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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Latreefers Inc. v Tangent Shipping Company Ltd [2000] EWHC 196 (Comm) (01 February 2000) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2000/196.html Cite as: [2000] EWHC 196 (Comm)

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Case No: 1999 Folio No 769

IN THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 1st February 2000

B e f o r e : THE HON MR JUSTICE LANGLEY

	LATREEFERS INC.(in liquidation) (A corporation incorporated in Liberia)	Claimants
	- v -
	TANGENT SHIPPING COMPANY LIMITED (A corporation incorporated in Cyprus)	Defendants

- - - - - - - - - - - - - - - - - - - - - Miss S. Prevezer ...instructed by Messrs Ince & Co for the Claimants) Mr A. Glennie QC ...instructed by Messrs Lawrence Graham for the Defendants) JUDGMENT With reference to R.S.C. Order 68 Rule 1 and the Practice direction of the Master of The Rolls dated 9th July 1990 ([1990] 1 W.L.R. 1126) I certify that the attached text records my judgment and direct that no further note or transcript need be made

The Hon. Mr Justice Langley

COPIES OF THIS JUDGMENT ARE AVAILABLE IN WORD 6 for WINDOWS 3.1 ON PROVISION OF A CLEAN DISC. APPLY TO THE CLERK TO THE HONOURABLE MR JUSTICE LANGLEY Telephone 0171-936-6395

Mr Justice Langley:

" Latreefers" claims re-payment of a loan of US$ 218,132.62 said to have been made by the company to "Tangent" in November 1993. Latreefers is now in liquidation. Latreefers and a company shortly described as Latstrand were both subsidiary companies of Latmar Holdings Corporation, which itself was a subsidiary of Latvian Shipping Company. Tangent was a subsidiary of Latstrand.

The major issue is whether or not Tangent had already repaid any debt due from it to Latreefers or Tangent's liability to do so had otherwise been discharged prior to the claim for repayment made by the liquidators in 1999.

The evidence adduced is all in written form. At the very last moment Tangent sought to rely on a third Witness Statement from a Mr Kisselev. Miss Prevezer understandably opposed that both in principle as a plain breach of earlier orders and because she had been prepared to accept his two previous statements without requiring him to attend for cross-examination but would have wished to cross-examine him on the third statement. Nonetheless I received and read the statement in order to determine whether it should be accepted in evidence. Having done so and taking account of the criticisms made of it by Miss Prevezer and that it has not been subjected to cross-examination I do not think it advances matters much and its contents in fact do little if anything more than state matters which could properly have been inferred in any event. In those circumstances I think it right and realistic to treat the statement as part of the evidence but to give limited weight to it and to do so only where I think it cannot be open to any real dispute.

Tangent's defence pleads that whilst it is admitted that Latreefers transferred the sum claimed to Tangent, Latstrand had transferred a much larger sum of US$ 2,696,392 to Latreefers and that :

In or about December 1995 Tangent, in accordance with Latreefers instructions and/or with the consent of Latreefers, transferred $218,132.62 directly to Latstrand thereby reducing any indebtedness of Latreefers to Latstrand by that amount and discharging any indebtedness as between Latreefers and Tangent.

As the dispute has developed, however, the specific allegation of payment by Tangent to Latstrand has, to quote Mr Glennie, ceased to be essential to Tangent's defence. That, no doubt, is because the only evidence of a payment by Tangent to Latstrand is payment in early January 1994 of a sum of $317,000 of which no breakdown has been provided. The real or major issue is whether Latreefers agreed to set-off Tangent's debt to it against its own debt to Latstrand.

Before turning to the evidence, I should shortly identify those people and other companies which play a part in it.

An independent (in the sense of not being part of the Group corporate structure) company called Latmar Services Limited acted as London agent for the companies in the group. The Solicitors to the group and Latreefers were Watson Farley and Williams. The accountants to the Group and Latreefers were Moore Stephens. A Mr Blincow was employed by Latmar Services as an accountant to perform the accounting functions for group companies. He reported to the managing director of Latmar Services Limited, a Mr Kisselev. The President of Latvian Shipping Company (the ultimate holding company) was a Mr Avotins. The Directors of Latreefers included a Mr Hobson and a Miss Potts of an Isle of Man registered company called "Capco". They were also Directors of Tangent.

The facts as they emerge from the evidence and documents are as follows.

Latreefers was formed to be the purchasing company under six contracts for building reefer vessels made with a Polish shipbuilding yard in September 1992. To fund payments under the contracts various Group companies paid monies into "a retention account" at Hambros Bank Limited in the name of Latreefers. The account was set up early in 1993. Latstrand was one company which made payments into the account and in February 1993 it paid into it the sum of $2,696,392.12. In November a vessel (Zoja 1) owned by Tangent suffered an engine breakdown. Normally Latstrand would have financed the repairs for its subsidiary, Tangent, which had insufficient funds of its own. The finance was provided by Latreefers from the Hambros account, and on November 15 the sum in dispute of $218,132.62 was transferred from the account to Tangent to pay for the repairs. The transfer was effected on the instructions of Mr Kisselev. He held a Power of Attorney to operate the Hambros account on behalf of Latreefers.

It appears to have been at about this time that it became apparent that the shipbuilding contracts would give rise to serious disputes between Latreefers and the Polish shipyard. Those disputes or their consequences continue and have already led to a judgment against Latreefers for very substantial sums and to its liquidation.

On December 3 Watson Farley and Williams sent a fax to Mr Blincow, copy to Paul Powell of Moore Stephens, saying:

Further to your conversations with me and with Florence this morning I attach two letters in the agreed form documenting the debts between Latreefers and Tangent/Latstrand.

As far as we understand the situation (but Paul must confirm), as Tangent is indebted to Latreefers and Latreefers is indebted to Latstrand, Latreefers can direct Tangent to pay US$ 218,132.60 directly to Latstrand which will reduce Latreefers' own debt to Latstrand.

However, according to our calculations, Latreefers will still owe Latstrand $2,478,259.52; can this money be repaid and, if so, from where?

I should be grateful if you could discuss the attached with Paul Powell or someone else at Moore Stephens and let us know whether these documents will solve the situation or, if not, how you are going to proceed.

The two attached draft letters were from Latreefers to Latstrand acknowledging receipt of $2,696,392.12, indebtedness in that amount, and agreeing to repay it on demand, and from Tangent to Latreefers acknowledging receipt of $218,132.60, indebtedness in that amount and agreeing to repay it on demand.

Mr Blincow replied by fax on the same day, copied to Miss Potts. He said:

Thank you for your letter of the 3rd December dealing with the debts between Latreefers and Tangent/Latstrand. I have spoken to Norman Sharp at Moore Stephens and they concur with the course of action which we have embarked upon. Would you therefore please amend the inter-company indebtedness of Tangent Shipping Company to Latreefers to read US$218,132.62 and accordingly the net indebtedness to US$2,478,259.50, which amount is due by Latreefers Inc to Latstrand Holdings Corporation.

This net indebtedness will be repaid by Latvian Shipping Company as and when required based on the previous documentation which has been issued.

Thank you for sorting out this loose end relating to the other matters with which you have been concerned recently.

Both Tangent (by Mr Hobson) and Latreefers (by Miss Potts) signed the draft letters prepared by the solicitors each of which was dated December 3.

I have the following comments on these documents.

(1) The letters signed by Tangent and Latreefers are clear. They each acknowledge a debt. I cannot accept Mr Glennie's, perhaps tentative, submission that no debt was ever due from Tangent to Latreefers because on analysis Latreefers was only holding in the Hambros account for Latstrand those sums paid to it by Latstrand. That is not the way the matter was recorded. It is also belied by the fact that the primary purpose of the monies in the account was to make payments under the building contracts which was an obligation of Latreefers.

(2) The first paragraph of Mr Blincow's fax is not well expressed. Read literally it makes no sense. The "net indebtedness" of Latreefers to Latstrand could only be $2,478,259.50 as stated if Latreefers was "credited" with the debt it owed to Tangent ($2,696,392,12 minus $218,132.62 equals $2,478,259.50). I think, however, that read with the fax to which it is a reply there is no real room for doubt that Mr Blincow, with the concurrence of Moore Stephens, was agreeing to the solicitors' proposal that Tangent's debt to Latreefers should be treated as due to Latstrand so reducing Latreefers' debt to Latstrand to the stated sum. The references to "net" indebtedness point strongly to that conclusion. The inter-company indebtedness of Tangent would in effect be no longer "to Latreefers" but to Latstrand.

(3) I am not surprised by the reference to this as a "loose end". The position was that Latreefers had paid monies to Tangent which it would otherwise have fallen to Latstrand to pay and netting off the debts would be both normal and acceptable.

(4) The reference to "previous documentation" was to an Assignment dated December 2 1993 whereby Latreefers had assigned all the monies it held in an account in Bermuda to Latmar Holdings Corporation on the basis that Latmar Holdings would discharge Latreefers obligations in relation to the monies. The monies were held on deposit and it would have been disadvantageous to break the deposit. The effect of the assignment was to put the monies out of Latreefers ownership without breaking the deposit. The monies represented the balance of the sums provided to Latreefers by subsidiaries of Latmar Holdings originally held in the Hambros account but which had been deposited off-shore to obtain a higher rate of interest. Latmar Holdings itself lent the money on to Latvian Shipping Company, hence Mr Blincow's reference to Latvian Shipping Company repaying the net indebtedness to Latstrand.

There is no doubt on the evidence that in early January 1994 Tangent did make a payment under the title "loan retention" to Latstrand of $317,000.

The position of Latvian Shipping Company was the subject of a number of Loan Agreements made between it and Latmar Holdings Corporation by one of which, (Agreement 'D') dated as of 30th November 1993 but signed by Mr Hobson for Latmar Holdings on 19th April 1994, Latmar Holdings lent Latvian Shipping Company the sum of $1,936,360.73. The Agreement included a Schedule showing how that sum was made up. The schedule itself recorded the state of account of Latreefers and expressly showed and included "Amount due to Latstrand 2,696,392.12" and "Amount repaid to Latstrand 218,132.12". The latter sum is of course and represents the sum advanced by Latreefers to Tangent.

On 10th March 1994, Mr Kisselev on behalf of Latmar Services sent a fax to Latvian Deposit bank instructing the Bank to transfer $2,478,259.50 to an account of Latstrand. That instruction was acted upon. It was copied to Mr Avotins. It represented (in effect) the re-payment by Latreefers of the Latstrand loan less the payment Latreefers had made to Tangent which is the subject of the claim.

On March 3, 1999 the Joint Provisional Liquidator of Latreefers wrote to Tangent at an address in Limassol, Cyprus stating that the books and records of the company noted that the sum of $218,132.62 remained due and enclosing Tangent's letter dated December 3, 1993. A chasing letter was sent to the same address on March 17. No replies were received. On May 13 a further chaser and demand for payment was sent to Tangent addressed to Capco house in the Isle of Man. Capco Trust replied to this letter on May 19 saying that Capco ceased to be involved with Tangent in 1994 and that they understood Tangent was now administered by another company of an address in Limassol different from that to which the March 1999 letters had been sent. Proceedings were commenced on June 10.

Although, understandably, the failure of Tangent to make a substantive response to these letters advancing the company's present case has been criticised, it is now clear that both Mr Blincow and Mr Kisselev had left Latmar Services which itself had ceased to be an active company in 1998 and, after the lapse of over 5 years since the material events, for my part I do not find it surprising or a matter for relevant or substantial comment in the present context.

The evidence (in the form of Affidavits and witness statements from the parties' solicitors and witness statements by Messrs Blincow and Kisselev) so far as it adds to the documents and matters to which I have referred is as follows.

(1) The first Affidavit (September 10, 1999) of Tangent's solicitors, based on information supplied by Mr Blincow, a Miss Kaloghirou (a director of Tangent) and Mr Powell of Moore Stephens (described as auditors to Tangent in 1992/4), advanced the case that the "debt relied upon was discharged by means of further inter-company transfers". This was substantially based on the documents to which I have referred, but placed more emphasis on the payment by Tangent to Latstrand of $317,000 in early January 1994 than is now Tangent's case.

(2) The second Affidavit of Tangent's solicitor (November 30) was based on information supplied by Mr Blincow and Mr Kisselev. It referred to the payment in March 1994 by (in effect) Latreefers to Latstrand of $2,478,259.50 and stated that it was this sum which was repaid "because of the earlier discharge of $218,132.62 by Tangent to Latstrand." The Affidavit also stated that "at all material times the Latmar group was receiving advice from well respected solicitors and accountants, namely Watson Farley and Williams and Moore Stephens. No transactions were conducted or accounted for which were inconsistent with advice from those sources".

(3) Mr Kisselev's first witness statement (dated December 17, 1999) stated (paragraph 7) that "many of the tasks undertaken at Latmar services on behalf of the Latmar group of companies were done at the request of Mr Avotins. I was in regular telephone contact with Mr Avotins. Most of our communications were oral rather than in writing". In referring to the payment from the Hambros account to Tangent (at paragraph 15) Mr Kisselev said "normally Latstrand would have advanced the money to Tangent direct. But given the series of transactions referred to above (a reference in part to Latstrand's transfer to the account of $2,696,392.12) it was deemed appropriate simply to treat the debt from Tangent to Latreefers as having been assigned in favour of Latstrand thus reducing the inter-company net indebtedness from Latreefers to Latstrand to $2.48m instead of the original figure of $2.696 million".

(4) Mr Blincow's statement confirmed Mr Kisselev's statement so far as it referred to him and stated "our legal advisers maintained the separate corporate structure of companies in the group by ensuring that Powers of Attorney were issued where necessary," and he referred to a Power of Attorney from Latreefers to Mr Avotins.

(5) In a second statement Mr Kisselev said "I mentioned in my (first) statement that my instructions in respect of Latreefers came primarily from Mr Avotins. I should have mentioned that Mr Avotins himself was acting on behalf of Latreefers pursuant to a power of attorney dated 6th April, 1993 ...." A copy of this power of attorney was attached.

(6) Despite Miss Prevezer's submission that Mr Avotins' power of attorney to act on behalf of Latreefers was limited to acts in relation only to the building of the six Reefer vessels, in my judgment it plainly is not so limited but extends to any business which Latreefers could lawfully transact "including the placement and transfer of the Company's funds" and acting in relation to the Vessels. Mr Kisselev himself held Powers of Attorney from Latreefers to act "in connection with the operation of the Corporation's account at Hambro's bank" and in connection with the shipbuilding contracts.

(7) Finally, in his third witness statement, to which I have referred above, Mr Kisselev said:

All transfers of large sums of money such as the $218,132.62, $2,696,392.12 and $2,478,259.50 were done with the knowledge and approval of Mr Avotins ....

I have no doubt therefore that both the transfer of $218,132 from the Latreefers account to Tangent and the arrangement whereby only $2,478,259 of the $2,696,392 originally paid by Latstrand into the Latreefers' account was repaid to Latstrand (the balance of $218,132 being deemed repaid by virtue of the fact that a Latstrand subsidiary, Tangent, had the benefit of the funds) was done with the knowledge and approval of Mr Avotins.

THE SUBMISSIONS

I have set out the evidence in detail because it is Miss Prevezer's primary submission that (even including and despite Mr Kisselev's third statement) it fails to establish that anyone authorised to act for Latreefers ever agreed or consented to the debt due from Tangent being repaid to Latstrand or treated as discharged on a balancing of Latreefers account with Latstrand. She submitted that whatever the intention and belief of those concerned they had simply made a mistake and if Mr Avotins or anyone else properly authorised to make such an agreement or give such a direction had done so it would have been easy to say so but that had not been done.

Mr Glennie submitted that all that was required was for Tangent to establish on the balance of probabilities that the debt to Latreefers had been or had been agreed to be treated as discharged by persons authorised to act on behalf of the company. Mr Avotins was not (for reasons not in evidence but which I accept) available as a witness but he was plainly aware of the net repayment (Mr Kisselev sent him a copy of the March 10 payment instruction) and, bearing in mind that the netting off could be seen as a "loose end" a fair reading of Mr Kisselev's evidence was that Mr Avotins must have authorised it. He also pointed out that Miss Potts (who responded to a copy of Mr Blincow's letter of December 3 by signing the acknowledgement by Tangent of its indebtedness to Latreefers in the full sum of $2,696,392) must have been aware of the position. So too were the solicitors and accountants, neither of whom would be likely to act without authorisation. The matter had been treated as at an end for some 5 years before the liquidators raised it which also demonstrated that it had been properly approved, although Miss Prevezer submitted that the lapse of time was equally consistent with a mistake being made and remaining unappreciated. The fact of payment of only the net sum due from Latreefers to Latstrand was compelling and even if the payment by Tangent to Latstrand of $317,000 in January 1994 could not be demonstrated to include the $218,132.62, it was paid with reference to the "loan retention", the Latreefers Hambros account was referred to as the retention account, and it would be surprising if it was not included or taken into account in the circumstances including the involvement of established professional advisers.

CONCLUSION

In my judgment, Mr Glennie's submissions are to be preferred. In reality netting off the two sums was a matter of little moment and reflected both the fact that Latstrand had funded Latreefers and that the obligation to Tangent was owed by Latstrand not Latreefers. In a real sense the payment could be viewed as a reduction in the loan from Latstrand. I think it entirely probable that Mr Avotins was party to and agreed to the netting off of the two sums. I do not find it surprising that there is no formal record to that effect nor that Mr Kisselev, after such a lapse of time, could properly say no more about the specific events than he has. I do not think Moore Stephens would have accepted the position (including repayment of the balance) unless satisfied that it was properly authorised. It is true that no one from Moore Stephens (or Watson Farley and Williams) has made any statement. But the first Affidavit of Tangent's solicitor was partly based on information provided by Mr Powell of Moore Stephens and it was open to Latreefers as much as to Tangent to obtain statements if either adviser was in a position to assist further.

Ultimately I agree with Mr Glennie that the evidence establishes the probability, even if as a matter of inference, that the discharge of Tangent's debt to Latreefers was properly authorised on behalf of the relevant companies concerned, and Latreefers cannot now seek to claim payment of it. The claim must therefore be dismissed.

I will hear the parties further on any orders consequential upon this judgment.