Court’s dismissal of US$500 million fraud claims spotlights difficulties of proving fraud

Alta Trading UK Limited & Others -v- Bosworth & Others [2025] EWHC 91 (Comm)

This was a long-running dispute involving allegations of what was described by the claimants as “a substantial and sustained fraud” in relation to West African crude oil trading. The English Commercial Court has dismissed all the claims.

The background facts

The claimants were four companies comprising the Arcadia Group (the Group).  The principal defendants were the former CEO and CFO of the Group as well as a Lebanese company in which they held shares and various shelf companies.  The litigation began two years after the CEO and CFO left the Group, in 2015, when the claimants successfully obtained a worldwide freezing order alleging that the defendants had acted fraudulently in respect of 144 West African crude oil transactions between 2007 and 2013. 

The allegations were broad, encompassing dishonesty, unlawful means conspiracy, breach of fiduciary duty, dishonest assistance and knowing receipt. 

In essence, the claimants argued that:

1. when a Group company was buying or selling crude oil, a fraudulent entity, that was not part of the Group but was beneficially owned and/or controlled by some or all of the defendants, was inserted into the string of sales to extract a profit; 
    

2. certain trades were diverted from legitimate Group entities to fraudulent entities beneficially owned and/or controlled by the defendants; and 
    

3. the defendants caused Group companies to enter into loss making trades for the sole or dominant purpose of allowing counterparties beneficially owned and / or controlled by the defendants to avoid losses. 

The defendants denied all the claims, contending that the entities inserted in string into the sale or purchase transactions were necessary to mitigate the risks of West African crude oil trading, i.e. the risk of corruption. Whilst the defendants owned shares in one of the intermediate companies, they claimed that they were held on behalf of the ultimate beneficial owner of the Group, the shipping magnate John Fredriksen, who knew of and benefited from those shares. The defendants counterclaimed for unpaid bonuses. 

The Commercial Court decision

After a lengthy trial lasting some 10 weeks, the Court dismissed all claims against the defendants, declining to make any finding of fraud. 

The Court held that the defendants had acted honestly throughout the relevant 144 transactions. The intermediary companies were either well known to the claimants and generated profits for the benefit of the Group or they effectively shielded the claimants from compliance concerns of dealing with national oil companies where the risks of bribery were well recognised. 

Expert and factual evidence presented to the Court satisfied it that long term supply contracts with West African national oil companies could not have been secured or operated without sponsors and service providers, hence the intermediary companies.

The judgment is some 429 pages long but it provides useful analysis of the constituent elements in English law of a number of the alleged offences in the context of civil fraud claims. 

• Dishonesty

  • The Court must ascertain the relevant facts, including the defendant’s actual state of knowledge and belief as to the relevant facts, and then appraise those facts against the objective standard of honesty. 

  • Cogent evidence is required, with the burden of proof being on the claimant. The “evidence must overcome the inherent improbability that people act dishonestly rather than carelessly.” The facts must give rise to an inference of dishonesty which is more probable than one of innocence or negligence. 

  • Motive is not strictly required but is a “vital ingredient.”

  • The facts should be assessed in their cultural and regional context. 

This latter consideration was of importance where the intermediate companies, rather than the claimants, dealt with West African national oil companies, thereby enabling the claimants to avoid compliance risks and concerns. 

• Unlawful means conspiracy

  • The essential components of unlawful means conspiracy are:

    • A combination or agreement between a defendant and one or more others; 

    • An intention to injure the claimant; 

    • Use of unlawful means, carried out pursuant to the combination or agreement, as a means of injuring the claimants; and

    • Loss to the claimant caused by the above. 

In this case, for the reasons given by the Court, there was no intention to injure or conspiracy.

• Breach of fiduciary duty

  • The general duties of a director are set out in ss.171 to 177 of the Companies Act 2006. 

  • The duty in s.172 to act in the company’s interests is to be judged in what the director, not the Court, considers was in the best interests of the company. 

  • S.175 contains a no conflict rule, which includes a “no profit” rule, which aims to prevent a director making a profit from his position for his personal advantage. The “no profit” rule is not dependant on a finding of fraud. To breach the no profit rule, the director must personally receive a benefit. 

In this case, the claimants could not satisfy the Court that the defendants had received any improper benefits that could give rise to a breach of fiduciary duty. 

• Dishonest assistance

  • The essential components are:

    • A breach of a trust or fiduciary duty owed by the fiduciary to the claimant; 

    • The defendant having assisted the trustee or fiduciary to commit that breach; and

    • The assistance having been dishonest. 

  • The assistance must have played more than a minimal role in the breach. 
     

• Knowing receipt

  • The key components are:

    • A disposal of the claimant’s assets in breach of a fiduciary duty; 

    • Beneficial receipt by the defendant of assets which are traceable as being the claimant’s assets; and

    • Knowledge by the defendant that the assets received are traceable to a breach of fiduciary duty. 

Once again, in the case in point, this claim failed because there had been no breach of fiduciary duty in the first place.

Comment

There were certain delicate considerations at play in this fraud case where dishonesty fell to be considered through the prism of standard practices of West African oil trading.  

What seemed apparent to the Court though was that the claimants had in part knowingly benefited from the interposition of intermediaries and, where they had not, the role of those intermediaries was legitimate in the context of the trading in question.  

This article was co-authored by Sophie Lee.