High Court Considers Unlawful Means Conspiracy Claim In The Context Of A Repo Fraud

• Published date: 29 March 2022
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Criminal Law, Financial Services, Trials & Appeals & Compensation, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Herbert Smith Freehills
• Author: Ms Ceri Morgan, Nihar Lovell and Phoebe Fox

The High Court has found in favour of a global financial brokerage business in its claim for unlawful means conspiracy against several businesses and individuals in the context of a repo fraud: ED & F Man Capital Markets Limited v Come Harvest Holdings Limited & ors [2022] EWHC 229 (Comm).

The decision will be of broader interest to financial institutions who may have been victims of a fraud perpetrated by a counterparty, or when defending mis-selling litigation, where allegations of unlawful means conspiracy are commonly included as part of a suite of claims.

While the decision did not involve new law, it serves as a reminder of the principles underpinning the tort of unlawful means conspiracy, and provides a useful application of the test set out in Kuwait Oil Tanker v Al Bader & ors [2000] EWCA Civ 160. Of note is the court's view is that in pursuing a claim for unlawful means conspiracy: (a) there can be different levels of intentionality involved when assessing whether there has been an intention by the fraudster(s) to cause harm; (b) it is not necessary that a party prove that the perpetrator(s) must have directed their actions towards a specific claimant, as opposed to a third party or class of persons more generally; and (c) blind-eye or Nelsonian knowledge (i.e. where a party abstains from inquiry because they do not wish to confirm a particular state of affairs which they believe likely to exist) may be sufficient to establish intention to cause harm.

In the present case, the court was satisfied that the defendants knew that the global financial brokerage was an intended victim of the unlawful means conspiracy, and if this had not been the case, the court noted that it would have found that the defendants had blind-eye knowledge. They also knew it was the global financial brokerage who would suffer loss.

We consider the decision in more detail below.

Background

Between May and October 2016, the claimant global financial brokerage business (MCM) entered into 28 sale and repurchase transactions. The counterparties to the transactions were 2 Hong Kong companies (together, the HK Companies). As part of the transactions, MCM received 92 purportedly genuine original warehouse receipts (Purported Receipts) purporting to give a right to title to parcels of nickel issued by the warehouse storing such metals. MCM consequentially provided finance to the HK Companies via its own sub-sale of 83 of the Purported Receipts to an Australian financial services...