Njord Partners Sma-Seal LP v Astir Maritime Ltd

Hearing dates: 4, 5, 6 and 7 March 2024 Draft judgment provided to the parties on 28 June 2024

Approved Judgment

This judgment was handed down remotely at 10.30am on 3 July 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Mr SalterKC

(A) Introduction

(A.1) The background

The matters which remain for determination in this action are claims in the torts of deceit and conspiracy.

The first to third claimants are the successors in title to the lenders under a written agreement dated 28 March 2017 as amended and restated on 14 September 2017 and on 20 December 2017 (“ the Facility Agreement”). For simplicity, I will refer in this Judgment to the first to third claimants and their predecessors in title, without differentiation, as “ the Lenders”. Under the Facility Agreement, the Lenders ultimately made a facility of approximately USD 45m available to Astir Maritime Ltd (“ Astir”), the first defendant.

Astir was incorporated in the Marshall Islands specifically for the purposes of acting as borrower for this transaction. Astir was a wholly-owned subsidiary of North Star Maritime Holdings Limited (“ North Star”), a St Kitts & Nevis limited company set up in 2015 by the second defendant, Muhammad Tahir Lakhani. His two sons, Muhammad Hasan Lakhani and the third defendant, Muhammad Ali Lakhani, were the shareholders. Each of the sons owned 50% and the third defendant was a director.

Because of the similarity between the full names of these three members of the Lakhani family, I shall refer to them in this judgment (without intending any disrespect) simply as “ Tahir” (the second defendant), “ Ali” (the third defendant), and “ Hasan”. For consistency (and, again, without intending any disrespect) I shall adopt the same “first name only” style of referring to the other persons who feature in the history of this matter.

The lending under the Facility Agreement was secured by a parent company guarantee given by North Star, by guarantees given by various subsidiary companies, and by a personal guarantee given by Tahir (“ the Tahir Guarantee”). These guarantees were given in favour of Nordic Trustee A/S, the fourth claimant, as security agent for the Lenders.

During the negotiations which led up to the Facility Agreement, Tahir provided to the Lenders a Statement of Net Worth (“ the Statement of Net Worth”). The Statement of Net Worth purported to show that Tahir's personal assets were worth more than USD 46 million. As I shall explain in more detail later in this judgment, it is now common ground that this was an overstatement, because Tahir himself did not own several of the assets referred to and the realistic value of certain of those assets was materially lower than that stated.

The business of North Star and of Astir and its subsidiaries was ship recycling.Clause 3.1 of the Facility Agreement required Astir to “apply all amounts borrowed by it under the Facility only for the purpose of financing the Debt Funded Amount of a Permitted Transaction”. “ Permitted Transactions” were of two kinds: “ As Is Transactions” under which Astir would buy the vessel from its owner and, as owner, would then transport the vessel to the scrapyard for recycling; and “ Delivery Transactions”, under which Astir would act as broker to arrange for the purchase and on sale of a vessel to be scrapped, but would not take ownership prior to delivery.

Under clause 4.3 of the Facility Agreement, amounts drawn down under the facility were to be paid in the first instance into a Funding Account from which they could only be withdrawn upon compliance with the conditions precedent set out in clause 4.4.

By clause 4.4(g) and Schedule 2 Part III, those conditions precedent included the delivery of “an original of the Approved Borrower Statement duly executed by [the] chief financial officer of [Astir]”. The Approved Borrower Statement was required to be in the form set out in Schedule 11, which included a confirmation that “all transactions are Permitted Transactions” and that “no Default is continuing”.

The facility provided under the Facility Agreement was a revolving one, which allowed Astir (upon compliance with the conditions precedent in clause 4.4) to make withdrawals from the funding account from time to time for the purpose of financing Permitted Transactions. Condition 6.2(a) nevertheless required Astir to repay the amount withdrawn in respect of any particular transaction (“ the Funding Amount”) five Business Days after the receipt of the sale proceeds of the vessel. Failure to do so was expressly made a Default by clause 26.2.

Between about 4 March 2019 and about 5 February 2020, Tahir gave a variety of excuses to the Lenders as to why there had been delays in the completion of various transactions, and therefore as to why the Funding Amount in relation to those transactions had not yet been repaid. In paragraph 29 of the Amended Defence, Tahir and Ali admit that these excuses were false and that the relevant vessels had already been beached and/or broken up. In paragraph 34(a) of the Amended Defence, Tahir and Ali also admit that there was a continuing Default from 30 November 2018, five Business Days after the vessel “Equator Peace” had been broken up and its sale proceeds had been received.

Between 26 November 2018 and 3 July 2019, Astir delivered Approved Borrower Statements to the Lenders to support drawdown requests in respect of transactions involving 16 vessels. These purported to be signed by Ali as CFO of Astir. It is common ground that, in consequence of the matters which I have just described, the confirmations in those Approved Borrower Statements that the relevant transactions were Permitted Transactions and that no Default was continuing were both untrue.

(A.2) The claims and defences, in outline

The Lenders say that:

13.1. The description of Tahir's assets in the Statement of Net Worth (“ the Asset Representations”);

13.2. The excuses given by Tahir for the delay in repaying the Funding Amounts (“ the Delay Representations”); and

13.3. The confirmations in the Approved Borrower Statements (“ the ABS Representations”);

were each and all false when made, and were made fraudulently. It is the Lenders' case that Tahir and Ali each knew of the falsity of these representations when they were made and intended thereby to deceive the Lenders.

The Asset Representations and the Delay Representations were made by Tahir. On the face of the statements of case, Tahir denies both the making of the Asset Representations and their falsity. Tahir does, however, admit the making of the Delay Representations and also admits their falsity. In relation to the Asset Representations, Tahir denies any intention to deceive the Lenders and puts the Lenders to proof as to their reliance on them. In relation to the Delay Representations, Tahir puts the Lenders to proof as to their reliance. In both cases he denies that the Lenders suffered any loss as a result.

The Lenders assert that Ali also was a party to the Asset Representations and assumed responsibility for them, knowing them to be untrue. Ali disputes this. His case in relation to the Asset Representations is that he played no part in making them and, in any event, did not know them to be untrue. In relation to the ABS Representations, Ali's case is that his signature was appended electronically to the Approved Borrower Statements without his knowledge or authority. He also says that, in any event, he did not know that what was said in the Approved Borrower Statements was untrue. Ali also disputes the Lenders' assertions of reliance, causation and loss in relation to each of these sets of representations.

The Lenders' further claim in conspiracy asserts that Tahir and Ali conspired to cause harm to the Lenders by the unlawful means of each and all of these deceits. This is denied by both Tahir and Ali.

(A.3) The procedural history

In September 2019, the Lenders informed Astir that they would not permit any further transactions until the outstanding Funding Amounts were repaid. On 17 February 2020, liquidators were appointed to North Star in the Island of Nevis. This constituted an Event of Default under the Facility Agreement. When the Lenders learnt of this, they began to investigate the status of the outstanding transactions. An acceleration notice was served on Astir on 9 March 2020, and a demand was served on Tahir under the Tahir Guarantee on 20 March 2020.

On 15 April 2020 Foxton J granted a worldwide freezing order against Tahir and Ali. The Claim Form in this action was issued that same day. That worldwide freezing order, as amended and re-granted from time to time, remains in force.

On 27 April 2020 the Lenders made a recovery from enforcement action against an account in the name of Astir at UniCredit Bank AG. This recovery was applied to reduce the amounts outstanding under the Facility Agreement.

On 3 July 2020 Foxton J gave summary judgment in favour of Nordic Trustee A/S, the fourth claimant, against...