The Court of Appeal (Males LJ, Popplewell LJ, Nugee LJ) has given judgment in ED&F Man Capital Markets v Come Harvest and Others  EWCA Civ 1704, upholding the judgment of Calver J at first instance on a quantum issue concerning the principle of res inter alios acta, although for different reasons.
The claim arose out of 92 documents which purported to be warehouse receipts. Copies of these documents, which professed to give a right to title to parcels of nickel, had been provided to the First and Second Defendants by the Tenth Defendant and then forged hard copies were provided by the First and Second Defendants to MCM under purchase contracts. MCM had then sold those warehouse receipts on to ANZ, and as a result incurred a potential liability to ANZ which was subsequently settled.
The Commercial Court found Straits liable for the tort of unlawful means conspiracy. The issue before the Court of Appeal was whether MCM was entitled to recover from Straits the US $284m which it paid in order to acquire the worthless receipts or whether the true measure of MCM’s loss was the amount payable by MCM under its settlement agreement with ANZ.
Males LJ proposed that the court adopt the following structured approach to assessing whether a benefit is collateral:
- Identify the transaction which caused the claimant to acquire the property in question.
- Identify any benefits received as a result of that transaction as distinct from benefits received as a result of some other transaction. This stage may require a decision to be made as to the date at which any benefits should be valued.
Males LJ also noted that a further question may sometimes arise which is whether the claimant has avoided that loss, either in whole or in part.
While considering stage 1, Males LJ noted that identification of the relevant transaction depends on an analysis of all the relevant circumstances in any particular case. The fact that the parties chose to conclude contracts principal to principal was an important consideration which often may be decisive, though it was outweighed in this case. The Court of Appeal therefore held that a settlement of MCM’s liability to ANZ for a reduced figure would not have been regarded as res inter alias acta if that was solely what the settlement agreement achieved.
However, the settlement agreement between MCM and ANZ actually involved the reorganisation of the terms upon which the parties to the agreement were going to conduct litigation against the fraudsters. It therefore was far removed from a simple release of ANZ’s claim in return for payment.
Accordingly, the Court dismissed the appeal.
Huw Davies KC and Katherine Ratcliffe represented ED&F Man, instructed by John Whittaker, Bethan Lovett and Merve Danagoz of Clyde & Co LLP. John Robb also acted at first instance and at the written stage in the Court of Appeal.