Kuwait Oil Tanker Company SAK & Anor v Al Bader & Ors

Factual and Procedural Background

This opinion concerns appeals against an order of a High Court judge dated 15th December 1998, which gave judgment against three defendants for large sums of money. The claimants are two companies: the first is a subsidiary of a national petroleum corporation owned by a sovereign state, and the second is a wholly owned subsidiary of the first. The defendants include senior executives and a fleet operations manager of the first claimant company during the period 1985 to 1992.

The claimants alleged that the defendants dishonestly conspired to defraud them of over US$60 million through various fraudulent schemes involving charterparties, commissions, and misappropriation of funds. The trial lasted 70 days, with extensive witness testimony and documentary evidence. The judge found the defendants liable for conspiracy to defraud, breach of fiduciary duty, and held them constructive trustees liable to account with compound interest awarded.

The defendants appealed, challenging findings on conspiracy, fiduciary duty, constructive trust, and interest. The appeal also considered new evidence relating to certain bank accounts and transactions. The court provided a detailed judgment analyzing the facts, legal principles, and the application of foreign law.

Legal Issues Presented

1. Whether the defendants dishonestly conspired to defraud the claimants of substantial sums of money.
2. The nature and scope of fiduciary duties owed by the defendants and whether breaches occurred.
3. The applicability and extent of constructive trust principles and entitlement to compound interest.
4. The proper application of the tort of conspiracy to injure by unlawful means under English law.
5. The operation of the double actionability rule in private international law, given the foreign elements.
6. The effect of new evidence on the findings of fact, particularly regarding control and knowledge of certain bank accounts.
7. The liability of one defendant after leaving employment and retiring abroad, including principles of withdrawal from conspiracy.

Arguments of the Parties

Appellants' Arguments

• The tort of conspiracy is subject to important limitations and should not be broadly applied to all joint tortious acts.
• The claimants failed to prove the predominant intention to injure, and intention cannot be inferred solely from the acts.
• The conspiracy claim improperly merges with the underlying torts and should not be relied upon as a separate cause of action.
• The claimants’ case was not properly pleaded, leading to unfairness, especially regarding one defendant’s liability after leaving employment.
• New evidence shows that certain bank accounts were controlled solely by one defendant and were used for his own benefit, undermining findings against others.
• One defendant should not be liable for acts committed after he left employment and retired abroad, as no agreement extended liability beyond employment.
• Awarding compound interest breaches the double actionability rule as the foreign law does not recognise such awards.

Respondents' Arguments

• The defendants dishonestly conspired to defraud the claimants through multiple fraudulent schemes involving charterparties, commissions, and false invoices.
• The defendants owed fiduciary duties to the claimants and breached them by misapplying funds.
• The tort of conspiracy to injure by unlawful means is established and actionable, with no requirement that the predominant purpose be to injure.
• The conspiracy claim is properly pleaded and reflects the true nature of the wrongdoing better than individual tort claims.
• The new evidence supports rather than undermines the judge’s findings, showing coordinated distribution of misappropriated funds.
• One defendant remained liable after leaving employment due to continuing participation by silence and assistance in cover-up.
• Compound interest is properly awarded as an equitable remedy for breach of fiduciary duty and is supported by foreign law provisions on restitution.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully analyzed the extensive factual findings made by the trial judge, who had the advantage of hearing lengthy oral evidence and examining voluminous documentary evidence over a 176-page judgment. The judge’s findings of dishonesty and conspiracy were supported by detailed scrutiny of the evidence, including the operation of complex schemes involving back-to-back charterparties, false invoices, and the diversion of funds through various bank accounts.

The court accepted the judge’s characterization of the tort as conspiracy to injure by unlawful means, rejecting arguments that such conspiracy claims should be limited or merge into individual torts. The court emphasized that intention to injure can be inferred from the acts and that the conspiracy need not be founded on an express agreement but may be established by conduct and common purpose.

Regarding one defendant’s liability after leaving employment, the court found no evidence that the conspiracy extended beyond his employment period, and therefore he was not liable for losses occurring after his departure. The judge’s finding that he remained liable after leaving was not supported by the evidence.

The court addressed the private international law issue of double actionability, concluding that although Kuwaiti law does not recognize conspiracy as a separate tort, the underlying wrongful acts were actionable under Kuwaiti civil law provisions. Therefore, the requirement of double actionability was met.

In relation to fiduciary duties and constructive trust, the court found that the defendants owed fiduciary duties as directors or employees and misapplied funds, thereby incurring liability. Kuwaiti law’s restitution provisions were held to correspond to fiduciary duties under English law, justifying equitable remedies including compound interest.

The award of compound interest was upheld as an equitable remedy designed to ensure full restitution, supported both by English equitable principles and Kuwaiti law. The court rejected submissions that such awards violated the double actionability rule, finding that the award was either procedural under English law or substantiated under Kuwaiti law.

Holding and Implications

The court DISMISSED the appeals of the first and second defendants, affirming their liability for conspiracy to defraud, breach of fiduciary duty, and constructive trust, with awards including compound interest.

The appeal of the third defendant was ALLOWED IN PART, reducing his liability by excluding losses incurred after he left employment and retired abroad in September 1989. The court held that there was insufficient evidence to show he remained a party to the conspiracy after that date.

The decision confirms that the tort of conspiracy to injure by unlawful means is actionable in English law even when the underlying unlawful acts are tortious and that conspiracy claims may be pleaded alongside individual tort claims without merger. It also clarifies the application of double actionability in cases involving foreign law, accepting that foreign civil liability need not mirror English tort categories exactly, so long as there is civil liability for the wrongful acts.

The judgment affirms the availability of compound interest as an equitable remedy for breaches of fiduciary duty involving misappropriation of funds, supported by foreign restitutionary law where applicable. No new precedent was established beyond the careful application of existing principles to complex facts involving international elements.