Claim No: CFI-024-2010
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF FIRST INSTANCE
BEFORE JUSTICE SIR DAVID STEEL
CORINTH PIPEWORKS SA
BARCLAYS BANK PLC
Defendant/Part 21 Claimant
(1) AFRAS LTD
(2) RADHAKRISHNAN NANDA KUMAR
Part 21 Defendants
Hearing: 25 November 2014
Counsel: John Taylor QC instructed by Clifford Chance LLP for the Defendant/Part 21 Claimant
No representative appeared on behalf of the Part 21 Defendant.
Judgment: 12 January 2015
JUDGMENT OF JUSTICE SIR DAVID STEEL
Summary of Judgment
The Claimant, Corinth Pipeworks SA, a Greek company engaged in the manufacture of steel pipes used in the construction of oil and gas pipelines, filed a claim against Barclays Bank PLC, the banker to the Part 21 Defendants in the case, Afras Ltd and Randhakrishnan Nanda Kumar. The dispute arises out of contracts entered into by Corinth and Afras pursuant to which Corinth agreed to sell steel pipes to Afras and in turn, Afras sold these pipes to well-known reputable companies, namely Bechtel Overseas, Inc and Petroleum Development Oman LLC (PDO). Over the course of two years, Corinth shipped the pipes under the Bechtel and PDO Contracts, yet Corinth never received the payment due by Afras in the amount of roughly US$24 million.
On 29 September 2010 Corinth issued proceedings against Barclays alleging Business Manager Mr Joseph Figueredo had participated in an unlawful conspiracy with Afras and Mr Kumar to defraud Corinth of the US$24 million as per Article 36 of DIFC Law No. 5 of 2005, the Law of Obligations. Barclays issued Part 21 proceedings against Afras and Mr Kumar and claimed indemnity or contribution from Afras/Mr Kumar on the grounds that if the Bank was found liable, then Afras/Mr Kumar were liable in respect of the same loss by virtue of their participation in the Trade Finance Scheme, their dishonest misrepresentations made to Corinth and their participation in the Account Representations. On 11 July 2013 Deputy Chief Justice Chadwick dismissed Afras/Mr Kumar’s challenge to the jurisdiction of the DIFC Courts. On 11 April 2014 Barclays settled all claims against it by agreeing to pay Corinth US$4 million and brought forth a claim for contribution or indemnity against Afras and Mr Kumar.
The Court found that Afras and Mr Kumar did indeed defraud Corinth out of US$24 million by siphoning monies owed to Corinth to personal accounts, dishonestly misrepresenting trade finance from Barclays in order to pay Corinth for previous contracts, fabricating e-mails to Corinth purported to come from the Bank’s Mr Figueredo, and fabricating commission claims in order to justify the non-payment of monies to Corinth. The Court concluded that Afras and Mr Kumar are liable to Corinth under Article 36 and Article 31 of DIFC Law No. 5 of 2005 for the deceitful misrepresentations which were the unlawful acts carried out pursuant to their conspiracy. Moreover, Article 56 of DIFC Law No. 5 of 2005 did not apply to claims to “recover contribution,” which was an unqualified right under Article 14 (1) and (2) of that Law, regardless of a claimant’s degree of fault or blame. Article 56 was limited to claims for loss or injury. Blame and fault were matters relevant to the assessment of what was a “just” amount recoverable under Article 14 (3).
Accordingly, judgment was granted to Barclays against Afras and Mr Kumar in the sum of US$3,900,000 plus interest.
This summary is not part of the Judgment and should not be cited as such
UPON hearing Counsel for the Claimant on 24 November 2014
AND UPON reading the submissions and evidence filed and recorded on the Court file
IT IS HEREBY ORDERED THAT:
1. Afras Limited and Radhakrishnan Nanda Kumar shall pay Barclays Bank Plc US$3,900,000 (three million nine hundred thousand United States Dollars) within 14 days of this Order.
2. Afras Limited and Radhakrishnan Nanda Kumar shall pay Barclays Bank Plc interest as follows:
(a) US$32,331.57 for the period 24 April 2014 to 26 July 2014; and
(b) US$335.354 per day from and including 27 July 2014 onwards (being at the rate of 3.13857% per annum) and interest shall continue to accrue at this rate on all outstanding sums until Afras Limited and Radhakrishnan Nanda Kumar have paid US$3,900,000 to Barclays Bank Plc.
3. Afras Limited and Radhakrishnan Nanda Kumar shall pay Barclays Bank Plc’s costs of and occasioned by the claim against them and the costs of and occasioned by Barclays Bank Plc in defending the claim brought against it by Corinth Pipeworks SA in this Court, such costs are to be assessed on the indemnity basis.
4. Afras Limited and Radhakrishnan Nanda Kumar shall pay Barclays Bank Plc interest on the aforesaid costs from 9 September 2014 and continuing until payment is made at the rate of 3.13857% per annum.
5. The liability of Afras Limited and Radhakrishnan Nanda Kumar to make the payments set out in paragraphs 1, 2, 3 and 4 of this Order is joint and several.
6. Barclays Bank Plc has permission to apply for an order for an interim payment on account of its costs pursuant to RDC 38.13 without prejudice to its right to apply for a detailed assessment of those costs in due course.
Date of Issue: 12 January 2015
1. The original claimant in this action, Corinth Pipeworks SA (“Corinth”), is a Greek company engaged in the manufacture of steel pipes used in the construction of oil and gas pipelines. Its factory is in Thisvi, Greece where it also operates a port from which its steel pipes are shipped around the world. One of Corinth’s Commercial Managers at the relevant time was a Mr Anastasios (also known as Tassos) Moiras (“Mr Moiras”). He was responsible for Corinth’s business in the Middle East and operated out of a branch office in Dubai. Mr Moiras had known Mr Randhakrishnan Nanda Kumar (“Mr Kumar“), the Second Part 21 Defendant, for many years at the time of the events in this case.
2. On or about 3 July 2001, Afras Limited (“Afras“) entered into an Agreement of Association with Corinth to market and sell its products in GCC and Middle Eastern countries. Occasionally Afras also dealt as principal with Corinth, buying and selling steel pipes in its own right. Mr Kumar dealt personally with Corinth in relation to the contracts which led to the dispute in this case.
3. Barclays Bank Plc (“Barclays“or the “Bank“) was the banker to Afras at all material times. The relationship manager to Afras was Mr Joseph Figueredo (“Mr Figueredo“), who held the position of Business Manager. Mr Sayeed Babader (“Mr Babader“) also assisted with managing the Bank’s relationship with Afras and he reported to Mr Figueredo.
4. In 2008 Corinth entered into three contracts with Afras pursuant to which it agreed to sell steel pipes for a price (in round figures) of €47 million. Afras in turn sold these pipes to a well-known and reputable US company called Bechtel Overseas, Inc (“Bechtel”) which was constructing a pipeline in Angola. The contracts between Corinth/Afras on the one hand and Afras/Bechtel on the other were back-to-back (save that Afras had to pay the freight costs to ship the goods from Greece to Angola). Afras was to make a profit of €1,995,091 on the cost of purchase from Corinth and the price it received from Bechtel. The Bank provided some loan and invoice discounting facilities to Afras in connection with the Bechtel Contracts (two short term loans of US$2 million and US$1.5 million to assist Afras in funding the freight costs, and invoice discounting facilities pursuant to which it discounted around US$6 million of the invoices rendered by Afras to Bechtel).
5. In April 2009 Corinth contracted with Afras to supply further pipes worth about US$35 million (“the PDO Contract”). These were for supply to a well-known and reputable company called Petroleum Development Oman LLC (“PDO”) which is majority owned by the State of Oman and part owned by Shell and Total. The pipes were needed for the construction of a gas pipeline in Oman. Again, there were back-to-back contracts between Corinth/Afras on the one hand and Afras/PDO on the other in that the goods supplied were the same under both. Afras was to make a profit of US$986,178 on these back-to-back contracts. Afras raised finance from the Bank for the performance of this contract, telling the Bank that it would receive an additional discount from Corinth if it paid it early upon shipment (as opposed to 45 days after the goods had been delivered to Oman, which was when PDO was obliged to make payment to Afras) (“the PDO Facilities”).
6. Corinth shipped the pipes under the Bechtel and PDO Contracts during the course of 2008 and 2009. Afras received payment in its entirety from both Bechtel and PDO, but (as Afras/Mr Kumar admitted in paragraphs 21 and 22 of their Defence) Afras did not pay over to Corinth a sum of US$24,198,231.25. For convenience this sum is referred to in round figures as US$24 million.
7. By a Claim Form dated 29 September 2010 Corinth issued proceedings against the Bank alleging that its Mr Figueredo had participated in an unlawful means conspiracy with Afras and Mr Kumar to defraud Corinth of this US$24 million within Article 36 of DIFC No. 5 of 2005 (the “Law of Obligations“) (“the Trade Finance Scheme”). Corinth alleged that the Bank, and Afras and Mr Kumar, made various misrepresentations to it as part of the Trade Finance Scheme and also alleged liability in deceit under Article 31 of the Law of Obligations. Corinth further alleged that in 2010 Mr Figueredo made various “Account Representations” to Corinth to the effect that Afras had sufficient monies in its account to pay the outstanding US$24 million. Corinth alleged that it relied on those representations and took no steps to freeze Afras’ assets in 2010 when it was actively pressing Afras for payment of the outstanding US$24 million. In the alternative Corinth alleged that the Bank had been negligent in its dealings with Corinth.
8. Faced with these allegations the Bank issued Part 21 Proceedings against Afras and Mr Kumar. These claims are described in more detail below but in short the Bank claimed an indemnity or contribution from Afras/Mr Kumar on the grounds that if the Bank was found liable, then Afras/Mr Kumar were liable in respect of the same loss by virtue of their participation in the Trade Finance Scheme, their dishonest misrepresentations made to Corinth and their participation in the Account Representations. On 11 July 2013 Deputy Chief Justice Chadwick dismissed Afras/Mr Kumar’s challenge to the jurisdiction of the DIFC Courts. Following that, all parties gave extensive disclosure, exchanged lengthy witness statements and served expert reports.
9. The trial of Corinth’s claim and the Part 21 claim were originally listed to start on Sunday 13 April 2014. On 11 April 2014 the Bank settled all claims against it by agreeing to pay Corinth US$4 million, with no order as to costs. The Bank made that payment on Monday 21 April 2014. The Bank issued Application Notice CFI-024-2010/9 dated 16 April 2014 seeking permission to amend its Part 21 Particulars of Claim to reflect the fact of settlement with Corinth and to bring its claim for contribution or indemnity against Afras and Mr Kumar under Article 14(2) of the Law of Obligations whereas, prior to settlement, it had been brought under Article 14(1). Afras/Mr Kumar resisted the application to amend and issued their own application to strike out the claim against them (Application Notice CFI-008-2013/7 dated 13 April 2014). In the alternative they sought a 4 month adjournment of the trial. Afras/Mr Kumar were represented at that hearing by Mr John Brisby QC and Mr Joseph Wigley of 4 Stone Buildings in London as well as by Ms Bushra Ahmed of KBH Kaanuun Solicitors (“KBH“). I heard those applications on Monday 21 April and ruled that the Part 21 Claim should not be struck out, the amendments should be permitted, and that the trial would commence as timetabled on Wednesday 23 April 2014.
10. On Tuesday 22 April 2014 Afras and Mr Kumar sent a string of emails to their solicitors, KBH, and the Bank’s solicitors, Clifford Chance LLP. The effect of these emails was to make clear that Afras and Mr Kumar no longer wished to play any active part in this trial whatsoever. In particular, they made clear that they no longer wanted KBH to represent them, they did not want to instruct any firm to represent them in place of KBH and they did not want to represent themselves or adduce any evidence at trial. In light of these emails, on Tuesday 22 April 2014 KBH issued and served on Afras/Mr Kumar an application to come off the record.
11. That application was heard on Wednesday 23 April 2014 following which I ordered that KBH come off the record and that Afras’/Mr Kumar’s address for service in these proceedings be the email address from which Afras/Mr Kumar had sent the string of emails on 22 April 2014 referred to above. In light of Afras’/Mr Kumar’s position that they no longer wished to play any active part in the trial whatsoever, I proceeded with the trial on 23 April 2014 in accordance with its order made on 21 April 2014.
12. Barclays called three witnesses to give oral evidence:
(1) Mr Terance Andrade an Assistance Vice President, Fraud Prevention and Detection Manager in the Bank’s Fraud and Risk Management Unit;
(2) Mr Mark Cook, a Corporate Credit Director in the Bank’s UAE Corporate Credit Team; and
(3) Mr Darren Mullins, an expert in forensic IT analysis who is a Director of Forensic Technology and Discovery Services in Ernst & Young’s Dubai branch.
Their evidence is referred to as appropriate below.
13. I was also invited to and did read the two witness statements served by Mr Kumar on behalf of himself and Afras. Mr Kumar’s statements comprised of sixty-one pages of witness evidence and 579 pages of exhibits. I also read the joint memorandum produced by the forensic IT experts to which the expert instructed on behalf of Afras/Mr Kumar had contributed (Mr Sangyop Steven Lee, the Managing Director of Alvarez and Marsal Global Forensic & Dispute Services in London).
14. In addition, I read the Skeleton Argument for Trial submitted on behalf of Mr Kumar and Afras. This was settled by Ms Bushra Ahmed of KBH and Mr Sharif Shivji from 4 Stone Buildings in London and filed before Afras/Mr Kumar had made plain that they no longer wished to instruct KBH.
15. On 24 April 2014 oral closing submissions were adjourned for the parties to explore whether their differences could be settled amicably. Unfortunately negotiations broke down by November 2014 and the hearing resumed on 24 November 2014. Counsel for the bank appeared by video from London. A supplementary closing written submission dated 24 November was served on behalf of the Bank which I read. Neither Afras nor Mr Kumar were represented although due notice of the hearing had been given.
16. I must express grateful thanks to Mr John Taylor QC who appeared for the Bank. This judgment borrows extensively from his written submissions.
DUBAI COURT PROCEEDINGS
17. Before turning to the facts of this case, mention should also be made of the proceedings which Corinth has been pursuing against Afras and Mr Kumar in the Dubai Courts. This is a claim in contract for the US$24 million against Afras and Mr Kumar. The claim led to a judgment by the Dubai Court of Appeal on 31 July 2013 which found Afras and Mr Kumar liable to Corinth in the sum of US$24,198,231.25. However, the Dubai Court of Appeal also found Corinth liable to Afras/Mr Kumar for commission payments in the sum of US$19,147,389.62 and held that this should be set off leaving a balance in Corinth’s favour of US$5,050,841.63. This finding by the Dubai Court of Appeal that Corinth owed Afras US$19 million has recently been “revoked” and referred by the Court of Cassation back to the Court of Appeal for reconsideration which includes consideration of whether signed “written acknowledgements” produced by Corinth’s Mr Moiras (which are relied upon by Afras/Mr Kumar in support of its claim to commissions) are genuine. The proceedings in the Court of Appeal have yet to conclude.
18. At the hearing on Monday 21 April 2014, when Afras and Mr Kumar were represented by Mr John Brisby QC, Mr Joseph Wigley and Ms Bushra Ahmed of KBH, it was argued on behalf of Afras/Mr Kumar that the US$19 million commission claim and the veracity of the “written acknowledgements” were not issues in these DIFC Courts proceedings. I rejected that submission since it was clear that these matters had always been in issue in this case as evidenced by the documents on the Court record, which include the following:
(1) The allegation that Afras was owed US$19 million in commission by Corinth was first raised by Afras in its Defence to the Part 21 Claim (see paras 5, 6 and 16.7).
(2) In its Reply the Bank pleaded that Corinth still disputed Afras’ claim for commission and the purported “written acknowledgement” of that debt provided by Mr Moiras (Reply para 10(3)).
(3) Afras then made a direct Request for Further Information from Corinth in relation to this issue. Corinth replied back in October 2013 making clear that it was alleged that no commission was due and the purported “written acknowledgments” had been fabricated (see paragraphs 4-4.4).
(4) With these matters being in issue, on 29 October 2013 the Bank served a detailed Request to Produce Documents on Afras/Mr Kumar seeking disclosure of all relevant documents concerning the commission claim and the purported “written acknowledgements”. The Court ordered Afras/Mr Kumar to produce these documents which included:
(a) “Documents evidencing any claims made by the Part 21 Defendants (including by any of their representatives) for the payment and/or set off of commissions allegedly owed by [Corinth]”;
(b) “The evidence advanced by the Part 21 Defendants in the Dubai Court proceedings” and
(c) “copies of any relevant paper records from the Part 21 Defendants’ accounts department…”
(5) In his witness statements for trial Mr Kumar made numerous references to the alleged US$19 million commission claim and the alleged “written acknowledgements”. In particular, Mr Kumar sought to rely on the alleged commission debt from Corinth as justification for Afras’ failure to pay Corinth under the Bechtel and PDO Contacts.
19. The Bank was not a party to the Dubai Court proceedings and there is no issue estoppel between it and Afras/Mr Kumar in relation to the commission issue. In those circumstances on Monday 21 April 2014, I rejected Afras/Mr Kumar’s submission that the commission claim and “written acknowledgements” formed no part of this DIFC trial. Furthermore for the reasons set out below, I unhesitatingly conclude that the US$19 million commission claim and “written acknowledgments” are bogus.
20. The position now is that the Bank has paid US$4 million to Corinth, and Afras and Mr Kumar have paid nothing (not even the US$5,050,841.63 found to be owing to Corinth by the Dubai Court of Appeal after applying a set off). The Bank claims a complete indemnity, alternatively a contribution from Afras/Mr Kumar in respect of its payment of US$4 million.
21. As was determined by a ruling made by me on Monday 21 April 2014, Article 14(2) of the Law of Obligations adopts the same approach as English law to claims for contribution by a party that has compromised claims against it. Accordingly, it is not necessary for the Bank to prove that it was liable to Corinth in its contribution claim against Afras/Mr Kumar. All that the Bank has to show under Article 14(2) is that:
(1) there was a claim made against it under the Law of Obligations;
(2) the claim has been settled by a payment; and
(3) the party from whom contribution is sought “would have been liable in respect of the same loss if the factual basis of the claim against him could be established”.
22. As regards the first two requirements, Corinth’s allegations against the Bank came in the form of allegations against Mr Figueredo who was employed by the Bank as Afras’ relationship manager. Those allegations included (amongst others) the allegation that the Bank (acting by Mr Figueredo) participated with Afras in the conspiracy to defraud Corinth. In this connection:
(1) Corinth alleged that Mr Figueredo knew that money received by Afras from Bechtel had not been paid over to Corinth as it ought to have been and knew that Afras was unable to pay for the Bechtel and PDO Pipes;
(2) Corinth alleged that Mr Figueredo knew that Afras had no intention of paying in full for the Bechtel and PDO Pipes;
(3) Corinth alleged that Mr Figueredo assisted Afras in obtaining the PDO Facilities from the Bank and knew that those facilities were misused by Afras to pay for the Bechtel Pipes, rather than the PDO Pipes.
23. The allegations against the Bank amounted to a cause of action in conspiracy under Article 36 of DIFC Law No. 5 of 2005. The loss claimed by Corinth was the same US$24 million which the Bank contends Afras and Mr Kumar are liable for.
24. The Bank paid US$4 million to Corinth in compromise of that claim. That payment has reduced the amount that Corinth is able to claim from Afras and Mr Kumar. Accordingly, the Bank is entitled to claim an indemnity or contribution from Afras and Mr Kumar in respect of that US$4 million (subject to it giving credit for the US$100,000 it has received from Afras/Mr Kumar).
25. As regards the third requirement, for the reasons set out below, I conclude that Afras and Mr Kumar are clearly liable in deceit and conspiracy to Corinth for the full US$24 million. Indeed, it is noted that, even on their own case, Afras and Mr Kumar admit that they are liable to Corinth for US$5,050,841.63 under the Dubai Court Judgment.
THE BECHTEL CONTRACTS AND BECHTEL FACILITIES
26. Bechtel is a US company carrying on business constructing oil and gas pipelines. In 2008 it was engaged in constructing a pipeline in Angola. Bechtel entered into three contracts with Afras for the purchase and supply of steel pipes for that project. Afras in turn entered into supply contracts with Corinth for the purchase of those steel pipes. The total sum payable by Afras to Corinth under the 3 contracts was €47,357,679.28 and made up as follows:
(1) €13,503,560 under the First Bechtel Contract (contained in Afras’ Purchase Order dated 8 June 2008);
(2) €22,407,430.40 under the Second Bechtel Contract (contained in Afras’ Purchase Order dated 15 June 2008); and
(3) €11,446,688.88 under the Third Bechtel Contract (contained in Afras’ Purchase Order dated 24 November 2008).
27. Afras was to make a legitimate profit of €1,995,091 by charging Bechtel more than it agreed to pay Corinth. That said it is clear that it had been agreed between Corinth and Afras and Mr Kumar that when Afras received payment from Bechtel, it would immediately pass payment on to Corinth (less this profit that Afras was making on the back-to-back sales). This is evidenced by an Afras email dated 20 October 2008 to Mr Kumar and an email from Afras to Corinth dated 28 January 2009 (copied to Mr Kumar), which stated in relation to the PDO Contract “the payment will be made to Afras Ltd and like the Bechtel order, will transfer the same to you immediately”.
28. However, this did not occur in relation to the Bechtel Contracts. Monies were received by Afras from Bechtel but they were not passed on to Corinth. By the end of March 2009 Afras had received over €49 million from Bechtel, but Afras had paid only €36 million over to Corinth. Afras and Mr Kumar were well aware at that time that over €11 million had not been paid over to Corinth as it ought to have been. Afras’ conduct is illustrated by the following:
(1) By email dated 12 February 2009 Corinth asked Afras (including Mr Kumar) for an update on payments under the Bechtel Contracts. On 18 February 2009 Corinth sent Afras (including Mr Kumar) the same message asking for an update.
(2) That day, 18 February 2009, Afras received €3,133,152.33 from Bechtel but instead of paying this on to Corinth it transferred €3 million away to another Afras bank account (held at Standard Chartered).
(3) On 25 February 2009 Afras received €6,513,624.60 from Bechtel but instead of paying this on to Corinth it transferred €6,500,000 away to Afras’ bank account at Standard Chartered.
(4) On 9 March 2009 Afras received €2,584,111.88 from Bechtel but instead of paying this on to Corinth the next day it transferred €2.68 million away to its bank account at Standard Chartered.
29. The final two invoices issued by Corinth to Afras under the Bechtel Contracts amounted to €11,449,424. By email dated 24 April 2009 Corinth asked Afras (including Mr Kumar) when it would pay these two invoices. On 28 April 2009 Afras (copying Mr Kumar) stated to Corinth that it would provide an update by the end of the week. This was followed by an email from Afras (copied to Mr Kumar) dated 30 April 2009 stating that outstanding payments from Bechtel were anticipated between 10-15 May 2009 and between 21 to 30 June 2009. On 15 May 2009 (when payment had not been made by Afras as anticipated) Corinth chased again for payment and Afras responded (copying Mr Kumar) stating that the anticipated payment dates had come from Bechtel and when Afras received an update it would let Corinth know. By email dated 9 June 2009 (copied to Mr Kumar) Afras provided Corinth with an update stating that it would be making payment early the following week.
30. In this remarkable sequence of emails, Afras and Mr Kumar dishonestly misled Corinth into believing that Bechtel had not yet made full payment under the Bechtel Contracts, and that payment would be passed on to Corinth when it was made. They evidence the Payment Representations relied on by Corinth, i.e. false representations by Afras and Mr Kumar that they intended that Afras would pay Corinth under the Bechtel and PDO Contracts. These Payment Representations were plainly false since:
(1) Afras and Mr Kumar knew full well that Bechtel had paid Afras all sums due in respect of the Bechtel Contracts by the end of March 2009;
(2) Despite this, Afras and Mr Kumar falsely represented that Afras had not yet been paid by Bechtel and falsely represented that it was their intention to pay when Bechtel had made payment to Afras. They knew that no further payment would be forthcoming from Bechtel since it had already paid in full; and
(3) They also knew that Afras had paid away over €11 million from its Euro Account with the Bank.
31. Afras and Mr Kumar sought to deal with these emails in paragraphs 121-122 of Mr Kumar’s witness statement for trial. There they contended that:
“121. Afras Ltd could not pay invoices SK/150/08 in the amount of EUR 2,371,428.46 and SK/108/09 in the amount of EUR 9,077,995.63 as Afras Ltd did not receive the payment it had expected from Bechtel. As I understand, the reason for the delay in payment by Bechtel was because CPW had delayed in shipping the goods.
122. Ms Chrysoula [of Corinth] contacted Mr Shah on 24 April 2009 requesting an update on the payments of those invoices. On 30 April 2009 Mr Shah responded to Ms Chrysoula stating that the first amount would be expected between 10 May 2009 and 15 May 2009, and the second amount between 21 June 2009 and 30 June 2009. Ms Chrysoula enquired again for an update on 15 May 2009, and Mr Shah responded the same day saying that Bechtel had informed Afras Ltd that it would be transferring funds to Afras Ltd in the week of 22 May 2009. See page 244 of NK3.”
32. These contentions are patently false. Afras had been paid in full by Bechtel by the end of March 2009. The reason why Afras could not pay Corinth was because Afras had siphoned off €11 million to its own bank account with Standard Chartered.
33. Corinth chased Afras for payment again on 2 and 9 June 2009. By this time Afras and Mr Kumar’s conspiracy had moved on to raising finance from the Bank to pay the outstanding Bechtel invoices. This finance was raised on the false premise that Afras needed it for a completely different contract, i.e. the PDO Contract. As set out below, Afras and Mr Kumar used over US$16 million drawndown from these PDO Facilities, which they told the Bank was being used to fund the PDO Contract, when in fact they used the money to pay off the Bechtel debts.
THE PDO CONTRACT AND THE PDO FACILITIES
34. PDO was and is a reputable company operating in the oil and gas industry in Oman. At the relevant time, it was majority owned by the state of Oman and part owned by Shell and Total. The background to the contract of sale between Corinth and Afras and the onward sale of those pipes by Afras to PDO was as follows:
(1) By a purchase order dated 27 August 2008 addressed to “Afras (Corinth Pipe Works)” PDO accepted Corinth’s tender offer to supply PDO with steel pipes in accordance with the specification contained therein (“the PDO Pipes”). The contract price was stated to be US$35,610,000.
(2) By email dated 26 January 2009 Afras LLC proposed that the PDO Contract should be assigned from Afras LLC to Afras (Ltd) on the grounds that Afras LLC’s local bank was not in a position to finance such a large order.
(3) By emails dated 19 and 28 January 2009 Afras and Mr Kumar persuaded Corinth to route payments under the PDO Contract through Afras for tax reasons. This latter email said that monies received by Afras from PDO (and Bechtel) would be paid “immediately” by Afras to Corinth.
(4) On 23 February 2009 Corinth sent a letter to PDO stating that Corinth had no objection to PDO changing the name on its purchase order and had no objection to accepting an order from Afras for the PDO Pipes. By letter dated 3 March 2009 Afras LLC stated to Corinth that it wanted to assign the contract to Afras (Ltd) as Afras (Ltd) had better lines of credit and other banking facilities. The representation that Afras (Ltd) had better lines of credit for the PDO Contract was said to induce Corinth to contract with Afras (Ltd) and was made on its behalf. (Mr Kumar admits that he knew of it in paragraphs 116-117 of his witness statement). By letter dated 9 March 2009 Corinth agreed to the assignment and made express reference to the fact that this was due to Afras Ltd having “better existing lines of credit & and other banking facilities”.
(5) It was against this background that:
(a) PDO agreed to buy the PDO Pipes from Afras as evidenced by PDO’s purchase order (no 4500425104) dated 13 April 2009. The price was US$35,610,000.
(b) On 30 April 2009 Afras sent a purchase order (no 9963/AF/09) to Corinth for the purchase of the PDO Pipes. The price was US$34,623,822.48.
35. It is clear from the foregoing (and paragraphs 116-117 of Mr Kumar’s witness statement) that Afras and Mr Kumar knew that it had been represented to Corinth that Afras had better lines of credit in order to fund the PDO Contract, and that was the reason why the PDO Contract was assigned to Afras. Thus Corinth had been told that credit was going to be used by Afras to fund the PDO Contract and in any event that, at the very latest, payment would be made under the PDO Contract “immediately” after it was received by Afras from PDO.
36. Pausing there, I accept that Corinth would never have entered the PDO Contract but for Afras’ and Mr Kumar’s false representations about Afras not yet having received payment from Bechtel which were used to excuse Afras’ non-payment. Corinth was also induced by the representation that Afras had lines of credit to pay for the PDO Pipes, which gave Corinth comfort that it would be paid – as indeed Mr Kumar admits in paragraphs 116 and 117 of his witness statement.
37. Afras and Mr Kumar then went about procuring finance from the Bank on the false premise that the finance would be used to make payments under the PDO Contract (“the PDO Facilities”).On 10 May 2009 Afras emailed the Bank informing the Bank’s Mr Babader and Mr Figueredo of details of the PDO order that had been secured. Afras’ requests for finance for the PDO Contract are clear from Afras’ emails to the Bank dated 21 and 26 May 2009, both of which were copied to Mr Kumar:
(1) On 21 May 2009 Afras sent an email to the Bank’s Mr Babader stating:
Further to your verbal request on the profitability of the PDO project please refer to the below mentioned:
– Based on the current P.O. between Afras & PDO and Afras & Corinth (CPW) the Gross Profit is +/- USD 1.00 Million
– If Barclays finance this project Afras would be able to negotiate and obtain a further discount of +/- USD 2.50 Million”
(2) This was followed on 26 May 2009 by another Afras email attaching a “PDO order flow execution chart”. This set out a timeline showing two shipments under the PDO Contract and showed estimated dates when Afras was to pay Corinth (on shipment of the pipes) and when PDO was to pay Afras (about 3.5 months later after delivery and invoice to PDO). The chart stated, “If Barclays were to finance this project Afras would receive an additional discount of USD 2.50 Million on the 2nd shipment”.
38. In his Reply Trial Witness Statement, Mr Kumar denied that there was ever any agreement with Corinth that a discount of US$2.5 million would be granted. But it is clear that this is what Afras told the Bank at the time (see Afras’ emails above and paragraph 23 of Mr Cook’s witness statement), and it is also clear that the Bank granted the PDO Facilities for the purpose of Afras making payments under the PDO Contract. This is clear from Afras’ own documents (referred to above), Mr Cook’s witness statement, and is evidenced by numerous documents including a 2 June 2009 ICA in which the Bank’s Mr Babader sought the approval of the Bank’s Credit Committee to a Trust Receipt Facility (“TRF”) of US$8.39 million for 120 days. This explained that:
“The customer has been awarded an order from Petroleum Development Oman LLC of USD 35.61M [for] supply of steel pipes. The merchandise is being shipped from Corinth Pipeworks S.A., Greece to PDO’s site in Salalah, Oman.
Although, Afras has open a/c payment terms with Corinth, they have requested us to finance part of the supply order, in order to enable them to increase the profitability on the deal. As per the purchase order from PDO Afras will only be able to make net profit of USD 1M on the supply contract, however if Afras makes the payment to Corinth on shipment rather than on receipt of the funds from PDO they will get additional discounts totalling to USD 2.5M which will substantially increase the profitability on the contract”
39. This ICA was considered and approved by:
(1) Mr Ashok Gulvady, the Bank’s Head of Corporate Credit in the UAE and GCC;
(2) Mr Alper Yuksel, the Bank’s Head of Corporate Banking in the UAE and GCC; and
(3) Ms Jennifer D’Souza (Senior Officer, Corporate Credit).
40. On 10 June 2009 Ms D’Souza informed Mr Babader and the Loans Administration Unit that approval had been given for the US$8.39 million TRF. The First Facility Letter for the PDO Facilities was dated 11 June 2009 and reflected the fact that its purpose was to make payment to Corinth under the PDO Contract; see:
(1) the “purpose” listed for the trust receipt facility in the table at Clause 1.1, which states: “to make open account payment to Corinth”;
(2) Clause 3.3.4 which required Afras to provide the Bank with relevant bills of lading and invoices (all of which related to the PDO Contract – see below);
(3) Clause 9.5 which sought an assignment of receivables in connection with the PDO Contract; and
(4) Clause 10.5 which required PDO to acknowledge that it would route payment through Afras’ accounts held with the Bank.
AFRAS’ USE OF THE PDO FACILITIES TO PAY OFF THE €11 MILLION DUE UNDER THE BECHTEL CONTRACTS
41. However, rather than using the PDO Facilities to make payments under the PDO Contract, Afras used them to pay off debts under the Bechtel Contracts. In doing so, Mr Kumar and Afras dishonestly misrepresented to the Bank the purpose for which these payments were being made. In short it was misrepresented that drawdowns were being requested under the PDO Facilities so that PDO invoices could be paid, when in fact Afras’ and Mr Kumar’s intention was to use that money to discharge Bechtel invoices. This is clear from the following 3 drawdowns.
42. First drawdown. Afras sent the first drawdown request (signed by Mr Kumar) on 14 June 2009 for the sum of US$3.32 million. This enclosed a Corinth invoice for payment under the PDO Contract (SK120/09) in the sum of US$9,732,686.64, the bill of lading dated 3 June 2009, and a packing list. The Bank permitted drawdown to be made on the basis that it was a payment to Corinth under the PDO Contract, but in fact Afras used the money to pay off part of the debt under the Bechtel Contracts. This is clear from Afras’ email (copied to Mr Kumar) sent to Corinth on 16 June 2009 stating that this US$ amount had been transferred in payment of the Euro amount of €2,371,428.46 (which was the sum in Corinth’s invoice for Bechtel pipes, number SK/250/08).
43. Second drawdown. On 6 July 2009 Mr Kumar sent an email to Corinth stating that “the payment from Bechtel is due this Friday and CPW will receive the payment Monday -the 13th. This was confirmed to me on last Fri”. This statement was plainly dishonest because Bechtel had already paid all that was due to Afras by the end of March 2009.
44. In order to raise finance to pay Corinth, Afras again submitted a dishonest drawdown request under the PDO Facilities. This was done by a fax dated 13 July 2009 in which Afras requested a second drawdown under the PDO Facilities, this time in the sum of US$5 million. It was expressly stated that payment was being made against Corinth’s invoice for payment under the PDO Contract (SK/120/09) which was enclosed with the fax. As explained by Mr Cook, the Bank permitted a transfer of US$5 million to be made to Corinth in the belief that it was a payment by Afras under the PDO Contract, but as is clear from the documents Afras in fact used this money to make a payment to Corinth under the Bechtel Contracts.
45. Third drawdown. On 12 August 2009 Afras’ Chief Accountant, Mr Shah, sent an email to Corinth (copied to Mr Kumar) stating “We would appreciate if you can send us the final outstanding balance in USD which is owed to Corinth Pipeworks by Afras for Bechtel Angola project. We are expecting to receive the money from Bechtel in a couple of days and your quick clarification will assist us in remitting the exact outstanding amount in USD”. Again, that was simply false because Afras had been paid in full by the end of March 2009.
46. On 17 August 2009 Corinth sent an email to Mr Kumar stating that the balance due for the final Bechtel invoice was €5,558,916.37 which was the equivalent to US$7,865,866 at the prevailing exchange rate. Mr Kumar replied on 18 August saying that the Bechtel monies would be transferred between 24 August and 1 September 2009. Again, this was a plainly false representation by Mr Kumar. At around this time Afras approached the Bank seeking to make a further drawdown in respect of the PDO Contract. This is evidenced by Mr Figueredo’s email dated 26 August 2009 to Mr Garg which stated that Afras now wished to drawdown a third sum of US$8.4 million to make another payment under the PDO Contract. On 3 September 2009 Mr Cook gave his approval to this third drawdown. Mr Cook’s evidence and the ICA which he referred to make it clear that the Bank’s Credit Committee believed that the drawdown was for the PDO Contract.
47. Having obtained the Bank’s approval for another drawdown, on 3 September 2009 Afras faxed a request to Mr Babader to make a drawdown on this facility of US$7,846,866. Enclosed with that fax were 2 invoices from Corinth in respect of PDO Pipes and a bill of lading concerning the PDO Pipes. The payment was made on behalf of Afras by SWIFT on 4 September 2009. That US$7,846,866 was the equivalent of €5,558,916.37 which was the final sum outstanding under the Bechtel Contracts.
48. Thus, yet again Afras made a drawdown under the PDO Facilities on the false premise that payments were being made under the PDO Contract when in fact Afras was using the monies to pay off liabilities under the Bechtel Contracts.
49. By mid-November 2009 Afras had received payment from PDO in the sum of US$34,571,455. It used part of this to repay the sums borrowed from the Bank. However, it did not even pay all of the remainder to Corinth, with the consequence that by the end of 2009 the amount it owed Corinth had increased from €11 million to over US$24 million.
50. Afras and Mr Kumar’s dishonesty succeeded in fending off Corinth’s requests for payment under the Bechtel Contracts but in 2010 Corinth started to press for payment of the sums due under the PDO Contract.
MR KUMAR’S FABRICATION OF EMAILS IN 2010
51. On 8 April 2010, Corinth sent documents to the Iraq State Oil Company for Oil Projects seeking to win the tender to supply pipes for a completely new oil and gas project in Iraq (“the Iraq Project”). As appears below, the Bank was told that this was a contract which was being carried out by Corinth and Afras, although Corinth always denied that any such contract was ever in fact awarded to it or Afras.
52.At the same time, Corinth was pressing Afras for payment of the sum of approximately US$24 million which was outstanding under the PDO Contract. In order to placate Corinth and make it think that payment would be made shortly, Mr Kumar dishonestly fabricated emails which purported to come from the Bank’s Mr Figueredo.
53. On 28 April 2010 Mr Figueredo sent an email to Mr Kumar stating, among other things:
“Dear Mr Nanda,
This refers to our discussion regarding banking facilities arrangement and submission of your company’s audited financials for our review.
We have not received your company’s audited financials till date due to which the review of facilities is held pending. Grateful if you could arrange to provide at the earliest.
Also note that you refrain from drawing funds for non-trade related business from the company’s bank account till the time you submit your audited financials and our review of facilities is complete”
54. The same day Mr Kumar forwarded this email to Corinth’s Mr Moiras, but on the Bank’s case, he dishonestly doctored the contents of Mr Figueredo’s email so that it stated (among other things):
“Dear Mr Nanda,
This refers to your request for transfer of USD 8.3M and USD 15.0M to the following account:
Beneficiary name : Corinth Pipeworks s.a. Pipe Industry and Real Estate
Please be advised that both the requests are under process and we will make swift copies available as soon as we receive the same from HO. Mean while [sic], please note that we have not received your company’s audited financials till date. Grateful if you could arrange to provide at the earliest.
Also note that you refrain from drawing funds for non-trade related business from the company’s bank account till the time you submit the audited financials and our review of facilities is complete”
55. In respect of each of such allegedly doctored emails, Mr Kumar came out with the same stock answer in his witness statement. This was to the effect that Mr Kumar does not recollect receiving the original emails from Mr Figueredo but denies that he forwarded the emails in doctored form to Corinth. He says that he has no knowledge of how the emails came to be altered.
56. I unhesitatingly reject that purported explanation. The expert evidence is clear and supports the Bank’s case that Mr Figueredo’s emails (including the above email dated 28 April 2010) were indeed doctored after they had been sent by Mr Figueredo to Mr Kumar. The only person who had the opportunity and motive to doctor the emails was Mr Kumar. The suggestion that it is theoretically possible that some of the emails were doctored after receipt by Corinth can be rejected as absurd. In addition, as noted below, there is information contained in some of the emails sent to Corinth which is only consistent with the emails having been sent by Mr Kumar.
May 2010: further developments on the Iraq project and further fabrication of emails by Mr Kumar
57. Afras approached the Bank for financing to assist it in performing the Iraq Project and on 20 May 2010 Mr Figueredo sent an email to Mr Garg outlining the financing that Afras was seeking (an import Trust Receipt Facility of US$6.5 million and a performance bond of US$1.25 million). On 24 May 2010 (8.16pm) Mr Figueredo sent an email to Mr Kumar with the subject heading “Iraq Proposal” stating:
This refers to your request for financing requirement for the Iraq Project.
We are currently working on the credit proposal and will advise you of the outcome at the earliest”
58. The same day Mr Kumar forwarded that email to Corinth’s Mr Moiras and Mr Mastorakis but on the Bank’s case he dishonestly doctored the contents of Mr Figueredo’s email so that the subject heading was changed to “Fund Transfer to CPW” and stated (among other things):
This refers to your request for the fund transfer to Corinth Pipe Works. The request has been accepted by us and we are only waiting for the clearance from Central bank to withdraw the hold on your account. As I informed you this morning, this is only a procedural delay and there is nothing any one of us here can do so speed up the process, due to the regulations.
We will advise you the transfer date in a day or two. Meanwhile, should you wish to handover a cheque to guarantee the payment to satisfy the BOD of CPW, you may to do as the funds are blocked”
59. Afras’/Mr Kumar’s own expert concedes that the email sent by Mr Kumar to Corinth “must have been altered somewhere between the email being sent by Barclays and it being produced by CPW”. That person was clearly Mr Kumar. In particular, Mr Kumar’s covering email to Corinth states “Dear Michael, As per our telecon, please find below the e mail received from the bank”. The inference is clear. Mr Kumar had spoken to Corinth’s Michael Mastorakis that day and made reference to that call when he forwarded the doctored email to him. As I see it, only Mr Kumar could have had the phone call with Mr Mastorakis and only Mr Kumar could have doctored the email that he forwarded to Mr Mastorakis.
60. Mr Figueredo sent another email to Mr Kumar on the “Iraq Project” on 27 May 2010 stating:
“This refers to the financing proposal for the subject supply project.
We wish to advise that we are currently working on the proposal. Upon approval of the proposal, we will require four working days to complete the documentation and effect the payment to the beneficiary. This is for your information”
61. The same day, 27 May 2010, Mr Kumar sent an email to Corinth, which purported to forward an email from Mr Figueredo, to Corinth’s Mr Moiras, Mr Mastorakis and Mr Taxiarchis, which had the subject heading “CPW Transfer” and stated (among other things):
This refers to your request for the transfer to CPW. The account is operational now and the transfer will happen on Sunday the 30th May.”
62. It is common ground between the IT experts that the “thread index” in this email is the same as the email sent by Mr Kumar to Corinth on 24 May 2010. As explainjed in the Joint Experts’ Report, this means that the 24 May and 27 May 2010 emails are likely to have originated from the same source email and that the email dated 27 May was created by someone outside of the Bank. In my judgment, that person was clearly Mr Kumar.
June 2010: further developments on the Iraq Project and further fabrication of Mr Figueredo’s emails
63. On 1 June 2010 Mr Kumar sent another email to Corinth which purported to forward an email from Mr Figueredo. This had a heading “Transfer” and the purported forwarded email stated:
This is to inform you that we have initiated your request on Sunday. However, Monday being a holiday in UK, the actual processing will start only today. I will advise you the value date shortly
64. Two of the three IT experts agree that it is likely that this email was created by someone with control of Mr Kumar’s email account. I accept that evidence. Again, that must have been Mr Kumar.
65. At this time the Bank was still considering the application for finance for the Iraq Project.
66. On 4 June 2010 Mr Kumar sent an email to Mr Moiras which purported to forward another email from Mr Figueredo. Once again, two of the three IT experts are of the view that this email was fabricated by someone with access to Mr Kumar’s email account. The suggestion from the expert for Afras/Mr Kumar that the email could have been fabricated by someone at Corinth can be rejected as a wholly unrealistic explanation for how the email came to be doctored.
67. At this time the Bank’s Mr Kurian raised further questions concerning the security and documentation that Afras could provide in relation to the Iraq Project. A further letter explaining the project was provided by Corinth on 7 June 2010. Mr Kurian considered this on 7 June and wished to discuss the proposition with those in the Bank’s Credit Department.
68. Thus, with Afras’ request for finance still being considered, on 10 June 2010 (11.45am) Mr Figueredo sent an email to Mr Kumar providing him with an update. The subject heading was “Project Financing” and the text of the email stated:
This refers to the several discussions we have had on the subject. Please note that we need more time to conclude this and I expect closure by next working week at best.
69. The same day, Mr Kumar sent an email to Corinth’s Mr Moiras which purported to forward an email from Mr Figueredo (timed at 11.45am). In fact, this was either a fabricated alteration of the genuine email sent by Mr Figueredo at precisely the same time, or a completely new, fabricated email. Two of the experts agree that this email has characteristics which indicate that it was altered by someone outside of Barclays after it was sent by Mr Figueredo or which indicate that it was not a forward of the email sent by Mr Figueredo at all. The suggestion by Afras’/Mr Kumar’s expert that this may have been done by Corinth is in my judgment absurd. The fabricated email had a subject heading “CPW” and stated [D9-110]:
This refers to my discussions with you and Michael on the above mentioned subject. Please note that we need more time to complete the transfers and I confirm a full closure by next working week at worst. We have to get one more clearance, hence the delay.
70. On 16 June 2010 Mr Kumar purported to forward an email from Mr Figueredo to Corinth’s Mr Moiras and Mr Mastorakis. In fact, yet again this email was fabricated. Two of the IT experts agree that this fabrication was carried out by someone with access to Mr Kumar’s email account. I accept that evidence. The fabricated email stated:
This refers to our meeting with you yesterday. As discussed regarding the confirmation of payment based on the instruction received from Afras Ltd, I am unable to provide any confirmation at this point in time. As advised in the meeting, I will confirm to you by early next week only. I hope to complete all the internal formalities by Thursday or Sunday the latest (if an additional review is required) and start remitting funds to CPW account from Tuesday onwards.
Appreciate your patience in the matter
71. The only person from Afras who had met with Mr Figueredo on 15 June 2010 was Mr Kumar (see Mr Kumar’s own Trial Witness Statement). This simply underlines that it was Mr Kumar who was doctoring Mr Figueredo’s emails. As with the reference to the phone call with Mr Mastorakis (referred to in paragraph 59 above), Mr Kumar’s emails referred to events which had in fact taken place (in this case a meeting) when he doctored the contents of Mr Figueredo’s email.
72. On 12 July 2010 Corinth wrote to the Bank alleging that the Bank had sent it various emails which stated that payment would be forthcoming. The Bank immediately launched an investigation, as described in the evidence given by Mr Andrade from the Bank’s Fraud and Risk Management Unit. By 13 July 2010 the Bank had correctly formed the view that Mr Kumar had been fabricating emails from Mr Figueredo and resolved to terminate its banking relationship with Afras the next day. A letter was sent to Afras on 14 July 2010 immediately terminating the relationship.
73. The doctoring of e-mails by Mr Kumar is not something of direct relevance to the Bank’s cause of action. But they go further than merely undermining if not eliminating Mr Kumar’s credibility. As the bank put it, Mr Kumar’s conduct in sending the e-mails supports the conclusion that Mr Kumar participated in a dishonest conspiracy because otherwise the sending of them is inexplicable.
THE FABRICATED COMMISSION CLAIM
74. When the Bank asked Afras to explain the position Afras alleged for the first time that there was a dispute with Corinth over whether or not payments due from it under the PDO Contract should be set off against commission claims that Afras had against Corinth. In particular, while Afras and Mr Kumar admit that US$24 million is owed to Corinth, they claim that Afras has a claim for around U$19 million by way of commissions. This, so they say, justifies the non-payment of monies to Corinth.
75. As with the emails, I have come to the conclusion that the story about commissions is another fabrication by Afras and Mr Kumar. The only documents which have been disclosed to support this US$19 million claim are letters written on Corinth notepaper and signed by Mr Moiras, the former Commercial Manager of Corinth, who is being prosecuted for fraud and breach of trust in Greece.
76. The letter dated 2 March 2010 purports to list out eight commission payments and one expenses payment totalling €3,714,237.80 and US$15,433,151.82 (or approximately US$19,147,388) which was allegedly due from Corinth to Afras as at 2 March 2010. The letter goes on to say that Corinth had no objection to Afras setting off this claim against the sums due under the Bechtel and PDO Contracts. This letter and the other two earlier “written acknowledgements” are plainly false. Indeed, even Mr Moiras has now disavowed them in the Greek criminal proceedings against himself and Mr Kumar. There, Mr Moiras has admitted that the commission documents were “fictitious and not real“.
77. As another general point, Mr Kumar alleges that the commissions had been outstanding as at 2010 for a period of 2-3 years (see para 148 of his witness statement). Plainly, if there was any truth in the commission claim there would be dozens if not hundreds of documents held on Afras’ computers to support the claim going back over this 2-3 year period. These would of course include ledgers, invoices and emails chasing Corinth for payment. However, in around late 2010 at a time when Mr Kumar knew that Corinth was chasing for payment of US$24 million, Mr Kumar authorised Afras’ employees to dispose of the entirety of Afras’ computers and servers (see Afras’ Further Information dated 19 September 2013 Answers 1, 4 and 5). Had Afras really had a US$19 million commission claim, it is inconceivable that Mr Kumar would have authorised Afras’ employees to dispose of such important and valuable records needed to prove that alleged claim.
78. Turning to the contents of the “written acknowledgements” these are plainly inconsistent with the genuine documents in the case.
79. The “written acknowledgement” dated 2 November 2008 as well as that dated 25 April 2009 are obviously fabrications because:
(1) The November 2008 “written acknowledgement” says that Afras can set off against the sums due under the Bechtel Contracts about US$5.5 million; and the April 2009 “written acknowledgment” says that Afras can set off against Bechtel invoices around US$8.9 million.
(2) However, in all the emails exchanged between Corinth and Afras in 2009 about outstanding debts owed under the Bechtel Contracts, no mention was made of this alleged set off.
(3) Furthermore, the final payment under the Bechtel Contracts was made on 3 September 2009 in the sum of US$7,846,866. On 18 August 2009 Mr Kumar had told Corinth that this payment would be made at around that time. Yet according to the “written acknowledgments” at this time Corinth was meant to owe a greater sum to Afras and Afras was entitled to set this off against the sum due under the Bechtel Contracts.
(4) Accordingly had these “written acknowledgements” been genuine documents, Afras would have referred to them in response to Corinth’s demands for payment under the Bechtel Contracts, but it did not. Furthermore, there would have been no need for Afras to make the final payment under the Bechtel Contracts because of the purported commission debt exceeding the sum due under the Bechtel Contracts coupled with the express right of set off in the “written acknowledgments”.
80. Equally all of the “written acknowledgments” are plainly fabrications when considered against the following genuine contemporaneous documents:
(1) Afras’ audited accounts for year end 31 March 2009 showed trade and other receivables as only AED8,915,403, which was equivalent to approximately US$2.4 million. According to the “written acknowledgments”, Corinth owed Afras commission of €2.65 million, US$5.218 million and OMR 71,175.68 (or approximately US$8.9 million) as at that date, which is wholly inconsistent with the 2009 audited accounts.
(2) On 21 July 2009 Afras’ Chief Accountant, Mr Shah, signed a letter at the request of Corinth’s auditors (PwC) confirming that the sum owed by Afras to Corinth as of 30 June 2009 was US$31,582,279. That is obviously inconsistent with a sum of US$8.9 million being owed the other way and the purported agreement that there would be a set off between sums due to Corinth under the Bechtel/PDO Contracts with Afras’ purported commission claim.
(3) On 23 December 2009 Corinth asked Afras to confirm that it owed Corinth US$25,917,334 (which related to the PDO Contract). This was done by Afras’ Chief Accountant, Mr Shah on 15 March 2010. That is obviously inconsistent with the existence of a multi-million dollar commission debt being owed by Corinth to Afras.
(4) Afras’ audited accounts for the year end 31 March 2010 showed Afras’ trade and other receivables as AED14,536,840 which is about US$4 million. That is plainly inconsistent with Afras having an entitlement to US$19 million in commission as at that date.
(5) The genuine email traffic in 2009 and 2010 is all about Corinth chasing Afras for payment and Afras making excuses that it had not received payment from Bechtel and PDO. Had Afras really been owed a huge commission payment by Corinth it obviously would have been referred to in these emails.
81. In addition to the foregoing, there is another obvious falsity in the “written acknowledgement” dated 2 March 2010 which states that a figure of US$1,900,000 and US$2,400,000 was due to Afras in respect of the PDO Contract, one of which is described as being in respect of “Settlement“. This is obviously false because:
(1) The settlement was only US$828,177 and was on account of the PDO Pipes being delivered late to PDO.
(2) This is clear from a letter from PDO to Afras dated 8 March 2010 which sets out how the figure of US$828,177 was arrived at.
(3) This settlement is entirely consistent with the statement of account in paragraphs 17-20 of Corinth’s P/C which show how the sum of US$24,198,231 was arrived at after taking into account the settlement of US$828,177.
(4) It is also consistent with the figure of US$24,198,231 entered by way of judgment in the Dubai Court Proceedings against Afras and Mr Kumar as the sum due under the PDO Contract (see para 21 of Mr Kumar’s witness statement).
(5) Accordingly, it is completely inconsistent with all of the foregoing for the “written acknowledgement” to say that Corinth owed Afras US$1.9 million and US$2.4 million in connection with the PDO Contract.
82. In light of this overwhelming evidence I find that the commission claim and the “written acknowledgements” are, like Mr Kumar’s emails, dishonest fabrications put together in an attempt to avoid paying Corinth the full US$24,198,231 which it is owed. The consequence of the foregoing is that Afras and Mr Kumar have not paid any of this sum owed to Corinth. Indeed, they have retained it and received the benefit of it.
THE BANK’S CLAIM AGAINST AFRAS AND MR KUMAR
83. Article 14 of the DIFC Law of Obligations (Law No.5 of 2005) provides that:
(2) A person who makes a payment in settlement of a claim arising under this Law may recover from any other person who would have been liable in respect of the same loss if the factual basis of the claim against him could be established.
(3) A contribution recovered under this Article is such that the arbitrator or Court finds to be just, having regard to that person’s responsibility for the loss in question”.
84. Afras and Mr Kumar are liable to Corinth under Article 36 of DIFC Law No. 5 of 2005 which provides that joint liability arises where “two or more persons conspire to do an unlawful act with the intention to cause loss to the claimant, and loss is caused to the claimant by the performance by at least one of them of the unlawful act”. They are also liable to Corinth under Article 31 of the DIFC Law of Obligations for the deceitful misrepresentations which were the unlawful acts carried out pursuant to their conspiracy. The first dishonest misrepresentation that they made to Corinth was the “Payment Representation” i.e. that they intended that Afras would pay Corinth for the Bechtel and PDO Pipes. This representation was made at the time when the PDO and Bechtel Contracts were made and at all times when the goods were being shipped and while payment was outstanding. The falsity of this representation and their dishonest intention behind it are manifest from the dishonest statements that they made to Corinth about Afras not having been paid by Bechtel, when in fact Bechtel had paid in full by 27 March 2009. The second dishonest misrepresentation was that Afras was to use trade finance to pay Corinth under the PDO Contract. In fact, as is clear, Afras used this trade finance to pay off the Bechtel debts. In making these payments to Corinth they also misled the Bank as to what they were using the PDO Facilities for. Their dishonesty is also manifest from the doctoring of the Bank’s emails which were forwarded to Corinth in an attempt to fend off Corinth’s demands for payment. Finally when their dishonesty in relation to the doctoring of emails was uncovered, Afras/Mr Kumar then invented the US$19 million commission claim with the assistance of Mr Moiras in an attempt to provide a substantial set off against the US$24 million owed to Corinth. In an attempt to cover their tracks they disposed of all of Afras’ computers and servers.
85. As intended by Afras and Mr Kumar, Corinth entered the Bechtel and PDO Contracts and supplied the Bechtel and PDO Pipes. Corinth would never have entered the PDO Contract had it not been misled in relation to why payment had not been made under the Bechtel Contract and had it not been misled as to the use to which Afras would put the trade finance that it raised from the Bank.
86. All of Afras’ and Mr Kumar’s dishonesty proves that their real intention was not to pay Corinth for the Pipes it was supplying. Afras and Mr Kumar acted in accordance with that intention by siphoning off monies received from Bechtel to another Afras bank account and not passing on to Corinth the monies that it received under the PDO Contract. Indeed, even in February 2010 when Afras owed Corinth USD 24 million, Mr Kumar was still taking substantial sums out of the company and transferring them to his personal bank accounts.
87. The loss of US$24 million suffered by Corinth is precisely the same loss that Corinth claimed from the Bank. The Bank has settled the claim against it and under Article 14(2) and it is now entitled to an indemnity or contribution.
88. Mr Kumar alleges that he has no personal liability to the Bank on the grounds that he acted solely as an agent for Afras. This is misconceived. He made dishonest representations himself. A dishonest director cannot escape liability for his fraud by alleging that he was acting solely on behalf of the company (Standard Chartered Bank v Pakistan National Shipping Corp (No 2)  1 AC 959). He also personally acted in the conspiracy.
89. Afras/Mr Kumar also allege that Corinth did not rely on any misrepresentation (see for example the Defence para 25.4). It is obvious from the documents that Corinth relied on what it was told by Afras and Mr Kumar. For example, a vendor of goods obviously relies on implied representations that payment will be made when it enters a contract of sale and also when it dispatches the goods to the purchaser.
90. Afras/Mr Kumar also contend that they honestly believed that the Payment Representations, which they made, were true when they made them. However, this contention is based on their allegation that Corinth owed Afras US$19 million which it would pay. In other words, Afras/Mr Kumar say that they honestly represented to Corinth that payment would be made, because at the time they thought that they would fund payment with the commissions due from Corinth. This contention is factually flawed since it is clear that no such commissions were due for the reasons set out above.
91. Afras/Mr Kumar submitted at the hearing on Monday 21 April 2014 that Article 56 of the DIFC Law of Obligations rules out recovery of contribution where the original claim against the party seeking contribution was in conspiracy or deceit. This submission is plainly wrong. It fails to give effect to the clear wording in Article 14 of the DIFC Law of Obligations and is also contrary to the position in English law which has decided that illegality is not a defence to recovery of contribution.
92. In Dubai Aluminium v Salaam  2 AC 366, the House of Lords awarded to a firm of solicitors (“the Amhurst firm”) that had settled a claim in fraud, a 100% contribution (i.e. a complete indemnity) against fraudsters who had benefited financially from the fraud. The question of ex turpi causa was considered by Rix J, the first instance Judge, when determining the amounts of contribution that should be paid. As Rix J held  1 Lloyds Rep 415 at 462:
“There has now been authority that a defence of ex turpi causa does not run in a contribution under the Act: see K v. P,  Ch. 140 at pp. 148H-149B. Moreover, in Downs v. Chappell the Court of Appeal awarded contribution in favour of the fraudulent against the merely negligent. In any event, it does not seem to me that I am being asked to enforce an illegal transaction”.
93. DIFC Law is the same. Article 14(1) and (2) of the DIFC Law of Obligations provide an unqualified right to “recover contribution” regardless of a claimant’s degree of fault or blame. Blame and fault come into the assessment of what is a “just” amount that may be recovered under Article 14(3).
94. Afras/Mr Kumar seek to rely on Article 56 of the Law of Obligations, which is in these terms:
“A claimant may not claim under this Part for loss or injury in the course of, or as a consequence of, his unlawful conduct, or where it would be unlawful for him to obtain a remedy”
95. However, the Bank’s claim is not for “loss or injury”. It is, in the words of Article 14, a claim to “recover contribution”. Articles 13 and 14 make a clear distinction between “loss” (which in this case was suffered by Corinth) and the right to “recover contribution” (which in this case is the Bank’s right to recover from Afras/Mr Kumar).
96. Accordingly on its proper construction, Article 56 does not apply to rights to “recover contribution”. This is a conclusion which is in accord with the justice of the matter. It would be entirely unjust if, having received the benefit of the entire US$24 million, Afras and Mr Kumar paid nothing to the Bank in respect of the US$4 million which it paid to Corinth which has reduced Corinth’s claim against Afras/Mr Kumar by that amount.
The amount of the contribution
97. The Bank submits that the amount of the contribution paid by Afras and Mr Kumar should be 100% as this is the just contribution, having regard to Afras’ and Mr Kumar’s responsibility for the loss in question. Not only were they the orchestrators of the dishonest scheme, they received the benefit of the entire US$24 million, whereas the Bank received none of this. Afras and Mr Kumar are responsible for the loss because they have paid away that money when it ought to have been paid to Corinth. Having had the benefit of that money for their own purposes, it is just that they provide the Bank with a complete indemnity.
98. In this connection it was submitted that the right approach was exemplified by the House of Lords’ speeches in Dubai Aluminium v Salaam supra. This case makes clear that as a matter of English law the extent to which some parties to the fraud, but not others, remain in possession of considerable sums of misappropriated moneys is a matter which should be brought into the assessment of an appropriate contribution. In that case a firm of solicitors was found to have dishonestly assisted two fraudsters in defrauding the claimant. The firm had not received any of the proceeds of the fraud (being paid only its fees) while the two fraudsters had received some of the proceeds of the fraud. In light of the benefit that they had received from the fraud, the two fraudsters were ordered to pay the solicitors a 100% contribution. An analogous situation arises in this case: the Bank did not receive any of the proceeds of the fraud (being paid only bank charges and interest) while Afras and Mr Kumar received US$24 million from the fraud.
99. I agree. Accordingly I grant judgment to the Bank against Afras and Mr Kumar in the sum of US$3,900,000. As regards costs this is a paradigm case for the award of indemnity costs. The case for Afras and Mr Kumar was fundamentally dishonest. It was conducted and concluded in an irresponsible fashion. Furthermore Afras and Mr Kumar were, as the Bank puts it, the architects and financial beneficiaries of the fraudulent scheme. It follows in my judgment that they should pay the costs incurred by the Bank in defending the claim brought by Corinth on the same basis that they have been held liable for the entire settlement sum.
100. As regards interest the Bank is entitled to recover EIBOR plus 2% on US$4 million from the date of payment to Corinth and on US$3.9 million from the date of the payment of Mr Kumar’s contribution of US$100,000. Interest at the same rate must also be paid on costs incurred by the Bank from 9 September 2014 the date on which I accept the Bank had incurred and paid the vast majority of its costs.
Date of Issue: 12 January 2015
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