Opinion

In my opinion, far from assisting the second defender, these points support the inference that the purported contract was part of a fraudulent scheme in which both MPL and CO&G were involved.

The second defender's position is that the bond was intended not to be a mere token of good faith, but to be a guarantee of performance by MPL. Indeed Bohn asserted that the performance bond “… was the catalyst that made us sign the contract…”

But the value of the bond was $300,000 and on the undisputed evidence in June 2004 the cost to the second defender of chartering a ship capable of loading and transporting one million barrels of crude oil would have been approximately $1,950,000. Clearly a bond to the value of $300,000 was no guarantee of performance at all. If CO&G had found the means to charter a ship and MPL had failed to deliver the oil, even if the value of the bond were paid in full, CO&G would still be out of pocket by $1,650,000. In my opinion these circumstances alone suggest that this was not a genuine transaction.

Moreover, CO&G had no money or other means of paying either for a charter of such a ship or for the purchase of a million barrels of crude oil, which in June 2004 would have cost approximately $35,000,000.

Bohn's explanation is that CO&G would have transferred its contract rights to one of CO&G's “associated firms” (by which he meant a major oil company or large trading house) that would “issue a letter of credit”… “that we have done a number of times.” Had I heard credible evidence from a representative of such a major oil company or large trading house that confirmed Bohn's claim of such a relationship with CO&G, different considerations might apply. But in the absence of such evidence I do not accept Bohn's explanation. In my opinion this is further evidence from which it may be inferred that the transaction was not genuine.

As to MPL, counsel for the pursuer found it more difficult to say what MPL were going to get out of such a fraudulent transaction.

In cross-examination for the second defender, DS Burke deponed that the police thought that MPL was attempting to defraud CO&G. To his knowledge there was no evidence that MPL ever owned one million barrels of crude oil. On being asked how much that fraud would be worth he replied, “Not the value of the oil. Similar cases show attempts to get advances as little as $40,000 or $50,000. But it's still in their interests because they didn't have the oil in the first place.” Counsel did not explore this issue. Consequently there is no evidence before me concerning how MPL might have extracted an 'advance' of $40,000 or $50,000 by fraud from CO&G.

On the evidence before me in this case I am driven to the conclusion that MPL could not hope to gain anything unless it was involved with CO&G and others in a fraudulent scheme.

Further, counsel for the second defender submitted that the pursuer's case amounts to speculation and innuendo. There are no 'hard' facts. The pursuer never had any 'direct' discussions with anyone from CO&G. The pursuer never had any 'direct' discussions with a director or employee of CO&G. There is no evidence of a 'direct link' between Vakharia and CO&G. Any fraud was perpetrated by MPL and, in particular, Addinell __ who declined to answer questions on the ground of self-incrimination. Addinell and Vakharia had a 'direct incentive' to get this deal done.

While I accept that both Addinell and MPL were participants in the fraudulent scheme, I reject the remainder of this part of the second defender's submissions. There are several facts from which, in combination, it may be inferred that CO&G and others committed fraud on the pursuer and others. 'Direct' links and 'direct' discussions are not required to establish the pursuer's case of fraud against CO&G, which is largely circumstantial. The proper approach is to consider the whole of the relevant evidence, and each piece of evidence in its proper context, before deciding what inferences in favour of the pursuer, if any, fall to be drawn from the evidence as a whole.

As noted above, fraud involves a false pretence, made dishonestly with the intention and effect of bringing about a practical result. Although pecuniary loss is averred in this case, that is not an essential element of the crime. What is required is that the victim is induced deliberately by false pretences to do something that he would otherwise not have done.

Nor is it necessary in the present case that CO&G or its representatives should have had 'direct' discussions with the pursuer. Here it is alleged that CO&G was involved in a fraudulent scheme to induce a third party (as it turned out, the pursuer) to do something that he would not otherwise have done. In that situation Brito (albeit unwittingly) and others became instruments in the inducement.

My impression of Bohn's testimony was that he was making every effort to distance himself from all aspects of the purported transaction. While he admitted that he signed the purported contract document (6/2/1 of process) on behalf of CO&G, he never suggested that he had negotiated contract terms, nor was he pressed on the question of how he came to sign the document. But he admitted that “perhaps” he authorised Vakharia to co-ordinate the negotiations. He was asked, “Did you ever authorise Hem Vakharia to co-ordinate and bypass you?” He replied, “Co-ordinate, perhaps. Bypass, no. Absolutely not.” I regard that as an admission by Bohn that he authorised Vakharia to negotiate on behalf of CO&G. That admission is confirmed not only by the testimony of Brito, but also by the unchallenged testimony of Addinell, who deponed that:

· Vakharia had a mandate to purchase oil for CO&G;

· Vakharia was appointed by CO&G; and

· Vakharia “was mandated for Capital to find them oil.”

In addition Bohn deponed that before the performance bond was put in place he discussed “the transaction” in “two or more” conference calls with Brito, Addinell and Vakharia. Vakharia and Bohn promised repeatedly to give Brito details of the chartered ship, including the name of its captain, but never did. In fact, no ship was ever chartered by CO&G.

Moreover DS Burke gave unchallenged testimony to the effect that “at least three versions” of the purported contract document were recovered by the police, one from Tamana's home and two from McCreery's home.

But the links do not stop there. The 'company profile' (5/2 – 5/4 of process) was found in McCreery's flat, which is the registered office of CO&G. McCreery is Bohn's business partner and owns 50% of the shares in CO&G. According to a note on the third page of the document Vakharia is co-ordinating the transaction on behalf of Bohn.

Bohn claimed that:

· he had not seen the document before his arrival in Scotland a few days before the proof;

· the signature above the printed words, 'Fred Bohn, Chairman' looks like his signature; but

· it is not 'an original signature'; and

· he does not know how the signature got there.

In cross-examination Bohn asserted that the signature and the whole document are forgeries. When asked if evidence was to be led from an expert regarding the authenticity of the document, he replied, “Not to my knowledge.” He was asked if he had ever seen other documents bearing his signature, but which he had not signed. He replied, “If I have, I can't recall.” He attempted to blame Vakharia for making the document. He suspected Vakharia because “Brokers sometimes are driven to doing things that I deem less prudent in an attempt to organize a transaction.”

I found Bohn's demeanour, his denial of his signature and his attempts to distance himself from the 'company profile' to be wholly unconvincing.

But the incriminating evidence is not restricted to events prior to the bond being put in place. As noted above, on many occasions Brito asked both Vakharia and Bohn for the name of the chartered vessel, the name of its captain, and details of the satellite phone at which the captain could be contacted. On each occasion Vakharia or Bohn promised to supply the details on the following day, but never did.

In my opinion these promises were made with a view to reassuring Brito and the pursuer that all was well and preventing discovery of the fraud until the bond had been drawn down, __ clear fraud being the only ground upon which the issuing bank could decline to honour the bond.

Moreover in my opinion CO&G also caused The Bank of Scotland to call up the bond, and Union Planters Bank to transfer $300,000 to the Scottish bank, by means of false pretences.

As noted above, Clause 3.3 of the purported contract provided that:

'The buyer's vessel shall begin loading within two (2) calendar days from the confirmation of the arrival of buyer's nominated vessel at trans-shipping location and the receipt of the Performance Bank Guarantee by the Buyer. Failure to fully load buyer's vessel within Eight Calendar (8) days when buyer's vessel is in position for trans-shipment, seller shall incur demurrage at the ship owners standard daily rates until the 15 day, at which time will result in forfeiture of Seller's $300,000.00 Operative PBG unless Force Majeure is the cause. '

Although the grammar is not perfect, in my opinion the language and its meaning are perfectly plain, viz:

1. the buyer is to nominate a vessel to receive the oil;

2. the buyer is to confirm to the seller the arrival of the nominated vessel at the trans-shipping location;

3. the buyer's vessel is to begin loading within two days of such confirmation being given and 'receipt' of the 'performance bank guarantee' by the buyer.

Thereafter Clause 3.3 deals with failures and penalties for failures, viz:

1. If the seller fails to load the buyer's vessel within eight days of the buyer's vessel being in position for trans-shipment, the penalty is demurrage at a specified rate; but

2. if such failure continues until the 15th day of the buyer's vessel being in position the $300,000 bond will be forfeited unless force majeure is the cause of the failure.

Therefore in terms of the purported contract document the performance bond can only be forfeited if the seller fails to load the buyer's vessel by the 15th day after the buyer's vessel is in position for trans-shipment. It is not suggested that such a failure occurred here, therefore CO&G were not entitled to payment of $300,000.

But on the very next day after the bond had been intimated to The Bank of Scotland McCreery wrote to The Bank of Scotland on behalf of CO&G, claimed falsely that MPL was in breach of contract, and asked the bank to call up the standby letter of credit and demand payment of the $300,000 from Union Planters Bank. The Bank of Scotland having called up the bond on the basis of CO&G's false pretence, the money was eventually transferred to the Scottish bank.

After the bond had been called up Bohn told Brito that the reason for calling up the bond was that he had spent $1.2 million on chartering a vessel (which was a lie) and there was no oil.

It follows that in my opinion the second part of the second defender's submissions also falls to be repelled. There is a substantial body of (mostly unchallenged) evidence linking Addinell, Vakharia, Bohn, Tamana, MPL and CO&G, and from which it may be inferred that they were all engaged in a fraudulent scheme in which Brito, the pursuer and the banks were the dupes.

I am satisfied (on the facts admitted or proved, and by inference from those facts) that the pursuer, The Bank of Scotland and Union Planters Bank were victims of a fraudulent scheme perpetrated not only by CO&G, Bohn, McCreery and Vakharia, but also by MPL, Addinell and Tamana, with whom Bohn, McCreery and Vakharia were in league. By false pretences and the furnishing of misleading information, and with assistance from the unsuspecting Brito, their aims were to:

1. induce the pursuer to put up the performance bond and leave it in place until it could be called up;

2. claim falsely that the conditions for calling up the bond had been met;

3. call up the bond at the earliest opportunity; and

4. make off with the $300,000.

Their first three aims were achieved. Only the Bank of Scotland's delay in handing over the money to CO&G prevented the fraudulent scheme from bearing fruit.

I am in no doubt that the pursuer and Brito are innocent parties in this affair. The contrary is not suggested.

Brito gave the pursuer a written personal undertaking to the effect that after a period of thirty days he would pay to the pursuer the sum of $300,000 plus 10% (i.e. $30,000) as a consideration for use of the money. Brito has already paid the sum of $30,000 to the pursuer. In terms of his undertaking he is still due to pay $300,000 to the pursuer, but the pursuer has decided not to insist on such payment until he knows the outcome of the present action.

Moreover in my opinion the pursuer's claim on the fund in medio is not precluded by the fact that HT lodged the $300,000 with Union Planters Bank. The pursuer was induced by fraud to borrow $300,000; provide collateral personally in respect of the loan; incorporate HT; put the money into HT's account; and (as sole signatory for HT) lodge the money in order that the standby letter of credit could be issued in favour of CO&G. When CO&G called up the bond, the pursuer's personal collateral was forfeited. Therefore the pursuer, personally, is a victim of the fraudulent scheme and is entitled to recompense. It follows in my view that he has a personal claim on the fund in medio that is distinct from any claim that HT might have made. HT not having made a claim on the fund, in my view the pursuer is entitled to it.

What is beyond doubt, in my opinion, is that CO&G is not entitled to the fund in medio or any part of it.

(c) Other Submissions

Submissions by counsel for the pursuer and for the second defender are set out more fully in Appendix A to this note.

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