Palmer's Company Law

'A corporation is not, like a partnership in English law or a family, a mere collection or aggregation of individuals. In the eyes of the law it is a person distinct from its members or shareholders, a metaphysical entity or a fiction of the law, with legal but no physical existence. It is, as Lord Selborne said, “a mere abstraction of law”, and, as Lord Macnaghten observed, “at law a different person altogether from the subscribers to the memorandum of association”.'

I submit that there is no evidence to contradict that position. On the contrary, the evidence is that a limited liability company is a distinct entity with limited liability.

Therefore the pursuer, as an individual, could not have title in respect of a transaction entered into by this separate legal entity, HT.

(ii) Double Distress

The court has a wide discretion when the holder of a fund raises an action of multiplepoinding.

Here, the party claiming the fund is the pursuer. The court has adopted a more formalistic approach in this situation, the key element being that there should be two persons with a claim on the fund:

'We allow an action of multiplepoinding to be brought by a competing party in name of the neutral person, but that is never allowed except when there is double distress in the strict and proper sense of the term. If a person thinks himself entitled to some property which is in the possession of another, his course is to raise a direct action. He is not entitled to raise a multiplepoinding on the mere report that someone else is claiming the fund. When there are double actions or double diligence is being done, then the only way to extricate the matter is by a multiplepoinding.'

What is truly required is two direct claims on an identifiable fund.

The 2nd defender has a clear claim based on contract. The pursuer as an individual was not a party to this contract. He invites the court to ignore this fact and seeks to step into the shoes of another legal entity. With no assignation in place that is an unsustainable legal position.

Therefore this case is irrelevant in terms of a multiplepoinding action.

(iii) Another Form of Action is the Proper Action

'Actions have frequently been dismissed on the ground that there was no double distress, and that another form of action was the proper one…'

I invite the court to conclude that there could have been a case for damages by MPL against CO&G, or by HT against CO&G.

The key issue is was MPL or CO&G in breach of contract? That issue does not appear anywhere in the record.

[2] The pursuer has no right to the fund in medio

The two propositions for the pursuer are;

1. Fraud; and

2. A very technical approach to interpretation of the underlying contract. This issue is not raised anywhere in the pursuer's pleadings.

Points about title also link in at this point. Even if the court rejects all my points about title and interest, again the pursuer is stymied by the most basic principles of company law.

HT put up that bond. They have the right to claim back anything due under it. As soon as the pursuer put money into HT's bank account, it was HT's money.

The issue raised by the pursuer which could lead to recovery is fraud.

I submit that CO&G never perpetrated any fraud on the pursuer. There might have been fraud by Addinall or by MPL, but that has nothing to do with CO&G.

Even if I am wrong, and the pursuer has given some notice of this strand of his case, on its plain terms the contract does not bear the interpretation that the pursuer contends for. The contract,

6/2/1 of process,

Provides at p 8:

'This being stated, we (seller's bank name), address (bank address) hereby irrevocably, unconditionally undertake to pay you, upon first demand without examining the underlying legal situation and waving [sic] all rights of objection and defense arising from the aforesaid contract any amount up to $300,000 (Three hundred thousands only) upon receipt of your swift request for payment and your written confirmation stating that Messrs Moustaf Petroleum Ltd. UK have not fulfilled their obligation in conformity with the terms and conditions of the above-mentioned contract.'

This has to be read in the light of clauses 1.1 and 3.2 of the contract, viz:

' 1.1 The Seller has sold and the Buyer has bought on a trans-shipment basis, total quantity of One (1) Million barrels of Forcados Blend Crude Oil as a spot buy…'

' 3.3 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 owner's 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.'

The only sensible construction is that the whole contract is predicated on the fact that oil must be available; and if there is no oil, CO&G could claim the bond.

The pursuer's approach is a pedantic and outdated approach to commercial contracts. The modern case law is to the effect that the contract has to be interpreted in the light of background circumstances and the intention of the parties.

Key guidance is to be found in two House of Lords authorities: Charter Reinsurance Company Ltd. v Fagan, and Mannai Investment Co. Ltd. v Eagle Star Life Assurance Co. Ltd.

'At first sight this seems the shortest of questions, requiring a very short answer; and so in the end it proves to be. But the instinctive response must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.'

Therefore it is not a question of looking at one clause in a contract in absolute isolation from all the other clauses and the background circumstances that led the parties to the contract.

The general approach is summed up in this quotation;

'In determining the meaning of the language of a commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language.'

The only person who speaks to the intention of the parties is Bohn, who highlights the fact that there were three prior failed deals because a bond was not put in place and there was no proof of product.

The whole point of a bond is a guarantee that the oil exists. And if the oil does not exist, you have to be able to claim the bond.

The bond was guaranteeing all of MPL's obligations under the contract.

The only other witness to the contract was Addinall. The court is invited to reject his evidence wholeheartedly. In examination in chief he spoke as if he were an expert in oil contracts. Yet in cross-examination he was just a simple individual who drilled oil, etc. He was not a credible witness in any way, shape or form.

[3] The Second Defender was entitled to draw down on the performance bond

CO&G never rescinded the contract with MPL. If they have breached the contract, MPL has a direct claim against them.

The whole crux of the deal was that, for once, MPL could provide a performance bond that could guarantee that they did have the oil. That was the crucial factor that gave the buyer the comfort to enter into the contract.

But it is clear that there never was any oil. The 2nd defender did not know that when it contracted.

D.S. burke said that the police did not find any evidence whatsoever that MPL ever had any oil to sell. The only person who claimed that there was oil and that the oil had made it to the trans-shipment point was Addinall. If that was so, why could he not provide the charter party? D.S. Burke believed that MPL was trying to perpetrate a fraud on CO&G. The police found no evidence of collusion between MPL and CO&G.

The court is invited to find that all the evidence given by the police is credible and reliable.

D.S. Burke had seen e-mails whereby details of the ship La Esperanza had been provided to CO&G. The police tried to verify and found that the tanker was on hire to Shell. Bohn told the exact same story.

As to the suggestion that Bohn was doubled over, __ I must have been in a different court. I only saw him doubled over when he was looking at accounts.

I submit that this was a legitimate contract so far as CO&G was concerned.

Because there was no oil there, MPL breached clauses 1.1, 3.2 and 3.3 of the contract. Therefore it was entirely legitimate for them to draw down on the performance bond, because the performance bond guaranteed all those obligations.

For a case which guidance is given on the operation of performance bonds I refer to a passage from the judgement of Lord Denning in Edward Owen Engineering Ltd. v Barclays Bank International:

'So there it is. The long and the short of it is that although prima facie the Libyan customers were in default in not providing the letter of credit, nevertheless they appear to have claimed against the Umma Bank on the performance bond issued by them; in turn the Umma Bank claimed upon Barclays Bank: who claimed upon the English suppliers.

A little later Barclays applied to discharge the injunction. After hearing argument Kerr J. held that these performance bonds must be honoured as between the banks; and that the relations between the English suppliers and the Lybian customers were no concern of the banks. He held that Barclays Bank International ought to pay the Umma Bank and leave the English suppliers to claim damages against the Lybian customers…'

In terms of legal proceedings that case is on all fours with the present case. If CO&G acted in haste, MPL had a cast iron claim for breach of contract. No such action was ever brought.

[4] There was no fraud on the Pursuer by the Second Defenders

The pursuer's case against CO&G amounts legally to speculation and innuendo. There are no hard facts.

The one matter that appears to have been completely ignored in this whole case is that if MPL genuinely had no oil, and there is no collusion between MPL and CO&G, the bond would always have been lost. If CO&G chartered a ship and waited at the trans-shipment point for 15 days it would have been 1.9 million dollars out of pocket and would still have been able to claim the performance bond.

Bohn said that he never heard of HT until its name appeared on the swift transfer. That is supported by the pursuer: he never had direct discussions with anyone from CO&G.