FM Capital Partners Ltd v Frédéric Marino

Hearing dates: 12, 13, 14, 15, 19, 21, 22, 26, and 27 March 2018

Judgment Approved

In this action the Claimant (“FMCP”) brings a variety of claims against the First Defendant (“Mr Marino”) and the Third Defendant (“Mr Ohmura”). Claims against other defendants, principally the Second Defendant (“Mr Bessot”) have been settled before this trial. FMCP is a UK company originally incorporated as a joint venture between Mr Marino, Mr Bessot and Libya Africa Investment Portfolio (“LAP”), a Libyan sovereign wealth fund, to manage LAP's assets. It is majority owned by LAP.

At all material times FMCP's directors included Mr Marino, who was also its employee and Chief Executive Officer, and Mr Bessot, who was also its Chief Investment Officer. At the same time Mr Marino and Mr Bessot were joint owners of another company, Ironfly International Limited (“Ironfly”), and Mr Marino was the owner of a company called Leopard Technology Limited (“Leopard”).

The overarching claim is one in conspiracy to injure. There are two major strands to the alleged conspiracy. The first relates to a series of large investments of LAP assets in certain financial products offered by Bank Julius Baer & Co. (“JB”). These are referred to collectively as the JB Notes and known individually by their acronyms as GAIN, AMFC+, TRAC and TRAC+. The initial investment in GAIN was US$125 million. Further tranches of LAP assets (previously held at another private bank, Union Bank Privée (“UBP”)) were also invested in GAIN in October 2009 (c. US$48.5m); and in AMFC+ in May 2010 (c. US$70m); before both GAIN and AMFC+ were unwound and the assets re-invested in TRAC in November 2010. TRAC was replaced by TRAC+ in October 2011.

In relation to the JB Notes, payments of more than US$8.5m were made by JB's investment arm, GAM Structured Investments Ltd (“GAM”), to Ironfly and Leopard, the source of the funds being the monies invested by LAP. Of this sum more than US$1m was paid to companies owned by Mr Ohmura, the founder and General Director of GAM until late July 2009, and subsequently a trader on his own account. These companies were a Cayman Islands company called Conquest Capital Limited (“Conquest Cayman” — now dissolved) and a Swiss company called Conquest Financial Partners AG (“Conquest”).

The second major strand of the alleged conspiracy relates to payments made to Conquest, Ironfly and Leopard arising out of a series of at least 14 one-off, shorter-term trades in structured products using LAP's assets (the “Structured Product Trades”). These payments, which again are said to have directly diminished LAP's asset values dollar-for-dollar, amounted to over US$7.5m.

The payments made to Ironfly, Leopard and Conquest are said by FMCP to be secret commissions. Consequently, as well as the claim in conspiracy, claims are made against both Mr Marino and Mr Ohmura on the basis of dishonest assistance, knowing receipt and bribery; and claims are also made against Mr Marino for breach of his duties as a director. There are also proprietary claims against each. The claims made against each of them by FMCP, and the amounts of those claims, are summarised in the Appendix to this judgment. In essence the total claims against both Defendants across the various trades (FM/YO) are:

i) Conspiracy: US$16,231,426/ US$16,231,426;

ii) Dishonest assistance: US$14,789,984/ US$12,183,713;

iii) Bribery: US$14,789,984/US$7,875,313

iv) Breach of fiduciary duty: US$14,789,984/zero;

v) Knowing receipt: US$13,933,713/US$625,000.

It is only the issues concerning these payments and giving rise to these causes of action with which I am concerned in this Phase I trial. Pursuant to a direction made by Andrew Baker J on 20 December 2016 there will at a later date be a Phase II trial concerned with claims relating to what is said to be a loss of c. US$46m caused by the forfeiture of capital protection on the GAIN notes, and claims relating to the extraction of various fees, without LAP's consent, both for FMCP and for the benefit of entities owned or controlled by Messrs Marino and/or Bessot.

I set out below a guide to the structure of this judgment:

i) The structure of the trial: Paragraph 9

ii) Uncontroversial facts: Paragraph 15

a) The Parties

b) LAP, its portfolio and initial contact with Mr Marino

c) The JB Notes and the IMAs

d) The Structured Product Trades

e) The Defendants' companies and the amounts paid to the Defendants

f) Sums paid to Third Parties

g) The PwC and BDO investigations

h) The Charles Russell letter and the current proceedings

iii) The legal common ground and the legal issues in outline: Paragraph 63

a) The standard of proof for dishonesty

b) Breach of fiduciary duties and directors' duties

c) Dishonest assistance

d) Knowing receipt

e) Bribery

f) Conspiracy

iv) Conclusions on Factual Issues and on Principal Claims: Paragraph 96

a) The witnesses and the inferences contended for

b) The background to FMCP's incorporation and the April Mandate

c) July — October 2009: GAIN I and II and the first payments

d) July — October 2009: The Vesper entities

e) January—July 2010: Mr Haggiagi

f) October 2009—September 2010: The Private Bank trades

g) May 2010: AMFC +

h) November 2010: TRAC

i) January 2011: Transfer of Custody to HSBC

j) Vesper: 2010–2011

k) January — June 2011: The Vesper Trades

l) October 2011: TRAC+

m) September 2012-July 2014: Payments to Mr Aversano and Mr Ay

v) Other Issues: Paragraph 409

a) The issue of loss

b) Knowing receipt

c) Bribery

d) Conspiracy

e) Limitation issues

vi) Choice of law and Swiss law: Paragraph 480

a) Choice of law

b) Swiss law: the substance

vii) Summary of conclusions: Paragraph 582

viii) Postscript: Remedies: Paragraph 583

a) Breach of Fiduciary Duty

b) Dishonest assistance

c) Knowing Receipt

d) Bribery

e) Conspiracy

The Structure of the Trial

The trial before me was structured to be a three week trial, in which each of the first three Defendants and Mr Eltriki for the Claimant would give factual evidence; and in which there would be three experts in structured products called (Mr Colas for the Claimant, Mr Beevers for Mr Marino and Mr Alpay for Mr Ohmura) as well as two experts in Swiss law: Professor Pieth for FMCP and Dr Weibel for Mr Ohmura.

Matters however developed in a number of respects. The Claimant indicated that they would not call Mr Bessot, with whom they had settled. After some debate, Mr Ohmura relied on Mr Bessot's witness statement, but no application was made by the Claimant to cross-examine him on it – not least because he was not in the jurisdiction.

More surprisingly on Day 2 of the trial, Mr Couser for Mr Marino indicated that Mr Marino would not be called on his own behalf. A suggestion was made that his statements would be tendered in his absence, though he was or had been within the jurisdiction. However, following an indication that the Claimant would then apply to cross examine him under CPR 32.7 it was indicated that Mr Marino would not either put in or seek to rely upon his witness statements.

As a result, the only witnesses of fact were Mr Eltriki, who was cross—examined (through an interpreter) for a few hours and Mr Ohmura who gave evidence for nearly 3 days. I deal further with the submissions made on their evidence below.

When it came to expert evidence the planned timetable also collapsed. Firstly, the Claimant, having trailed Mr Colas' evidence fairly thoroughly in opening, elected not to call him. Following a necessarily short cross-examination of Mr Beevers by the Claimant, Mr Ohmura then also elected not to call his own expert witness Mr Alpay. Thus, the structured products evidence that was left before me was essentially the agreed parts of the Joint Memorandum of the experts, although ultimately reliance was placed (both by FMCP and Mr Ohmura) on parts of the evidence of Mr Alpay for Mr Ohmura as well as parts of the evidence of Mr Beevers (for Mr Marino). This was not an entirely satisfactory position, as the Joint Memorandum largely proceeded by reference to evidence which was never called. In the circumstances I have considered carefully to what extent any of this evidence actually assists and referred so far as possible only to truly agreed evidence, and then only to the extent necessary.

The two experts on Swiss law were called and were briefly cross-examined on their reports. The experts had different legal backgrounds, which was sometimes reflected in the different approaches they took to particular issues: Professor Pieth gave slightly more weight to academic writing while Dr Weibel focused more on what he said was the legal reality in practice. But there was considerable agreement between them and both gave clear and helpful evidence supported by decisions of the Swiss court.

Uncontroversial Facts

The Parties

Mr Marino was born in 1966. Since 2000 he has been involved in the derivatives business, initially at Rabobank and later (having been headhunted after developing a specialist fund derivatives business) at Merrill Lynch, Bear Stearns and following the Bear Stearns merger with JP Morgan, JP Morgan.

His experience is on the investment advisory side of the business having...