Episode Description
In the recent decision in Lakatamia Shipping Company Ltd v Hsia and another (the Lakatamia Ruling), the UK Commercial Court provided helpful commentary on the key elements of the Marex tort and unlawful means of conspiracy. This ruling will undoubtedly assist judgment creditors in pursuing their claims against parties who attempt to frustrate or obstruct their efforts to enforce judgment or recover losses.
Background
The proceedings revolve around efforts by Lakatamia Shipping Company Limited (Lakatamia) to recover judgment debts from the notorious fraudster Nobu Su (Mr Su), with claims extending to his associates, Ms Tseng and Ms Morimoto.
Lakatamia had previously obtained a worldwide freezing order against Mr Su, followed by judgment for amounts due under forward freight transactions. However, recovering the judgment debt proved problematic due to Mr Su's attempts to dissipate his assets or move them beyond Lakatamiaâs reach.
Consequently, Lakatamia initiated proceedings against Mr Suâs associates, contending that they were parties to unlawful means conspiracies and that they unlawfully induced or procured violation of Lakatamiaâs rights under the earlier court judgment.
Unlawful Means Conspiracy and the Marex Tort
The UK Commercial Court, in upholding Lakatamia's case, held that the defendants were liable for unlawful means conspiracy by dealing with the assets of a defendant against whom the claimant had obtained freezing orders and the judgment debt.
Mr Justice Foxton affirmed the relevant tests for establishing unlawful means of conspiracy, as set out in FM Capital Partners Ltd v Marino and Lakatamia Shipping Co Ltd v Su. In summary, it is necessary to demonstrate concerted action, consequent upon the combination or understanding between parties, with the intention to injure, 1along with the use of unlawful means causing loss to the target.
Mr Justice Foxton also confirmed the existence of the Marex tort, which involves intentionally and knowingly inducing a violation of rights in a judgment debt. He noted that, despite being a relatively new cause of action, its existence and requisite elements, which include the defendantâs knowledge of the judgment and realisation that the induced conduct would breach the rights under the judgment, have been sufficiently established in law.
The Court established that Ms Tseng, a party connected to Mr Su to whom he transferred assets, had knowledge of the freezing order and the judgment debt. The Court was able to conclude that her involvement in the distribution and concealment of Suâs assets breached the freezing order and injured Lakatamia. The Court reasoned that it must have been clear to Ms Tseng that assets were being dealt with in a manner that sought to conceal their ownership and control, with the likely intention to obstruct creditors from enforcing against those assets.
Conclusion
Harneys does not advise on matters of English law; however, the judgment is likely to be of persuasive value in the courts of the Overseas Territories. It is undoubtedly a welcome development in the asset recovery and asset tracing field, further adding to the jurisprudence2 on the courtâs capabilities to enforce its orders, for example, by debarring a party from making representations or otherwise participating in the proceedings pending compliance with an order, among other remedies, to ensure that that contumacious conduct is prevented.
Footnotes
1.The intention to injure need not be the defendantâs predominant intention; there is no need for him, or she acted maliciously in the sense that harm to the target need not be the end sought.
2. See, in particular, Oscar Trustee Limited v MBS Software Solutions Limited.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
