[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Kuwait Oil Tanker Company SAK & Anor v Al Bader & Ors [2000] EWCA Civ 160 (18 May 2000) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/160.html Cite as: [2000] 2 All ER (Comm) 271, [2000] EWCA Civ 160

[New search] [Printable RTF version] [Help]

133. It does not follow from the above that each defendant must personally take part in every act so long as it is done pursuant to the agreement. Moore-Bick J put the matter in this way (at page 126):

Of course, as in any case of this kind, it is necessary to examine the evidence with care to see whether each defendant was involved in each fraudulent transaction, but once one reaches the conclusion that the defendants combined to steal from their employer by whatever means might present themselves, the question in relation to any particular scheme or enterprise in which only one or some of them can be shown to have directly participated is whether that enterprise fell within the overall scope of their common design. If several people agree to enable each other to steal from their employer, lending their support in different ways at different times and taking different shares of the proceeds (or even each retaining for himself what he takes), each of them is party to the agreement pursuant to which all the thefts take place. In those circumstances there is in my judgment no need for each to be fully aware of the circumstances of each theft in order for him to be liable as a conspirator provided that the theft in question falls within the scope of their agreement.

We agree with those conclusions but stress the need for proof to the relevant standard at every stage.

Claimants’ case properly pleaded?
134. Mr Brodie submitted that the claimants' case was not properly pleaded or advanced because it led to a broad brush approach which in turn led to what was described in argument as an ambulatory conspiracy and thus to a lack of reality. This criticism was advanced particularly with regard to Captain Stafford because it led (it was submitted) to his being unfairly held liable for events which were, for example, the subject of Scheme III and which took place long after he had left Kuwait and retired to Australia. It was submitted that the logic of the broad brush approach was that if, for example, two people agree one day to steal and then, say twenty years later, the two not having met in the meanwhile, one commits a burglary without the knowledge or assistance of the other, they are both jointly and severally liable for the burglary because it was within the scope of the common design.

135. While there were moments during the course of the argument when Mr Malins’ submissions seemed to drive him to just such a proposition, it was not the approach of the judge. Nor would it be correct. In our judgment the case was properly pleaded and advanced by the claimants at the trial both in the tort of conspiracy and as individual breaches of fiduciary duty. Moreover, as we said earlier, every incident was investigated in the evidence and almost every incident was analysed in the judgment.

136. The judge approached the matter correctly in principle. He considered what agreement was made at the outset, partly by reference to the evidence about what was said at the time and partly by inference from what happened thereafter. He then asked himself whether each of the transactions which made up the four schemes was carried out pursuant to the conspiracy and concluded that the defendants were all parties to a single actionable conspiracy. He then considered whether Captain Stafford at any stage left the conspiracy. In our judgment that was the correct approach, although (as explained below) we have reached the conclusion that in one important respect the judge did not correctly identify the true nature of the conspiracy and that the question whether Captain Stafford left the conspiracy did not have to be considered. We do not consider that there was any unfairness in the way that the judge approached the case or, indeed in the way in which it was advanced at the trial. The defendants had no doubt at each stage what case they had to meet.

CONSPIRACY - APPLICATION OF LEGAL PRINCIPLES TO THE FACTS
Mr Al Bader and Mr Qabazard.
137. Application of the legal principles to the facts leads clearly to the conclusion that the judge was correct to hold that both Mr Al Bader and Mr Qabazard were liable for damages for conspiracy to injure by unlawful means. Once the strategic fund defence was rejected and it was held (in our view correctly) that Mr Al Bader was aware of the Gulf Shipping account and that he received substantial sums from Mr Qabazard, almost certainly out of that account, and given the detailed findings of dishonesty made by the judge, as summarised in the quotations in paragraph 90 above, there was no alternative but to hold that the losses under all four schemes were part of the conspiracy and that Mr Al Bader and Mr Qabazard were liable for them. We turn to Captain Stafford.

Captain Stafford.
138. It is of particular importance in the case of Captain Stafford to identify the terms of the original conspiracy or combination. The judge held that the agreement from the outset was dishonestly to misappropriate the claimants’ assets, or put more generally, to defraud them. The agreement was initially made between Mr Al Bader and Mr Qabazard in late 1985 and Captain Stafford joined it in September 1986. The judge correctly considered the evidence as to what agreement was made at that stage. As indicated in paragraphs 74 and 75 above, he held that the discussions at which Sheikh Ali, Mr Al Bader and Captain Stafford were present involved discussion of three particular methods of raising money, namely creating differences of hire under the back to back charterparties, taking sums by way of commission on the sale and purchase of tankers and taking commissions on newbuildings. The judge rejected their evidence that the purpose of the schemes was not their enrichment but to feed the strategic fund. We have already expressed our view in paragraph 75 that the evidence of Mr Al Bader and Captain Stafford provided strong support for the conclusion that there was from the outset an agreement to divert monies by what became Schemes I and II and for the further conclusion that the essence of the agreement was that the defendants would defraud the claimants by whatever means came to hand.

139. Further the judge held that Captain Stafford played a significant part in the detail of Scheme I, including the commissions and the extra war risk premiums and crew bonuses: see paragraphs 47 to 50 above. He also held that Captain Stafford was aware of all the Clarksons’ accounts and that he was concealing much of what he knew both about the way in which the accounts were operated as well as his own role in relation to them: see paragraphs 51 to 53. Apart from the sum of US$100,000 paid into Captain Stafford’s TSB account at Anlaby on the March 1987 (referred to in paragraph 17), there is no evidence that he received monies from Scheme I, but he received traveller’s cheques both from Clarksons and from Scheme IV. Although the evidence suggests that Captain Stafford received substantially less out of the various schemes than either Mr Al Bader or Mr Qabazard, he admitted receiving traveller’s cheques totalling US$1.24 million as and when it became apparent that the claimants could prove such receipt. The judge rejected Captain Stafford’s evidence that the traveller’s cheques were legitimate bonuses: see paragraph 56. In our judgment the judge was justified in holding that Captain Stafford dishonestly played a part in Scheme I and that he was liable in respect of the claimants’ losses under Schemes I and under Scheme IV before he left Kuwait. It should be noted that the judge expressly held that there was no evidence that he received any further money derived from Scheme IV after he left Kuwait: see paragraph 61.

140. Scheme II began in about May 1989 after Scheme I came to an end because there were no longer any relevant charterparties. The judge expressed his conclusions as to Captain Stafford’s involvement in Scheme II in this way (at page 75):

Capt Stafford denied that he was involved in any of the arrangements which make up scheme II and in truth there is very little direct evidence to support the conclusion that he was, other than such inferences as one can draw from the fact that the majority of the funds found their way to Gulf Shipping. If Mr Malins is right in saying that Gulf Shipping was an account which had been set up for the purposes of distributing the proceeds of fraud to the different conspirators, including Capt Stafford, then the fact that funds derived from the various sale and purchase transactions found their way to Gulf Shipping would tend to show that Capt Stafford was implicated in Scheme II along with others who can be shown to have benefited from earlier dishonest transactions. That is something to which I shall return when I consider the position of Gulf Shipping generally. Apart from that, however, Mr Malins could only point to the fact that raising money through commissions on the sale and purchase of vessels was one method which Capt Stafford said had been specifically discussed at the meeting with Sheikh Ali so that he could be expected to be involved in it if it did ever take place; that he received some money in the form of traveller's cheques obtained out of the commission on the Al Rawadatain, and further substantial sums in traveller's cheques during the summer of 1989 when the purchase of the Maersk vessels was being negotiated; and that he attended a dinner at the Savoy to celebrate the handing over of those vessels. None of these seems to me to take the matter very far. The fact that this method of raising money had been discussed (if indeed it was) does not necessarily make it any more likely that Capt Stafford was directly involved in implementing these arrangements. Whether he was personally involved in any scheme would presumably depend on its particular nature. Mr McCoy doubted whether Capt Stafford had been involved in the raising and disposing of commissions and I can see no reason to think that his involvement was necessary. The receipt of traveller's cheques simply raises the question whether, as he said, all the payments he received in that manner were bonuses which is a matter which I shall come to consider a little later. I can attach no significance to Capt Stafford's presence at the dinner at the Savoy: there could be many innocent explanations for that. In the end the plaintiffs have failed to satisfy me that Capt Stafford played any active part in obtaining funds by these means or that he benefited from them other than through the receipt of traveller's cheques obtained in connection with the Al Rawadatain.

141. We have quoted the judge’s conclusions as to Captain Stafford’s knowledge of the Gulf Shipping account in paragraph 88 above, but it is convenient to repeat them here. He said:

Evidence of how the Gulf Shipping account was operated could, on the other hand, affect the position of Capt Stafford if it established that Gulf Shipping was a distribution account from which he also benefited. In fact, however, Capt Stafford's connection with Gulf Shipping is far less well established. There is no clear evidence showing when the Gulf Shipping account was set up, other than the fact that the first transfer occurred in July 1988 when US$232,000 was transferred from Account No 1, and no direct evidence to show that he received any part of the funds which were paid into it. However, in view of the close co-operation between Capt Stafford and Mr Al Bader in relation to the back-to-back charter arrangements I find it difficult to accept that he did not know of the existence of Gulf Shipping and the fact that funds were being transferred to it.

As indicated above Mr Brodie submitted that in order to hold Captain Stafford liable it was not sufficient to say that it is difficult to accept that Captain Stafford did not know of the Gulf Shipping account or that funds were being transferred to it. We accept the submission that, if they are to rely upon them, the claimants must prove that Captain Stafford knew those facts.

142. The problem here from the claimants’ point of view is that there is no evidence that Captain Stafford benefited from the Gulf Shipping account and, with the one exception of the traveller’s cheques obtained in connection with the AL RAWATADAIN, that he received anything directly from Scheme II. The essence of the judge’s conclusion that Captain Stafford was liable for Scheme II is, however, that the original agreement expressly contemplated such a scheme, that in these circumstances there can be no doubt that Scheme II (which naturally followed Scheme I) was operated pursuant to the conspiracy to defraud the claimants which Captain Stafford joined in about September 1986 and that he received both monies out of the traveller’s cheques obtained out of the commission on the AL RAWADATAIN and substantial monies in the summer of 1989 when the purchases of the MAERSK vessels were being negotiated. As the judge put it on page 128 (albeit in the context of Scheme IV) in a passage quoted in paragraph 90 above:

Although there is no direct evidence that Capt Stafford was involved in implementing any of the transactions, all three defendants were working closely together throughout the period between 1986 and September 1989 when Capt Stafford left Kuwait and I am satisfied that during that time they were all aware of, and lent their support to, all the various schemes that were employed from time to time. The close relationship between them arising out of the back-to-back charter arrangements makes it impossible to believe that any one of them was kept in the dark about what others were doing, but apart from that there is the evidence that Capt Stafford received several substantial blocks of traveller's cheques obtained through the frauds based on the forged Clarksons and Brown & Root invoices. These schemes were little more than developments of the original enterprise underlying Scheme I. In any event, I am satisfied that all three defendants knew of them and lent their support to them. The transfers to Gulf Shipping from the accounts of Porchester and Yucatan all occurred during the period between August 1988 and September 1989 and I am satisfied that they represented thefts falling within the scope of the agreement to which all the defendants were parties.

Captain Stafford’s own evidence shows that he knew about Scheme II. In our judgment, the judge was justified in concluding that Scheme II was simply one of the ‘various schemes that were employed from time to time’ to which Captain Stafford lent his support and from which he benefited at least indirectly by dishonest receipt of traveller’s cheques.

143. We have reached the conclusion that the judge was right to hold on the evidence available at the trial that Captain Stafford was liable on that basis for the losses sustained by the claimants under Scheme II while he was still in Kuwait. However, in our judgment the position is different once Captain Stafford left Kuwait and retired to Australia. There is nothing in the evidence of the agreement itself which supports the conclusion that the agreement either expressly or impliedly contemplated that the various conspirators would continue to take part in the conspiracy once they had ceased to be engaged or employed by the claimants.

144. Although we have expressed the view that a conspiracy of this kind should not be approached as if it were a contract, it is nevertheless appropriate to consider it in its context. In September 1986 Captain Stafford was an expatriate working for the claimants. He was likely at some future date to leave Kuwait and live elsewhere. In these circumstances he would be unlikely to be able to play any part in any scheme to defraud the claimants once he had left. Nor is there reason to suppose that such participation was anticipated. It is not therefore surprising that that there is no evidence that the agreement was that he would do so. In these circumstances, if it is to be held that, so far as Captain Stafford was concerned, the conspiracy extended to any period after he left Kuwait, such a conclusion must be inferred from the overt acts carried out pursuant to the alleged conspiracy.

145. Captain Stafford left Kuwait at about the beginning of September 1989. The losses sustained by the claimants in respect of Scheme II, except for those referable to the MAERSK vessels, and all the losses sustained by them in respect of Scheme III were suffered after he left. A small proportion of the losses under Scheme IV were also sustained after August 1989. Before the judge it was submitted by the claimants that Captain Stafford was liable in respect of those losses because they were sustained as a result of the conspiracy to defraud the claimants by whatever means came to hand and that he at no time left the conspiracy. The judge essentially accepted that submission.

146. The judge’s conclusion in this regard can be seen from his approach to Scheme III. When considering the position of Captain Stafford he said (at page 79):

Apart from the fact that virtually all the funds were transferred to Gulf Shipping, there is nothing to support the conclusion that Capt Stafford was involved in Scheme III. Mr Qabazard did not mention him in connection with it in any of his interviews and there is nothing in the documents to suggest that he was directly involved. The opportunity for him to become involved no doubt existed because at the time the arrangements were put in place he was in London assisting Mr Qabazard and others to deal with KOTC's affairs. Mr Malins submitted that if Capt Stafford co-operated with Mr Al Bader and Mr Qabazard in setting up and sharing the proceeds of schemes I and II, it is likely that he also co-operated in and benefited from scheme III. However, opportunity is one thing, active participation another. The plaintiffs have failed to satisfy me that Capt Stafford played any active role in diverting war risk premium rebates away from KOTC or that he obtained any benefit from Scheme III.

The judge thus held that the claimants had failed to establish that Captain Stafford played any part in or received any benefit from Scheme III. However, the judge held Captain liable in respect of Scheme III because he had not withdrawn from the conspiracy.

147. He considered the principles relevant to withdrawal from a conspiracy of this kind (at pages 136 to 139) and then concluded that Captain Stafford had not effectively withdrawn in these terms (at pages 139 to 140):

There is no evidence that Capt Stafford received any money after he left Kuwait other than the sum of US$25,000 which he was paid for the assistance he gave to KOTC at the time of the Iraqi invasion, but he has continued to maintain close links with Mr Al Bader who has funded his defence to this action and it would hardly be surprising if someone with as much knowledge as he had of a dishonest conspiracy continued to receive some benefits from it. The evidence does not enable me to make a finding that he has done so, but equally, I am unable to go so far as to make a positive finding that he has not. The frauds based on falsified Brown & Root invoices continued for a few months after his departure, but they were merely a continuation of a method which had already been in use for a year and did not involve any departure from the plan as it had by then developed. The main frauds which occurred after his absence involved the purchases of additional second-hand tankers and the four new buildings (Scheme II) and the diversion of the war risk premium rebates to Clarksons (Scheme III). All those frauds were within the contemplation of the original conspiracy, but even if there were any doubt about that, they were certainly within the contemplation of the conspiracy as it had developed by September 1989. It is not necessary for Capt Stafford to have taken an active role in order for him to have remained a party to the conspiracy, much less for him to remain liable for the loss which the plaintiffs have suffered as a result of its continuing implementation by Mr Al Bader and Mr Qabazard. It is sufficient that he should have continued to play a part by keeping silent and later by helping to protect Mr Al Bader and Mr Qabazard when Mr Al Roumi's investigations began, despite the fact that he had the means to disclose both the existence of the conspiracy and much of what had been done pursuant to it. For these reasons I have reached the conclusion that Capt Stafford did not effectively withdraw from the conspiracy when he retired to Australia. His active participation between September 1986 and September 1989 together with his subsequent silence remained as one of the effective causes of the loss which the plaintiffs suffered as a result of its continued implementation by Mr Al Bader and Mr Qabazard.

148. It is plain from that passage that the judge held that Captain Stafford was liable after he left Kuwait because he had not withdrawn from the conspiracy. It follows that his liability in this regard depended crucially upon the finding that the agreement or conspiracy was to defraud the claimants whenever the opportunity arose. Thus, however long into the future a particular defendant committed an act defrauding the claimants, all the defendants were liable for the loss sustained as a result because the act was committed pursuant to the conspiracy. We have reached the conclusion that this part of the judge’s reasoning cannot be supported. In our judgment, neither the evidence of the agreement in September 1986 (or indeed in December 1985) nor the inferences which could properly be drawn from subsequent events justified the conclusion that Captain Stafford agreed that he would continue to take any part in the conspiracy after he had left Kuwait and the employment of KOTC.

149. In these circumstances we are unable to accept that it is correct to hold that it was sufficient for Captain Stafford to have continued to play a part by keeping silent and later to help to protect Mr Al Bader and Mr Qabazard when the investigations began. Nor are we able to accept that Captain Stafford’s active participation between September 1986 and September 1989 together with his subsequent silence (our emphasis) remained one of the effective causes of the loss which the claimants suffered as a result of the continued implementation of the scheme by Mr Al Bader and Mr Qabazard after Captain Stafford left Kuwait. We do not think that it was established by the claimants on the evidence before the judge that it was at any time agreed that Captain Stafford would play any part in the conspiracy after he left Kuwait. In short it was not established that he was ever a party to any conspiracy to defraud the claimants after he left.

150. Dealing with the period before his departure, we accept Mr Malins’ submission that Captain Stafford admitted knowing about Scheme II and account no 1 and that, on the evidence before him, the judge was entitled to draw the inference that he knew about Gulf Shipping, but it does not seem to us to follow that he was at any time party to the agreement to defraud the claimants after he left Kuwait.

151. Mr Malins placed considerable reliance upon a number of events which took place after Captain Stafford left. In the summer of 1990 he returned from Australia to London to help KOTC. It is true, as Mr Malins submitted, that Mr Al Bader and Mr Qabazard were still defrauding the claimants at that time, but Captain Stafford was only in London for about a month, during which he received about US$25,000 for assistance rendered to KOTC in various ways. However, as Mr Brodie observed, August 1990 was a traumatic time for Kuwait because of the Iraqi invasion and, in our judgment, no adverse inference should be drawn against Captain Stafford for assisting his previous employers in return for remuneration during what must have been very a very difficult period for them. Mr Malins relied upon the fact that Mr Qabazard felt able to tell Captain Stafford about Scheme III while they were both in the London office in August 1990, but that does not seem to us to be a sufficient basis upon which to infer that he ever became party to a conspiracy involving him after he left Kuwait in 1989. We do not think that it was proved on the evidence before the judge that Captain Stafford assisted in defrauding the claimants in 1990 or that he agreed to do so.

152. Mr Malins further submitted that Captain Stafford assisted the conspiracy thereafter by helping to cover it up. In particular he relied upon the following. In June 1992 Captain Stafford refused to assist Sheikh Salman of KOTC in the investigation of alleged irregularities which had taken place under its previous management. The taped conversation between Captain Stafford and Mr Qabazard in January 1993 shows that Captain Stafford knew about ‘other bits and pieces’ and was willing to discuss them with Mr McCoy. Also in January 1993 Captain Stafford asked Mr McCoy to slow down the process of providing documents to KOTC. Immediately upon receiving the Mareva injunction in July 1994 he communicated with Mr Al Bader by telephone and fax. Mr Al Bader's family have funded his legal costs throughout and continue to do so. Mr Malins also submitted that Captain Stafford continued to play a part in the conspiracy by giving dishonest and untruthful evidence at the trial.

153. The difficulty with those submissions is that the facts relied upon are consistent with either view as to the ambit of the conspiracy. They are consistent with the view that the conspiracy was entirely open-ended in the sense that the agreement was to defraud the claimants indefinitely whether or not the conspirators continued in the employment of or as officers of KOTC. However, they are also consistent with a more limited conspiracy, namely that the defendants would defraud the claimants so long (in the case of each conspirator) as he was an officer or employee. The other factors relied upon by Mr Malins do not help to identify the true nature of the conspiracy and are consistent with assistance in a ‘cover-up’ by an employee no longer bound to his former employer by any fiduciary obligation.

154. In these circumstances we have reached the conclusion that none of the facts relied on by Mr Malins supports the conclusion that Captain Stafford ever agreed to help in defrauding the claimants after he left Kuwait. We do not think that silence or subsequent cover-up rendered him liable as a conspirator in the absence of evidence that he either played a part in, or received the proceeds of, any later acts of misappropriation on the part of Mr Al Bader or Mr Qabazard. The conclusions reached by the judge in the passage quoted in paragraph 147 show that there was no such evidence.

155. It follows that we need not concern ourselves further with a general consideration of the doctrine of ‘withdrawal’ from a common enterprise which has given rise to difficulty in the field of criminal law and does not readily transpose into the field of civil actions for conspiracy. It also follows that Captain Stafford’s appeal must be allowed in part unless there is new evidence sufficient to support the judge's conclusion that he should be liable in respect of losses sustained by the claimants after he left Kuwait. Mr Malins submitted that there is such evidence, to which we now turn.

The New Evidence – Captain Stafford
156. There are now available some of Captain Stafford’s bank statements which were not available at the trial. Mr Malins submitted that they show that Captain Stafford received both part of the proceeds of the Gulf Shipping account and part of the proceeds of the frauds perpetrated after he left. As to the former, we have already referred in paragraph 93 above to the fact that there is a note on the file of UBS London that Mr Qabazard told it that the code ‘Humberside’ was to indicate instructions to deposit a draft to the credit of Captain Stafford’s US dollar account with the TSB at Anlaby in Hull. We accept Mr Malins’ submission that the note supports the judge’s conclusion both that Captain Stafford received part of the proceeds of the fraud and that he either received or was intended to receive such proceeds from Mr Qabazard before he left Kuwait. It does not, however, help to determine his liability (if any) thereafter.

157. In that regard Mr Malins relied on evidence relating to Captain Stafford’s own bank statements which are now available. Mr Brodie submitted, by contrast, that the new evidence does not implicate Captain Stafford in respect of any of the events after he left Kuwait. It is common ground that the bank statements show that on the 10th July 1990 the sum of £226,934.85 was credited to Captain Stafford’s sterling account at TSB Anlaby. Mr Malins submitted that that was the sterling equivalent of US$400,000 and that it was part of the proceeds of the operation of the conspiracy after he left Kuwait. The question is whether the documents establish that that is the case because, if they do, they provide strong support for the judge’s conclusion that Captain Stafford is liable in respect of losses under all four schemes.

158. On the 4th January 2000 the claimants’ solicitors wrote to Captain Stafford’s solicitors asking for an explanation. In response he made a witness statement exhibiting a Hill Samuel document dated the 28th June 1990 evidencing instructions to transfer US$400,199.61 from Hill Samuel to his TSB account at Anlaby, although he did not say what its original source was. Thereafter the claimants asserted in their skeleton argument for this appeal that Captain Stafford had not previously revealed the existence of a Hill Samuel account, that he had not explained whence came the money and that the overwhelming inference was that it came from the fraudulent conspiracy after he retired. Captain Stafford then made a further witness statement (his third) in which he said that he had no deposits with Hill Samuel when he swore his affidavit pursuant to the order made at the same time as the Mareva injunction was granted, that without consulting him TSB had in late 1987 opened the foreign currency account with Hill Samuel as a member of the same group and that the monies had originally been transferred to him when he was still employed by KOTC. He also exhibited two documents evidencing a deposit with Hill Samuel of A$665,778.96 on the 26th July 1989, which had grown to A$676,154.02 by the 29th August. The inference which Captain Stafford intended us to draw from those documents was that that sum was the source of the US$400,000. However, as Mr Brodie recognised in argument, that could not be the case because the Hill Samuel account was closed on the 29th September 1989.

159. After his third statement Captain Stafford made a yet further statement (his fourth) in which he sought to meet a contention on behalf of the claimants that the sum of US$400,000 could not have come from funds in existence when he left Kuwait because payments were made out of the Hill Samuel dollar account which depleted the funds held by him to such an extent that the source of the US$400,000 must have been later receipts. Those payments were transfers to Australia of A$500,000 and A$150,000 on the 4th and 24th May 1990 respectively. Captain Stafford sought to meet that point by saying that the Hill Samuel accounts showed that before leaving his employment he had deposited two sums maturing on the 29th September 1989, namely US$712,421 and A$676,154 respectively. Those sums were in addition to the sterling funds in his Anlaby account. He said that in these circumstances there were ample monies to fund the payment relied on by the claimants.

160. Both Mr Brodie and Mr Malins analysed the bank statements at some length. Mr Brodie submitted that Captain Stafford’s US dollar account showed that he had more than US$700,000 on deposit which was ample to fund the payment of US$400,000. He identified the source of the three sums of A$500,000 (namely US$376,823.25), A$150,000 (namely US$115,500) and US$400,000 in the US dollar account. Mr Malins submitted that those sums add up to much more than the US$700,000 which was in the account when Captain Stafford left Kuwait plus any possible amount of interest earned. Mr Brodie replied that a letter from TSB dated the 4th January 1990 showed that in addition to the US$712,421 which was then standing to the credit of the US dollar account referred to above there was a further sum of US$150,721 standing to the credit of another account (previously no FYL 43), so that there were sufficient funds to meet the payments including that of US$400,000. Mr Brodie thus submitted that it would be wrong to draw the inference that Captain Stafford must have been receiving the proceeds of the continuing fraud. Mr Malins responded that the explanation given by Mr Brodie was not the explanation given by Captain Stafford in his witness statements and that the bank statements which have been produced are even now incomplete and therefore unsatisfactory.

161. We agree with Mr Malins that the position is by no means satisfactory for both those reasons. Indeed the missing pages of the FYL 43 might well throw considerable light on what Captain Stafford had been receiving while he was still in Kuwait. Thus, for example, the statements produced for the account which was FYL 43 do not include the year from the 30th April 1988 to 30th April 1989. If this were part of the trial, it would no doubt be appropriate for Captain Stafford to be recalled to explain the position in detail and to answer some of the questions raised by Mr Malins, but the limited question for us to determine is whether it is appropriate on the incomplete evidence which is available to infer that Captain Stafford must have received the proceeds of part of the fraud which continued after he left Kuwait. In our judgment it is not. We remind ourselves of the necessity for cogent evidence in this class of case. Since the explanations given by Mr Brodie for the figures may be correct, we decline to draw the necessary inference.

162. Finally, the claimants rely upon a further piece of evidence which has recently come to light. It is that a payment of A$100,000 was received into Captain Stafford’s wife’s bank account on the 25th March 1994. The payment was made by Mr Al Bader. Mr Malins invited the court to infer that that too shows the receipt of monies from the continued fraud. However, in his second witness statement Captain Stafford explained the payment as part of an investment by Mr Al Bader in a company called Engine Care Systems (NSW) Pty Ltd. He produced some documentary support for that evidence and, again, we have reached the conclusion that it would be wrong to draw the inference suggested.

163. It follows that, while the new evidence raises a number of questions, it is not sufficient to enable us to conclude that Captain Stafford received any part of the proceeds of the fraud after he left Kuwait and retired in September 1989. It follows that it does not lead to the conclusion that Captain Stafford was ever party to a conspiracy operating after his retirement. On the other hand it in no way undermines the judge’s conclusion that he was a party to the conspiracy operating while he was still working for KOTC.

Conclusion on Conspiracy under English Law.
164. For the reasons we have given we uphold the judge’s view that there was a conspiracy actionable under English law which was originally between Mr Al Bader and Mr Qabazard (and perhaps others) that they would defraud the claimants by any means at their disposal while they were working for the claimants. Captain Stafford joined the conspiracy in about September 1986. Subject to the principle of double actionability discussed below, Mr Al Bader and Mr Qabazard are liable for damages before September 1986 and thereafter all the conspirators are liable for damages in respect of all four schemes, save that Captain Stafford is not liable in respect of losses incurred after he left Kuwait in September 1989.
CONSPIRACY - DOUBLE ACTIONABILITY
165. The claimants having pleaded their case primarily in the tort of conspiracy, and the judge having found that under English law all the defendants were parties to a single actionable conspiracy wrongfully to misappropriate the claimant’s assets, it became necessary for the judge to consider the defendants’ plea that the acts complained of as giving rise to their liability took place (or largely took place) in Kuwait, and that Kuwaiti law was thus the lex loci delicti of any alleged tort said to be owed by the defendants to the claimants. On that basis the defendants contended that the rule of ‘double actionability’ could not be satisfied because the tort of conspiracy is unknown to Kuwaiti law.

166. It must first be noted in this respect that by Part III of the Private International Law Miscellaneous Provisions Act 1995 the choice of law rules (including the double actionability rule) for determining the law applicable to torts and issues in tort as stated in Rule 202 and Rule 203 of Dicey & Morris: The Conflict of Laws (12th ed.) at p.1480 and 1487 have been abolished (save in relation to defamation claims). The statutory principles now applicable and the replacement Rules 202 and 203, as stated by the editors of Dicey & Morris are discussed at length in the Fourth Cumulative Supplement to the 12th edition. However, the provisions of Part III of the 1995 Act do not apply to acts or omissions giving rise to a claim which occurred before the commencement of Part III of the Act. Accordingly, because the latest act or omission of the defendants relied upon occurred in 1992, in respect of the claims in tort the judge was concerned (as is this court) with the former common law rules.

167. The rule of double actionability as stated in Rule 203 in Dicey and Morris (12th ed.) At p. 1487 is as follows:
"(1) As a general rule, an act done in a foreign country is a tort and actionable as such in England, only if it is both

(a) actionable as a tort according to English law, or in other words is an act which, if done in England, would be a tort; and

(b) actionable according to the law of the foreign country where it was done.

(2) But a particular issue between the parties may be governed by the law of the country which, with respect to that issue, has the most significant relationship with the occurrence and the parties.


Paragraph (1) of the Rule derived from the well known dictum of Willes J in Phillips v Eyre (1890) L.R. 6 Q.B.1 that:
"As a general rule, in order to found a suit for a wrong alleged to have been committed abroad, two conditions must be fulfilled. First, the wrong must be of such a character that it would have been actionable if committed in England. . . Secondly, the act must not have been justifiable by the law of the place where it was done."


169, The text of Clause 1 (as set out above) was the subject of express approval in the judgment of the Privy Council in Red Sea Insurance Co v Bouygues S.A. [1995] 1 AC 191 at 199 per Lord Slynn of Hadleigh. Having referred to the decision of the House of Lords in Boys v Chaplin [1971] AC 356 the effect of which (overruling Machado –v- Fontes [1897] 2 QB 231) led to the present wording of Clause (1)(b), Lord Slynn stated:

"Lord Guest, at p.381, explicitly accepted that:
"To justify an action in England for a tort committed abroad the conduct must be actionable by English law and by the laws of the country in which the conduct occurred, the lex loci delicti." (Emphasis added)

Lord Wilberforce at p.388, also regarded Machado v Fontes as having been wrongly decided:

"The broad principle should surely be that a person should not be permitted to claim in England in respect of a matter for which civil liability does not exist, or is excluded, under the law of the place where the wrong was committed:”

He continued:

“I would, therefore, restate the basic rule of English law with regard to foreign torts as requiring actionability as a tort according to English law, subject to the condition that civil liability in respect of the relevant claim exists as between the actual parties under the law of the foreign country where the act was done."

Their Lordships in the present case thus consider that it is clear that there was a majority in favour of reading “not justifiable” as meaning actionable in civil proceedings even if it was not necessary for the act to be characterised as a “tort” under the foreign law. Their Lordships agree with that decision and, subject to the effect of Clause (2), consider that Rule 203(1)(b) in Dicey & Morris, Conflict of Laws (12th ed.), is a correct statement of the law."

170. As is clear from the authorities, the “double actionability” rule was concerned with the broad question of whether the facts which would give rise to liability in tort under English law would render the defendant liable in a civil action under the foreign lex loci delicti. Thus the fact that he might be criminally liable there, or only entitled to receive compensation under a statutory compensation scheme, rather than by way of civil proceedings, would be insufficient.

171. The rationale of the rule that the act or omission of the defendant must be actionable abroad in civil proceedings between the same parties is by way of a safeguard against imposing liability upon a defendant in England as the lex fori for acts in respect of which there would be no liability in the lex loci delicti. However, it is not necessary for the act or omission to be characterised as a tort or delict under the foreign law, provided there is a right of recovery to a similar extent by way of civil action. The reasons of policy which dictate that the defendant should not be held liable in circumstances where, or to the extent that, he would not be held civilly liable in the country where the relevant acts or omissions took place, do not dictate that the legal basis of such liability should be the same. Indeed, the degree to which systems of civil law differ the world over, and the diversity of the conceptual routes by which they impose liability on a defendant to compensate or otherwise make restitution to a claimant in respect of a civil wrong, militate against the requirement that the court of the lex fori should enmesh itself in an exercise of characterisation and fine distinction as between the remedies afforded by different jurisdictions to achieve a similar result. Thus, so far as acts or omissions on the part of a defendant or defendants may give rise to a liability in tort under English law, there is no requirement that such conduct must be tortious by the lex loci delicti. All that is required is that it should be “civilly actionable” there (see Boys v Chaplin per Lord Hodson at 377 and per Lord Wilberforce at p.389 and Metall und Rhostoff A.G. v Donaldson Lufkin & Jenrette Inc. [1990] 1 QB 391 per Slade LJ at 439-440). It follows from this that, as stated in Dicey & Morris (12th ed.) at p.1496
"It is sufficient if by that law [i.e. the lex loci delicti], his [i.e. the defendant’s] liability to pay damages is contractual, quasi-contractual, quasi-delictual, proprietary or sui generis.”


172. As a preliminary to his consideration and application of the double actionability rule in this case, the judge first considered the question: where was the tort committed? In that respect the claimants had submitted that, despite the strong Kuwaiti connection of the parties, having regard to the seat of the claimants’ operations and the residence and activities of the defendants, on a detailed analysis of the facts relied on, the tort of conspiracy was properly to be regarded as committed in England rather than in Kuwait. It was submitted that that was so whether one applied the “substance” test propounded in Distillers Co Bio-Chemicals Limited v Thompson [1971] AC 458 D-E, per Lord Pearson (“the right approach is, when the tort is complete, to look back over the series of events constituting it and ask the question, where in substance did this cause of action arise?”) or the test that the court should first consider all the elements of the tort and then decide with which jurisdiction they are “mostly closely connected”: see Diamond v Bank of London and Montreal [1979] QB 333 per Lord Denning MR at 345G–346G and Stephenson LJ at 348H-350G. See also generally Metall und Rohstoff (supra) at 447-9. If that were right, then no question of double actionability would arise in relation to the tort of conspiracy.

173. Briefly stated, the claimants contended that the design underlying the defendants’ fraudulent activities was to generate funds outside Kuwait, the primary location chosen to effect such design being London. The monies were largely obtained through Clarksons in London, Mr McCoy playing a central role in the events which gave rise to the proceedings; of the twenty-seven charterparties used by the defendants as part of their fraudulent conspiracy, only six were signed in Kuwait and the rest were signed in London; the overt acts of the conspirators in effecting their frauds were substantially committed in London, Schemes I, II and III all involving the procurement of Clarksons to remove money from accounts held by them on the claimants’ behalf in London, largely in cash or traveller’s cheques delivered in London; and the bulk of the known enrichment took place in London rather than Kuwait.

174. Nonetheless, having made a detailed analysis of the various elements and events relied on as constituting the conspiracy, the judge, applying the principles discussed in Metall und Rohstoff, reached the conclusion that the tort was in substance committed in Kuwait and, therefore, that it was necessary to apply the double actionability rule in the circumstances of the case. By their respondents’ notice, the claimants assert that the judge erred in his conclusion. However, since the judge went on to apply the double actionability rule in favour of the claimants, Mr Malins made clear in responding to the appeal that the alleged error of the judge would only be relied on if the court held that he had erred in his application of the rule. As appears hereafter, we consider that the judge was correct in his application of the rule; it has not therefore been necessary to consider the point raised in the respondents’ notice.

175. So far as concerns sub-paragraph (a) of Rule 203(1), the judge found, and as we have stated rightly found, that the acts of the defendants complained of constituted the tort of conspiracy under English law. The critical question was thus whether the acts constituting the conspiracy were also civilly actionable according to the law of Kuwait.

176. The relevant law was the subject of evidence from three expert witnesses, Dr Mark Hoyle for the claimants, Professor William Ballantyne for the defendants, and Judge Mohammed Sallam (a retired judge of the Kuwait Court of Cassation) for the third parties. There was little disagreement between them on the basis of civil liability for wrongful acts under the law of Kuwait. That law is contained primarily in a series of codes, the relevant code in this case being the Civil Code of 1980 which is based broadly on the Egyptian Civil Code. Kuwait does not, like English law, have a law of individual ‘torts’, but contains general provisions relating to obligations and civil wrongs. It was agreed that the provisions relevant to this case were Articles 227-229 which relate to the award of damages and/or compensation for civil wrongs and Articles 264 and 267 which deal with questions of restitution. Their relevant text as translated into English is as follows:
"Art. 227-1. Every person who by his wrongful act causes damage to another is liable to compensate such other, whether he acted directly or indirectly.

...........

Art.228-(1). If the damage was caused by the fault of several persons,.each of them is liable to compensate the injured party for all the damage he has suffered.
(2). Liability shall be apportioned between the several wrongdoers in proportion to the part played by their wrongdoing in causing the damage. If it is impossible to determine what part each played liability shall be apportioned equally.

Art.229.- Where the wrongful act which caused the damage was the result of incitement or assistance the damage shall be deemed to have been caused by the wrongful act of the immediate perpetrator and those who incited or assisted him, all of whom shall be liable to make compensation therefor.

Art.264.- He who has received that which is not due to him must restore it.

Art.267-(1) Where the receiver of that which is not due was of good faith he shall only be bound to return that which he received; but if he was of bad faith he shall be liable to restore also the fruits he has obtained or which he has failed to obtain as of the date of receiving the thing or from the date when he became of bad faith as the case may be.
(2) In any case, he who has received that which was not due shall be obliged to restore the fruits from the day of initiation of proceedings against him for restitution."


177. In dealing with the cause of action in conspiracy, it was common ground between the experts that there was no civil wrong known to the law of Kuwait which depended on proof of an agreement or combination between two or more persons to injure another, and thus equated to the tort of conspiracy in English law. However, it was also not in dispute between the experts that Article 227 provided a broad basis of liability for wrongful acts which caused damage to another, and that, whatever the precise nature of what would be regarded as “wrongful” in this context, it would include the dishonest appropriation by whatever means of money or other assets. As the judge rightly held, that would obviously include obtaining by fraud as well as simple theft. It was also common ground between the experts that if two or more people acted together in such a way as to cause damage to another, Article 228 rendered each of them liable for the whole of the loss. As the judge observed, essentially this Article reflected the principles governing liability as joint tortfeasors under English law, liability as between the wrongdoers themselves being apportionable under Article 228(2). It was not disputed between the experts that if the defendants had co-operated to obtain money by fraud from the claimants, the defendants would be liable to compensate the claimants in accordance with those provisions of the Civil Code. It was further accepted on all sides that if the facts alleged by the claimants could be established, the claimants would in principle be entitled to recover from all the defendants. Nonetheless, the defendants argued below, as Mr Brodie has argued before us, that double actionability had not been established by the claimants in respect of the plea of conspiracy for two reasons, both of which were largely interrelated with the arguments we have already considered in relation to the plea of conspiracy under English law.

178. Mr Brodie's first argument is essentially a pleading point. He submitted that Kuwait being the lex loci delicti, the claimants should have begun by identifying the causes of action open to them under the law of Kuwait. He submitted that, had they done so they would have seen under the Articles previously quoted that the acts of wrongdoing on which they relied provided them prima facie with individual causes of action in respect of each of the misappropriations alleged against one or more of the defendants jointly and severally. Had those causes of action been pleaded it would have been seen that essentially similar claims for deceit, conversion and restitution lay against the defendants as several and joint tortfeasors under the laws of England, which claims could and (as Mr Brodie submitted) should have been pleaded without resort to the tort of conspiracy. He conceded that, had that been done, the double actionability rule would have been satisfied. However, he submitted that, the claimants having decided to pin their colours to the conspiracy mast in order to gain what they regarded as a more advantageous cause of action, it was appropriate that the question of double actionability should depend upon whether or not a cause of action for conspiracy to injure or defraud is known to the law of Kuwait.

179. Mr Brodie’s second argument was that, because no such civil wrong as conspiracy is known to the law of Kuwait, the claimants, in breach of the principle stated by Lord Wilberforce in Chaplin v Boys at 389d, were seeking to claim in England in respect of a matter for which civil liability does not exist under Kuwaiti law and that civil liability in Kuwait in respect of the relevant claim could not be demonstrated.

180. Mr Brodie’s first argument is neither founded upon authority nor hallowed by practice. The claimants case, as originally pleaded, was a straightforward case in conspiracy in respect of which the claimants placed no reliance upon foreign law, it being their case that the lex loci delicti was English. Once the defendants had pleaded that the law governing any claim by the claimants arising out of any alleged breach of duty owed by the defendants was Kuwaiti law and it was expressly denied that the tort of conspiracy was actionable under the law of Kuwait, the claimants amended their claim to plead that each of the unlawful means by which the conspiracy was put into effect, and upon which the claimants would rely as a self-standing cause of action, was unlawful under the law of Kuwait as a breach of each of the defendants’ duties of good faith and honesty owed as directors (in the case of Mr Al Bader and Mr Qabazard) and as an employee (in the case of Captain Stafford) and that the deliberate assistance by one defendant of any breaches committed by another defendant would be actionable under Article 227. That was a perfectly proper way to proceed and, save that the claimants later added to the Articles of the Kuwaiti Civil Code on which they relied, that was the way matters proceeded.

181. So far as the form of the pleading was concerned, the judge observed:
"Although the plaintiff must show at trial that the acts complained of give rise to civil liability as between himself and the defendant in the country where they were committed, and may, if he chooses to do so, identify at the outset the relevant foreign law on which he relies, he is entitled to rely on the presumption that foreign law is the same as English law until the contrary is proved: see University of Glasgow –v- The Economist (1990) [1997] 1E.M.L.R. 495"


182. The case last referred to was a decision of Popplewell J as to the propriety of a libel pleading which the claimants proposed to amend to allege that the publication abroad of the libel complained of was actionable in the particular countries in which publication occurred, but declined to plead particulars of the relevant foreign laws relied on. The defendants objected to a plea in that form; but the claimants argued that they were simply entitled to rely on the presumption that, in the absence of proof to the contrary, the laws of the countries concerned were the same as English law. In making observations much to the same effect as those made by the judge, Popplewell J nonetheless did not doubt that, so far as a libel pleading was concerned, the claimant had to state (albeit he need not state more) that the tort was actionable in the foreign country concerned. In this connection we note the general view expressed at paragraph 2.20 of the Law Commission Working Paper No. 87 on ‘Private International Law, Choice of Law in Tort and Deceit’ that:
“it is not necessary for the plaintiff to plead the existence of civil liability under the lex loci delicti: he may rest his case on the basis of English law alone, and leave it to the defence to raise any questions of foreign law. If the defence does not do so, the case will be disposed of without any reference to foreign law."


183. In the text which follows Rule 203 in Dicey & Morris (12th ed.) at p.1514 which related to allegation and proof of the lex loci delicti, it is stated that authority is divided on the question whether it is for the claimant to allege that the defendant’s conduct is actionable under the lex loci delicti (i.e. that such an allegation is part of the claimant’s positive case), or whether it is sufficient for the claimant to plead the cause of action in English law, it then being left to the defendant to plead and prove that his conduct was not actionable under that law. Preference is expressed by the editors for the latter view, thus aligning themselves with the Law Commission.

184. Since English courts proceed on the basis of a presumption that foreign law is the same as English law unless the contrary is proved as a fact, it seems clear that, whether or not the claimant incorporates in his pleading an averment that the matters relied on are civilly actionable under the lex loci delicti, the burden in practice lies upon the defendant to plead and prove that his conduct was not actionable under the lex loci delicti. That being so, the debate appears to be a somewhat arid one. The context in which it is likely to give rise to controversy is at the interlocutory stages of an action involving a foreign element when the court is concerned to consider and give directions in relation to any issue of foreign law arising on the face of the pleadings and as to the form and extent of any expert evidence of foreign law sought to be adduced by the parties. It seems to us that questions of where the burden lies and its practical consequences for the progress of the action are best dealt with on a case by case basis rather than by the application of an inflexible rule. So far as the instant case is concerned, by the time of trial, the issues of law were unambiguously pleaded on both sides, directions having been given in respect of the expert evidence to be called, and the judge was entirely right to deal with the matter as he did.

185. Mr Brodie’s second argument was considered and rejected by the judge in the light of the state of the expert evidence before him considered in the light of the authorities to which we have referred. The judge (at page 151) held that:
"It is immaterial in the present case that the law of Kuwait does not recognise the separate terms of liability based on the existence of a combination provided that the acts which give rise to the tort under English law provide a cause of action under that law. In the present case they do, and the effect of Art. 228 is to render the defendants liable to the same extent as under English law."

Again, it seems to us that the judge was entirely right in the conclusion which he reached.
186. As already indicated, and as Mr Brodie accepted, Article 227 of the 1980 Civil Code speaks in terms of liability for ‘wrongful acts’ and Article 228 imposes joint and several liability in respect of damage caused by the fault of several persons; in this respect the Articles appear to be conceptually similar to, and entirely apt to cover, the position of joint tortfeasors in English law. Thus, they are apt in substance to cover tortious acts committed by individuals pursuant to a common agreement or combination to effect such acts. In the course of argument Mr Brodie conceded, indeed as part of his argument upon merger (see paragraphs 122-127 above) he asserted, that if and to the extent that the individual defendants were found liable in respect of the misappropriations complained of, they could and should be liable as joint tortfeasors and the averment of conspiracy was surplusage. That is because the gist of the action in a civil case of conspiracy is the damage caused not by the agreement itself, but by the acts carried out pursuant to it. We consider that the words of Lord Wilberforce in Boys v Chaplin (“civil liability in respect of the relevant claim”) should be read with his earlier reference to a “claim in England in respect of a matter”. The essential question is simply whether the underlying facts and matters which gave rise to the tort claim in England would also gave rise to civil liability (whatever the label or description of the cause of action) under the lex loci delicti.

FIDUCIARY DUTY AND CONSTRUCTIVE TRUST
187. By way of alternative to their claim for damages for conspiracy to defraud by the various acts of misappropriation relied on, the claimants’ points of claim also characterised the unlawful means adopted by the defendants as breaches of the duties of good faith and honesty which each owed to the claimants by reason of his office or employment. In addition, by later amendment, the claimants asserted that they would if necessary rely upon each of the unlawful means adopted as giving rise to a separate and self-standing cause of action against each of the defendants, should the claim in conspiracy fail. The judge was somewhat critical of the brevity of the pleading; however he regarded it as cured by the particulars separately supplied which made the defendants well aware of the nature of the case made against them.

188. We start by considering the claimant's alternative claim in the context of English law. In many company fraud cases it is necessary to distinguish between a director who misapplies the claimant company's funds on the one hand and someone who either receives them for his own benefit with knowledge of the misapplication (knowing receipt) or dishonestly assists in the misapplication (knowing assistance) on the other. Those who fall into the first category, being persons who control the company's funds and owe it fiduciary duties, are treated by the law as if they were actual trustees of the funds. Those who fall into the second category, being persons who neither control the company's funds nor owe it fiduciary duties, are classified as constructive trustees of the funds. The only reason why the directors are not actual trustees of the funds is because the whole legal and beneficial ownership of the assets of a company is vested in the company itself. The principle was authoritatively stated by Lindley LJ in Re Lands Allotment Co. [1894] 1 Ch 616, 631:
"Although directors are not properly speaking trustees, yet they have always been considered and treated as trustees of money which comes to their hands or which is actually under their control; and ever since joint stock companies were invented directors have been liable to make good moneys which they have misapplied upon the same footing as if they were trustees . . ."

A more recent affirmation of the principle is to be found in the judgment of Buckley LJ in Belmont Finance Corp. v. Williams Furniture Ltd (No 2) [1980] 1 All ER 393, 405.

189. In the present case Mr Al Bader was a director of both KOTC and SITKA and Mr Qabazard was a director of KOTC. Moreover, both here and below, Mr Brodie accepted that, although Mr Qabazard was not a director of SITKA and Captain Stafford was not a director of either company, each of them owed fiduciary duties to the claimant or claimants in respect of funds which were under his control. Accordingly, each of the three defendants fell into the first category stated above, and it was only necessary for the claimants to establish that they had misapplied the funds. Questions of interest apart, it was not even necessary to establish that they had acted dishonestly, although the nature of the misapplications was such that, once found, it was inevitable that they would also be found to have been dishonest. What was unnecessary and merely confusing was for the judge to be asked to consider whether the defendants were liable as constructive trustees. Plainly they were not. An actual trustee or someone whom the law treats as such cannot at the same time be a constructive trustee.

190. The judge held that the claimants' alternative claim was made out. Although his consideration of the question proceeded mainly on the footing that the defendants were liable as constructive trustees, he concluded by holding that they were also liable by reason of breaches of their fiduciary duties to the claimants. On the basis of his previous findings, that conclusion was both justified on the facts and correct in law. However, because the rule of English private international law is that the obligation to restore the benefit of an enrichment such as was obtained by the defendants in this case is governed by the law of the country where the enrichment occurred (see Dicey & Morris: The Conflict of Laws (13th ed.) Rule 200(2)(c)), it was necessary for the judge's decision to be based, in the first instance, on the law of Kuwait.

191. Although the concept of a trust is unknown to Kuwaiti law, both Dr Hoyle and Professor Ballantyne agreed that Articles 264 and 267 of the Civil Code (see above) imposed on each of the defendants an obligation to make restitution to the claimants in respect of the funds misapplied by him. On that footing the judge followed the decision of Chadwick J in Arab Monetary Fund v. Hashim (15th June 1994 - unreported), which has since itself been followed by Mance J in Gruppo Torras S.A. v. Al Sabah (24th June 1999 - unreported), and held that the restitutionary obligation under Kuwaiti law could be characterised as fiduciary in character by English law and thus capable of supporting the equitable remedies in personam which would be available to the claimants in an English court.

192. In our judgment both the decision of Chadwick J in Arab Monetary Fund v. Hashim and the judge's application of it to the present case were correct. In Hashim the claimant sought recovery from the defendants on the grounds that they had acted in breach of fiduciary duties under the law of Abu Dhabi. Chadwick J said:
"In the context of a claim to invoke its equitable jurisdiction it is for the English court to decide whether the necessary fiduciary relationship exists. Where the duties to which a relationship gives rise are determined by foreign law, the question for the foreign law is what is the nature of those duties. It is for the English court to decide whether duties of that nature are to be regarded as fiduciary."

Later, having referred to a passage in the judgment of the Privy Council delivered by Lord Templeman in A.G. for Hong Kong v. Reid [1994] 1 AC 324, 331, and to what is now rule 200 in Dicey and Morris's Conflict of Laws, Chadwick J continued:
"I find nothing in the rule which is inconsistent with the view that, in cases involving a foreign element in which an English court is asked to treat a defendant as a constructive trustee of assets which he has acquired through misuse of his powers, the relevant questions are: (i) what is the proper law which governs the relationship between the defendant and the person for whose benefit those powers have been conferred, (ii) what, under that law, are the duties to which the defendant is subject in relation to those powers, (iii) is the nature of those duties such that they would be regarded by an English court as fiduciary duties and (iv), if so, is it unconscionable for the defendant to retain those assets."


193 Our only possible criticism of Chadwick J's judgment is that he too referred to the defendants in that case being treated by English law as constructive trustees and not as actual trustees. There may have been special reasons for that. But whether there were or not, the inaccuracy of the description can have had no effect on the principles by which the defendants were held liable. In the present case the answers to Chadwick J's four questions are the following: (i) the proper law which governed the relationship between the defendants and the claimants was the law of Kuwait; (ii) the duties imposed on the defendants by Articles 264 and 267 of the Civil Code were to make restitution in respect of the sums misapplied by them respectively; (iii) the nature of those duties was such that they would be regarded by an English court as fiduciary duties; and (iv) it would be unconscionable for the defendants to retain the funds. We accordingly hold that the claimants' alternative case is made out.

INTEREST
194. The claimants sought, and the judge awarded, compound interest upon the principal sums for which each defendant was held liable. He did so on the basis of the decision in Wallersteiner –v- Moir (No.2) [1975] QB 373 as considered by Lord Browne-Wilkinson in the Westdeutsche case [1996] AC 669.. The judge said (at page 174):
"... Lord Browne-Wilkinson at page 702D-E indicated some support for the view that compound interest could be awarded in all cases where a fiduciary has improperly profited from his trust and in my judgment that should follow from the application of established principles to modern conditions. An award of compound interest in accordance with equitable principles is in the nature of a remedy designed to ensure that the wrongdoer makes full restitution. As such I think the jurisdiction to make such an award is to be regarded as part of the procedural law of the lex fori."


The judge concluded (at page 175) that, while he was satisfied that he had power to award simple interest under the provisions under s.35A of the Supreme Court Act 1981 he should nonetheless make an award of compound interest in the exercise of his equitable jurisdiction, this being:
"a case in which the defendants can properly be regarded as being under a duty to account the plaintiffs for a property which they received and any benefits obtained from it."


195. The judge reached that conclusion, despite the submissions of Mr Brodie, renewed on this appeal, that any award of interest in the circumstances of this case would amount to a breach of the double actionability rule, because the law of Kuwait does not recognise or provide for awards of interest, save in respect of transactions governed by its Commercial Code and save insofar as permitted by Article 306 of the Civil Code, which all experts agreed were not applicable to the circumstances in this case.

196. The judge dealt with Mr Brodie’s argument by posing and answering the following three questions. (1) Was an award of interest precluded by the double actionability rule as being contrary to the law of Kuwait? (2) If not, was it a case in which it would be appropriate as a matter of discretion to award interest at all? (3) If so, should such interest be awarded on a simple or compound basis?

197. In relation to question (1) he rightly stated (at page 167-8):
"Whether the plaintiffs are entitled to recover interest on any sum awarded as damages in the present case, either under s.35A of the Supreme Court Act 1981 or under the rules of equity, depends first on whether in making an award of interest the court is giving effect to procedural or substantive rights. If the part of an award of interest is simply procedural it is governed exclusively by English law as the lex fori and no question of Kuwaiti law arises, save insofar as it may be relevant to the exercise of the court’s discretion. If, however, the court is giving effect to substantive rights it becomes necessary to decide whether the loss of use of money represents a head of liability recognised under Kuwaiti law so as to satisfy the double actionability rule: see Chaplin –v- Boys."


198. The judge first considered the position in relation to awards of statutory (simple) interest under s.35A, and adopted the view of Hobhouse J in Midland International Trade Services Limited –v- Al Sudairy (11th April 1990, reported Financial Times 2nd May 1990) that such awards are procedural rather than substantive in nature. He expressed a similar conclusion in respect of awards of compound interest based on equitable principles. That being so, he concluded that both types of award may be made in English proceedings regardless of the lex causae.

199. In case he was wrong, the judge went on to consider the position under Kuwaiti law. He concentrated simply upon the provisions of the Kuwaiti Civil Code because, although the defendants’ acts of misappropriation were all committed in a commercial context, the expert witnesses were agreed that the court could not resort to the principles governing commercial transactions contained in the Kuwaiti Commercial Code, as the matters complained of did not amount to commercial activities for the purposes of that Code. However, so far as the Civil Code was concerned, the judge held, on the basis of the expert evidence which he had heard, that interest upon sums misappropriated was recoverable in the sense and to the extent that the terms of Article 267 justified such an award (“Where the receiver of that which is not due was of ..... bad faith he shall be liable to restore also the fruits he has obtained or which he has failed to obtain ... from the date when he became of bad faith ...").

200. The judge stated (at page 172):
"... [although] .. with the possible exception of the funds received by Capt. Stafford which were invested the plaintiffs are not in a position to show that the stolen funds did actually produce any fruits in the hands of the defendants ... Art. 267 also imposes an obligation on a person who has received property in bad faith to account to the plaintiff for the fruits he ought to have received. This aspect of the Article was not investigated with the witnesses in very great depth, but Prof. Ballantyne accepted that it imposed an obligation on the defendant to account for any fruits which could have been obtained but were lost as a result of his negligence. That being so, I am satisfied that the Kuwaiti courts have the power under this Article to award interest where they are satisfied that the property in question could have been used to earn interest and would have been so used if the interests of the owner had been properly safeguarded. It seemed clear to me from the evidence of both Dr. Hoyle and Prof. Ballantyne that the Code is more concerned with laying down principles of general application than with prescribing different rules for different types of claim. Prof. Ballantyne accepted that a person who stole property would be regarded as having thereby received it in bad faith within the meaning of Art. 267 with all the consequences which that Article prescribes, and since in the present case the defendants were acting in concert, I think it follows that receipt by any one of them could properly be regarded as receipt by all. That being so, I am satisfied that interest could be awarded against them under the law of Kuwait."


201. The judge therefore answered his question (1) in the negative. So far as his question (2) was concerned, he made clear that in principle he considered an award of interest appropriate, and in answer to question (3) he concluded that it should be on a compound basis.

202. As to the judge’s finding that interest could be awarded under Article 267, Mr Brodie raised two points on this appeal. First, he submitted that, in coming to his decision, the judge should have disregarded Article 267 altogether. That was because Article 267 had not been pleaded and reliance had not been placed upon it in the claimants’ expert’s report, although its text appeared in a schedule thereto. We do not think that complaint has substance. It is correct that Dr Hoyle first placed reliance upon Article 267 as itself applicable to a claim in respect of interest in the course of his cross-examination by counsel for the third party. He had earlier asserted a power in the court to award compensation for loss of the claimant’s monies. In cross-examination he expressed the view that interest earned, or which could reasonably be expected to be earned (which he called ‘opportunity cost’), could also be awarded under Article 267 as part of the Kuwaiti court’s general power to compensate a victim of misappropriation. Mr Brodie objected to that evidence at the time, but it was admitted on the basis that Professor Ballantyne should have an opportunity to deal with the point and that Mr Brodie could apply to have Dr Hoyle recalled for further cross-examination should he see fit. Following Professor Ballantyne’s evidence, that right was not exercised. In these circumstances, it seems to us that Mr Brodie’s complaint must fail so far as it was based upon a plea of surprise.

203. As to the substance of the experts’ evidence, Mr Brodie submitted that the evidence of Dr Hoyle was in any event insufficient to justify the judge’s finding that interest was recoverable. He asserted that the judge should have preferred the evidence of Professor Ballantyne, the gravamen of whose evidence was not represented by his concession that a thief or receiver could be obliged to account for fruits which could have been obtained but were lost through negligence, but rather by his statement of opinion that the reference to ‘fruits’ in Article 267 was not intended to be applied to a claim for interest upon monies at all, the concept of ‘fruits’ being based on historic principles of recovery in relation to the produce of animals or plants and inappropriate to comprehend a claim in respect of lost interest on monies placed on deposit. Having studied the transcript of the expert evidence, we are satisfied that there was before the judge a clear issue between the rival experts as to whether or not Article 267 could be used to require a fiduciary in wrongful receipt of monies to account for interest which he had obtained or failed to obtain through investment, in respect of which issue the judge was entitled to prefer, as he did in fact prefer, the opinion of Dr Hoyle. We therefore reject this ground of appeal.

204. In these circumstances, the judge's finding that interest was recoverable by way of compensation under the restitutionary provisions of Article 267 represented a finding that there was under Kuwaiti law a provision of substantive law which closely corresponded to the award in England of compound interest against a person whom English law would regard as a trustee or constructive trustee in respect of monies stolen or appropriated by fraud. Accordingly, if the judge was wrong to regard his award of compound interest as a matter of procedural law for the lex fori, he was nonetheless justified in making the award he did, given that it “harmonise[d] with the right according to its nature and extent as fixed by the foreign law” (see Phrantzes –v- Argenti [1960] 2 QB 19 at 35 and Dicey & Morris (13th ed.) at page 171) and was thus the remedy appropriate in English law to give effect to the substantive right contained in Article 267. That being so, it is strictly unnecessary to decide the question, hitherto devoid of authority, as to whether an award of interest against a person in the position of a trustee or constructive trustee is better regarded as substantive or procedural in character so far as English law is concerned. What does seem clear to us, however, is that (although the judge held it to be so) the answer is not necessarily the same as that in respect of an award under s.35A of the Supreme Court Act 1981 (which prohibits awards of compound interest).

205. As to the nature of awards under s.35A there is a degree of controversy whether, for the purposes of the conflict of laws a claim for and/or the award of simple interest in respect of debt or damages should be characterised as procedural (as the judge concluded) or substantive in nature. In stating his conclusion on that point, the judge said that he found the reasoning of Hobhouse J in Midland International –v- Al Sudairy convincing. In brief summary, that reasoning was that (1) there is no English common law right to be paid general damages by way of interest or otherwise for delay in payment of a debt (see President of India –v- La Pintada [1985] AC 104), the statutory discretion provided by s.35A being an alternative to any substantive right and not reflective of it; (2) the power is a broad discretionary power in the court to remedy injustice as part of its procedure; see the La Pintada decision at p.131 per Lord Brandon, and BP Explorations –v- Hunt No.2 [1979] 1 WLR 793 at 845 et seq per Robert Goff J approved by the House of Lords at [1983] AC 352; (3) the statutory power is dependent on and springs from the existence of legal proceedings, rather than altering or adding to the contractual rights of the parties. Thus it is an incident of procedure and not of substantive law.

206. In coming to his conclusion, Hobhouse J rejected the contrary view, at that time expressed in general terms in Dicey & Morris (11th Ed) in the text beneath Rule 199 (now to be found in somewhat expanded form beneath Rule 196 in Dicey & Morrtis (13th ed.) at pp.1459-60) and adopted by Bristow J in Miliangos –v- George Frank Textiles (No.2) [1977] QB 489 at 496-7, that in respect of “claims for interest as damages”, the right to claim such interest is at common law governed by the law which is applicable to the contract albeit the rate of interest to be awarded is a matter for the lex fori. That view is essentially based on the premise that a claim for interest is in substance a claim for damages in the sense that it is awarded as compensation to the plaintiff for being kept out of money justly due to him, and that the question of whether or not such a claim or award is available to a claimant is (like the availability of heads of damage strictly so called) governed by the law applicable to the contract or tort sued upon. Hobhouse J, like the judge in this case, recognised that a claim for interest due under an express or implied term in a contract (like the identification of recoverable heads of damage in the law of tort) is a matter of substantive law for the lex causae. However, he took the view that Rule 199 (now Rule 196) in Dicey & Morris should be confined to the context of a contractual right to interest and he pointed out that the question whether the general discretionary power of the court under s.35A is itself substantive or procedural is a different matter.

207. While we acknowledge the force of Hobhouse J’s reasoning as an analysis of the nature and origins of the English court’s general power to award interest, it is also right to observe that the creation of that power creates a right in a claimant to claim interest, which right is recognised and consistently given effect on the basis that it represents compensation to the claimant for having been kept out of money to which he has been held entitled

208. Because it is not necessary to resolve the controversy over s.35A for the purpose of deciding this appeal, we do not propose to do so. That is because it has not been fully argued before us, and we consider that any thorough review of the proper characterisation of the power of the court under s.35A should take into account the possible effect of Article 10(1) of the Rome Convention on the Law Applicable to Contractual Obligations 1980 which was imported into English law by the Contracts (Applicable Law) Act 1990, but which had not come into effect at the time of Hobhouse J’s decision. The editors of Dicey & Morris express the view at p.1459 of the current (13th) edition that, for the purposes of the Convention, the right to claim interest should be regarded as a substantive matter for the applicable law as one of the ‘consequences of breach’: see Article 10(1)(c). However, we express no view upon that point, because we have heard no argument upon it.

209. All that said, the judge did not make his award of interest as a matter of, or in connection with, a claim for debt, breach of contract or damages for tort. He made it as part of a restitutionary award of compensation for breach of fiduciary duty. Such a claim made on the basis of trusteeship and available to the claimants in the circumstances of the case, is by its origin and nature an equitable proprietary claim moulded and used for the purpose of achieving restitution by a person called to account by equity on the basis of a defaulting trustee. Since there is no jurisdiction in the court to award compound interest at common law or by statute, it was indeed the only basis on which the judge could make an award of compound interest. The jurisdiction which he exercised is that which Lord Brandon stated in the La Pintada case at p.116 is confined to situations
"where money had been obtained and retained by fraud, or where it had been withheld or misapplied by a trustee or anyone else in a fiduciary position"

and which the majority of the House of Lords declined to expand further in the Westdeutsche Bank case (see per Lord Browne-Wilkinson at 717F, Lord Slynn of Hadleigh at 718f-719b and Lord Lloyd of Berwick at 739b-741a).

210. In such a case, the award of compound interest is made on the basis that a trustee misapplying monies for his own benefit, and a person obtaining or retaining money by fraud who is to be similarly treated, should be obliged either to account in full for the benefit he has unjustly derived or, in lieu of such account, to pay compound interest when the circumstances justify an award on that basis. The rationale is historically and essentially that of restitution i.e. that a fiduciary should not be permitted to make a profit from his trust. As explained by Lord Denning MR in Wallersteiner v Moir (No.2) at page 388, it is also a means of ensuring full compensation where the wrongdoer deprives a person or company of monies employed in trading operations. It is noteworthy that the judgments of Buckley LJ and Scarman LJ did not refer to that aspect as constituting the basis for a compound award. It is nonetheless an element which usually plays a part in the reasoning of the court when considering whether or not to make such an award in modern conditions.

211. It seems to us that the court’s power in such circumstances to award compound interest (although discretionary in the sense that it will be exercised in accordance with established equitable principles) is not only distinct, but different in character, from its broad powers under s.35A, being a necessary adjunct of the claimant’s substantive right to restitution. An award of compound interest upon that basis is thus itself substantive rather than merely procedural in nature. Accordingly, whilst we would differ from the reasoning of the judge in that last respect, that difference is not one which leads to any different result so far as the award of interest in this case is concerned, in the light of the provisions of Article 267 of the Kuwait Civil Code..

CONCLUSION
212 For the above reasons, the appeals of Mr Al Bader and Mr Qabazard will be dismissed. The appeal of Captain Stafford will be allowed to the extent that the sums which he was ordered to pay (see paragraph 3 above) will be reduced by reason of his not being liable in respect of losses incurred after he left Kuwait in September 1989 (see paragraph 164 above). We anticipate that the amount of the reductions will be capable of agreement between the parties.


Order: appeals of Mr Al Bader and Mr Qabazard dismissed; appeal of Captain Stafford allowed in part; applications to adduce further evidence granted; no order to be drawn up today; counsel for the defendants to have until 9th June to put in written submissions on any points they wish to address; counsel for claimants to have until 16th June to put in any submissions in answer.