, in the absence of clear language, the court will be very slow to infer that a party intended to surrender rights and claims of which he was unaware and could not have been aware.' Lord Browne-Wilkinson agreed, and Lord Clyde (at [86]) expressed substantially the same view. It seems to me to be clear that the same principle must apply to fraud-based claims. If a party seeking a release asked the other party to confirm that it would apply to claims based on fraud, it would not, in most cases, be difficult to anticipate the answer.
85 It is not, I think, very helpful to consider whether the release/covenant not to sue applies in the abstract to unknown claims, and then separately whether it applies to fraud-based claims. The true question is whether on its proper construction it applies to claims of the type made in the Texas proceedings, namely that, unknown to Upaid when the Settlement Agreement was entered into, Upaid was supplied by Satyam with forged assignments. To that question it seems to me that there is only one possible answer. In my judgment, express words would be necessary for such a release. The provision in clause 2.6 for destruction of documents does not assist. It was plainly designed to deal with Upaid's confidential information, and does not support the argument that the Agreement was designed to draw a line under all possible claims. If it were necessary to decide separately whether the release/covenant not to sue applied to (a) unknown claims, and (b) fraud-based claims, I would have come to the same conclusion as the judge.
86 For the sake of completeness I should refer to Upaid's alternative argument that if Satyam was aware when the Settlement Agreement was entered into that some of the employee assignments contained forged signatures, it would be unconscionable for Satyam to be able to rely upon clauses 2.3 and 2.4 as having compromised all claims including those in the future arising as a consequence of such forgery.
87 In Bank of Credit and Commerce International (in liquidation) v Ali Lord Nicholls (at [32]) said that if one party knew (but the other did not) that the latter had or might have a claim, the law would be defective if it did not provide a remedy for such unacceptable sharp practice. The judge did not decide the point because the underlying allegation of sharp practice was a very serious one which would require to be specifically pleaded and proved. It was wholly inappropriate to proceed on "assumed facts" in relation to such a serious allegation, and it would be unfair to Upaid to shut it out from arguing sharp practice, by deciding the point on limited materials at the present stage. On this appeal Satyam accepted that if Upaid had a factual basis for such a "sharp practice" contention, Upaid could claim to have the Settlement Agreement set aside for fraud, but said that such a claim would be within the scope of the English jurisdiction clause."
- The arrangements made in May 2006, and thereafter in October 2006 were practical commercial arrangements aimed at resolving difficulties that had arisen in circumstances where:
i) Waypharm had presented documents under the Letter of Credit in December 2005 and February 2006 which had been accepted at the time by NatWest, thereby imposing contractual obligations on NatWest to honour the Letter of Credit on the prospective maturity dates (and a corresponding liability on BPL to reimburse NatWest);
ii) where BPL was accordingly exposed to substantial liabilities on the maturity dates of the presentations:
iii) where BPL had concerns whether orders had indeed been raised for the goods the subject matter of the relevant invoices prior to the relevant presentations;
iv) for various reasons (not limited to the fact that Waypharm had not been able to satisfy conditions in relation to the provenance or nature of ethical products), and despite assurances that had been given by Mr. Mekni, deliveries of product in respect of the two presentations had not, in fact, been made;
v) BPL was obviously concerned to limit its financial exposure and the risk that it would not receive value for the monies that were due to be paid to UBS under the Letter of Credit, by securing delivery of the maximum amount of stock, and/or refunds.
Such arrangements were not formally or legally structured agreements of claims that had been raised by either side.
- By the time of the October 2006 Agreement, Mr. Redfern had, on 27 September 2006, expressed BPL's concerns to Mr. Martin Stocks ("Mr. Stocks") at the Documentary Credits Team at NatWest about the fact that no goods had been received in respect of the December 2005 and February 2006 presentations. Mr. Redfern had also told Mr. Stocks that he had a suspicion that the FCR lodged in support of the December 2005 presentation was fraudulent, based on the fact the FCR asserted that the stock had "… been delivered, accepted and placed at the disposal of [BPL]", but BPL had still not received any stock. Mr. Redfern said that he wanted to stop any further payments under the Letter of Credit in respect of the two presentations. Mr. Stocks said, in response, that NatWest had accepted documents that had appeared, on their face, to comply with the terms of the Letter of Credit, and that the bank did not, and could not, validate the genuineness of any document. In those circumstances, NatWest could not stop payment under the Letter of Credit as its obligation was to pay. He also told Mr. Redfern that one could not tell whether Waypharm had discounted the presentations with UBS.
- However, neither at the meeting in May, nor at the meeting on 11 October 2006, nor in the contemporaneous correspondence was there any mention or discussion of fraud or fraud claims in respect of the two presentations. Nor was there any discussion to the effect that the terms of the new arrangements for delivery of replacement goods would compromise or waive any claims which BPL might have had in relation to fraudulent presentations under the Letter of Credit. Nor did Mr. Mekni assert, either in cross-examination of the claimants' witnesses, or in his own evidence or submissions, that there had been any such suggestion. Moreover, at that stage, the true and complete position in relation to the fraudulent presentations was only known to Mr. Mekni and Waypharm.
- Accordingly, I reject the argument put forward by or on behalf of Mr. Mekni and Waypharm to support their contention that BPL's claims in relation to the December 2005 and February 2006 presentations had been compromised.
- There was nothing in the terms of the arrangements made in May 2006, nor in the terms of the October 2006 Agreement, when viewed objectively, which could be said to be directed at compromising, or waiving, fraud, or, indeed, any other, claims which BPL might have had against Waypharm, Mr. Mekni or Best Financial in respect of the December 2005 or February 2006 presentations. Both arrangements were, rather, a means of limiting BPL's financial exposure and risk, and mitigating its potential losses in the circumstances in which it then found itself. Although there were concerns at the time of the May 2006 meeting about whether the goods had, in fact, been ordered at all, and, by the time of the October 2006 meeting, about whether the FCRs had been fraudulent, so far as BPL was concerned, the position in relation to Mr. Mekni and Waypharm's conduct, and the existence of the goods, was still opaque.
- The argument put forward in paragraph 70 of Mr. Mekni's closing submissions that:
"It was obvious to everyone at the time that the purpose of these swaps was to replace any prior liability under or any dispute in respect of the previous invoices. The parties intended to move on in a positive trading relationship and the essence of that was to draw a complete line under any issues. The idea that there was some residual liability is not born out by any contemporaneous documentation. There was no reservation of the Claimant's position."
is a mischaracterisation of what occurred. All that BPL was concerned to do was to obtain delivery of products or cash payments, whether from sales or from refunds, to reduce its potential exposure under the Letter of Credit on the relevant maturity dates. Whilst it is true that there was no express "… reservation of the Claimant's position", nothing in the evidence relating to the arrangements amounted to a compromise of the type described in paragraph 70 of such submissions.
- Nor, contrary to the arguments made in paragraphs 66 - 69 of Mr. Mekni's closing submissions, did BPL's agreement to accept delivery of the goods listed in 113 GCSA in substitution for those listed in invoice 85 GCSA and (if it occurred) in invoice 92 GCSA for those in invoice 88 GCSA, achieve the discharge, satisfaction or waiver of BPL's claims in fraud, or otherwise, arising out of the two presentations. Whilst the new arrangements would most probably have subsequently prevented BPL from turning around and refusing deliveries of stock or remittances of funds from Waypharm, pursuant to the October 2006 Agreement, had these, in fact been tendered, there is no reason why they should have precluded BPL from bringing tort claims in respect of the fraudulent presentations under the Letter of Credit in circumstances where, it had indeed suffered a loss as a result of the original frauds, because deliveries and payments were not made. Moreover, even if I am wrong, and the substitution of the invoices and/or the arrangements did amount to some affirmation or confirmation of contracts purportedly reflected in invoices 113, 88 and/or 92 GCSA, I do not consider that this would, in the circumstances, have prevented BPL from bringing its tort claims against Mr. Mekni and Best Financial, albeit that, in this alternative argument, BPL might have been restricted to a damages or restitutionary claim against Waypharm.
- I record that I was not referred to any legal authority, either by Miss Dohmann, or by counsel assisting Mr. Mekni, to support or rebut Mr. Mekni's argument under this head, other than Satyam (supra).
- I also reject the further argument that, in "permitting" NatWest to pay UBS under the Letter of Credit on maturity of the December 2005 and February 2006 presentations in December 2006 and January 2007 respectively, BPL was somehow waiving any claims in fraud which it might have against the defendants in respect of the original presentations. Having accepted the documents presented as conformant, NatWest was contractually bound to honour its obligations under the Letter of Credit. Although, in very rare circumstances involving fraud, an issuing bank can be restrained from actually paying a beneficiary under a letter of credit, in late-2006/early-2007 the factual situation applicable to Mr. Mekni and Waypharm's conduct was by no means sufficiently clear to have made such a course a realistic or practical one, not least because of the position of UBS, which, having discounted the Letter of Credit, no doubt expected to receive the proceeds of the presentations on maturity.
- Accordingly, I reject Mr. Mekni and Waypharm's arguments based on alleged compromise or waiver.
v) Liability of defendants
- Under this head, I have to determine whether, in the light of the factual findings in relation to the above issues, Waypharm, Best Financial and/or Mr. Mekni are liable in tort for conspiracy, causing loss by unlawful means and/or inducing breach of contract.
Deceit
- I have already indicated that, since the claim in deceit was removed by amendment from the claimants' Particulars of Claim, I am not prepared to consider it. Moreover, Ms. Dohmann, in her final written submissions on the law, dated 1 June 2011, did not appear to respond to Mr. Mekni's criticism, in his written closing submissions, of the apparent continued maintenance of such claims, despite their deletion. Since the false representations under the presentations were made to and relied upon by NatWest, rather than BPL, and NatWest itself suffered no loss, it is difficult to see how a direct claim in deceit could be maintained.
Conspiracy
- So far as Waypharm and Mr. Mekni himself are concerned, in the light of my conclusions below in relation to their liability for causing loss by unlawful means, there is strictly no need for me to consider whether, as Mr. Mekni submitted, he cannot, as a matter of law, be liable for the tort of conspiracy. His argument, as set out in his closing submissions, was that he could not be liable in conspiracy for agreeing to do something with Waypharm or Best Financial, because, as the sole controlling mind of both companies he was effectively being accused of agreeing something with himself.
- This is an interesting argument. It has been held, in the criminal context, that a criminal conspiracy between a company and its sole controller is an impossibility, because it is not possible to find an agreement between two minds: see R v McDonnell [1966] 1 QB 233. At paragraph 24 - 93 of Clerk & Lindsell on Tort, 20th Edition 2010, the editors state:
"This might not be the case in a civil action where the controller had used the corporate machinery in what was alleged to be a conspiracy to damage the claimant.512
512 Such a controller can make a binding contract with his company: Lee v Lee's Air Farming Ltd [1961] AC 12 PC; and a combination of two or three wholly controlled companies would seem to constitute a sufficient combination: cf (1966) 82 LQR 151 at 153. In Taylor v Smith [sic - Taylor v Smyth] [1991] IR 142 IrSCt, such liability was favoured: see especially at 162-165 per McCarthy J."
I was not referred to R v McDonnell, or to Clerk & Lindsell, and I received no argument on the point from either side.
- Since Best Financial, as a separate corporate entity, was not in any way party to the fraudulent presentations made to UBS/NatWest, but was merely involved in receiving from Waypharm, and transferring to various other companies controlled by Mr. Mekni, the discounted proceeds of the letters of credit received from UBS, I have some conceptual difficulty in seeing how it could be said to be liable for the torts of causing loss by unlawful means, or of inducing breach of contract, both of which appear to require the commission of an actual act or omission by the defendant in relation to the claimant (see paragraph 230 below). However, in a conspiracy claim, liability can be grounded merely on the fact that a defendant is party to a combination or agreement between two persons, aimed at another, to use unlawful means, pursuant to which unlawful action is taken, resulting in damage to the victim: see Kuwait Oil Tanker Co SAK v All Bader [2000] 2 All ER (Com), 106 CA. There is no requirement that a defendant has to be the one who takes the unlawful action, provided that he is party to the agreement.
- It is thus necessary to consider whether, subject to the legal point referred to above, Best Financial was party to such a conspiracy. Otherwise it appears to me that no claim lies against it in tort.
- The evidence before me (see, in particular, Mr. Redfern's 1st Witness Statement at paragraphs 180 - 194 and 227 - 234, and the evidence from the District Prosecutor's Office in Zurich) that was relevant to the conspiracy claim showed that:
i) Mr. Mekni was the sole signatory and person having economic rights to Best Financial's assets;
ii) Best Financial's account at UBS was regarded by UBS as "beneficially controlled" by Mr. Mekni;
iii) Best Financial was effectively used by Mr. Mekni as a means of dispersing monies drawn down under the Letter of Credit to various of his companies including KM and Waypharm SAS so that they were not available in Waypharm to meet the latter's liabilities to BPL.
iv) Best Financial appears to have no other corporate purpose other than to have operated as a bank account "front" or money box for dealings between Mr. Mekni's various companies, and to disperse the proceeds of the draw downs under the Letter of Credit, with the result that such proceeds were irrecoverable.
v) Mr. Mekni's knowledge clearly is to be attributed to Best Financial.
- In the circumstances, and in the absence of any defence by Best Financial to the allegation made against it, in paragraph 41A of the Re-Re-Amended Particulars of Claim, that:
"… it is to be inferred that Best Financial was a party to the conspiracy to defraud BPL in that it immediately laundered the monies obtained by Waypharm as a result of the fraud …."
I would be prepared (subject to the legal point articulated above) to conclude that Best Financial was indeed party to an agreement with Waypharm and Mr. Mekni to defraud BPL by the unlawful means of Waypharm making the presentations under the Letter of Credit on the basis of the false documents, known by all of them to be false, and thereby wrongly obtaining money under the Letter of Credit.
- This was a clear case where the corporate machinery of the various companies was being used, or, more accurately, abused, by Mr. Mekni as controller to damage the claimant BPL.
- In Taylor v Smyth, the case referred to in the footnote to the passage cited above from Clerk & Lindsell, the Irish Supreme Court (Finlay CJ, Hederman and McCarthy JJ) held that an agreement causing injury to a person by unlawful means is an actionable conspiracy notwithstanding that the parties to the agreement might be a natural person and a limited liability company under his control, or two or more persons under the control of a single person. In so holding, McCarthy J (with whom Finlay CJ and Hederman J agreed), after referring to Nield J's decision in R v McDonnell (supra) said, at page 165:
"He concluded at p. 246 that, whilst an indictment for common law conspiracy to defraud would lie against a limited company, 'the true position is that a company and a director cannot be convicted of conspiracy when the only human being who is said to have broken the law or intended to do so is the one director, and that is the situation in the present case.' No authority was cited in support of extending this proposition to an action for civil conspiracy. In principle, it would seem invidious, for example, that the assets of a limited company should not be liable to answer for conspiracy where its assets had been augmented as a result of the action alleged to constitute the conspiracy. Essentially, it would be permitting to company to lift is corporate veil as and when its suits."
- Then, after referring to Belmont Finance (no. 1) v Williams Furniture [1979] Ch 25 (CA), he said:
"The point now under consideration in this appeal did not expressly arise in [Belmont], but it must underlie the entire [sic] of the argument and judgment in it. The basis of that case was that the separate legal entity of the company may, in law, conspire with those directors who, in effect, control it.
…
Apart from authority, in principle, I see no reason why the mere fact that one individual controls the company of limited liability, should give immunity from suit to both that company and that individual in the case of an established arrangement for the benefit of both company and individual to the detriment of others. If such were the case, it would follow that a like arrangement to the advantage of two companies of limited liability, both controlled by the same individual would give an equal immunity from suit to both companies, and so on. I recognise the force of the reasoning by Nield J in Reg v McDonnell [supra]. I express no view in regard to his conclusion save to point out the obvious, - it was a criminal case."
- I find this approach persuasive. Despite the absence of full argument on the point, I hold that Best Financial was party to a conspiracy as BPL contends, and liable in damages accordingly. It follows logically that Waypharm and Mr. Mekni were also party to such a conspiracy.
Causing loss by unlawful means
- As Ms. Dohmann submitted, causing loss by unlawful means requires
i) an act intended to cause loss to the victim;
ii) by interfering with the freedom of a third party to act in particular way;
iii) which is unlawful as against that third party; and
iv) which would have been actionable by the third party if it had suffered loss: OBG Limited v Allan [2008] 1 AC 1 (HL), [45]-[51].
As Lord Hoffmann observed at 49:
"… in National Phonograph Co Ltd v Edison-Bell Consolidated Photograph Co Ltd [1908] 1 Ch 335 the defendant intentionally caused loss to the plaintiff by fraudulently inducing a third party to act to the plaintiff's detriment. The fraud was unlawful means because it would have been actionable if the third party had suffered any loss, even though in the event it was the plaintiff who suffered."
It is no defence that the perpetrator only intended to enrich himself: see paragraphs 60, 62 and 130-135 of OBG (supra).
- I have already found as facts, that fraudulent misrepresentations were made by Mr. Mekni and Waypharm in both the December 2005 and February 2006 presentations. I also hold that such fraudulent representations were made by them in order to obtain NatWest's acceptance of the documents as conforming documents under the Letter of Credit. The fraud engaged in by Mr. Mekni and Waypharm constituted unlawful means for the purposes of the tort because it would have been actionable at the suit of NatWest, had NatWest suffered any loss, even though in the event it was BPL which suffered. Because of the representations made, NatWest clearly relied upon the documents as purportedly complying with the conditions of the Letter of Credit, and paid under it.
- I also find that Waypharm and Mr. Mekni clearly intended to cause loss to BPL; they intended that BPL should indirectly provide funds to Waypharm under the Letter of Credit mechanism in circumstances where the Letter of Credit documentation was not conformant, the conditions for payment under the Letter of Credit were not satisfied, and BPL had no contractual liability to Waypharm in respect of the goods listed in the relevant invoices. It is no defence for a defendant to say that he did not intend to injure the claimant but merely to enrich himself, if the means by which he achieves his end is by causing the claimant loss: see ibid per Lord Hoffmann at paragraphs 61 at pages 130 - 135.
Mr. Mekni's personal liability
- It is appropriate at this juncture to deal with some of the other points raised by Mr. Mekni in his evidence and submissions to support the argument that he, personally, was not liable in tort.
- The arguments put forward by Mr. Mekni in his closing submissions; that somehow others might have been responsible for what was said in the FCRs; that he never signed any FCRs; and that he was not responsible for any discrepancies, flies in the face of the evidence. As does the suggestion made in paragraph 81 of his closing submissions, that he:
"… had no active role in the delivery process. He presented the documents as they were provided to him for the purpose of the draw down. He was entitled to rely on them as true documents, in the same way as the banks did."
- I have no doubt that Mr. Mekni was closely involved (in the sense of giving instructions) in the preparation of the relevant invoices and the FCRs, even though he may not physically have typed them up, completed them or signed them.
- Contrary to his arguments, it is immaterial that the claimants' have not made any positive allegations of wrongdoing against Mr. Bellemans and Mr. Ceulemans, of Tytherleigh, Tytherleigh itself, the Jebali shareholders in MYK, or Mr. Muller. The claimants did not need to do so, as it was not a necessary part of their case. I find the likelihood is that Tytherleigh co-operated at least in providing Waypharm with apparently genuine FCR forms, and, perhaps, also obtaining insurance (though this point was not an issue explored at trial). Whether someone at Tytherleigh, Mr. Muller, someone at MYK or Mr. Mekni himself signed the FCRs is irrelevant. I have no doubt that the whole scheme involving:
i) the use of false FCRs, signed, or purportedly signed, by MYK, and purporting to confirm the existence of goods in Antwerp under MYK's control, and held to the order of BPL; and
ii) the fraudulent presentation of the FCRs and the relevant invoices under the terms of the Letter of Credit
was a scheme conceived and implemented by Mr. Mekni.
- As Ms. Dohmann submitted, and I find as a fact, the overwhelming impression given, by the contemporaneous documents and the other evidence is that Mr. Mekni, as Waypharm's only representative, was intimately involved in every aspect of the trading relationship between BPL and Waypharm, including organising deliveries of batches of stock.
- Another point taken by Mr. Mekni was that he had no motive for wanting to defraud BPL, risking the termination of what had been an extremely profitable trading relationship from Waypharm's perspective. I reject this contention. It was clear from the claimants' Annex B, that Mr. Mekni timed presentations under the Letter of Credit to coincide with Waypharm's obligations to made refunds to BPL, such as to give rise to a strong suspicion of teeming and lading on Waypharm's part. Contrary to his assurances, the Letter of Credit mechanism was not merely being used in an emergency, but effectively to fund Waypharm's activities and payments to Mr. Mekni's other companies. The Letter of Credit was clearly an extremely useful source of funding to Mr. Mekni, and I have no doubt that he and/or Waypharm needed the funds, and that he thought, given the claimants' informality in their dealings with him and Waypharm, and their apparent willingness to adopt the Letter of Credit mechanism without having done due diligence, that he would get away with the fraudulent presentations provided that Waypharm was in a position to supply some sort of product in the following months. Moreover, there was no evidence to suggest that Waypharm (or any other of Mr. Mekni's other companies) had other funds or resources available to meet Waypharm's liabilities to refund BPL under the Letter of Credit double payment mechanism, other than by drawing down further sums under later presentations. Mr. Mekni therefore had every motive to engage in fraudulent presentations.
- Mr. Mekni also sought to argue that the only liability (if any) fell on Waypharm, and that he, as controller, had no separate personal liability. However, it is clear from the decision of the House of Lords in Standard Chartered Bank v Pakistan Shipping Corporation (No 2) [2002] UKHL 43; [2003] 1 AC 959 that a director who makes fraudulent misrepresentations on behalf of a company cannot escape personal liability for his fraud.
- The facts were similar to the present case, in that Oakprime, a company defendant of which Mr. Mehra was the managing director, was the beneficiary under a letter of credit confirmed by Standard Chartered. Mr. Mehra, in his capacity as managing director of Oakprime, signed a letter to Standard Chartered confirming that (with one exception) the documents presented by Oakprime under the letter of credit were all those required by the credit. That statement was false to his knowledge, because he himself had arranged for the back-dating of the bill of lading that was one of the presented documents.
- Cresswell J found both Mr. Mehra and Oakprime liable in deceit. On Mr. Mehra's appeal, the Court of Appeal had held that Mr. Mehra was not liable because he had made the false representation on behalf of Oakprime, and not personally.
- In allowing Standard Chartered's appeal against Mr. Mehra, Lord Hoffmann (with whom Lords Mustill, Slynn, Hobhouse and Rodger agreed) said as follows:
20. My Lords, I come next to the question of whether Mr Mehra was liable for his deceit. To put the question in this way may seem tendentious but I do not think that it is unfair. Mr Mehra says, and the Court of Appeal accepted, that he committed no deceit because he made the representation on behalf of Oakprime and it was relied upon as a representation by Oakprime. That is true but seems to me irrelevant. Mr Mehra made a fraudulent misrepresentation intending SCB to rely upon it and SCB did rely upon it. The fact that by virtue of the law of agency his representation and the knowledge with which he made it would also be attributed to Oakprime would be of interest in an action against Oakprime. But that cannot detract from the fact that they were his representation and his knowledge. He was the only human being involved in making the representation to SCB (apart from administrative assistance like someone to type the letter and carry the papers round to the bank). It is true that SCB relied upon Mr Mehra's representation being attributable to Oakprime because it was the beneficiary under the credit. But they also relied upon it being Mr Mehra's representation, because otherwise there could have been no representation and no attribution.
21. The Court of Appeal appear to have based their conclusion upon the decision of your Lordships' House in Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830. That was an action for damages for negligent misrepresentation. My noble and learned friend, Lord Steyn, pointed out that in such a case liability depended upon an assumption of responsibility by the defendant. As Lord Devlin said in Hedley Byrne & Co Ltd v Heller & Partners [1964] AC 465, 530, the basis of liability is analogous to contract. And just as an agent can contract on behalf of another without incurring personal liability, so an agent can assume responsibility on behalf of another for the purposes of the Hedley Byrne rule without assuming personal responsibility. Their Lordships decided that on the facts of the case, the agent had not assumed any personal responsibility.
22. This reasoning cannot in my opinion apply to liability for fraud. No one can escape liability for his fraud by saying 'I wish to make it clear that I am committing this fraud on behalf of someone else and I am not to be personally liable.' Sir Anthony Evans framed the question ([2000] 1 Lloyd's Rep 218, 230) as being 'whether the director may be held liable for the company's tort.' But Mr Mehra was not being sued for the company's tort. He was being sued for his own tort and all the elements of that tort were proved against him. Having put the question in the way he did, Sir Anthony answered it by saying that the fact that Mr Mehra was a director did not in itself make him liable. That of course is true. He is liable not because he was a director but because he committed a fraud.
23. Both Sir Anthony Evans and Aldous LJ treated the Williams case [1998] 1 WLR 830 as being based upon the separate legal personality of a company. Aldous LJ referred ([2000] Lloyd's Rep 218, 233) to Salomon v A Salomon & Co Ltd [1897] AC 22 . But my noble and learned friend, Lord Steyn, made it clear (at p 835) that the decision had nothing to do with company law. It was an application of the law of principal and agent to the requirement of assumption of responsibility under the Hedley Byrne principle. Lord Steyn said it would have made no difference if Mr Williams's principal had been a natural person. So one may test the matter by asking whether, if Mr Mehra had been acting as manager for the owner of the business who lived in the south of France and had made a fraudulent representation within the scope of his employment, he could escape personal liability by saying that it must have been perfectly clear that he was not being fraudulent on his own behalf but exclusively on behalf of his employer.
24. I would therefore allow the appeal against Mr Mehra and restore the order which Cresswell J made against him. In enforcing this order, SCB will of course have to give credit for the money it has received from PNSC but how this sum should be apportioned is not a matter which your Lordships have been asked to consider."
- Lord Rodger said the following (at paragraph 36 - 40):
"36. The incorporation of companies is vitally important for commerce since it allows transactions to be entered into and carried out, property to be held and actions to be raised by, or against, a body which continues in existence despite changes in the individuals who conduct or invest in the business. The company is a separate entity, distinct from the directors, employees and shareholders. The law has rightly insisted that the distinction should be duly observed: Lee v Lee's Air Farming Ltd [1961] AC 12. In particular the company does not act as the agent of the directors and, in general, they do not incur personal liability for the acts of the company or its employees: Rainham Chemical Works Ltd v Belvedere Fish Guano Co Ltd [1921] 2 AC 465, 488 per Lord Parmoor. Directors may, however, be personally liable if they directed or procured the commission of a wrongful act. The exact scope of this type of liability has been discussed in a line of cases. Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1, 14 per Atkin LJ and C Evans & Sons Ltd v Spritebrand Ltd [1985] 1 WLR 317 may serve as examples.
37. A hallmark of modern companies is that the liability of the shareholders is limited. This is not a necessary characteristic of a commercial corporation. Indeed even for some time after the Limited Liability Act 1855 there were major trading entities which had been incorporated but the investors in which were exposed to unlimited liability for the corporation's debts. This could, and not infrequently did, result in the investors' ruin. By reducing and defining the potential risk to investors, limited liability opens the way for modern companies to raise the necessary capital for their business, either privately or on the stockmarket. For this reason, only in exceptional circumstances does the law allow a creditor of the company to pierce the veil of incorporation and fix the shareholders with personal liability: Salomon v A Salomon & Co Ltd [1897] AC 22.
38. Although Aldous LJ referred to lifting the corporate veil, the question of the limited liability of shareholders is irrelevant to the present issue since Standard Chartered do not seek to make Mr Mehra liable as a shareholder in Oakprime. Nor do Standard Chartered seek to make Mr Mehra liable, by virtue of his position as a director, for the deceitful acts of Oakprime or its employees or other agents. Rather, they seek to do no more than hold him liable for deceitful acts that he himself performed. So no question arises as to whether he directed or procured the doing of tortious acts by others and the C Evans & Sons Ltd v Spritebrand Ltd line of cases is not in point. [emphasis supplied]
39. At the heart of the Court of Appeal's decision is the view that, because Mr Mehra was a director of Oakprime and acted as such when cheating Standard Chartered, his acts must be regarded solely as the acts of Oakprime and he should have no personal civil liability for them. As Mr Cherryman QC acknowledged, no man could escape the clutches of the criminal law by the simple device of showing that he had carried out his frauds in his capacity as a director of a company and in circumstances where his acts were to be attributed to the company (Meridian Global Funds Management Asia Ltd v. Securities Commission [1995] 2 AC 500). In R v ICR Haulage Ltd [1944] KB 551, 559, for example, both the managing director and, through him, the haulage company were convicted of conspiracy to defraud. His acts 'were the acts of the company and the fraud of that person was the fraud of the company'. In the world of tort, however, all was said to be more happily arranged for the fraudster. He could use the device of acting as a director to escape any liability to his victims: they were to be regarded not as his victims but just as the victims of the company's fraud. His fraud might be the fraud of the company but, somehow or other, it was not his own fraud.
40. My Lords, the maxim culpa tenet suos auctores may not be the end, but it is the beginning of wisdom in these matters. Where someone commits a tortious act, he at least will be liable for the consequences; whether others are liable also depends on the circumstances. Here, as the facts make plain and as Cresswell J specifically found, 'all the ingredients of the tort of deceit are made out against Mr Mehra (and Oakprime).' In other words Standard Chartered have proved all that is required to make Mr Mehra - and through him Oakprime - liable in deceit. That being so, there is no conceivable basis upon which Mr Mehra should not indeed be held liable for the loss that Standard Chartered suffered as a result of his deceit. If he had been a mere employee of Oakprime and had done the same things and written the same letters on behalf of the company in that capacity, it could never have been suggested that Mr Mehra was not personally liable for his fraudulent acts. His status as a director when he executed the fraud cannot invest him with immunity."
- Accordingly, I have no hesitation in finding Mr. Mekni personally liable for the tort of causing loss by unlawful means. As Lord Rodger pointed out in paragraph 38 of the passage cited above, there is no need, in such circumstances, to have recourse to the type of liability discussions in the C Evans & Sons Ltd v Spriteboard Ltd (supra) line of cases, so it is not strictly necessary for me to consider whether, as BPL contends, Mr. Mekni would, given his position as controller or owner of Waypharm, have been responsible for Waypharm's tort. Mr. Mekni is liable for the deceitful acts which he himself performed.
Inducing breach of contract
- Because of his direct personal involvement and responsibility for the fraudulent presentations to UBS/NatWest, if it were necessary to do so, I would also hold Mr. Mekni liable for inducing Waypharm's breach of the contract set out in paragraph 79 above, namely the admitted implied terms that Waypharm would only draw down sums following good faith presentations. This adds nothing to the quantum of Mr. Mekni's liability in damages, however. As I have said, Best Financial was not instrumental in inducing any such breach, and I do not hold it liable for inducing breach of contract.
Restitution/breach of contract
- Waypharm is also liable in restitution in respect of the difference between:
i) The sums paid by BPL under the Letter of Credit pursuant to the December 2005 and February 2006 presentations: and
ii) The value of cash and goods BPL received following the October 2006 Agreement.
- Waypharm is also liable in damages for breach of the implied terms of the admitted contract set out in paragraph 79 above.
vi) Quantum
- BPL contends that the quantum of its loss is £8,745,464, as set out in paragraphs 16 to 18 above.
- Mr. Mekni, on the other hand, contends that on the running account between the parties, the current position is that in fact BPL owes Waypharm £843,830. Accordingly, BPL has suffered no loss as a result of the presentations, and he has no liability to it in damages.
- Schedule 2 to Waypharm and Mr. Mekni's Amended Defence dated 2 August 2011 was prepared to support this contention. The claimants responded to Schedule 2 by means of a Scott Schedule entitled Annex 4, which set out the respective position of both sides. This Scott Schedule was revised several times during the course of the trial. The latest version was updated for the purposes of oral closing arguments, as at 15 June 2011. I shall refer to it as "the Scott Schedule".
- A more detailed commentary on the documents referred to at trial and the evidence relating to the Scott Schedule was contained in a further composite schedule which contained both the claimants' and Mr. Mekni's closing notes on the Scott Schedule. This was referred to as "Annex C".
- I have carefully revisited the evidence and submissions comprised in the Scott Schedule and Annex C. The Scott Schedule does not have numbers allocated to the individual items. Accordingly, I express my conclusions by reference to the pages on the Scott Schedule, and, where necessary, the narrative description of the items. I do not deal specifically with the evidence relating to every item. Many of Mr. Mekni's challenges to the figures were in relation to invoices that had been paid, or sums which had been remitted by Waypharm without demur, many years ago.
Page 1 of the Scott Schedule
- I reject all the claims to credits for Waypharm made by Mr. Mekni on this page. The only item requiring mention is the credit of £320,011 claimed by Mr. Mekni. This was a sum paid by Waypharm in April 2004 to Daniels Enterprises, a previous trading name of BPL.
- Waypharm paid the invoice rendered by BPL which related to a number of items, including an amount of £172,515 which had been charged to BPL as a facility fee. Whilst the Letter of Credit specified that all banking charges (except the Letter of Credit opening charges) were for Waypharm's account, it was clear from the evidence and the contemporary correspondence, that Mr. Mekni, on behalf of Waypharm agreed that Waypharm would pay all BPL's charges and expenses in connection with the Letter of Credit. At the time, the invoice was paid by return, without demur. The first time any query was raised was in Schedule 2 to Mr. Mekni's Amended Defence in August 2010.
Pages 2 and 3 of the Scott Schedule
- I have already referred in paragraph 73 above to Mr. Mekni's claim that Waypharm had made deliveries to BPL of ethical products worth over £3.7 million under invoices number 71 and 72 GCSA. Mr. Mekni's position was that he had produced various documents which he claimed supported his case that the goods had been delivered. I heard a substantial amount of evidence relating to this topic from Mr. Mekni, Mr. Paddock and Mr. Redfern. I am satisfied that Mr. Mekni's allegation that the stock had been delivered is wholly without foundation. The first time that reference was made to invoices 71 and 72 GCSA, and their alleged non-payment, was in Schedule 2 to Mr. Mekni's Amended Defence in August 2010. The evidence which he produced does not support the alleged deliveries. Waypharm did not make any deduction in respect of the sums (totalling £3.7 million) which Mr. Mekni claims BPL owed in respect of invoices 71 and 72 GCSA from the amounts it refunded to BPL in respect of previous presentations in July 2005, September 2005 and March 2006. Nor did Waypharm seek to do so in the subsequent negotiations. Mr. Redfern's evidence was that if BPL had indeed received goods under invoices 71 and 72 GCSA without paying for those goods, its profits would have been noticeably inflated, which they were not. I reject Mr. Mekni's claim under this head.
Page 4 of the Scott Schedule
- I reject Mr. Mekni's claim that goods were delivered pursuant to invoice 84 GCSA in the sum of £2,359. He produced no evidence to support it; invoice 84 GCSA is not recorded on Annex 1, and the claimants had no record of any delivery pursuant to this invoice. The evidential burden was on Mr. Mekni to establish that this was a genuine credit which Waypharm could claim. He failed to do so.
Page 5 of the Scott Schedule
Nivea
- The first item relates to an admitted delivery of Nivea products to BPL. Mr. Mekni's contention under this head was that Waypharm delivered Nivea products to BPL with a value of £600,491, but only received credit against such deliveries in the sum of £445,346. Mr. Redfern explained in evidence that he had calculated the value of the Nivea received by BPL's sister company from analysing a schedule of all deliveries received from Waypharm into the warehouse at the relevant time. He said that the unit price of the Nivea products differed between invoices 88 GCSA and 113 GCSA, with the unit prices on invoice 113 being nearly double for some products. Mr. Redfern said it was not possible to identify which goods were received in relation to invoice 88 GCSA and which in relation to invoice 113. He said it was appropriate to use the unit prices on invoice 88 GCSA, and not those on invoice 113 GCSA, on the basis that there was no negotiation with BPL regarding the unit prices of the goods on invoice 113 GCSA, and that these were prices unilaterally applied by Waypharm. Mr. Mekni countered by saying that it was appropriate to use the unit prices that were exclusively on invoice 113 GCSA, rather than those on invoice 88 GCSA. Mr. Mekni complained that BPL had taken advantage of Mr. Mekni's and Waypharm's personal weakness because of the impact of the freezing order. However, BPL took delivery of this stock in December 2007, before the freezing order was made in March 2008.
- I am satisfied, on the balance of probabilities that the evidence, particularly that from Mr. Redfern, shows that it was appropriate to attribute the unit prices set out in invoice 88 GCSA to the Nivea products, rather than the markedly higher prices appearing on invoice 113 GCSA. As Mr. Redfern pointed out, the goods on invoice 88 GCSA should have been sourced by Mr. Mekni in advance of the goods on invoice 113 GCSA, and BPL was entitled to expect to receive deliveries against invoice 88 GCSA before deliveries against invoice 113 GCSA.
Optium, One Touch and Impulse
- I reject Mr. Mekni's evidence and arguments in relation to his contention that these products should be included in the schedule at higher values than those attributed to them by the claimants. I am satisfied, from Mr. Redfern's evidence, that the claimants have attributed the correct quantities and values to the products that were delivered, and accordingly I reject Mr. Mekni's contention.
Mr. Muscle
- Mr. Mekni's position is that Waypharm delivered Mr. Muscle products to a value of £1,866,572. The claimants' position is that the appropriate value for Mr. Muscle products delivered to BPL was £131,435, as that was the total value of this product delivered to BPL. Mr. Mekni did not produce any evidence to substantiate a delivery of the amount which he claimed. He asserted, in the course of cross-examination, that the Mr. Muscle products had been held to BPL's order in Antwerp, and then returned to MYK, even though that company was in liquidation. As I have already held above, the Mr. Muscle product listed in invoice 88 GCSA was not present in the Tytherleigh warehouses on 20 February 2006, nor was there any wrongful rejection of those goods by BPL. I reject Mr. Mekni's claim under this head.
Page 5: Mawdsley stock, Tytherleigh stock
- I reject Mr. Mekni's evidence and contention in relation to these items. The value for these items of stock were agreed between Charles Russell and Isadore Goldman, then acting on behalf of Waypharm. There was no reason to go behind these negotiated compromise figures which, it was agreed, would be set off against the sums which Waypharm owed to BPL.
Tytherleigh storage and logistics charges
- Mr. Mekni's claim is that BPL should pay the storage and logistics charges in the sum of £221,310 in respect of stock which Mr. Mekni claimed was at Tytherleigh, held to BPL's order. At trial, he produced a schedule setting out a reduced value for those storage and logistics charges of £83,898 (€113,356). I reject Mr. Mekni's arguments under this head. I have already held that the relevant goods the subject of invoice 85 and 88 GCSA (the subject of the December 2005 and February 2006 presentations) were not in the Tytherleigh warehouses at the time, and accordingly Tytherleigh would not have charged Waypharm for storage of the goods. Mr. Mekni did not produce Tytherleigh invoices in support of any of the storage and logistics charges which he asserted were due. Moreover, in respect of the goods which were delivered by Waypharm in respect of its obligations pursuant to the October 2006 Agreement, there was no contractual basis for BPL to pay such charges. Throughout its trading relationship with Waypharm, BPL did not pay Waypharm in respect of storage and logistics. Moreover, Mr. Mekni did not produce any evidence that Waypharm itself had paid any storage or logistics charges, whether in the sum of £83,898, or any other amount.
UBS cancellation fee
- Mr. Mekni submitted that BPL should be liable for fees in the sum of £75,983, raised against Waypharm by UBS in respect of the failed July 2006 presentation (invoice 93 GCSA). There was no contractual basis for such a claim. As I have already said, in correspondence with BPL Mr. Mekni had repeatedly made reference to the fact that BPL was not responsible for any of the charges under the Letter of Credit. There were discrepancies in the July 2006 presentation which BPL was entitled to waive, but refused to do so. There was no obligation on BPL to waive such discrepancies, and therefore there can be no question of BPL having any liability to pay the fees charged by UBS.
Letter of Credit fees paid by Waypharm
- Mr. Mekni sought to contend in the Scott Schedule that BPL should pay the entirety of fees of £778,000 charged by UBS to Waypharm in relation to the Letter of Credit. However, he accepted at trial that there was no contractual basis for BPL to be held liable, but he contended that it was justifiable "on commercial grounds". The reality was that Waypharm incurred charges in respect of the successful presentations under the Letter of Credit where BPL had an irrevocable obligation to pay, and did pay, Waypharm on the maturity dates. In circumstances where, as I have found, Waypharm was responsible for the fact that at least two of the presentations were fraudulent, there is no reason why it should be reimbursed for the fees imposed on it. Moreover, the fees which Mr. Mekni sought to recover by way of credit in the account between Waypharm and BPL appear to include the discounting charges levied on Waypharm by UBS. There was absolutely no basis on which BPL was obliged to reimburse charges which Waypharm had had to pay UBS as a result of obtaining the discounted proceeds of the presentations.
Page 6 of the Scott Schedule
Double payment to BPL
- Mr. Mekni's position was that Waypharm should be given credit for an alleged double payment to BPL in the sum of £176,512. The evidence before me did not support Mr. Mekni's contention. The contemporaneous documentation demonstrates that this figure was the second instalment of a BPL invoice 0402 in the sum of £176,000. in an email dated 21 July 2005, Mr. Mekni confirmed that payment of the invoice would be made on 29 July 2005. In other words, the payment was simply an instalment payment, not a double payment.
Waypharm's alleged loss in respect of the alleged cancellation by BPL of Pfizer products
- Under this head, Mr. Mekni claimed that Waypharm incurred a charge of £608,828, for the return of Pfizer merchandise which was the subject of invoice 85 GCSA, and that BPL was liable for this charge. Mr. Mekni relied upon a purported letter from Oxet SA to Waypharm dated 29 July 2008, which referred to a charge in that sum to Waypharm for the return of Pfizer products. I heard a substantial amount of evidence about this issue. I have already held that Mr. Condliffe never ordered the goods which were the subject matter of invoice 85 GCSA. As I have already observed, that evidence was not challenged by Mr. Mekni in cross-examination. I also rejected Mr. Mekni's evidence to the effect that the goods were ordered and then rejected. Mr. Mekni changed his account over time, and made a crucial admission whereby he accepted that: BPL had not declined to take the goods listed in invoice 85 GCSA; and had never said that it did not want the goods, but that it wanted to be certain that the origin of the goods was legitimate. Moreover, Mr. Mekni's explanation as to what became of the goods listed in invoice 85 GCSA, which he contended were present in Antwerp at the time of the December 2005 presentation, was internally inconsistent and incapable of belief. Neither Waypharm nor Mr. Mekni disclosed any documents evidencing the agreement concerning the exchange or the sale of the goods, or the alleged shipment of the goods in question to Oxet SA, nor the shipment of the alleged substitute OTC goods from Oxet SA to Waypharm. Mr. Mekni gave conflicting evidence as to what happened to these goods. His explanation, based on the purported letter from Oxet to Waypharm SAS dated 29 July 2008, (but which was most probably procured by Mr. Mekni in October 2008) was highly implausible. His story was confused as to whether the goods were allegedly delivered to Waypharm by Oxet Corporation, rather than by Oxet SA, and consequently would have been returned Oxet Corporation, rather than to Oxet SA. There was no evidence of any loss incurred by Oxet SA, and no evidence of any return of physical goods, including, in particular, no evidence of CMRs, transport insurance or storage costs which one would have expected to have been in Waypharm's files, if Mr. Mekni's account were true. As I have already held, I am satisfied on the evidence on the balance of probabilities, that the goods listed in invoice 85 GCSA were not in Antwerp on 1 December 2005, and, accordingly, that Mr. Mekni can claim no credit in the running account as between Waypharm and BPL in respect of this asserted claim by Oxet SA.
Disposition
- Accordingly, I find that Waypharm, Mr. Mekni and Best Financial are jointly and severally liable to pay BPL damages in the sum of £8,745,464.
- Waypharm is additionally liable to pay BPL, as money had and received, the same sum, although subject to a maximum recovery of that amount.
