Lakatamia Shipping Company Ltd and Others v Nobu SU/HSIN CHI SU (aka SU HSIN CHI; aka Nobu Morimoto) and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke |
| Judgment Date | 05 November 2014 |
| Neutral Citation | [2014] EWHC 3611 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 05 November 2014 |
| Docket Number | Case No: 2011 Folio 357 |
[2014] EWHC 3611 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Cooke
Case No: 2011 Folio 357
SJ Phillips QC, NG CaseyandClara Benn (instructed by Hill Dickinson) for the claimants
John Jarvis QC, Josephine DaviesandLeonora Sagan (instructed by Cooke, Young & Keidan) for the defendants
Hearing dates: 21st, 22nd, 23rd, 24th, 27th, 28th, 31st October and 5th November 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Cooke Mr Justice Cooke Introduction
It is common ground between the parties that during the weekend of 5th and 6th July 2008 an oral agreement (the FFA Contract) was reached by which, in return for one world scale point (equivalent, in the event, to $1.8 million) an FFA position (600,000 mt/month in the calendar year 2009 on Route TD3) would effectively be transferred for a one month period from persons/entities on the defendants' side of the fence to the first claimant (Lakatamia) which was controlled by the fourth claimant Mr Haji-Ioannou. One of the major issues in this action is the identity of the parties to that contract, it being the claimants' case that the first defendant, Mr Su and all of the defendant companies in the group under his control (the TMT Group) were parties to a contract with Lakatamia and Mr Haji-Ioannou, whilst the defendants contend that only the sixth defendant (TMT Liberia) entered into the contract with Lakatamia.
The arrangements were brokered by Mr Vassilis Karakoulakis of Clarkson Securities Ltd in London (Clarksons) who dealt with Mr Su and Mr Haji-Ioannou, neither of whom spoke directly to each other at any stage during the period when the contract was being negotiated. The terms of the FFA Contract are reflected, to some extent at least, in e-mail exchanges passing between them and Mr Karakoulakis and in a guarantee given by the seventh defendant (Iron Monger) to Lakatamia. There are also transcripts of telephone conversations and a fax cover sheet upon which the parties rely in relation to the terms of the contract and the identity of the parties thereto. Additionally I heard evidence from Mr Haji-Ioannou and Mr Su, but not from Mr Karakoulakis, whom neither party sought to call. There was evidence under the Civil Evidence Act as to what he had said 3 years later to the claimants' solicitor and a representative of the claimants however.
The guarantee appears as Appendix 1 to this judgment (signed on behalf of Iron Monger and Lakatamia). It contained an undertaking on the part of Iron Monger to "guarantee the good performance, execution and undertaking" of a contract by "messrs TMT". The contract is described as an "agreement reached between yourselves and messrs TMT concerning the sale to yourselves and respective buy back of a certain quantity of FFA's on cal09 vlcc td3 route". The terms of that agreement were expressed in the guarantee in the following manner:
"8th July 2008
Lakatamia buys via RBS/LCH and TMT sells via LCH following quantity of FFAs:
600kt/month of cal09 td3
purchase price for Lakatamia: ws 100.65 including RBS cost
following such transaction having taken place, TMT to undertake to buy back from Lakatamia same quantity as per above as follows:
TMT buys via LCH and Lakatamia sells via RBS/LCH again 600,000mt/month of cal09 td3 purchase price for TMT: ws 101.65
TMT to undertake to repurchase of above quantity from Lakatamia by no later than 8th August 2008 ie within latest 1 month after original purchase of same quantity by Lakatamia from TMT.
above two FFA trdes between the two parties to be mutually reliant and interlinked, therefore first one cannot take place without the second one."
Lakatamia held a clearing account with RBS but had to provide extra collateral for margin purposes of $10 million in order to take this trade. TMT Liberia also held a clearing account with RBS, on which Mr Su alone could give instructions. The guarantee referred to Lakatamia both purchasing and selling through RBS and LCH whilst referring to "TMT" selling and purchasing via LCH alone. It is not contended that "TMT" was bound to use RBS for either the sale or purchase. In fact, as emerges clearly from the correspondence, Mr Karakoulakis stressed the need for the "buy-back" element of the deal to be hidden from RBS altogether, at the time it was made, and which, when revealed to RBS in August, led to an explosion on the part of Mr Joynson of RBS, according to Mr Su.
In practice, what occurred on 8th July 2008 was that TMT Liberia sold the relevant FFAs to RBS and RBS sold them to Lakatamia, making a profit of 0.65 world scale points on the turn. Lakatamia paid Clarksons a commission of $100,000. On 8th August 2008 the buy-back did not take place. TMT Liberia was, it is said, unable to buy back the positions held by Lakatamia because RBS would not permit it. It is clear that TMT Liberia was, throughout this time, being subjected to pressure by RBS in respect of margin requirements and, because TMT Liberia was unable or unwilling to put up further margin, RBS would not clear a re-purchase of the positions in circumstances where the market value had fallen.
There are three main issues which the Court has to determine:
i) Who was party to the FFA contract? Was it merely Lakatamia and TMT Liberia, as the defendants contend or was there a personal contract between Mr Su and Mr Haji-Ioannou in addition and were other TMT companies in the TMT Group also bound?
ii) What is the measure of loss suffered by Lakatamia and/or the other claimants?
a) It is the defendants' case that recovery is limited to the difference between the contract and market value of the relevant FFA positions at the date when the repurchase should have taken place, namely 8th August 2008 (or at least the value to be ascribed at that date for effecting an orderly disposal of the large quantity of forward positions over an appropriate period following that date).
b) The claimants seek recovery of sums far in excess of that on the basis that, in the period following August 8th 2008, Mr Su and/or companies in the TMT group were giving assurances that the buy-back would take place and did in fact effect repurchase of 200,000 mt or more, usually at or around the market price, making balancing cash payments to compensate for the difference between that and the contract price. In addition other TMT companies gave freight discounts to Lakatamia to offset the liability arising under the FFA contract. 100,000 mt were repurchased on 18th August 2008, 50,000 mt were repurchased on 16th September 2008 and 50,000 mt on 16th October 2008. An additional 50,000 mt was bought back by RBS from Lakatamia but there was some doubt as to whether this reflected purchases by TMT companies or third parties. Payments of cash were made on dates between 8th October 2008 and 9th October 2009 totalling $32,303,195. Discounts on freight and hire were given by the companies in TMT group to Lakatamia which, it is agreed, totalled $11,276,033.01.
c) The balance of the FFA positions were closed in the respective calendar months in 2009 and the overall loss on the positions amounted to $79,633,538.25. Allowing for the sums paid and the discounts from freight, the balance which is claimed is $36,054,310.24.
d) It is the defendants' case that Lakatamia would have been able to sell all the FFA positions in a period of approximately 30 days at an average rate of 20,000 mt per day, without distortion of the market and should have done so by 19th September 2008, thereby suffering a loss of approximately $27,350,340, which is less than the sums already paid. TMT Liberia reclaims sums paid in excess of this on a restitutionary basis.
iii) Whether Lakatamia is, by virtue of Novation Agreements concluded on 8th November 2008, entitled only to claim loss in respect of 20% of the FFA positions because the other 80% of positions with RBS which were closed out thereafter were transferred to the second and third claimants (Slagen and Kition) because of RBS' collateral requirements and the security that RBS was prepared to accept from these other two companies in Mr Haji-Ioannou's group, as each had ships which could stand as collateral. The defendants contend that, by these Novation Agreements, Lakatamia's obligations to RBS in respect of the FFA positions were extinguished and replaced by obligations owed by Kition and Slagen, so that Lakatamia has no further claim beyond the 20% of the FFA positions which it retained. The claimants submit that Lakatamia is still entitled to claim for the full amount and that, if necessary, an indemnity should be implied into the arrangements between it and Kition/Slagen or alternatively an assignment to those companies of its right to claim for loss should be implied. If Mr Haji-Ioannou is entitled to claim for his own loss, then as the ultimate owner of the Cyclops Ship Group of which all these companies form part, it is said that his loss and damage is unaffected by the novations.
The parties to the FFA contract
The background to the FFA contract
The claimants' case, as pleaded originally, alleged a contract between Lakatamia alone and the TMT group, which was said to comprise the first-sixth defendants, including Mr Su. By an amendment made...
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