Kuwait Oil Tanker Company S.a.k and Another (Plaintiffs) Abdul Fattah Sulaiman Khaled Al Bader and Others (Defendants) H. Clarkson & Company Ltd and Others (Third Parties)
| Jurisdiction | England & Wales |
| Judgment Date | 17 December 1998 |
| Judgment citation (vLex) | [1998] EWHC J1217-10 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 17 December 1998 |
[1998] EWHC J1217-10
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Honourable Mr. Justice Moore-Bick
Mr. Julian Malins Q.C., Mr. Richard Slade and Mr. Jonathan Adkin instructed by Shaw and Croft appeared for the plaintiffs.
Mr. Stanley Brodie Q.C., and Mr. Robert Howe instructed by Olswang appeared for the first defendant
The second defendant appeared in person
Mr. Selwyn Bloch instructed by Brian Harris appeared for the third defendant.
Mr. Nicholas Strauss Q.C., and Mr. Craig Orr instructed by Slaughter and May appeared for the third third party
The first, second and fourth third parties did not appear and were not represented.
The Hon. Mr. Justice Moore-Bick
Background
In this action the plaintiffs, Kuwait Oil Tanker Company S.A.K. ("KOTC") and one of its wholly-owned subsidiaries, Sitka Shipping Incorporated ("Sitka"), are seeking to recover sums in excess of US$70 million which they allege were embezzled by the defendants between 1985 and 1992 pursuant to a fraudulent conspiracy whereby the defendants systematically enriched themselves at the plaintiffs' expense. KOTC itself is a wholly-owned subsidiary of Kuwait Petroleum Corporation ("KPC"), a state-owned corporation which has responsibility for all aspects of the petroleum industry on which the State of Kuwait depends for its revenue. KOTC's primary function is to make available to KPC vessels required by KPC for the carriage of Kuwaiti crude oil and products.
The first defendant, Mr. Abdul Fattah Al Bader, was appointed a director of KPC and chairman of the board of KOTC in March 1983 and held that position until he resigned in February 1992. He was replaced by the current chairman, Mr. Abdullah Al Roumi who had previously been assistant managing director for marketing at KPC and also a non-executive director of KOTC. As chairman of KOTC Mr. Al Bader was also its chief executive. From its incorporation in July 1984 he was also president and a director of Sitka which is a Liberian company. The second defendant, Mr. Hassan Ali Qabazard, was Deputy Managing Director (Administration and Finance) of KOTC from April 1981 until June 1992. He had previously been employed by KOTC in other capacities continuously since 1972. During the period with which I am concerned Mr. Qabazard was head of KOTC's Finance Department, reporting director to Mr. Al Bader. Mr. Qabazard's immediate subordinate was the Financial Manager, Mr. Nasim Mohsin, who the plaintiffs say was also involved in the fraud but who is not a party to these proceedings. The third defendant, Capt. Timothy Stafford, entered KOTC's employment in October 1980 having previously served at sea from 1959 to 1976 and thereafter practised as a marine surveyor in Kuwait for about four years. He became Fleet Operations Manager of KOTC in February 1983, with responsibility for all operational aspects of KOTC's fleet of vessels. KOTC's management structure provided for a Deputy Managing Director (Operations) at the head of the Operations Department, but that post remained vacant throughout the 1980s. Capt. Stafford therefore acted as head of the department for most practical purposes and reported directly to Mr. Al Bader. He left KOTC at the beginning of September 1989 when he retired to Australia.
One other person must be mentioned at this stage, Sheikh Ali Khalifa Al Sabah, a prominent member of the Al Sabah Ruling Family who served at various times as Oil Minister and Finance Minister. Oil is the life blood of Kuwait and the petroleum industry is state-owned and state-controlled. The Oil Minister is an important member of the Council of Ministers and is also a member of the Supreme Petroleum Council, a body of ministers which has general responsibility for supervising the policies and activities of KPC. The Oil Minister is also Chairman of KPC. Sheikh Ali became Oil Minister in 1978. He was a man of powerful personality who was widely regarded as an extremely able and dynamic minister and was the architect of the development of KPC as an international oil company involved in all aspects of the petroleum industry. Sheikh Ali remained in office as Oil Minister until June 1990 when he became Finance Minister. As Oil Minister and Chairman of KPC he had regular contact with Mr. Al Bader, but apart from their professional contact the two men were close personal friends having known each other very well for many years.
Shortly after his appointment as chairman of KOTC Mr. Al Bader became acquainted with Mr. Hugh McCoy, then Deputy Head of the Sale and Purchase Division of the London brokers H. Clarkson & Co. Ltd ("Clarksons"). Much of Mr. McCoy's contact with KOTC at that time was made through Capt. Stafford who was handling the day to day aspects of KOTC's business relating to the purchase and sale of tankers, but he also had a certain amount of direct contact with Mr. Al Bader. Prior to 1986 Clarksons acted as chartering brokers for KOTC in relation to a few fixtures of product tankers. That side of the business was not handled by Mr. McCoy personally, but I have no doubt that there were sufficient contacts between them during that period for Mr. Al Bader to have formed a favourable impression of Clarksons and a good working relationship with Mr. McCoy. In due course that led to a far more extensive relationship between Clarksons and KOTC during the period between 1986 and 1992.
The course of events between 1984 and 1994
In order to put the issues in context I propose to begin by describing the course of events between about April 1984 and July 1994. In doing so I shall as far as possible confine myself at this stage to the uncontroversial facts, save in a few respects in which it is more helpful from the point of view of the narrative to deal with certain matters in dispute. At a later stage I shall return to those aspects of events which were controversial in order to make any findings about them.
(a) The tanker war
In April 1984 the war between Iran and Iraq which had already been in progress for over three years entered a new phase with the onset of the "tanker war" in which both parties began systematically to attack merchant shipping in the Gulf. Iraqi attacks were directed mainly against Iranian shipping, but Iran responded with attacks on Saudi and Kuwaiti vessels and vessels of other nationalities using their ports. The first of KOTC's vessels to be attacked was the Umm Casbah which was hit in May 1984. Attacks of that kind had very serious implications for Kuwait which depended on the free access of foreign tankers to its ports to enable it to maintain exports of crude oil and products. As attacks on tankers became more frequent foreign shipowners became increasingly reluctant to send their vessels into the northern part of the Gulf and in an attempt to keep exports flowing freely KOTC established a shuttle service between Kuwait and Khor Fakkan for both crude oil and products. The bulk of the crude oil was moved to Khor Fakkan using three tankers purchased by KOTC for that purpose, the Caribbean Breeze, Porchester Sky and Yucatan Valley. These vessels were formally owned by two new Liberian subsidiaries of KOTC incorporated specifically for that purpose, Porchester Shipping Co. ("Porchester") and Yucatan Shipping Inc ("Yucatan"). During the period from 1984 to 1988 Capt. Stafford played an important role in implementing measures designed to protect tankers calling at Kuwaiti ports throughout their voyages into and out of the Gulf at no small risk to himself and with considerable success.
(b) The Strategic Oil Reserve
In April 1986, as part of the measures being taken to safeguard Kuwait's exports, the Supreme Petroleum Council approved a plan to establish a strategic floating oil reserve of between 35 and 45 million barrels of crude oil outside the Straits of Hormuz and instructed KPC to charter the tankers required for that purpose for the account of the state. That decision was ratified by the Council of Ministers at a meeting held on 27 April 1986. In anticipation of the formal approval of this plan by the Supreme Petroleum Council and the Council of Ministers a delegation from KPC and KOTC which included both Mr. Al Bader and Mr. Al Roumi and also Capt. Stafford had already been sent to London to begin negotiations through brokers there to obtain the necessary tonnage. The original plan was for the delegation to charter 18 vessels over a period of time in the name of Sitka in order to provide floating storage with a total capacity of about 35 million barrels for a period of some months. In the end the joint delegation fixed 6 vessels during the period between May and July 1986 using three different firms of brokers before sole responsibility for chartering operations was entrusted to KOTC.
(c) Back-to-back charters
The establishment and operation of the strategic oil reserve was intended to be confidential, but before long information began to leak out and the vessels became the target of attacks. As a result, Sheikh Ali directed that KOTC alone should take over responsibility for chartering the remaining vessels required. Although contained in a formal memorandum dated 25th November 1986, that decision was in fact taken in about September 1986 and implemented immediately. From that time onwards all chartering was carried out by Capt. Stafford...
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