“I destroyed these remaining notebooks about a year ago as they were of no use to me and I did not think, at the time, that they would have been of use to anyone else. I was concerned that the documents could still be commercially sensitive, so I shredded them….”
“I destroyed them … because although the lawyer from the first hearing told me to keep them, I destroyed them simply because I forgot.”
“[c]orruption of various kinds was widespread and frequently encountered, which caused issues with compliance and corporate reputation. Access to cargoes, whether for purchase or for sale, was often subject to an opaque allocation process, greatly influenced by various forms of patronage which in turn predicated the employment of intermediaries who were familiar with local customs and practices and so capable of safely navigating these local idiosyncrasies.”
“70. Commodity trading firms frequently operate in countries in which corruption is rife, making the firms vulnerable to running afoul of anti-corruption laws in the USA, Europe, and elsewhere. Reputable lifting companies operating under strict anti-corruption rules can encounter compliance issues when dealing within WAF, where the practice of paying signature bonuses, as well as other rewards and incentives, are the norm. It is often the case that the NOC will be the centre for a nexus of patronage involving politicians, regional governors and tribal heads and as such, there are problems when dealing with what the banks refer to as “politically exposed persons” – or PEPs …. 71. Moreover, commodities are sometimes the subject of trade sanctions. … 72. As a consequence of the above, trading firms often wish to deal with NOCs that reside in difficult jurisdictions via intermediate entities, rather than directly. … in summary, and in my experience it was common for oil companies during the Relevant Period [2005 to 2013] to structure their operations so as to provide a degree of separation between the principal (i.e. the oil trading company) and the NOC. Individual structures varied based on individual company needs, but included the use of sleeving – including the creation of special purpose companies incorporated in offshore jurisdictions to undertake their operations and structure their ownership when operating in WAF, as well as utilising intermediate entities to sit in the transaction chain between the buyer and the seller of the crude oil.”
“I would not take issue with Mr. Hendry’s description of the routine existence and use of intermediaries, sleeves, service providers, however described, to distance companies that are sensitive about their reputation from the accusation of involvement in bribery and corruption This distancing could be arranged in a number of different ways. ...”
“There are marked cultural differences between how business is done in WAF compared with the large global financial centres”
“Companies may wish to deal through intermediaries…to put some distance between themselves and the NOCs in case they are subject to investigation by the regulatory authorities.” “Given the potentially large rewards that are on offer in the oil trading business, it is unsurprising that companies may attempt to find a halfway house by outsourcing to third parties activities that they do not wish to undertake in their own name.” and: the “existence and use of intermediaries, sleeves, service providers, however described, to distance companies that are sensitive about their reputation from the accusation of involvement in bribery and corruption” is “routine”
“[T]here are certain risks to an IOC [i.e. an international oil company] which are exacerbated within the WAF region. For example, in introducing the sponsor, the service provider needs to be confident that the candidate will maintain sufficient leverage over the duration of the contract and not be ousted and replaced by someone who is less favourable towards the IOC. In Equatorial Guinea, for instance, there is an on-going family squabble about who will succeed President Obiang. At least two of his sons both want the job. In Nigeria, the GMD of NNPC and the oil minister are frequently changed. Another non-regional (and historic) example might be the sudden jailing of the Malaysian Deputy- Prime Minister, Anwar Ibrahim, by Dr. Mahathir, the Prime Minister, on trumped-up charges. If you lose your sponsor the chances are you will lose your business. So, the risk of early contract termination can be lessened by backing a good sponsor. But precisely because of this reliance on patronage to acquire business in the WAF region, an IOC can quickly become exposed to reputational and compliance risks e.g. by engaging with politically exposed persons (PEPs), which in-turn can often complicate the IOC’s relationship with their trade financier, who, if they are based in USA or Europe, will need to closely follow international guidelines to counter bribery and corruption. To identify a sponsor who is not a PEP can be a difficult task and so these risks must be accepted. So, by utilizing sleeving entities and alternative finance and other intermediaries, it is possible to create some distance between what happens in the WAF region, and what is seen to happen in the IOC’s home country. Their involvement created some clear space between IOCs and NOC which helped to safeguard the reputational risks of the IOC.”
“Personal relationships with decision makers within the NOC were key to obtaining contracts. Usually, it was necessary to enlist well-connected individuals to further these relationships. To achieve a close relationship with any WAF NOC producer will be of significant benefit to a trader, especially with a NOC like NNPC, which is routinely able to supply large quantities of high quality, highly desirable crude oil. Many WAF crudes, especially those from NNPC, are readily able to arbitrage north, south, east or west and are widely accepted in most markets.” and “It was a virtual necessity to use third party service providers so the practice was commonplace. Many IOCs engaged intermediaries during the RP [Relevant Period]. The reason for IOCs to use third party service providers is to enhance their chances of being allocated export volumes within the NOC tenders. All IOCs operating in the WAF region will have attempted to form close direct relationships with the NOCs, but even when supposedly succeeding in this goal, they may not succeed in getting what they most desire – a steady high volume of crude oil, awarded through a term tender. In the case of NNPC, there are so many potential lifters competing for the same supply that demand always outstrips supply and NNPC usually “rations” their awards. As a result, no one company gets all the oil. Even equity producers who co-produce with the NOC (in the case of Nigeria, NNPC has around 60% share) usually submit bids to buy more volume through the annual tenders but not even they can guarantee any success and they also resort to third-party assistance. Once an award is made these same third-party service providers help to ensure optimal operations on an on-going basis.”
“The range of activities might include anything from simple introductions and socializing with influential persons to applying pressure or incentives to those in a position to grant contacts or allocate the most valuable cargoes and exercise operational preference in, for example, berthing order.”
“Although the sponsor would not usually continue to be so “hands on” after the contract was agreed, the involvement of the third-party service provider would be on-going. The use of local sponsors and/or introducers and/or third parties was of the utmost importance in obtaining term contracts with NOCs during the RP. During the RP, some well-known refiners may have succeeded in winning allocations within NOC tenders. This can be seen from the published results (where available) and from the lifting schedules but what is less clear is precisely how they managed to win those awards. No-one is willing to reveal or to publish this information. After all, ultimately no one is paying a higher price than that set by the NOC within their official selling price (OSP). Some refiners, who might not normally need, say, NNPC crude, also participated and won from time-to-time. There can be no doubt that the chances of a successful award were significantly enhanced by forming a relationship with the right third-party service provider. … For a successful award of volume potential awardee will principally rely upon the services of their sponsor to steer an allocation their way. The potential awardee will, in turn, rely upon their service provider to facilitate the introduction to the best sponsor (or contract-holder). A symbiosis develops. The sponsor must rely upon the buyer to successfully perform the contract, while the buyer is relying upon the sponsor to ensure an award. The Service Provider has risk both ways, both with the sponsor and with the buyer.”
“A deal facilitator who seeks out and develops relationships with key personnel in the target area, with the aim of spotting an opportunity, creating and developing business. Initially, to provide a bridge between sponsors/ contract-holders to IOCs. Once any contract is concluded, the service provider is usually expected to perform a myriad of further tasks during the lifetime of the contract and so plays an integral role throughout.”
“The main thing that we do as service providers is procure oil trading business in West Africa for international oil trading businesses. We assist these oil traders with identifying and winning opportunities that they themselves are unable to find or win without local help. Most oil trading opportunities in West Africa are largely controlled by national oil companies and Nigerian private producers. It is very difficult to gain an audience with, let alone secure business from, the decision makers in these oil companies without local knowledge, local contacts and local assistance. Service providers sometimes have enough influence with national oil companies or private producers to influence the allocation of the contract and help make sure it goes to an oil trader they work with.” and: “… one of the most important services I provided to Arcadia was making introductions to Nigerian traditional rulers, chiefs and retired military officers or ministers…because from them could come opportunities to win or bid for valuable contracts”
“and in particular the continued hands-on involvement of the third-party service provider, who often bears most responsibility for the smooth running and optimization of the term contract. From a buyer’s perspective, the seller (the NOC) holds virtually all the cards. The NOC can choose not to supply, or to offer a sub-optimal grade, or to provide an undesirable loading window. Such operational enhancements can sometimes be positively influenced by the service provider, who will also be relaying vital operational and market information, to all parties.”
“… service providers did provide routine operational services but crucially much more besides, particularly with regards to services like introductions and facilitation to large contracts, which wouldn’t have been possible without the service provider’s participation. So no, it was not unusual. It was part and parcel of the role of many service providers to provide continuous on the ground operational and logistical support, for the duration of any term contract, especially parallel communications with the NOC to ensure optimal performance of the contract but also in expediting general operations and logistics. The service providers were expected to get involved from top to bottom, i.e. from the NOC and sponsor at one end, to the guy manning the pump at the other end. “Operations” usually refers to everything related to the physical loading of the cargo onto the ship. Some service providers would be expected to positively influence all aspects of operations by providing continuous support. Although just about every aspect of operations is critical, of particular importance (and where a good service provider could influence events), would have been in the choice of the crude grade allocated by the NOC and in the loading window given. Although all grades of Nigerian crude oils are desirable, some are more desirable than others. Equally, loading windows at the very beginning and at the very end of the month can, sometimes, also enhance profitability. Other operational support might include, enhancing reaction time to loading instructions, expediting documentation, facilitating customs documentation, liaising with agents, inspectors and freight forwarders, etc., but maybe only stepping in if a situation demanded their attention.”
“…success or failure in the physical oil trading business is heavily dependent on logistics. A transaction that looks on paper to be a highly profitable, well-hedged arbitrage when it is constructed, can turn into a loss maker if the logistics come unstuck. Late loading, short loading, substitution of grades, contamination or other quality issues, delays to cargo documentation and export licences can cause a, supposedly “locked in”, profit to leak away into loss.”
“For example, any delay to a loading usually has detrimental consequences, which can include the need for letter of credit amendments, extra demurrage costs, hedging inefficiencies, added costs and onward customer problems. Cargoes are often expedited and delays avoided by the employment of local third parties, who are knowledgeable as to local customs and practices, and who are able to oversee and facilitate smooth operations.”
“In addition to providing these introductory or brokerage services, service providers also often help traders with operational issues. For example, something might go wrong in the process of moving a cargo of crude oil onto a vessel and out of a port, such as a customs issue or an inspection issue. It is often very difficult to resolve such problems in Nigeria without actually going to meet the people causing the holdup and speaking to them. It is often difficult for Westerners to do this because most oil traders are based in London, Geneva, the USA or somewhere else outside Nigeria. There are also cultural and linguistic differences. To fix an operational problem of this kind, a service provider like me would go in on the ground and talk to the people who can actually fix the problem for the oil trader.”
“The amounts paid to the various categories of intermediaries will alter with their role and the extent of their work, and also by the expected profitability of the deal. For instance, someone who simply makes an introduction might just get 1-2 cents per bbl [barrel], a briefcase company will have very little to do after it hands over the contract to the IOC and so might also be paid a relatively small commission, but this is highly negotiable, too. Alternatively, another contract holder may be expected to continue to show face to the NOC and so provide a screen for whoever stands behind it. They may also have to provide a security deposit and open letters of credit, to pay for the cargoes. Inevitably, the contract holder will have greater cost to bear than the briefcase company whereas the sponsor and the service provider might expect considerably more, eg. 20-60 cents per bbl each, but such rewards might also be paid as a fixed fee, or as a profit share or both.”
“In my opinion, typical remuneration might fall somewhere between$0.2 -$0.6 /bbl but might vary with market conditions, expected workload and whether or not a profit share was involved. Profit share varied widely between, say, 5% and 60% with expectations rising throughout the RP. Some service providers might have considered winning an allocation within the tender as being the meat of their work done but many service providers would often have been expected to be hands on, and to provide logistics support, for the entire duration of the contract.” and: “In my opinion, the payments made by Arcadia Lebanon and by Attock Mauritius to service providers were pretty average.”
“11. Paragraphs 112-115 of LB1 [Ms Bossley’s first report] imply that the level of fees paid to service providers was dependent only on which end of the “spectrum” a company was willing to go towards the payment of bribes, and that the services provided by a service provider simply depended on how far along that “spectrum” the company / service provider was prepared to travel. I do not agree with this. The level of remuneration paid to service providers would vary considerably for reasons other than at which end of the spectrum the service provider was considered to inhabit – and in my experience depended on the services they provided, their position in the market, their ability to procure and maintain term contracts and their relationship with NOCs (see [JM/13], at 2.8 and paragraphs 99-102 of my First Report). The more influence a service provider had, and the more active a role it continued to play in connection with a relevant contract, the higher the levels of remuneration it would be paid. 12. The fees paid to service providers would likely have been negotiated on a contract-by-contract basis and therefore would have varied over time. 13. At paragraph 116 of LB1, Ms Bossley states that “Winning term contracts in WAF usually does not involve brokers but does involve the more the proactive involvement of companies prepared to bid in their own name for contracts”
“… in my opinion, with regards to a service provider, a profit share was not uncommon to see, especially towards the end of the RP but it was often part of the negotiation, ultimately resulting in a smaller commission with a larger profit share or vice versa. Sometimes, the profit share might be very significant e.g. at 60%. A 50% profit share became quite common. And, as it was the IOC who was keeping the books, the recipient of the profit share would need to trust that IOC if he expected fair recompense. I have never heard of a profit-sharing scheme (of this nature) where any losses would be shared by the service provider. Once again, my explanation of the role of a “service provider” … should be seen to encompass far more than an agent that provided just routine services.”
“Q. So we can't really call that pretty average, can we? A. No, I would say it was upper echelon and out of the average. Q. Out of the average? A. For what I have seen but as I say, I have never done an Equatorial Guinea contract and I certainly have not done an Equatorial Guinea crude contract. The potential profitability because of the pricing that was made available to the buyer being able to choose a five-day date range retrospectively, one would consider that to be a very profitable option for the trader to exercise and so somebody orchestrating such a deal might feel that they were entitled to a bigger profit share. I don't know. Q. Orchestrating such a deal and operating a contract? A. Yes. Q. And negotiating those prices? A. Yes.”
“A. Well, if somebody is negotiating both a fee per barrel for their service plus an eventual profit share if fee per barrel negotiated is low, the profit share might be expected to be higher and vice versa. Q. But you are aware -- 70% of gross profits can't be regarded as pretty average given what you have referred to in the joint statement, can it? A. No, I think 70% is a higher echelon. Was there a fix fee paid, can you remind me? Q. No? A. No, so if there was no fixed fee paid then you might expect a higher echelon profit share. That is logical I think. Q. I think you will agree with me that neither the percentages of profit share under the Zafiro contract nor Proview's 70% under the Senegal contract can fairly be described as pretty average, can they? A. No, they are higher than I would say is normal. But again, you have to look at whatever services are being provided by the service provider if there are finances being paid, finance being offered in some way, or what service is being provided generally.”
“The split could vary quite a lot depending on the relative bargaining power of the oil trader or service provider, or the relationship that existed between them. However, 50/50 was not unusual. Sometimes you saw 60/40”
“Q. If Mr Kelbrick is very well connected within NNPC, he is carrying out some of the services you have just described, would it be a surprise to you if he is getting the kind of commissions that you refer to -- sorry profit shares that you refer to in paragraph 58; 50/50, sometimes 60/40? A. Well, yes, because he didn't do more than I did and from what I can see he got more profit share than I did. But based on that, it wouldn't be, generically speaking. Once you get to that level, which was my gripe, I spent 30/25 years getting to that point, getting paid. Q. It may irritate you that he did, but it didn't surprise you? A. But it doesn't surprise me, no. That's what was supposed to happen. … Did you say that, Mr Akpata; that's what is supposed to have happened? A. Yes. MR JUSTICE HENSHAW: Well, it can be checked. A. Yes. That was, in my understanding, at that level that was what the remunerations were supposed to be. Yes.”
“Attock Oil International Limited (‘AOIL’) is incorporated in Mauritius and has approximately 20 years trading crude oil and refined products under long-term contracts from a number of national oil companies, including those of Abu Dhabi, Algeria, Bahrain, Cameroon, Ghana, India, Iran, Malaysia, Nigeria, Saudi Arabia and Venezuela”
“Despite the risks associated with trading in West Africa, this kind of trading brought with it distinct advantages. At a basic level, West African crude is of a very high quality (with a low sulphur content) and physical trading provides liquidity to the paper traders. Further and in particular, West African crude is useful for hedging and paper trading purposes, as trading in it gives access to a large amount of market information which is valuable in respect of paper trading. For example, physical trading gives information as to who is buying the crude, and where this crude is being shipped to. This can have long and short term effects on the global pricing of crude and is very valuable information in itself. Even knowing what pricing dates and components other market participants are attempting to negotiate is useful, given that it indicates the view those participants are taking on market movements. Oil markets are inter-linked, and West African crude oil is priced by reference to the price of Brent. This sort of information is not just useful to traders - I recall that shippers would call Arcadia up to try and obtain our market intelligence.”
“A. … But in a place like West Africa, particularly Nigeria, to know the disruption would be useful and to know whether it is going east or whether it is going west, whether it is going by small tankers of 1 million barrels or by VLCC with longer routes. Yes, it is very interesting. I'm sure you could see in the press what happens when the Suez Canal is being disrupted. Q. But that news travels quite fast, doesn't it? A. What, that the Suez Canal is disrupted? That one, yes, but to know two months in advance more or less what will be the requirement for shipping one month to seven weeks ahead of time is an interesting position for demand in the shipping market. Q. I'm interested in the information used by traders. You have explained that you were not on Nick Wildgoose's team so you don't really know exactly what information he was using? A. I know when he was not happy, that was very clearly stated. They would shout loud enough and I won't repeat his language, but -- so I knew exactly what he wanted because I had been doing that long before. He wanted to know the swing, he wanted to know the pace of sells, when the programmes were out. He wanted to know what were the tenders going east as well as the people in Singapore office. So they were very tough, obnoxious and arrogant in getting this WAF tracking and not happy because I was putting in horizontal rather than vertical what they wanted and vice versa. Q. But the information that you were able to obtain was available to other traders as well, wasn't it? You didn't have a particular insight into the information that Mr Wildgoose wanted? A. Within Arcadia I did. Q. Yes, but other traders would have access to the same information? A. The people active in the market would spend time collecting that information as well, yes. Q. There's a free exchange of information between the traders? A. It's not free -- well, it is free in the sense that you are not paying. It's not free in the sense that information is key so there is need to be a give and take in information. And that is why being active, having a cargo, gave you a chance to call the people and tell them, "I have this cargo, which cargo do you have, what are you asking, what are you showing, what are you seeing?" Commerce.”
“Q. It has been suggested in the course of these proceedings that buying physical oil somehow allows Arcadia to get into the paper market but it is true that this pure paper trading can take place without any physical trading? A. It can take place, whether it can be traded and exercised in the full knowledge, you have to go to Morgenstern’s theory of utility with passion, knowledge and full knowledge. So as we were talking yesterday, the more in the future you are going, the more it is closer to financial and GDP and type of very financial markets, the closer it goes, the more it is a physical market and the more it is linked with supply and demand and price discovery. Q. If you wanted particular exposure to Brent, there are other ways of obtaining exposure to Brent through physical trading than buying West African crude? A. There are plenty of ways, but West African is the first one to −− because of the programming of the loading, and the timing of exchange, the one that is trading physically, the most forward and it is the balanced barrels that are going eastwards and westwards as well as remaining in Europe. This gives the trade −− the pace of trading physical West African is giving a huge incentive to understand what is happening on the balance on the market.”
“… around 2010/11, the ICE and Nymex exchanges, where Brent and WTI future contracts were being traded, imposed new position limits and rules regarding the exiting of positions ahead of their expiry. These limits would vary depending on the nature of the business being carried out by the trading company in question and the volumes of physical trading being conducted. I believe that these restrictions were introduced following the major market disruptions in 2008/09. Trading companies willing to trade paper could apply for an exemption or extension to their limit if they could cite bona fide hedging purposes to cover the market exposure created by a physical trade. Additionally, if there was no exemption granted, those trading companies with paper positions would have to “exit and roll” their position to a later maturity a certain number of days ahead of the expiry date. To the best of my ability, I recall that different fees were also charged by exchanges depending on the nature of the crude volume “within hedging” or “out of hedging”
“78. In the around the early 2000s, I was introduced to Jean-Paul (JP) Driot. I do not now recall how I came to know Mr Driot, but it may have been through Steve Kelbrick. At this time, Mr Driot had a small trading company called Stag. I recall that, as a trader, I would track which cargoes went to different companies in order to be able to analyse the fundamentals of the West African market. Stag was a company frequently on that list. Mr Driot had also been involved in Nigerian and Cameroonian crude oil and petroleum product businesses as well as in Equatorial Guinea. I believe Mr Driot first went to Africa when he worked for Renault. 79. While in Equatorial Guinea as part of his role at Renault, JP Driot developed a relationship with the President of Equatorial Guinea and they became personal friends. JP Driot told me that at one stage the President fell ill and he funded the President’s flight and medical treatment in Europe (France or Germany I believe). JP Driot later left Renault and that is when he developed his own oil trading business in the name of Stag. 80. Arcadia began its relationship with Stag by buying spot cargoes of Zafiro grade crude oil from Stag which had its own contract with the Equatorial Guinean government. Arcadia would then sell those cargoes on the open market. I remember that Glencore and Vitol also had their own contracts around that time with the Equatorial Guinean government. After a period of buying spot cargoes from Stag (I do not recall the precise length of time) and as I explain further at paragraph 130, I believe that I approached JP Driot (or he may have suggested to me) and we discussed the idea of Arcadia being able to obtain its own term contract with the Equatorial Guinean government.”
“So whenever oil business is conducted around the world, it’s quite common to find middlemen at the heart of the deal - even if most of their operations are significantly more limited in scope than were those of the old guard. In Equatorial Guinea, a former top Elf executive named Jean-Paul Driot now has an exclusive agreement to market the government’s share of its international production through his company, Stag Energy.”
“we genuinely believe that the services we received from Pang Ling were of significant value”
“Q. So these are entirely independent third parties you are referring to, who are holding the contracts; is that right? A. Not necessarily, no. Q. So are they working for Arcadia as an agent? A. There was one in particular that I know was working for Arcadia. Q. Which one are you referring to? A. I think it is -- I think it's Arcadia Mauritius but I'm not certain and then there was another company I think in between. But I can't remember the details of that.”
“Mohammed Asibelua was the service provider who brought the Sao Tome Contract to Arcadia… Mr Asibelua had spent one or two years developing his relationship with the President and government in Sao Tome. I recall that Mr Asibelua assisted the President of Sao Tome in preparing the application/letter to the Nigerian government for a crude oil contract… It was Mr Asibelua alone who developed the relationship with between Sao Tome and Arcadia London. It would not have been possible for Arcadia to, for example, pick up the phone to the President of Sao Tome and simply request a contract. We therefore had to go through someone who was well connected with the Sao Tome Government, and this was Mohammed Asibelua.”
“You had to be in Nigeria a lot, which Pete in the beginning was but then couldn’t be any more” and that being on the ground in Nigeria was “critical” and “impossible to do without”
“By spending less time in Nigeria, it was challenging for Mr Bosworth to maintain the depth of contacts in the country, including because his contacts were replaced by people that Mr Bosworth did not know”
“As agreed, we got in touch with Peter Bosworth, Executive Vice President of Arcadia Petroleum Ltd to ascertain his interest in discussing a senior role in building the Frontline commodities business. He has a reputation through his staff of being a good manager to whom people were loyal. … Peter Bosworth is 42, British, and has been running Arcadia for seven years Personality wise he is: - Approachable, team orientated, motivated - Communicates well - an obvious leader By way of background, Peter and Arcadia had a legal dispute about seven years ago with a US oil company, which also involved a fight with their Auditors. They were not found to [be] in the wrong but it took two years and a lot of funds to sort out the mess. Because of this Peter is strict on compliance matters and runs a very tight ship guided by his lawyers / consultants based in London (not Monaco or the Lebanon where compliance is much looser). Interest: Peter said that he would be very interested in talking to an established company that is serious about building an oil trading business in a professional way - a major shipping company would be attractive. He believes that there could be a win / win situation for both parties, though he does not know Frontline's identity yet. The Arcadia business is its people and Peter firmly believes he could “transplant” all the people he wanted to move”
“ARCADIA PETROLEUM LTD 1. Overview of Current Business Physical Term Business (It should be noted that all the contracts referred to hereunder included assignment clauses as a matter of course). Nigeria: Arcadia has very recently renewed its term contracts with the NNPC, for total of 160,000 bbls/day. In addition we have secured under contract a further 85,000 bbls/day from indirect sources of Nigerian crude oil. We have also concluded a term deal with the Indian Oil Corporation whereby they will allocate to us the Nigerian crude oil under their 40,000 bbls/day contract with the NNPC. We have a first class relationship with a Nigerian-owned equity producer, and have just renewed our contract with them to market 20,000 bbls/day of their own production. In total, therefore, Arcadia markets 285,000 bbls/day of light sweet Nigerian crude oil. … Equatorial Guinea: We have just concluded a term supply purchase of Zafiro crude oil with the Govt., via a fronting company, for a volume of 20,000 bbls/day. … Spot Business Nigeria: In addition to our base position in Nigeria and West Africa in general, we run an active spot book, buying from both majors and traders, with an average volume of 100,000 bbls/day. This, together with our term availability, makes Arcadia one of the biggest volume traders in the whole of the West African market, rivalling many major equity producers. … 2.Company Profile Arcadia was founded in 1988 by Marcus Green as a 100% subsidiary of Mitsui and Co, Tokyo. After Marcus' death in 1999, Peter Bosworth assumed the role of CEO. The company's profile, as well as its volume of business, has grown steadily over recent years. We have estimated our annual budget to be in the area of 50 to 120 million USD. The expected profitability of the company for the year 2004/05, (the financial year ends on31st March 2005 ) is expected to be in the region of 120 million USD. In considering this result, one must take into account that Arcadia is limited by Mitsui to VAR of 3.5 million USD. We believe that if such a severe restriction were to be withdrawn or revised to a more workable level, then the profit potential of the company would be significantly increased. We feel that our budget target could be reasonably set at between 100 and 250 million USD with the necessary VAR and position/volume limits. We must note with regret, however, that such an eventuality is unlikely to be granted by the current Mitsui management. In addition, we face further limitations in that we are only permitted to trade in the relatively narrow field of crude oil trading. In the course of our business associations with various energy groups, a number of investment opportunities have arisen which we have been unable to take advantage of due to the restrictive environment in which we operate. 3. Synergies: Arcadia/Front Line • Greater flexibility and less restrictive practise would add to the profitability across all existing businesses. • Our cargo tracking system on all physical crude markets increases Front Line's understanding of tonnage demands and timing in all major crude oil supply areas. • Arcadia's crude oil trading expertise can secure cargoes for Front Line tonnage as and when it is deemed economic and viable across both trading and freight profit books. • We can switch the emphasis of our trading away from FOB deals to CIF or delivered sales to create 'in-house' business for the freight book. • Jointly, we can expand our involvement in the FFA market either speculatively or as a hedge mechanism. In addition, we would like to develop this market to such a degree where we could present our ideas to institutional investors, creating liquidity and position with fixed profit margins. • By utilising our considerable experience in Risk Management, we can work with Front Line's fuel department to establish a Bunker hedging strategy which would reduce the risk of extreme market volatility in the key area of tonnage costs. • Our special relationship with a number of crude oil producers over the years has given us an excellent insight into the planning and political views of the OPEC cartel Our intelligence has proved to be accurate on a number of occasions in respect to OPEC out-put. 4. Investment Opportunities Our broad-based level of contact in the State organisations of many producing countries can presents us with diverse investment opportunities. For example, we have been approached to supply and maintain a FPSO unit for the off -shore production of a West African oil producer. • We have been offered a term LNG contract, also in West Africa. We are currently prohibited in concluding this by Mitsui. • We have, on several occasions, been offered the rights to buy lucrative blocks for E and P purposes in West Africa and elsewhere. We have had the opportunity to obtain licenses with proven reserves and/or existing production. On each occasion our application to Mitsui to invest in such projects has been rejected. Our aim in this area of business is to acquire a block with a minimum 250 million barrels of proven reserve, with a view to look to an IPO or sell privately to a mid-range E and P Company. • Arcadia has been requested to invest in product storage facilities, and given the opportunity to secure such rights and land necessary to build significant storage units at strategically important ports in West Africa. • By using vessel storage made available by Front Line, we believe there are substantial savings to be made in providing logistical flexibility to product deliveries in West Africa, where certain products are in tight supply and an off-shore storage unit would prove to be invaluable.”
“the intention was to build up a big trading company like Glencore and go to the Stock Exchange with it, that was the ambition”
“We thought that we could effectively compete with Vitol and Glencore and Trafigura and the other people. We had been to see Mercuria which was one of the companies we had considered to buy at that time, or buy into, which had been very, very successful.” and: “I think Ian Taylor kind of, Marc Rich and these people are friends of John and he saw how successful they were and in many ways he wanted to have a bit of the cake and that is why we started. I think we mainly started because we had the fleet, we thought we had something. What the traders do is they trade without having the assets and we had the assets in the companies so we thought that we could be successful on that basis.”
“I think the physical was important in order to understand, as Pete always said, to understand the financial and to trade the financial but I think what we betted on, if you look at the people we hired trading the paper books, we hired a team from Goldman Sachs which had a historic record.”
“The company shall operate from four regional offices – London, Geneva, Beirut and Singapore. The company shall trade crude oil and oil products encompassing risk management, shipping management, operational and financial arrangements. In addition the company shall develop opportunities identified in energy related assets to include crude oil upstream projects. The company shall trade approximately 1,000,000 barrels per day of physical crude oil supplemented by paper trading activity of up to 5,000,000 barrels per day through either exchange trader or OTC derivative products.”
“PAYMENTS TO SERVICE PROVIDERS Cost of sales includes US$16 million in respect of amounts payable in the year ended31 March 2003 to service providers in Nigeria, the Middle East, and other countries (2002 – US$16 million ) where Arcadia have no offices, to provide assistance in the execution of purchase contracts with local suppliers”
“Q. You were being told by the accounts that the service provider payments were to assist Arcadia in the execution of purchase contracts with local suppliers; correct? A. I can probably say maybe in the naivety, the fact that John and I didn’t know this business very well, we said that if an auditor goes good for an account including the payment to service provider and they have the boxes to check about payments to related party transactions, all the stuff they need, if it is good enough for auditors, it is good enough for us. Q. That is why because payments to service providers are not necessarily wrongful or necessarily bad, are they? A. No, I don’t think so. But of course, it depends a certain amount of KYC linked to it and it depends on the fact that they really do the service for the thing. That is the auditor’s mission. I think kind of running four public companies, this is a big part of our kind of story every time you are ending up on the audit when it gets questioned about that and everybody in the organisation has to sign off. It is a very proper process.”
“43 Throughout my career I have sought to make sure that the businesses I have been involved with act lawfully, including not engaging in corruption. John and I operated in highly regulated environments given we were in control of sizeable listed companies, several of them being listed on the New York Stock Exchange and on Nasdaq and which were regulated by the SEC. The reputational damage from corruption allegations would have been very serious. 44 I do not recall specific discussions on this topic during the negotiations for the acquisition, but I believe that I would have raised this issue during the talks with Mr Bosworth and Mr Hurley. I was aware generally that the oil trading sector did not have the best reputation in terms of corruption and was concerned that John and I did not end up on the front page of the Financial Times because of a couple of trades in a small subsidiary.”
“120. … Having had my memory refreshed by reference to these documents, I recall that we discussed with John and Tor Olav possibly opening an office in Beirut early on in the process of their takeover. I do not however remember the precise details of those discussions as they took place almost 20 years ago. I do however remember that John and Tor said at this time that it was very important for John to be distanced from the potentially riskier aspects of Arcadia’s business in West Africa, and I believe that the discussion of a Beirut office was part of the discussion of how to distance and protect both John (and his business interests) and the Arcadia group from any [of] the compliance risks associated with Arcadia’s West African trading activities. This is just one example of the way in which John wished to be insulated from the Arcadia business and the lengths he went to so as to ensure that there was a separation between him and any risk to his other business interests (I explain … below further instances of this, including the instruction from John and Tor that we should no longer send emails about Arcadia’s daily reporting to John’s personal email address). It had been communicated to me by John and/or Tor Olav on a number of occasions that the risk to John’s business interests of any compliance-related issue would be critical, and – this was something John and Tor said several times, I think as a way of hammering home the message – that Arcadia could never make enough money to make up for such an issue. 121. As far as I can remember, the commercial rationale for opening an office in Beirut rather than some other country would be to take advantage of the low compliance environment (it being outside of the UK and the US and with as I understand it less strict legislation on anti-corruption practices) and banking secrecy laws. There was not (as far as I can recall) any other business case for establishing an office in Beirut. If Arcadia wanted to expand in that geographical area, we would have established an office in Dubai, rather than Lebanon.”
“The principal reason for establishing an office in Beirut was to have a lower compliance environment. We were instructed to own the company on John and Tor's behalf. This would allow a distancing for John Fredriksen himself if there was a problem.”
“Q. Are you suggesting that you discussed the company, Arcadia Lebanon, in late 2005? Or are you saying, as I think you have said a couple of times, that actually you didn't consider moving the contract to Arcadia Lebanon until auditors raised a problem with this Contract [the Zafiro Contract concluded in December 2005]? A. We raised right at the beginning the potential of having a Beirut office for compliance reasons. We continued that conversation as you can see with a potential budget. And later on, having entered into this contract in the interim period between Mitsui and John Fredriksen, we entered into this contract and this was one of the contracts where we discussed and it was agreed or we were instructed to move it to Beirut.”
“85. As for Beirut, the only recollection I have of Lebanon being discussed at any time during Farahead’s takeover was as a non-group, or standalone, company, not as an office for the Arcadia Group. 86. This was part of the proposal as to how to handle the service provider payments that caused them concern. Beirut would be an operational office, but not in the group – that is the only conversation I can recall with regards to Lebanon. I cannot recall any discussions of other business being run through Lebanon, only that it would act in a way that would provide the necessary shield under the structure proposed for the Arcadia Group. 87. I have refreshed my memory on this subject by looking at a spreadsheet that I sent to Trøim on15 September 2005 . The spreadsheet has 5 tabs – including the overhead expense budget for the Singapore office, which was a proposal, as we did not have an office there yet. Then there is a tab titled ‘Beirut’. The costs were fairly low on the whole, around USD 1 million including all overhead costs. I remember that we didn’t plan to have any traders in that entity, nor would any have gone to Beirut. It can be seen from the salary budget, which is quite low. It wasn’t proposed as a trading office, it doesn’t involve any traders’ salaries, just the salaries for operational and support staff. What was being proposed for Beirut was a limited operation that would enable us to book certain trading in that location. That is my only understanding of any discussions about a Beirut office in 2005.”
“Q. So this is what was presented to you at the time? A. I can seriously not recall to have seen this document, number one. And I still wonder why a headhunter would make a document like this. Somebody must have prepared a document. Q. Yes, it comes from Arcadia, a presentation for you and Mr Trøim to discuss at the Old Rectory in early April 2005; do you understand? A. I understand what you are saying but I don't believe it. Q. Okay. Let's have a look at what is said, {I/9039/68}. The proposal that is coming from Arcadia: "The company shall operate from four regional office ... " Do you see that? A. Yes. Q. So the proposal in the business plan is for Arcadia company to have four offices in the world; yes? A. Yes, I see that. Q. And you knew that one proposed office was in Beirut? A. I didn't know. Q. Well, you are being told at the time, "This is the proposal". A. No, I don't accept that. Q. Why don't you accept that? A. Because I can't recall it. Q. So is your evidence that you can't recall as opposed to I deny. Do you understand the difference? A. I deny. Q. Why do you deny? A. Why did that happen at that office in Beirut? Q. I think the transcriber didn't get the answer there. I was asking why you deny? A. I didn't know about it, put it that way, whatever that means. I didn't know about the Beirut office. Q. You are being told -- A. I might have been told but I can't recall and I never accepted any Beirut office. Q. Yes, but do you understand the distinction between not being able to recall something and -- A. I understand that. Q. -- actually positively saying that didn't happen? A. This didn't happen. Beirut office didn't happen.” and, later:- “Q. From the outset of the discussions with Mr Bosworth and Mr Hurley to acquire Arcadia, Farahead, you and Mr Trøim, were discussing the establishment of an Arcadia office in Beirut; that's right, isn't it? A. It could be, but I don't remember and also, it never happened so, not as far as I know. I'm not sure I was in that meeting. I don't recall seeing this document. Q. So your evidence is you don't recall seeing this document? A. No, I don't recall seeing the document. That is the reason.”
“Q. And is it fair to say that when you were looking at the Arcadia business, you wanted to set up offices in the world that had tax and compliance advantages; is that fair? A. That’s true, but so do all the oil companies, Shell, BP, everybody in the world do the same so that is the reason why I don’t understand your concern. Q. There is nothing necessarily wrong, is there? A. Because it is what you are saying, it is common for all of this type of business.”
“In the course of the negotiations, Mr Bosworth told Mr Trøim (acting on behalf of Farahead) that some of the principal trading contracts under which Arcadia London operated in Africa were held by and in the name of an entity in Mauritius which was owned or controlled by Mr Bosworth (as opposed to being owned by Arcadia London). The Claimants aver that the entity being referred to by Mr Bosworth was Arcadia Mauritius. Mr Bosworth expressly represented to Mr Trøim that after the acquisition by Farahead, such a practice would be brought to an end, and those contracts would be transferred to Arcadia London (i.e. cease to be held in the name of Arcadia Mauritius and rather be held in the name of and by Arcadia London).”
“I told Mr Trøim that one contract (singular) was held by an entity in Mauritius but I never said that it was owned or controlled by me as it never was. I have never held shares in Arcadia Mauritius or otherwise controlled it. As I have already explained (see above), Arcadia Mauritius was transferred to JP Decker from (I believe) Mark Lance with the full knowledge and approval of Mitsui. I never said that the contract (there was only one) would be transferred to Arcadia London (and it never was).”
“Q. … Mr Trøim, Mr Bosworth did not say that he owned or controlled Arcadia Mauritius, did he? A. He didn't say that he controlled that contract/contracts. We still don't know what kind of volume of contracts we are talking about, but he said that was part of the leverage to get the deal out from Mitsui. He said several times that he controlled subcontracts through that group. He said he didn't, him personally, but he controlled, which he probably did, through friends.” and:- “A. He said he controlled it, because that surprised me a bit, and he could use that as a leverage but I don't think he could say that was specifically him. It was some close friends, from what I remember.”
“… during negotiations, Mr Bosworth told me and Mr Trøim that certain contracts for West African trading were held outside the Arcadia Group by him through an entity in Mauritius, and these would be transferred to Arcadia London following the acquisition.” (§ 6.4) On the other hand, later on in the same witness statement Mr Fredriksen said: “As I have previously explained in my first witness statement, I have a recollection that, during the negotiations, Mr Trøim and I were told by Mr Bosworth that he (Mr Bosworth) was able to bring with him a number of valuable physical trading contracts to lift oil out of West Africa, which would be transferred to Arcadia London after the purchase. Given the passage of time, I cannot be more specific about when Mr Bosworth told me this or what precise words he used. I am however clear that this is what I was led to believe. As far as I recall, I wasn’t told the name or further details about the entity at the time” (§ 42) It is notable that the Claimants’ pleaded case was that the alleged statement about Mr Bosworth’s ownership or control of Arcadia Mauritius was made to Mr Trøim, not to both Mr Fredriksen and Mr Trøim. In his oral evidence, Mr Fredriksen said “I never heard about Mauritius before later, afterwards”
“Q. … Can I take it that that is not your evidence from what you recall at the time; is that right? A. Give me a second ... No, I did not. Mauritius came later. I heard Mauritius. But what happened was that Arcadia was whatever it was. Arcadia was Arcadia, so I didn't pay any attention to it, if you understand what I mean.”
“Q. Is it right to say that the concept of sleeving isn’t particularly difficult; it’s not a difficult concept, is it? A. No, but I have never used the expression in my line of business. Q. It is about the terminology, the language? A. Yes, that is what I’m saying. Q. Because if you have an entity that sits between a buyer and a seller in the middle, Mr Bosworth and Mr Hurley might call it a sleeve, what would you call it? A. For me it looks like a back-to-back operation. They are paying off somebody and they are back-to-back, they sell the cargo and make some margin. That is the way it looks to me. Q. There is an intermediary there in the middle, isn’t there, an entity in the middle? A. It could be, yes. Q. And there might be all sorts of reasons why you have that entity in the middle? A. Yes. Q. So there is nothing particularly unusual about having an intermediary between the buyer and the seller? A. That’s -- it can be quite normal.”
“Q. … Now, you had been told about Arcadia's use of service providers in the financial statements, hadn't you? A. I think, as I said yesterday, we were told that contracts was hold outside the contracts, that is later defined as sleeve contracts. Sleeve contracts I first noticed in 15/16 but it is the same as the contract that is held in Mauritius, it is just another name for it. But it is the same thing. When it comes to service provider, I said yesterday that we are used to paying commission for getting ships fixed and we are paying that regularly to institutions and that is a part of the business.”
“The 30% bonus entitlement initially agreed to by Farahead was understood at the time to be in excess of the bonus percentages which traders within other similar energy trading companies could expect to receive. This was agreed to by Farahead in recognition of the need to retain and incentivise Mr Bosworth and Mr Hurley and also reflected the fact that no ‘signing on’ bonuses or other lump sums were being paid at the point of purchase.”
“During the negotiations for the acquisition of the Arcadia Group, I had agreed that I would personally loan Mr Bosworth the sum of US$20 million to buy a house in London – this loan was made entirely outside of the Arcadia Group, essentially a personal matter between me and Mr Bosworth.”
“3.6 FSA private warning letter We have seen two letters from the FSA dated1 November 2002 , one addressed as a private warning to Mr Peter Bosworth, the other addressed to Arcadia. Both letters concern Mr Bosworth’s failure to inform the auditors of material information and his management of a specific trading contract. The FSA decided not to make a formal determination or enforcement action. We note that the FSA could take this matter into account in future applications for approval of Mr Bosworth or enforcement actions against Arcadia generally, although we are not aware of any such action having occurred.” “5.1 Tax query regarding contracts with Pang Ling We have been informed that Mitsui will not be providing any warranties on a potential tax dispute that may arise as a result of agreements with a Nigerian company, Pang Ling Nigeria Limited ("Pang Ling"). We have been provided with various correspondence between the Inland Revenue and Deloitte & Touche, Arcadia’s auditors. Pang Ling was retained as a consultant under various agreements dated between January 2000 and February 2002. Pang Ling’s role was to provide various oil brokerage services in Nigeria to Arcadia. Originally Pang Ling was remunerated on a discretionary basis. Arcadia nominated on which cargo or cargoes Pang Ling’s right to remuneration would arise. For such cargoes Pang Ling was entitled to a "share of the profit". We understand that this was arranged on an ad-hoc basis between Peter Bosworth, on behalf of Arcadia, and Pang Ling. However, an agreement dated18 February 2002 provides that Pang Ling is entitled to a fee of "US$0.10 for each and every net US barrel lifted during the term of the agreement pursuant to any contract for the sale of Nigerian crude oil entered into by Mitsui or Arcadia and the Nigerian National Petroleum Corporation". Pang Ling was also entitled to a discretionary bonus at the option of Arcadia, such bonus never to exceed US$3,000,000 in any one year. In each case Pang Ling was to invoice Arcadia for any amounts due to it under the agreements. We have been informed by Arcadia that the [sic] it has a potential exposure to taxation liability in relation to these payments of US$19million , but that this is theoretical as there is no basis for any such liability and there is no dispute with the Inland Revenue. It is not readily apparent what any dispute with the Inland Revenue would concern. We have been provided with correspondence between the Inland Revenue and Deloitte & Touche. In this correspondence the Inland Revenue has only asked for further information from Arcadia regarding its arrangements with Pang Ling. The Inland Revenue has thus far requested evidence of invoices, copies of correspondence between Pang Ling and Arcadia and copies of the agreements between the two companies. The majority of the requests relate to the financial year ending December 2000. We are unable to assess whether the Company is exposed to any taxation liability and Arcadia have requested that we do not discuss the issue with Deloitte & Touche at this stage.”
“The primary purpose of this letter is to draw your attention to the areas which gave rise to concerns during the course of our audit. We have also, as a separate section within the letter, carried forward and updated those points raised in our previous audit letters which we still consider to be pertinent. We consider those areas prioritised as "high" within this letter to be of major importance to ensure compliance with the statutory and regulatory obligations of the Company and its management, and for managing the risks faced by the Company. Those areas prioritised as "medium" and "low" do not majorly impact the ability of the company to comply with its statutory and regulatory obligations but still require attention from management in order to improve the company’s internal control environment. You will be aware that during prior years’ audits we have discussed with management significant specific matters of control and operations which have given cause for us to have concerns relating to the overall corporate governance structure within the Company and to its oversight and control from within the overall Mitsui Group. During the current year we have seen that management have made significant improvements in the areas of corporate governance, compliance and information technology and have considered all and acted on the majority of comments raised in prior years’ management letters.”
“Given the fact that many of these brokers are based in countries with poor regulatory records and that substantial payments are made to the brokers by Arcadia, it is essential that signed agreements are in place with all brokers which fully detail the services to be provided and the specific remuneration arrangements. These need to be put into place with immediate effect. Traders should also maintain a regular log of services provided by each broker so there is formal documentation of the exact nature of these services. It is also vital that all such agreements entered into with brokers are properly authorised by the Arcadia Internal Committee ("AIC”) and that formal due diligence procedures are carried out on all new brokers used, and existing brokers on a five year rotational basis, going forwards.”
“Please refer to the AIC Meeting minutes on19 May 2005 which were forwarded to you. We believe that all brokerage payments represent valid commercial transactions and the level of brokerage is in the normal practice in the industry. Further, a number of the brokerage payments are with FSA registered entities. As the above minutes mentioned, the AIC decided that in order to avoid confusion in the future, all brokerage contracts being revolved, together with any new brokerage contracts, shall be formally ratified by the AIC.”
“There has been a fairly significant change in Arcadia’s business in that they are no longer sourcing oil directly from national oil companies such as NNPC and therefore are no longer using their service provider network in sourcing this oil. As a result Arcadia have terminated their contracts with service providers and now buy oil from the secondary market. Hence the issue regarding regular due diligence reports on service providers being commissioned is no longer relevant.”
“Should Arcadia choose to employ service providers in the future then management’s proposals for the AIC to appoint an independent research firm to carry out a programme of ongoing due diligence, in such a way that all service providers were covered at least once every five years and that this due diligence work would be put out to tender on the basis of criteria set by the AIC, would again become relevant.”
“As you point out, Arcadia is no longer sourcing crude oil directly from national oil companies such as NNPC and therefore is no longer using its service provider network. It is certain that should Arcadia employ service providers in the future then all relevant details will be included in the relevant agreements and discussed by the AIC for its approval”
“I understand from Grosvenor Law that Mr Bosworth and Mr Hurley also allege that I was aware at this time and in March 2006 that the use of so-called “service providers” was “necessary to acquire West African oil”, and that “it was not possible for Arcadia London to conduct West African oil trading … without the use of and/or payment of commissions and/or fees to service providers”
“Q. You had been told about the use of service providers in the financial statements; yes? A. Yes, I see it but I hadn't been told. Okay.” … [in relation to the Deloitte management letter] “Q. So what Farahead is being told at the time is that Arcadia has a network of service providers which is no longer necessary because Arcadia Group is no longer sourcing oil directly from the national oil companies; yes? A. Yes. … A. I haven't read this. As I tried to say -- you have to listen for two seconds -- I have seven or eight big companies, huge companies, on the New York Stock Exchange, believe it or not, and we have 40 or 50,000 employees. How can I -- we have people to check this for us. Q. The reason I ask the question, Mr Fredriksen -- A. And this is a small detail. The question is was it stolen or not stolen. This is what it is all about. Q. The reason I ask the question, Mr Fredriksen, is you are the Farahead representative at the time. A. I'm not the Farahead representative. I have been referred to, yes, but I'm not. It was done by Trøim more than me and our lawyers. … Q. Right. If we go then back to paragraph 48 then of your statement … just so I understand exactly what the evidence is, you accept that Farahead was told about the service providers, not you. Your evidence is that you were not told but do you accept that Farahead was told? A. Yes, I can -- service provider. Q. And do you also accept that Farahead was told about a service provider network to acquire the crude directly from the national oil company? A. Yes. Q. Is it right to say that of course if Arcadia was to source the crude directly, there would be a risk? A. Risk? Q. A risk to Arcadia. If Arcadia uses its service provider network, there are risks, aren't there? A. There is always risk in business. What can I reply to these questions? Q. Well, you wanted to minimise those risks? A. Of course, obviously.”
“So, Attock was an offshoot, Attock Trading was an offshoot of a Pakistani refinery company. It was run by a gentleman called Imtiaz Dossa. I had had a long term relationship with him when I was working for SUN. He was one of the largest lifters of crude oil in Nigeria and SUN Refining and Marketing was the largest refiner of Nigerian crude oil at the time. So we had a good relationship with him. [The company] was owned by a gentleman called Ghaith Pharaon, who was somewhat of a colourful character. … Ghaith Pharaon is my best recollection. He ran a bank or owned a bank called BCCI which went belly up. All of the financing for Attock at the time was done by BCCI. Mr Dossa took over the entity from Ghaith Pharaon is my recollection. We, as SUN at the time, financed him on one of the cargoes in order to keep the relationship with him going. He then continued. At a certain point in time, Mr Imtiaz Dossa put the company up for sale. He approached us, he approached Vitol, he approached Glencore. I duly approached Mitsui who rejected it and said, "We don't want another entity to be purchased", and Mr Decker took over the entity. And there was a loan from Mitsui/Arcadia to Mr Decker to buy what was in the bank, I understand. I don't know if I will get the terminology right, but one is not allowed to do financial assistance, or something like that. So, yes, we lent Mr Decker the money. He bought the name. It was much to the chagrin or discomfort of Vitol who were very keen to do it and he bought the name and paid Mitsui back. … MR HAYDON: Now, again, I suggest to you that Attock Mauritius, having been procured in this way, you had a sufficient interest in Attock Mauritius to be able to insist that Mr Decker transfer it to Mr Kelbrick and Mr Mounzer in 2009? A. Not correct.”
“The price in US Dollars (U.S. $) FOB FPSO Serpentina terminal offshore Equatorial Guinea in barrels of the bill of lading will be determined in the following way: P = Dated Brent plus or minus a differential X in USD per net barrel X is a differential to be negotiated for each cargo strictly on the basis of the market conditions between the Seller and the Buyer, by mutual agreement latest 28 days prior to the first day of the preliminary loading dates range of two days. Dated Brent corresponds to the arithmetic average of five (5) consecutive mean quotations of the Dated Brent published by PLATT’S Crude Oil Marketwise during the month of loading and shall be advised by the Buyer to the Seller latest the second working day of the month following the month of loading.”
“130. It was through JP Driot that I travelled to Equatorial Guinea. By this stage, Arcadia was already purchasing spot cargoes from JP Driot’s company, Stag. However, I wanted to expand Arcadia’s business with Equatorial Guinea. I do not now recall whether it was me who brought up the idea of Arcadia entering into a term contract directly with the Equatorial Guinean Government or whether this was something JP Driot proposed to me. I would imagine it was me, but as I say I am not sure about this. Whoever started the discussion, at some point JP Driot suggested that I should travel to Equatorial Guinea. He made all of the necessary arrangements. 131. During my trip to Equatorial Guinea I was introduced by Mr Driot to representatives from GEPetrol (Equatorial Guinea’s state oil company) and some of the traditional rulers who Mr Driot told me were associated with a company called Sonergy Limited. As I explain below, Sonergy was the sponsor in the term contract which Arcadia London ultimately secured with GEPetrol. I do not recall precisely the name of the individuals that I met with. Mr Driot had built these relationships from his time working in Equatorial Guinea. I understood at this time that Mr Driot had a close relationship with the owners of Sonergy and that he provided them with assistance and services in relation to crude oil trading and other businesses. I recall that Sonergy were involved in other assets in Equatorial Guinea aside from crude oil contracts. 132. Sonergy could not trade on its own because it did not have the expertise, the contacts or the resources to do so. It needed an oil trading company to sell its crude oil into the international market, similarly to how the Equatorial Guinean Government used JP Driot’s company, Stag. Sonergy was not a trading company. 133. Arcadia London entered into the term contract with GEPetrol to lift Zafiro grade crude oil in December 2005. ... 134. It was because of JP Driot that we were able to secure the Zafiro Contract. He sourced the opportunity and introduced us to Sonergy. In return for this, we agreed to pay him a profit share. I do not remember exactly what the share was. I believe from memory that he used his company, Bergamot, to receive them. I believe that Bergamot signed a service provider contract with Arcadia London at about this time but I have not seen that document. All the payments to Bergamot were made by Arcadia London. 135. As I note above, the sponsor was Sonergy. Arcadia paid Sonergy a profit share in return for securing and maintaining the Zafiro Contract for Arcadia. I believe from memory that it was about the same as the profit share later paid by Arcadia Lebanon, i.e. about 60 or 65% of the gross profit. My belief and understanding at the time was that Sonergy acted as a sponsor for multiple trading companies, including Stag, but I didn’t have any concrete information showing this. 136. For all intents and purposes, while the Zafiro Contract was in the name of Arcadia London, it was in substance Sonergy’s contract. It was Sonergy who held great power with GEPetrol. They decided which oil trading company would get the Zafiro Contract and whether they would get to keep it. For example, if Sonergy decided that they did not like Arcadia and they wanted to go with a different company, they had the ability to annul the contract with around three months’ notice. 137. JP Driot’s main role in the trading under the Zafiro Contract was negotiating the price paid by Arcadia London (and later, Arcadia Lebanon) to GEPetrol. The price Arcadia London was to pay GEPetrol for cargoes lifted under the Zafiro Contract was not fixed. Rather, JP Driot negotiated with GEPetrol the price of each cargo. He tried to agree with GEPetrol purchase prices which were lower than Arcadia London’s sale prices. The price paid to GEPetrol was based on the average of the Dated Brent pricing measure over a five day period, normally falling within the month of loading. To the best of my understanding at the time, this was a cargo by cargo negotiation between Mr Driot and GEPetrol, and took place after the cargoes had been lifted, not before. This was how the Zafiro Contract worked throughout its entire existence, including after it moved to Arcadia Lebanon. Mr Driot frequently negotiated a price that was lower than the price Arcadia London sold the cargoes for. This produced a profit which we shared with Mr Driot’s companies and Sonergy. (When I talk about ‘profit share’ with sponsors and service providers, I am talking about this profit, the simple profit resulting from the difference between the purchase prices negotiated by Mr Driot / Sonergy and the sale prices achieved by Arcadia London. i.e. the gross trading profit on the physical cargo. Arcadia did not share the profits that we made in other ways such as from contracts for difference trading.) 138. To the best of my recollection and knowledge, the Zafiro Contract became operational at the very end of 2005. From the last couple of days of 2005 through into 2006, Arcadia lifted Zafiro Contract cargoes. I have been shown an email from Ann Bickerstaffe (Arcadia’s West Africa operations manager) sent to me and a number of other Arcadia traders / employees (as well as Mr Kelbrick) dated14 December 2005 . I am reminded by this document that Arcadia London lifted its first cargo pursuant to the Zafiro Contract in or around 30-31 December 2005 . I have also been show a further email from which I can see that the cargo was carried on a vessel called “MT Front Energy”
“Q. The reason why any oil company in West Africa needs to pay Mr Driot and his companies is because he controlled access to GEPetrol, didn’t he? A. Yes. Q. So if Arcadia wanted oil from GEPetrol, it was necessary to get the oil to pay Mr Driot and his companies? A. True. Q. And those payments were to Arcadia’s commercial benefit because Arcadia secured the oil; correct? A. Yes, they were to Arcadia’s benefit in total, yes. Q. Because if Mr Driot wanted to, he could simply move any GEPetrol contract to a competitor? A. And he threatened that almost constantly.”
“my recollection of this is Mr Driot would negotiate on our behalf as Arcadia, both when this contract was in Arcadia London and when it was moved to Arcadia Lebanon. And he would negotiate with GEPetrol a five-day pricing period”
“Not only was PB prepared to expose the Arcadia Group and Farahead to high risks of reputational and compliance issues, contrary to Farahead’s instructions. In the case of the Zafiro Contract, he knew (or turned a blind eye) to the fact that bribery was involved, as Sonergy was connected to the family of the President of Equatorial Guinea and Obexys/Rodexkia were companies owned by Mr Oburu who was an official at GE Petrol who dealt with pricing …”
“[Sonergy] is currently controlled by Justo Obiang, one of the sons of President Teodoro Ngema Mbaso Obiang. He was 16 at the time Sonergy was formed and only became involved at the time of the acquisition of the shares from Tacoma. The takeover of the Tacoma shares is understood to have been the start of increasing influence over the company by a branch of the President’s family led by his wife, Constancia Mangue Nsue Okomo, and this takeover involved the buy-out of a local traditional ruler who set-up the company. But it is known that the family only fully assumed control of Sonergy in 2015 when Justo severed the relationship with Mercuria.”
“Q. It is inconceivable that you did not know who was behind Sonergy either. You did know who was behind Sonergy? A. I had no idea who was behind Sonergy. Firstly, when I met with Sonergy, with Mr Driot, they presented themselves, the gentlemen, as traditional rulers. And if, later on, it became apparent to the world that Sonergy was associated with the President, I didn't know at the time at all. No, I didn't. Q. You must have known, Mr Bosworth, you would have asked and that is what you would have been finding out when you went there? A. No. Q. And in the absence of any other credible explanation as to why this payment was made to Sonergy, it should be regarded as a bribe? A. No. Q. And you knew that payment had no legitimate purpose, didn't you? A. Absolutely not. Q. And nor did the payments to Mr Driot's companies since he is being paid for giving access to Oburu and Sonergy? A. No, Mr Driot brought us the opportunity. It was not access. He brought us the opportunity and we paid him commensurably with that.”
“19. During the term of this Agreement, Arcadia may pay the Service Provider in its sole and unfettered discretion at the end of each loading month and upon receipt of invoice, a bonus of such amount as it may decide in response to any request or proposal made from the Service Provider at any time and from time to time (never in a sum exceeding US$2.000 .000 or equivalent per bonus). 20. Without in any way fettering Arcadia’s discretion under clause 19 above, Arcadia may take into account the following factors when considering whether to make any payments under clause 19 above, and if so, how much, namely: the volumes, grades, timing of crude oil lifted by Arcadia under its contracts of sale with GEPetrol [La Compania Nacional de Petroleos de Guinea Ecuatorial], the overall demurrage liabilities incurred by Arcadia; the net profits per cargo made by Arcadia the performance by the Service Provider of the Services set out in Schedule One of this Agreement; and any other special factors which Arcadia may consider to be relevant for the period to which any such request or proposal relates. The decision of Arcadia to award commission or bonus, or as to the amount of any commission or bonus if it decides to make such an award, shall be final and binding between the Parties, and the Service Provider shall not be entitled to know or be advised of the internal process (if any) it applied. The Service Provider will be notified in writing by Arcadia of the amount of any commission or bonus which Arcadia may decide to pay.”
“Q. … Mr Bosworth says that he was able to secure the Zafiro contract because of someone called Mr Driot, Jean-Paul Driot, do you see that in paragraph 134? A. Yes. Q. And he also says that it was necessary to have a sponsor called Sonergy, in paragraph 135; do you see that? A. Yes. Q. And you yourself, you have no basis to say that it was not necessary for Mr Bosworth to obtain the Zafiro contract without the assistance of Mr Driot and Mr Sonergy? A. I don't know the actual details but it could have been like this. I'm not -- Q. Because you left it to the experts, the oil traders? A. I was that much involved in this. I don't really recall it, but it could have happened. Q. So you don't say that the payments that Arcadia made to Sonergy were not necessary to obtain this contract? A. I don't know. Q. And likewise, you don't say that payments that Arcadia made to Mr Driot and Bergamot were not necessary for Arcadia to obtain the Zafiro contract? A. I don't know the details. Q. And you don't know the details because you left it to Mr Bosworth to obtain and secure the contracts; is that correct? A. That's correct. Q. And you were happy or you were content for Mr Bosworth to obtain and secure the contract as he saw fit? A. That was his job. Q. And it is right also that you don’t say, do you, that the payments that Arcadia made to service providers under your ownership to carry on West African trading are somehow wrong or illegitimate; that’s right, isn’t it ? A. It depends on the circumstances, but as we spoke about yesterday, that happened from time to time, that much I know. But I don’t call it -- I would call it rather the correct word, a commission. A commission, that is what I would call it. Q. Insofar as Arcadia was making commission payments to Sonergy or Mr Driot’s company, there is nothing wrong in that, is there? A. As long as it is done in a legally correct way, there is nothing wrong with it. Q. If it is important for those payments to be made to obtain the business, you would be content with those payments; yes? A. As long as it is done correctly. It happens.”
“Not from inception, never has been and is still not today in 2024.”
“24. Farahead’s acquisition of Arcadia London completed on16 March 2006 . Mr Fredriksen and Mr Trøim were sensitive about regulatory issues, in particular corruption allegations, because of previous investigations into Mr Fredriksen’s businesses. Mr Fredriksen and Mr Trøim wanted Arcadia London to continue its higher-risk West African crude oil trading, but in a way that mitigated the regulatory and reputational risks to Arcadia London, Farahead and (above all) to Mr Fredriksen and Mr Trøim themselves. 25. Accordingly, in around late spring/early summer 2006, Mr Fredriksen and Mr Trøim instructed Mr Bosworth and Mr Hurley to establish a new company in an offshore jurisdiction whose purpose was to handle and/or facilitate the higher risk oil trading business on behalf of the Arcadia Group. This company was Arcadia Lebanon. Farahead (in particular Mr Fredriksen and Mr Trøim) required Mr Bosworth and Mr Hurley personally to hold the shares in Arcadia Lebanon (such that it was not officially part of the Arcadia Group), but to hold the shares to Farahead’s instruction and/or order. Farahead (in particular Mr Fredriksen and Mr Trøim) at all times had the ability to determine Arcadia Lebanon’s activities. Mr Fredriksen and Mr Trøim negotiated a profit share with Mr Bosworth and Mr Hurley in respect of any of Arcadia Lebanon’s net trading profits. The profit share arrangement in respect of Arcadia Lebanon reflected the wider profit share arrangements between the Claimants (and Farahead in particular) and the Arcadia Group’s management and traders. As such, Mr Bosworth and Mr Hurley became entitled to retain at least 30% (subsequently 35%) of Arcadia Lebanon’s net trading profits; the remaining net trading profits were to be paid to Farahead or otherwise used for the Claimants’ benefit. 26. In summer and/or autumn 2006, Mr Fredriksen instructed Mr Bosworth to move Arcadia London’s high risk term contracts with West African national oil companies (and its dealings with the associated service providers) to Arcadia Lebanon and to establish sleeving arrangements to insulate the Claimants (and Mr Fredriksen) from the risks associated with such contracts. In particular, Mr Fredriksen instructed Mr Bosworth to move the Zafiro Contract to Arcadia Lebanon. The Sao Tome Contract was also required to be moved to Arcadia Lebanon. 27. Over the following months Arcadia Lebanon became operational, and it became the contract holder (i.e. the immediate buyer of the crude oil) for the Zafiro Contract and Sao Tome Contract by around April 2007. The Arcadia Group and Arcadia Lebanon established sleeving arrangements so that the latter could transfer the cargoes which it had acquired under its term contracts to the former. In order to make the sleeving arrangements effective (see paragraphs 124 to 126 below), Arcadia Lebanon could not contract directly with the Arcadia Group. Instead, arrangements were made to sell the crude oil to Attock Mauritius/Tristar group entities. Such entities acted as sleeve entities through which crude oil acquired by Arcadia Lebanon was transferred to the Arcadia Group. ”
“6.9 … some time after the acquisition of Arcadia London, Mr Bosworth and Mr Hurley indicated to us that there was a Lebanese entity that they had established for a particularly lucrative oil trading contract involving a handful of trades, which I refer to as “Arcadia Lebanon”
“78 I remember that Mr Bosworth and Mr Hurley told me that they had established an entity in Lebanon (which I now understand to be Arcadia Petroleum SAL Offshore, or “Arcadia Lebanon”), in their own names, to carry out a very limited number of specific trades over a very short time span of activity. 79 I do not recall precisely when I found out about this, save that I recall that the company was already in existence when I was told. Grosvenor Law has advised me that Arcadia Lebanon was set up in July 2006, so it must have been sometime after that. 80 I recall that Mr Bosworth told us that he and Mr Hurley had set up this company this because they wanted one specific trade or counterparty trades to be separate from the rest of the Arcadia Group business. I recall that this trade or counterparty may have been related to Sao Tome and Principe but I cannot be sure so many years later. 81 Mr Bosworth said to me that he and Mr Hurley had done this because they wanted those specific trades to be separate from the bonus pool arrangements in which the Arcadia Group’s traders as a whole participated (and which I have described above) because they were particularly lucrative. 82 At the time, my response (beyond being unhappy at being told about this after the event) was to request that the situation to be regularised by the return of 70 per cent of the net profits from these trades / counterparty transactions to Farahead and that, in future, all profits and losses for all trading activity must be included within the profit and loss reports provided to us by Mr Bosworth and Mr Hurley on a daily basis. 83 At the time, I was assured by Mr Bosworth that Arcadia Lebanon was only being used for this specific trade and that Farahead's 70 per cent share of the net profit from the same that had been put through Arcadia Lebanon would be transferred to Farahead in accordance with the arrangements we had made. 84 I understood clearly from the explanation above Mr Bosworth told us that Arcadia Lebanon would not be involved in any ongoing activity after those trades had been completed. My clear understanding was that, once those trades were complete, it was no longer active and was to be closed down. 85 I was not told by Mr Bosworth or Mr Hurley, and I was not aware, that Arcadia Lebanon had been involved in any further trading activity in West Africa or elsewhere (beyond the specific trades for which I was told it had been established). … 89.1 I did not instruct Mr Bosworth or Mr Hurley to establish Arcadia Lebanon, whether to deal with high-risk business or otherwise. 89.2 I was told about the existence of Arcadia Lebanon after the acquisition by Farahead and at some point after the incorporation of Arcadia Lebanon. 89.3 It was Mr Bosworth who told me that he had set up Arcadia Lebanon and it was in respect of one specific trade or counterparty (which I believe may have had some connection to Sao Tome). 89.4 I had no knowledge and was not told that Arcadia Mauritius or Arcadia Lebanon were being used as intermediaries (or “sleeves” or “contract holders”). 89.5 It was suggested to me that Arcadia Lebanon profits would flow to the Arcadia Group/Farahead; I would not have agreed to any other approach. Indeed, had I been consulted before the event rather than after the event, I would not have agreed to any approach that saw profits accumulate in a company that was not part of the Arcadia Group.”
“120. … Having had my memory refreshed by reference to [an email dated15 September 2005 from Mr Hurley to Mr Trøim attaching a draft budget, including a budget relating to a Beirut office], I recall that we discussed with John and Tor Olav possibly opening an office in Beirut early on in the process of their takeover. I do not however remember the precise details of those discussions as they took place almost 20 years ago. I do however remember that John and Tor said at this time that it was very important for John to be distanced from the potentially riskier aspects of Arcadia’s business in West Africa, and I believe that the discussion of a Beirut office was part of the discussion of how to distance and protect both John (and his business interests) and the Arcadia group from any the compliance risks associated with Arcadia’s West African trading activities. This is just one example of the way in which John wished to be insulated from the Arcadia business and the lengths he went to so as to ensure that there was a separation between him and any risk to his other business interests (I explain at paragraph 179 below further instances of this, including the instruction from John and Tor that we should no longer send emails about Arcadia’s daily reporting to John’s personal email address). It had been communicated to me by John and/or Tor Olav on a number of occasions that the risk to John’s business interests of any compliance-related issue would be critical, and – this was something John and Tor said several times, I think as a way of hammering home the message – that Arcadia could never make enough money to make up for such an issue. 121. As far as I can remember, the commercial rationale for opening an office in Beirut rather than some other country would be to take advantage of the low compliance environment (it being outside of the UK and the US and with as I understand it less strict legislation on anti-corruption practices) and banking secrecy laws. There was not (as far as I can recall) any other business case for establishing an office in Beirut. If Arcadia wanted to expand in that geographical area, we would have established an office in Dubai, rather than Lebanon. 122. I also do not specifically recall who came up with the idea of establishing an offshore vehicle for engaging in Arcadia’s riskier oil trading activities, but I do remember that the idea was proposed as a way of solving John’s desire to be distanced from the riskier aspects of Arcadia’s business in West Africa, as I have already explained. As I have said, this was a long time ago and I am not sure, but I think it was probably either Colin or myself who raised the idea – we were the ones who had been tasked with finding a specific solution to the problem John had identified. Our discussions at that time mostly took place at John’s office in Sloane Square (I recall that as you walked into the Sloane Square offices and turned right, there were two meeting rooms, and the one that we held most of these discussions in was the large meeting room on the right hand side, close to the kitchen). Similarly, I think that the jurisdiction of Lebanon was probably recommended by one or both of Colin and I, then agreed to by John and Tor Olav as suitable. I understand from what John told me at the time as well from publicly available sources that John had close political ties with the hierarchy in Lebanon and I believe that he actually lived there while he was trading oil for a period of time.”
“164. … I do not recall much about the process by which Arcadia Lebanon was incorporated and set up. ... 165. John and Tor Olav told Colin and I that we would have to hold the Arcadia Lebanon shares on behalf of Farahead and this is what we did. 166. Upon incorporation, Arcadia Lebanon did not have any members of staff or offices. This came later in early 2007 when the company become operational. I remember that in one or several of the management meetings in (to the best of my recollection) the latter part of 2006, John and Tor Olav instructed Colin and I to make Arcadia Lebanon operational towards the end of the 2006 financial year. I believe that was because there were anticipated questions from the auditor due to sizeable funds being paid to Sonergy in connection with the Zafiro Contract which I describe above. As such, the Zafiro Contract was transferred from Arcadia London to Arcadia Lebanon. I believe that this probably took place in early 2007 and we would have had to inform the Equatorial Guinean government. At or around the same time, the Sao Tome Contract was also transferred to Arcadia Lebanon.” “183. From the period when Arcadia Lebanon became operational until its entry into a liquidation process in 2013 ...it continued to operate the Zafiro, Sao Tome and Senegal Contracts until they were not renewed by the relevant governments. Arcadia Lebanon assumed the risks associated with those contracts and had dealings with, and made payments to, the relevant service providers. During this time, I would typically have to travel to Lebanon for short periods of time. This was purely for administrative purposes for example signing off on payments and making sure all documentation was in order.” “185. I understand from Quinn Emanuel that the Claimants state in their Re-Re-Re Amended Particulars of Claim that shortly after the acquisition, I told John and Tor that Colin and I had secured a “particularly lucrative” trading contract but that because we did not want to share the bonus pot with the remainder of Arcadia London’s trading team and staff, we had established Arcadia Lebanon for the sole purpose of being the counterparty to the contract. This is false. I do not know which contract John and Tor are referring to and I understand from my solicitors that they have so far refused to say. The only significant new contract that I can remember being secured in 2005 or 2006 was the Zafiro Contract. If John and Tor are referring to that contract, I would not describe it as “particularly lucrative”
“to carry out a small number of African trades under a particular oil trading contract or opportunity”
“Please see below a service provider agreement drawn up by Clifford Chance in respect of our business with Equatorial Guinea. As we expect to be appointing you as auditors of the company we wanted to be certain that this was sufficient for audit purposes.”
“Initially the new Lebanese Company will be formed to protect the name in Lebanon. However the plan is that it will be used for Middle Eastern oil trading activity. It will open a bank account in Beirut and it may have an office. It will not be trading with any Lebanese entities. Initially its director and shareholder will be a British national, resident in Dubai. Obviously we want the new company to be as tax efficient as possible. I am assuming therefore that it can be a Lebanese offshore company”
“The client is Arcadia Petroleum, one of the largest crude oil traders in the word. … I am a director of Arcadia and am able to sign the proxy to which you refer. Arcadia is also a client of Moore Stephens London. Arcadia will not be the registered shareholder of this entity – we will use nominee shareholders.”
“25.02.2008 Mark [Lance] – Arcadia Lebanon = Fredriksen’s stand alone company 16.04.2008 Skilton – Arcadia Lebanon shares to a Liberian co. 12.06 Skilton – Arcadia London meeting in London yesterday – Arcadia Lebanon kept out of discussion per Fredriksen/Trøim 24.06 Skilton – Advised of Arcadia London meeting in Limassol with 3rd party present 08.07 Skilton – Saleh memo on reporting requirements 06.10 Skilton – Trøim told him that it was not necessary for him to participate in the Arcadia London meeting in Limassol 07.10 Skilton – asked me to request from Hurley financials of Arcadia Lebanon 13.10 Skilton – Frederiksen advised him not to bother attending Arcadia London meeting in Limassol 16.10 Skilton -$15m dividend from Arcadia Lebanon to Beirut Holdings?? 03.11 Erling [Lind] – he advised that transfer of shares of Arcadia Lebanon to Beirut Holdings are on hold – he will talk to Skilton 05.11 05.11 Skilton – Trøim should advise Arcadia Lebanon dividend payment and how 09.12 Trøim -$15m Arcadia Lebanon dividend will be used to reduce Bosworth loan from Fulham 22.01.2009 Skilton – Arcadia Lebanon financial from Trøim 10.03 Hurley – Arcadia Lebanon accounts 31.12.2008 are being reviewed. 26.03 Skilton – discussed meeting in London between Farahead/APL – Erling [Lind] is drafting minutes 24.06 Hurley – advised of$10m (e) Arcadia Beirut profits for 2008 25.08 Hurley – advised that he is talking to Fredriksen/Trøim re Arcadia Lebanon cash availability 04.09 Skilton – pointed out that we should chase “them” for Arcadia Lebanon info 09.09 Skilton – he was advised by Fredriksen/ Trøim that we should not make any more enquiries on Arcadia Lebanon”
“in which he told me that Arcadia Lebanon was Mr Fredriksen’s stand-alone company. I understand it to mean that Arcadia Lebanon was not under Farahead’s ownership, but was held for Mr Fredriksen’s benefit (or for the benefit of entities associated with him).”
“We had approached Cristina Azzariti and Morgado I phoned them probably a year or so ago to see if their situation had changed from what it was previously. I spoke to her son, Azzariti's son, which is Morgado's son as well. And he said, look, my mum can't and won't speak to you. The reason for that, my Lord, is when -- just before Freshfields left, I believe, I received a call from Azzariti in a very distressed state from Dubai saying that she had been approached by two gentlemen in a shopping mall on behalf of Tom Francisco [of Arcadia] who was having a coffee close by and he wanted to have a word with her. Upon saying no, she didn't want to, the two gentlemen said to her if she did not cooperate with -- I think the law firm was Jones Day, that it was possible they would bring criminal action against her and under Dubai law, that meant she could potentially lose access to her children. So I would love for Morgado and Cristina to have come here but unfortunately, I don't have access to them, they did sign with Jones Day, and I have not spoken to them since so that is by way of background to this.”
“… at that time we were in between the two and we didn't know whether this would be a problem internally. The problem was always going to come, potential problem, from the auditor and at that time we didn't know and so we put the deal in Arcadia London. They were aware of it. And once there was an indication of a potential issue with the auditor, we then enacted what had been discussed before was the setting up of Arcadia London.” and: “Look, we had a situation whereby you start one way, you have a plan if something goes wrong. If it continued and there was no problem, then no problem. But there became a potential issue with the auditor and therefore it was moved out.”
“Q. When you spoke to Mr Trøim about Arcadia Lebanon for the first time, he was simply told that it was owned by you and Mr Hurley? A. When it was originally set up. There was then a later discussion as to the enactment of it which had been ...”
“Later on, when the decision was gone through with John and Tor, authorised by them, we remained at their request the shareholders, holding the shares in effect -- I don't know the legal term but to their benefit”
“it’s not the reason for setting it up in any way, shape or form. I could have told the traders in London you don’t get a share of it, full stop”
“The reason for setting it up was the compliance issues and I will have said to [Mr Trøim] that I don’t anticipate having to share that bonus pool with anybody who is not involved in that aspect of it”
“Q. You did not tell Mr Fredriksen or Mr Trøim that it was necessary to engage service providers to acquire West African oil, did you? A. You cannot engage in West African crude oil trading without a service provider is my experience over the last 30 years. Q. Mr Fredriksen and Mr Trøim had no reason to suggest to you that an offshore vehicle should be set up for engaging in Arcadia's riskier oil trading activities, did they? A. They agreed to it. … Or instructed it.” “Q. Sleeving arrangements are not used to hide transactions from a company’s auditors, are they? A. They are used in this, in what we did, to hide the significant payments to service providers for the business from Arcadia Lebanon. Q. That must mean that you recognised that the payments to the Zafiro service providers were unjustifiable? A. No, not at all. They were part of the contract. That is the way that contract was done. It is the way you enter into the contract. And if you don’t want to do it, then you don’t get the contract. Q. You would be unable to demonstrate to the auditors that the service provider payments served any legitimate and commercial purpose? A. We would be able to show them as to why the service provider was there. But it may not have been sufficient for the western auditor, London auditor to accept. Hence the concept of Arcadia Lebanon. Q. Because they would have had the same concerns that Andersen had, about Pang Ling. A. They may have done.” and: “Q. Mr Trøim and Mr Fredriksen, they are rational businessmen, aren't they? A. Most of the time. Q. If you described this contract as high risk business, you would have at least have had to demonstrate that the risk was worth taking, wouldn't you? A. No, with the conversations with John and Tor, that was not the way the relationship was. We didn't go into those details unless we were asked. Q. But you are suggesting that they gave you permission to run a high risk business? A. They didn't give me permission to do it, they asked us to -- well, our business is a high risk business, all of it is. So by buying the company, John knew that, and he asked us to move it out into an entity called Arcadia Lebanon, to distance himself if anything went wrong.”
“If I may, I will tell you why I recall it very well, because I went for a beer with Mr Fredriksen outside of his offices, outside the hotel, and there was a gentleman, there is a square in Sloane Square and there was a gentleman sitting on one of the benches and John explained to me it is better to talk like that [covering his mouth] because some people can be lip readers.”
“… But I trusted Bosworth and company to take care of all this, being the CEO of the company. Q. So if they could manage the risks, you were content? A. As long as they were legal, yes. Q. So as long as Mr Bosworth and Mr Hurley managed the risks legally, using structures in oil trading that were commonplace, you were content with their activity in West Africa, yes? A. As long as they were legal, yes.”
“The problem with Arcadia purchasing oil directly from GEPetrol under the Zafiro contract is that it raised concerns about compliance when dealing directly with national oil companies and service providers; that’s right, isn’t it? A. Yes, it happened sometimes. Q. So you had these concerns, but at the same time, you wanted to expand the Arcadia business? A. Yes, over business: normally if you buy a business, it is to expand. Q. So you needed to find a way for Arcadia to expand the West African business but also manage and minimise the compliance risk; correct? A. Yes, you can say it like that. Yes.”
“Q. Do you remember, Mr Fredriksen, you appreciated that purchases from national oil companies carry particular compliance risks; do you remember that? A. Yes, of course. But those days it was different. Q. In those days, purchases from national oil companies involved potential risks concerning bribery and corruption, didn’t they? A. Oh yes, they always do that. Yes. Q. So that is why it would make sense for that high risk business involving purchases from West African national oil companies to move to Lebanon, correct; from your perspective? A. It is hard for me, whether it is Lebanon or wherever but of course generally speaking, if you are in the borderline situation, better to get it to a place like Lebanon or Dubai or wherever. That I accept.”
“A. … this was left to Bosworth, all this decision was left to Bosworth. He was running the company and he had the experience. Q. And you were content for Mr Bosworth and Mr Hurley to structure the trading in a way that they saw fit to protect Arcadia; yes? A. I guess so.”
“Q. So those were two term contracts, Sao Tome and Equatorial Guinea, the one we have just been talking about; yes? A. Yes. Q. And that was the opportunity, wasn’t it, that you were being presented with for Arcadia Lebanon; correct? A. I guess so.”
“Q. And you authorised Arcadia Lebanon to carry on those term contracts, Sao Tome and Equatorial Guinea; yes? A. I did not. Q. When you say you did not, you can't recall the position, can you? A. No, I cannot.”
“Q. What happened, Mr Fredriksen, was that during the summer and autumn of 2006 after Arcadia Lebanon had been set up, Farahead instructed Arcadia's crude oil West African trading to be transferred to Arcadia Lebanon; correct? A. Not as far as I know. Q. So once Arcadia London was up and running, Arcadia Lebanon stepped into the shoes of Arcadia in its dealings with the West African national oil companies and the service providers; yes? A. No. I don't know. Q. You don't know? A. No. It could happen. I'm not denying that. Q. And Farahead authorised Arcadia Lebanon to have that role as the contract holder with the national oil companies? A. I don't think they authorised it. … Q. And likewise, Farahead authorised Arcadia Lebanon to have this contract holding role for the Sao Tome contract; yes? A. I paid some contracts. Q. The Zafiro contracts; yes? A. Yes. Q. And later on, the Senegal contract; yes? A. That I don't recall. But it could have happened. I don't ...”
“Q. And the reason why Farahead wanted this to happen, ie for Arcadia Lebanon to have the contract holding role, was that minimised the risk of any audit investigation into Arcadia; correct? A. It could be, yes. Q. And that was an advantage to you and Farahead, wasn’t it? A. It depends how you look at it. But we didn’t get any money out of it. That is the whole point. Whatever you say, we didn’t receive anything. Q. We’ll come to the money later. At the moment, it was of benefit to Farahead for Arcadia Lebanon to have the contract holding role for the Sao Tome contract, the Zafiro contract and the Senegal contract; correct? A. It could be the case, yes. Q. Because that minimised an audit investigation into Arcadia; do you understand that? A. Yes. Q. And that would protect not just Arcadia, but Farahead from any investigation; correct? A. If they did something illegal, I agree with that. As long as the – Q. Because you wanted to minimise any possibility of an auditor raising questions about this risky West African business; yes? A. I hear what you say but of course we don’t want to take any unnecessary risks. Q. And you accept I think that Arcadia Lebanon was making what you call commission payments; yes? A. On certain business deals, I accept it, yes. Q. And there was – A. This has happened in time of history in the business. It is quite normal in the business. Q. In particular it would be normal in a West African oil trading business for these commission payments to be made; yes? A. Yes.”
“Q. So you knew before Arcadia Lebanon had been actually formally incorporated that Arcadia Lebanon was being set up; correct? A. But you already told me yesterday that Arcadia Lebanon was set up in 2005, in the budget. Q. No, it is set up in July 2006, Mr Trøim? A. You said it was in the budget in 2005. Q. Just answer the question. You knew in April or May 2006 that Arcadia Lebanon was in the process of being set up; correct? A. Yes, that I knew at that time.”
“As I said, that is from me. I don't know what the date on the Sao Tome contract when that telephone came to me and they wanted to put that into Lebanon but it must have been before there.”
“Q. The expansion of the new Equatorial Guinea business raised exactly the problem about compliance, didn't it, that Deloitte had warned about, ie contracting directly with national oil companies. Do you remember that? A. Yes, I remember it from you showed me the document. Q. And the concern was that you didn't want there to be another Pang Ling investigation to risk into Arcadia; correct? A. I don't think we assumed it would be another Pang Ling investment because I think we assumed that the guys would follow the rules and thereby you don't have a problem.”
“Q. Effectively you agreed to replicate the arrangement that had happened under Mitsui with Arcadia Lebanon; correct? A. We did that because we were presented with a fait accompli. This is the way we are going to do it and we are going to run it here and then we effectively don't have to share the bonus pool with the rest of the people and your economic interest is kind of the same as it was before.”
“Q. And the Lebanese company was to be outside the official group, wasn't it, to distance and protect you from the risks of West African oil trading? A. That was the idea Pete Bosworth had when he came up and said he had the contract, that he wanted to take it out and he wanted to organise it through Lebanon and he wanted to kind of -- effectively they owned the shares and that was the story.” “Q. And the reason why you were going to transfer the higher risk business to Lebanon was to ensure that Arcadia itself wouldn't have problems in the future with the auditors; correct? A. You should not ask me about this question. I said we never came up with this idea, it came from Paul and Pete and -- from Colin and Pete and you should ask them why they did it. Q. The advantage of Lebanon was that it offshored the risks, didn't it? A. You should ask Pete and Colin about it. Q. I'm asking you, Mr Trøim? A. We never came up with the idea. Q. But you knew about the idea, didn't you? A. No, because they presented us with a fait accompli and said, "We are going to do it this way". Q. And you agreed to the idea, didn't you? A. We agreed to the idea subject to the fact that our economic interest in the transaction became the same 70%.”
“Q. And the advantage from your point of view was that Arcadia Lebanon could make the payments to the service providers, not Arcadia London; correct? A. You are putting words in my mouth which I don't like. Listen to what I'm saying. This was presented to us as a way to do it and in retrospect, stupidly enough agreed to do it for that limited amount of trades which we talked about which was kind of I think originally talked about an amount of USD6 million to USD8 million, something like that. It was not to establish a big business with a lot of trades. That was never ever, ever discussed. The first time I actually heard about it was when Tom Francisco started to dig into what had happened in that company.”
“We allowed Arcadia Lebanon to operate that contract based on the recommendation they had and when they had the set-up arranged, in hindsight we should never have done it, but that is the mistake. It was made with a very clear purpose, that this was a very kind of small trade with a kind of very limited economical effect.”
“Q. You mentioned Farahead's ownership arrangements earlier, didn't you? You instructed Mr Bosworth and Mr Hurley to hold Arcadia Lebanon shares subject to your instruction or order; correct? A. No. I said that also two or three times. They came up with the whole idea. They would park those initial contracts in that company and that we would hold harmless economically that they will receive 70% and they will be kept outside the bonus pool. But the 70% will go back to kind of the shareholder in Arcadia.” and then:- “Q. Yet nine years later in your third statement you now say the counterparty may have been related to Sao Tome. You have no basis to say that at all, do you, Mr Trøim? A. I think part of the reason is that I had −− that comes back recollection because I have spent some time in Equatorial Guinea over the last years doing Golar business and then I remember the story and then it came to me. But as I said, have I not given any guarantees. I said it was most likely the Sao Tome contract. Q. Your memory has improved over nine years; is that right? A. Yes, because I have been down to the country and I was kind of recollecting the story. Q. So you have experience – A. But I have also done it with reservation. I tried to help the court, to advise in one direction but I have not given any assurance that was the case but there was a specific thing. My strong feeling is that it was linked to the Equatorial Guinea/Sao Tome set up with ( indistinct ). Q. Exactly. The business that was being talked about was Equatorial Guinea, wasn’t it? A. Yes. That is the Sao Tome/Equatorial Guinea structure. Q. That was the opportunity that Arcadia Lebanon was going to take, wasn’t it? A. I have now said that for the fifth time, this was an opportunity, this was an executed contract which they wanted to find a home for.”
“Q. We were discussing Mr Lance yesterday. He is the Arcadia secretary; yes? A. Yes. Q. Mr Hannas is recording that Arcadia Lebanon is Mr Fredriksen's standalone company. Do you see that? A. Yes. Q. And the reason why Arcadia Lebanon was the standalone company was because Arcadia Lebanon was Mr Fredriksen's company; correct? A. That is legally wrong. Q. So in substance, it is the stand-alone Fredriksen company; correct? A. No, it is a company where effectively we have a 70% economical interest.”
“Q. But it is right, Mr Trøim, that after Arcadia Lebanon is set up and the term contracts are transferred, there was not any audit enquiry or investigation into Arcadia's West African activities, was there? A. No, but what was more important, there was even no reporting to the 70% economic holder. So this was totally hidden from us. Q. But the arrangements meant that the auditors no longer raised any questions about payments to service providers; correct? A. I don't know what kind of audit there is in Lebanon but kind of I assumed there is an audit there as well, if it's not that kind of thorough. But it was not part of the group company because it was owned by Pete Bosworth and Colin Hurley. Q. And because -- A. But when I see this list, it is far in excess of what was agreed to when they started this company. Q. Because there was no audit enquiry, you and Mr Fredriksen were able to protect your reputation? A. If you want to protect your reputation, I think it is pretty stupid to call the company Arcadia Lebanon. Q. Why do you say that, Mr Trøim? A. Because that will naturally belong to part of the Arcadia Group. Q. But Arcadia Lebanon is hidden from the auditors, isn't it; correct? A. Yes, but if something comes out that you have paid your own money, it does not come out necessarily from audit.”
“I don’t recall the percentage or the basis for the agreement. I knew that I was working to get the cargoes and for Arcadia and that is all that I can really recall” and: “I don’t recall a profit share agreement but if I have been running a contract, if I have been managing a contract, if I’m the only option that they have on the ground, right, then - - and to my knowledge, I was the only option because you know you couldn’t go and hire other people that had the expertise…so these monies would have been due because there are gross profits associated with them. I would have been involved in ensuring that gross profit was made”
“Within NNPC, you have the crude oil marketing department. Within the crude oil marketing department, you then have the programming department and those are the people that have to try to ally all their commitments with what the production is going to be. And the reason I make it ally like that is you are always going to leave people out, because you have committed the politicians. And everybody else has committed far too much contractually than can be met, especially when there are community disturbances, pipelines broken”
“to get the grades they [Arcadia Lebanon] wanted - - well, number one was to get the molecules…It was number two to get the correct molecules. Number three, to make sure they were arranged on the appropriate dates for the customer”
“Getting grades and getting dates. Those are significant. You know, dates can go into things like getting a month, getting the right month. Then you go into the right decade and then the right two days. That becomes very specific”
“If you get one of those three elements wrong [grade, volume, timing], it can result in a multi-million-pound loss”
“Q. But these are described as logistical or administrative services, aren't they; making sure the documents are filed? A. Well, perhaps in any other country and certainly in other countries I have been to, it can be a fairly straightforward task. Finding the right person, getting into NNPC, literally getting into the building itself some days could be a nightmare. I was fenced at the gate for days on end. There could be any number of things that meant you couldn't get in there and once you were in there, you made sure you stayed there because you weren't going to necessarily come out and go back unless everything was more routine. There were times at NNPC genuinely where I would go in the jeep and I would sit there and they would just wave and say go, just pass, we don't want you here. So, it was -- I do understand from your perspective about thinking it's normal. It is really not normal. I lived there as well and I spent a lot of time away from my family, just working hard and doing all of these tasks that everybody thinks is mundane. And it really isn't because if it isn't hit, and if somebody decides to take exception, then again the last thing I want is to be picking up the phone to somebody in Arcadia and saying, "We have a problem". Q. Mr Kelbrick, this is all very interesting, but it is all a matter that should have been explained in your witness statement, isn't it, if it were true? A. It is true. Q. You talk about filing, shipping and letters of credit documents. The only difficulty referred to is not being allowed access to the building. And yet you say you regularly attended day-long meetings for programming? A. No. I would get into what was called the crude oil marketing department, COMD, I would get in there at 8 o'clock in the morning and you just had to pick off whoever was coming. There was no "I will see you at 10.35", it just didn't work that way. I had to be on the ground in front of people's faces to get things done. Q. But what you are describing are things that could have been done by any local Nigerian as well? A. Not necessarily, no.”
“Q. All you are talking about, handling all the operations on the ground, you could have employed someone specifically to do that at a fraction of the cost. A full-time employee in Nigeria, how much do you think you might have spent on that? A. It's not quite as simple; it's not as black and white as that in that employing somebody who has no experience or employing a local employee is part of the package. In order to get someone who really knows, and as I said before, Mr Kelbrick lived in Nigeria I think at this time or around that time, so he had access to everybody that Arcadia or Sao Tome needed to handle the contract. Q. And who might that be? A. Everybody within NNPC, everybody within government, everybody outside of it as well.”
“he hasn’t brought crude oil to the Arcadia stable”
“Each of the countersignatories below, each of whom is a director at the time when the directors’ report is approved, in signing this letter confirms that: (a) so far as each director is aware, there is no relevant audit information of which the company’s auditors are unaware; and (b) each director has taken all the steps that ought to have been taken as a director, including making appropriate enquiries of fellow directors and of the company’s auditors for that purpose, in order to be aware of any information needed by the company’s auditors in connection with preparing their report and to establish that the company’s auditors are aware of that information.”
“the purpose was to make sure that I never let Arcadia down on putting the pricing option in”
“So the idea of them, their MO as a portfolio company being the same as my MO as a small trader, smaller trader before we go any further, their MO is different. Their MO was to stack their paper positions, to stack their Brent positions, to stack their TI positions and my MO was to make money operationally at the front end. Q. But surely Arcadia would have made money at the front end, if they could, by exercising the option? A. But they didn't have access to the oil. I was the one who got the contracts. I had those contracts. They were mine to operate and to sell as Attock to Arcadia.”
“7. PRICE The price in US Dollars (U.S. $) FOB FPSO Serpentina terminal offshore Equatorial Guinea in barrels of the bill of lading will be determined in the following way: P = Dated Brent plus or minus a differential X in USD per net barrel X is a differential to be negotiated for each cargo strictly on the basis of the market conditions between the Seller and the Buyer, by mutual agreement latest 28 days prior to the first day of the preliminary loading dates range of two days. Dated Brent corresponds to the arithmetic average of five (5) consecutive mean quotations of the Dated Brent published by PLATT’S Crude Oil Marketwise during the month of loading and shall be advised by the Buyer to the Seller latest the second working day of the month following the month of loading.”
“To be able to buy at the lowest price possible is a very enviable style of contract.”
“Well, the appointment -- no, it was my power of attorney, because I had had the meeting with NNPC and with PetroSen in the towers and NNPC is the party that put me forward to manage this contract. Yes? So at that point, once again, you know, I could have gone anywhere with it, and out of loyalty and out of history and also out of knowing the people, then I offered it to Peter Bosworth and then I can't speak to that wording because I don't -- I'm not sure it was my wording. I don't know why it is there. But it was my power of attorney because NNPC had told PetroSen that they wanted me to manage the contract. I think they wanted somebody they trusted that they understood and that they had worked with, because I had been there for a long time. Q. They wanted Arcadia, didn't they, because they wanted a reliable lifter of the oil to be managing this contract? A. No, I don't think -- I think once again the power of attorney was struck in my name. Where the Arcadia thing comes from, I can't speak to. Q. It's an important part of this actually, isn't it, Mr Kelbrick? It's not just Mr Kelbrick passport number. It specifically identifies Mr Kelbrick of Arcadia. A. That is what it says here. Q. And that would have been an important part of this document, wouldn't it? A. Again, I don't know how important because it was -- West Africa is down to an awful lot of individuals and if you trust the individual, then you will trust the organisation that they represent.”
“As a part of the GEPVTN framework, a profit share arrangement was agreed. GEPVTN’s profits would be shared with GEPetrol, and companies nominated by Jean-Paul. Two of these entities were Obexys and Rodexkia. The names of the participants in the profit plan were provided to Dimitris, who managed GEPVTN’s finances on behalf of Seatankers. I did not know much about these companies, but it wasn’t surprising to me that there should be profit share arrangements with various companies in relation to GEPVTN. Such arrangements were commonplace in the businesses I worked on.”
“Q. Did you never question whether it was plausible to say there is a fraud involving Arcadia Lebanon, because a Farahead company is getting payments from Arcadia Lebanon? A. I think these people, the various market paid out some peanuts money to Farahead. But of course they made hundreds of millions. What happened to those money? That is what I told you yesterday. … Q. Why would they be paying peanuts to a Farahead company as part of a fraud? A. To imply that we are involved in it. Obviously.”
“Of equal importance is that APL should NOT under any circumstances be entering into obligations of any nature “on behalf” of Farahead. This simply should NOT happen and could lead to argument from the UK revenue that APL and Farahead are one and the same operation and therefore Farahead should be taxed in the UK on any profits etc. (- at the very least it will not enhance the defence of the guarantee fee arrangements when faced with attack from the UK revenue-). It is Farahead which should be dealing with its subsidiaries NOT APL.”
“It is clear that there is a general lack of reporting from APL. This to an extent is understandable – APL has moved from a controlled environment under Mitsui to a situation where it is largely autonomous. HOWEVER the current situation is surely untenable. For Example:- Beirut Office: Farahead has no information on this structure which we understand now — not just to be a simple representative office of Arcadia but rather a corporate entity which is owned by Colin Hurley and Pete Bosworth!!?? .WHY? Has this company been funded? How has this been accounted for considering it is “not part of the group” ?”
“The motives of management need to be monitored: It is important that shareholders are in a position to fully understand the motives/rationale of the management and traders in order to assess whether such actions are in the interests of the shareholders or whether there is a hidden agenda in operating the business in a "particular" way for their own ultimate objectives. (eg: Beirut office — why has it been set up in this way with no explanation to shareholders??)”
“Of equal importance is that APL should NOT under any circumstances be entering into obligations of any nature “on behalf” of Farahead. This simply should NOT happen and could lead to argument from the UK revenue that APL and Farahead are one and the same operation and therefore Farahead should be taxed in the UK on any profits etc. (- at the very least it will not enhance the defence of the guarantee fee arrangements when faced with attack from the UK revenue-). It is Farahead which should be dealing with its subsidiaries NOT APL. PRESENT SITUATION is of concern: There are a number of companies now established (-and seemingly operating-) in various jurisdictions —eg: Switzerland, Singapore, Beirut etc. It is understood that these companies “should” be owned by Farahead. HOWEVER Farahead does not have any information whatsoever nor have they been involved in the establishment of any “subsidiary”
“This Zimbabwe based ore and minerals company (mainly gold, but they do own some rigs) is still available to acquire at USD 7 million with additional cost of USD 3 million to cover the first year over-head. We are awaiting a report from Pareto, who will view the asset in the near future, to get a better understanding of what value we could see in acquiring this business.”
“I was given the normal powers of a CEO over a company which was involved in oil trading and I was instructed or authorised to expand that business to become like a Glencore or Trafigura or Vitol ie into the asset businesses which may be oil related and some of them not oil related.”
“51. In early 2008, Farahead was told by Mr Bosworth that Arcadia Mauritius had been closed and its business had been moved to Arcadia London or to Arcadia Switzerland. 52. This statement was false, and was known by Mr Bosworth to be false, since Arcadia Mauritius had not been closed in or by early 2008, nor had all of its business been moved to Arcadia London or Arcadia Switzerland; on the contrary, it remained an active company, and an active participant in the fraud being perpetrated on the Claimants. This statement served to conceal the fraud from the Claimants, as, it is averred, it was intended to.”
“175. While I do not specifically recall this meeting, I believe that the person who prepared this summary is likely someone from Farahead who misinterpreted or misunderstood what I (or David Ford) had said. I believe this because Arcadia Mauritius had no other business that I was aware of except the NNPC contract – it had no “products” business. Nor was any such business transferred to Arcadia London or Arcadia Switzerland – and I would have no reason to tell Farahead that it had been. 176. I have been shown a copy of an email from John Skilton dated15 March 2008 in which he sent a copy of the11 March 2008 minutes to me, Colin and David Ford. I note that Mr Skilton says in this email “Please give me a shout if you have any queries etc (-or if I have misunderstood anything!-).”
“In general terms I cannot emphasise enough the importance I attach to Farahead being in "control" of the group and for this control to be exercised from Cyprus. Farahead must receive full reporting from its subsidiaries on their activities and approve inter-company arrangements etc. I do not like Farahead "delegating" authority to Arcadia management etc. Farahead should have the opportunity to discuss at Board level all important decisions and especially those decisions which require it to be party to agreements/contracts etc.”
“8. Beirut Dimitris and Colin to travel together to Beirut. Shares should be transferred to "stand alone" Liberian Company. Company administrators/lawyers to be changed to those already known to Farahead Dave F confirmed that there were no inter-company balances/loans with this Beirut Co All details ie: management accounts since incorporation, name of administration office in Beirut & list of assets should be passed to Dimitris asap”
“60 I remember independently that, at some point (I do not recall when), Mr Trøim and Mr Fredriksen were informed by Mr Bosworth and Mr Hurley that Arcadia Lebanon had profits to distribute to Farahead of up to US$15 million , and that I was then instructed to take the steps necessary to take over ownership of Arcadia Lebanon and therefore enable the payment of a dividend from Arcadia Lebanon to a Farahead entity. Without ownership, there would be no connection through which to bring the dividends into Farahead. I recall, however, that this is not what ultimately happened, and to the best of my knowledge, the ownership structure of Arcadia Lebanon never changed.”
“A. Maybe it was to divert the shareholders of Arcadia Lebanon who at that time was Mr Bosworth and Mr Hurley, to divert it to a company or two individuals as nominees from our group. Q. Yes, what you wanted to do was to, as you say, formalise the position; the reality was Arcadia Lebanon was a standalone Fredriksen company; yes? A. Yes. Q. And you wanted to formalise the position with a different corporate structure; correct? A. That's right. Q. But to retain the standalone status of Arcadia Lebanon? A. This was my understanding at that time. Yes.”
“JOHN I TRIED TO CALL YOU BUT YOU MUST BE VERY BUSY I WILL PROVIDE TO YOU WITH ALL THE INFORMATION AND DOCUMENTS YOU REQUIRE LATER ON TODAY BUT WHEN YOU HAVE TIME PLEASE GIVE ME A CALL. BEST REGARDS DIMITRIS”
“The name of the company is "ARCADIA PETROLEUM SAL (OFFSHORE)" but I do not know who are the administrators although apart from Pete and Colin the board consists of another 2 directors Naji Mouzannar and Youssef Mouzannar - who together with Sally Sfeir were the founders of the company. Please also note that according to the incorporation documents of the company, out the 100,000 shares (of$2.50 each) of the company "every director shall own at least three shares during this period in office". I hope the above is of some assistance.”
“Skilton – [Arcadia London] meeting in London yesterday – [Arcadia Lebanon] kept out of discussion per [Mr Fredriksen/Mr Trøim]”
“Q. So you decided to take the item of Arcadia Lebanon off the agenda, didn't you? A. Yes, because we said can it remain like this. There was kind a lock box effectively where some profit had been made on initial contracts and there was no further activity going on. Q. No, Mr Trøim, you decided at this time when Mr Skilton was wanting to formalise the arrangements, to take Arcadia Lebanon off the agenda, didn't you? A. I don't think it was specifically that but this company -- we didn't own this company. It was owned by two of our employees who owned the company. So from a corporate way, it didn't fit in here. That is another discussion. Q. You don't refer to this direction in your witness statement, do you? A. What is wrong with the witness statements? What are you lacking? Q. You saw this note, didn't you? A. I specifically said I didn't know if I saw that note. I saw it when I went to the documents here. What should I have added? Q. You wanted to keep references to Arcadia Lebanon to a minimum because -- A. Because it was not owned by us. Q. You had concerns, didn't you, that if the structure was formalised, that could create a paper trail that would lead back to Farahead; correct? A. The money had to be paid back to Farahead/Arcadia anyway. Q. By -- A. The 70%. Q. By creating another paper trail, correct? A. Yes, if you send money, I get the paper trail.”
“I have completely run out of excuses in relation to my non-performance of the tasks I was assigned responsibility for in our meeting in respect of Arcadia on 11 June. Please forgive me. Having finally found the time to attack my file on this, I can report back as follows: 1. Arcadia Petroleum SAL (Offshore) I have noted the Legal Opinion provided by Mr. Elie Chamoun of the law firm Abouhamad, Merheb, Nohra, Chamoun, Chedid of13 March 2007 . This provides relevant information on Arcadia Petroleum SAL (Offshore) which appeared to be in good corporate order in March last year. I have also made a quick check on the law firm and can confirm that it is one of the most reputable in Beirut. What we need to do is obviously to document, in relation to the current 4 recorded shareholders, that they agree and accept to act as nominees for the beneficial shareholder, Beirut Holdings Limited. In order to complete this, I need to make contact with the law firm and ask them to help us preparing the documents required in order to have the shares now held by these nominees transferred to Beirut Holdings as their beneficial owner in undated form so that we can have the shareholders execute these and allow us to keep it and be ready to execute a transfer if and when we feel this is required. I need, in this connection, to find out whether the shares are evidenced by physical share certificates or not. We could, in this connection, also ask Mr. Chamoun to update his Legal Opinion so that we are certain that no changes have taken place which we have not been informed of. In so doing we should obtain a copy of the Company" s Articles of Association. Finally, we need to establish some form of communication between the directors of Arcadia Petroleum SAL (Offshore) and Cyprus so that we can keep an eye on the company’s accounts and other activities. I attach a draft letter agreement between the nominal shareholders and Beirut Holdings Limited for your review and comments.”
“We write to you to document our joint understanding and agreement on the ownership and corporate governance of Arcadia Petroleum SAL (Offshore) (the “Company”). By way of background the following should be noted: … (v) You are the shareholders of record in the Company, its shares being distributed between you as follows: Mr. P. Bosworth 49,999 shares Mr. C. Hurley 49,999 shares Mr. N. Mouzannar 3 shares Mr. Y. Mouzannar 3 shares 100,000 shares (vi) You constitute the Company’s board of directors with Mr. Bosworth being the chairman. (vii) Mr. Hurley has been appointed the Company’s manager with responsibility for its day-to-day operations. Based on this, we have the following joint understanding and agreement: 1. You are holding the shares in the Company which are nominally registered in your name as nominees for ourselves and have done so since you subscribed for the same. Accordingly, you recognize that we are the true and beneficial owner of the said shares. 2. You agree to continue as nominee shareholder on record in the Company on our behalf and will, as such, not sell, transfer, encumber or, in any other way, dispose over the shares in the Company without our prior written approval having been obtained. … 5. You confirm that you, in your capacity as registered shareholders in the Company, will ensure that you are present, by proxy or in person, on the Company’s general meetings. You will seek our instructions prior to voting on the items on the agenda for the Company’s general meeting. Failing receipt of such instructions, you shall vote in the general meeting according to your best business judgment, always provided that: • you shall never vote in favour of any dividend or other distribution from the Company; • you shall never vote in favour of any payment, distribution or other consideration to yourself, whether as nominal shareholders or directors; and always having the Company’s and our best interests in mind. … 8. You will supervise and operate the Company as you have in the past, always having our best interests as the Company’s sole beneficial shareholder in mind. 9. You will keep us regularly informed of the activities of the Company and provide us with a copy of the Company’s annual accounts as and when the same become available.”
“Q. That was the reality, wasn't it? Mr Lind was putting into paper the reality that since 2006, Bosworth and Hurley held the shares as nominees for you; correct? A. I don't know if you can call it nominee. As I said, the important thing in that telephone call will come when they are effectively asked to close the trade to Lebanon office. Effectively what we reacted to was we said that is fine, as long as we keep the 70% and they hold the shares, that's what they said.”
“Q. Let's go to paragraph 97 of your statement, {Mr Bosworth.2/1/19}. You say in 2008 Farahead attempted to formalise the ownership of Arcadia Lebanon and then you say that "as far as we were concerned it was a normal part of the group". Do you see that? A. Yes. Q. So from your perspective, Farahead's perspective, Arcadia Lebanon was just like any other Arcadia company, a normal part of the group; correct? A. Yes. Q. And that is why you wanted to formalise the position. You wanted to put into effect legally, formally, what was already the informal position, yes? A. That is what is stated there. Q. No. You wanted to put into effect legally what was already the informal position; correct? A. Yes.”
“Skilton -$15m dividend from [Arcadia Lebanon] to Beirut Holdings??”
“In the end, it would appear that Farahead decided that something more formal actually carried more risk, and it may be better to just leave things as is. The risk profile was considerably lower if it were Pete and I as directors and shareholders, because Farahead could then attempt to claim ignorance at all points.”
“Erling – he advised that transfer of shares of Arcadia Lebanon to Beirut Holdings are on hold – he will talk to Skilton”
“I do not believe that these efforts were ever ultimately successful, though I do not recall the particular steps taken. As I have explained in paragraph 61 above, I decided not to press these issues, given the profitability of the Arcadia Group around this time”
“The accountants met and it was a matter of how those monies could be recouped to us and I said let’s find a way to do that in a smart way. It was also overhanging the agreement which is touched upon in my affidavit, that they owed Mr Bosworth some money if the transaction turned out to be a good transaction.”
“Q. Just go back to the question. Is your evidence that in late 2008, Bosworth and Hurley did not make any representation that Arcadia Lebanon had become dormant? A. I think the best I can say about this is that they presented us a P&L which didn't move which had effectively then come up to the 15/16 million and which was constant there. There was no activity going on. Q. You knew that in late 2008, Arcadia Lebanon had not closed down, didn't you? A. It hasn't closed down but the 70% was not distributed and the money was there. Q. Exactly. Shall we go to the Hannas note, please, at bundle {I/880.2/1}. You can see that in late 2008, you were discussing money and activity in Arcadia Lebanon, weren't you; yes? A. Yes. Q. So if you look at the entry for 5 November, 9 December, there is a highlighted reference about the USD15 million dividend? A. Yes. Q. So you knew in 2008 Arcadia Lebanon is still in business; correct? A. Yes, because we hadn't got our cash out from the …., Farahead hadn't got the money out from the company. Q. You don't mention in your statement these discussions about the Arcadia Lebanon dividend in late 2008, do you? A. I can't remember exactly what I said in the statement but I don't think so. Q. Despite the fact that you had looked at this note for witness statement; correct? A. Yes.”
“Q. [Mr Trøim] said once the trades under the particular contract had stopped, it was no longer active and was to be closed down? A. Well, Zafiro by way of example continued through the whole period. Q. Yes, it did. A. So it is clearly not true. Q. He didn't know that. A. He had access to know that. Q. You didn't tell him it was still running? A. I don't know if I did or I didn't. But we did discuss it with -- and we were well aware of GEPVTN which shows ongoing activity right through the period, nothing hidden. … There was a company that was set up between VTN, the shipping entity, which was based in Cyprus, and GEPetrol as a joint venture which basically charged a levy on lifters -- … MR HAYDON: You didn't tell him about the features of the Zafiro contract, did you, in terms of the ones we have been looking at, the pricing mechanism. A. I told him it had limited risk. How much detail I went into about the limited risk, I don't recall.”
“As I have explained in paragraph 87 above, I understood from what Mr Bosworth and Mr Hurley said that, from around 2009, Arcadia Lebanon was no longer active, so would not be generating further profits from crude oil trading.”
“Q. If we go back to the Hannas note, please, bundle I/8802.2/1}, June 2008, at this point Arcadia Lebanon is obviously not dormant; correct? A. What date did you say? Q. This is June 2008. A. I don't know on this, whether it was dormant or not. obviously thought it was dormant but I cannot say yes or no on it. Q. Well, I wanted to ask you that, Mr Fredriksen. In the middle of 2008, you are talking about Arcadia Lebanon with Mr Skilton, aren't you? A. I don't recall that. Q. Is it fair to say that you wouldn't have been talking about Arcadia Lebanon with Mr Skilton if you knew that Lebanon in mid-2008 was dormant? A. I don't know. I don't recall it. Q. It's not likely that you would have spoken about Arcadia Lebanon with Mr Skilton in mid-2008 if in fact, Arcadia Lebanon was already dormant; correct? A. This -- I had no idea when this company was closed or dormant. I have no idea which year or when.” and:- “Q. In the pleaded case, it is said that at the end of 2008, there was a representation to Farahead that the company, Arcadia Lebanon, had come to an end and now was dormant. Yes? A. Yes. Q. It is right that you don't yourself give any evidence as to what was happening in late 2008 concerning Arcadia Lebanon? A. I was not involved in the details. Q. Yes. So, well, you then say that you were aware that by about 2009, Arcadia Lebanon was no longer active. Yes? A. Yes. Q. But Arcadia Lebanon on the pleaded case had already closed down by 2008; yes? A. I don't exactly remember it.”
“[Mr Trøim] -$15m [Arcadia Lebanon] dividend will be used to reduce PB loan from Fulham”
“This entry reflects a conversation between me and Mr Trøim (“TOT”) on9 December 2008 , in which Mr Trøim told me that Arcadia Lebanon would pay a USD 15 million dividend which would be used to reduce the Fulham Loan …, which was outstanding from Mr Bosworth to Fulham Properties. I explained in Hannas3/97 … that it would not in my view make any commercial sense for a dividend to be paid via repayment of the Fulham Loan. However, I think I would have thought at the time that Mr Trøim’s comment made sense if this were a way for a bonus to be paid to Mr Bosworth. As I have mentioned, Arcadia Lebanon did not pay a USD 15 million dividend or otherwise pay this amount to Farahead. I have addressed at Hannas3/89–97 … a USD 5 million payment that was ultimately applied to reduce to the Fulham Loan, which Mr Bosworth and Mr Hurley say originated from Arcadia Lebanon. I am not aware of Mr Bosworth having treated this amount as part of his bonus.”
“Q. You discussed with Mr Fredriksen how to get the Arcadia Lebanon dividend payment from Lebanon to Farahead; yes? A. What I said earlier which is in line with what I said two minutes ago, we were considering how to get that profit out from Arcadia Lebanon. One thing, if there was USD15 million there, was to effectively let them take the company which they already owned and they took the 15 million and then we would have that retention bonus which I talked about several times. Another alternative was effectively to forgive that Fulham Properties property loan at some stage if you felt it had been a successful business, to compensate their obligation which was there −− undocumented from 2005 if this turned out very good, that there should be some extra money for Pete Bosworth. Q. And this was discussed with Mr Fredriksen, wasn’t it? A. Yes.”
‘JD’ (Mr Dyer), ‘NW’ (Mr Wildgoose) and ‘GA’/’
“A. You can say −− because that is Arcadia’s responsibility so if you use Arcadia’s cash which they belong from Lebanon to pay their bonuses, that is kind of within the same pocket.”
“Let me remind you that Vitol and Attock shares the GEPetrol Ceiba cargoes on a 50% basis. And this is Attock’s turn”
“Tor Olav is after the accounts for the Beirut office? Please let me know when he may expect them”
“140. As a result, we declared a dividend of USD 6 million in early 2009. This resulted in USD 3 million being paid to Pete and I each. From these amounts, we each paid USD 2.5 million in accordance with Farahead instructions. This constituted a dividend distribution to Farahead of USD 5 million in total. Pete and I retained USD 500,000 each on account of the amounts due to us under the Arcadia Lebanon Profit Share Agreement. This was well below the minimum amount that Pete and I should have received in accordance with the Profit Sharing Agreement. We retained the residual amount of the dividend payment (USD 500,000 each) in order to partially cover our bonuses due under the Arcadia Lebanon Profit Share Agreement. 141. Once we had declared the 2009 dividend, I was told by Trøim that Pete and I would receive instructions from Hannas as to how, when and where the payment(s) due to Farahead should be paid. In due course, Pete and I received invoices from Hannas, which were in the name of an entity called ‘Fulham Properties’. Pete and I were to pay USD 2.5 million each to an account which was held by Fredriksen’s Seatankers Greenwich group of companies. Seatankers was Fredriksen’s chosen vehicle through which to receive this payment. This USD 5 million amount appeared on many spreadsheets that I gave to Farahead as ‘other dividend’ or ‘other payment’. They saw this amount described in this manner on a regular basis and knew exactly what it was. 142. The structure in place for the dividends and invoices was in line with Farahead’s instructions. Therefore, in order to facilitate payment of Farahead’s share of the profits of Arcadia Lebanon in accordance with Farahead’s instructions we first had to declare a dividend that would be paid to Pete and me as shareholders of Arcadia Lebanon. Only then did Hannas provide instructions for how this money was to make its way to Fredriksen’s nominated account. 143. Other than that, I don’t know what Fulham Properties is. I don’t know what role it plays nor why it was Fulham Properties that was invoicing us. It was made clear to me by Trøim that I would receive payment instructions from Hannas and that I was to comply with those instructions. You don’t question these things. I got the invoice, I paid the money. There was no in-depth conversation about it, at least not with me. It would just be to the tune of “this is the amount that we are getting and this is the invoice. Let me know when you have paid it”. 144. A year later, on17 June 2010 , following receipt of further payments made to Arcadia Lebanon, we declared a further dividend of USD 2 million, out of which Pete and I received an additional USD 1 million each, which we retained to bring the amount held back towards the ratio agreed in accordance with the Arcadia Lebanon Profit Share Agreement.”
“We have arranged settlement of the interest and the balance against the Principal amount due. As at 11.05.09 your loan balance is Stg 9,363,877. Please confirm that you are in agreement with our attached calculations.”
“advised of US$10 million [Arcadia Beirut] profits for 2008”
“advised that he is talking to [Mr Fredriksen/[Mr Trøim] re [Arcadia Lebanon] cash availability”
“Q. ..The reason why Farahead is interested in the financial statements for Arcadia Lebanon is because those statements set out the Arcadia Lebanon profits, don’t they? A. Yes, that must be correct.”
“he was advised by [Mr Fredriksen]/[Mr Trøim] that we should not make any more enquiries on [Arcadia Lebanon]”
“Q. …But in 2009, do you recall, you or Farahead, you agreed that Arcadia Lebanon would use its cash to pay the costs and expenses of Arcadia, the Arcadia Group, instead of distributing those profits via a dividend payment to Farahead. Do you recall that agreement? A. I don’t recall it, no. Q. Do you recall that the reason for the agreement was if Arcadia Lebanon paid Arcadia’s costs, that would reduce Arcadia’s costs, yes? A. That I accept in principle what you are saying. Q. That would of course mean that Arcadia’s profits would be higher, net profits would be higher, of the group? A. That’s correct, yes. Q. And that would mean that Farahead and of course the mechanism for Farahead to get its profits from Arcadia Group was set in stone, was in place; yes? A. Depends on the certain circumstances. I don’t know the details on this. Q. But in principle, that would be a more effective way -- Arcadia Lebanon is reducing Arcadia London’s costs such that Arcadia London’s profits were higher, that is a more effective way for you, Farahead, to get money out of the Arcadia pockets; correct? A. Yes, I see what you are saying. Q. And just to show what Mr Bosworth says, at his seventh statement, paragraph 201, … he says -- well, you see what he says there, Mr Fredriksen. And that’s right, isn’t it: there was this agreement to use the Arcadia Lebanon cash to pay Arcadia Group’s expenses; yes? A. Yes. I hear what you are saying but I cannot recall the reason and I’m not an auditor or anything like that. I understand what you are saying to me….” and: “Q. The reason why there were not going to be any further enquiries is because of this agreement with Mr Bosworth and Mr Hurley for Arcadia Lebanon to make the payments. That is why there was no need for Mr Skilton and Mr Hannas to make further enquiries, was there? A. It could be, I don't know.”
“I was focused because there was a hunger to get the dividend out quickly and we said we need to be careful how this dividend is taken out and we still probably owed Pete Bosworth some money if things have worked out in the way it has worked out until that date.”
“But as I said, it’s too stupid because we got a report every day, as you just showed me. I think what he can mean, when it is said there, reduced activity level down to a level where there was no hard political risk in any of the contracts but that you can trade. The fact is here, they traded West Africa. They sent us a report every day where we had West African trading in there.” and: “As I said, this must stand for him. I never said that we stopped the trade in West African oil. How can I say that when I get a report every day which shows that there is a result on West African trading? I’m not stupid.”
“I knew what was happening, obviously”
“Q. So looking at this particular report, you can see that West Africa is changing on a daily basis, isn’t it ? A. Yes, but that’s normal. This changed every day, this market. Q. It’s regular? A. Every second of the day. Q. It is regular and ongoing; correct? A. Yes. Whether it is regular, I don’t know.”
“No, I’m not saying that, but I’m saying what happened to the profits, where did they go? In which pockets? That is what it is all about, the whole case”; and said: “A. I am not worried about the trading in West Africa, as long as it was done in the proper matter. Q. And of course profit, you get profit after paying costs, don’t you? A. Correct.”
“My understanding is that Arcadia Mauritius was set up by the Claimants and subsequently transferred to Mr Decker. All I knew at that time was that Mr Decker had a company which had a long history of lifting cargoes from NNPC and an ongoing contract and I was offered the chance to acquire the company which held the contract. It did not occur to me to change the name or the stationery of Arcadia Mauritius, which I inherited from Mr Decker. It would have defeated the purpose, which was simply to continue the business as it had been successfully operating for a number of years in order that its contract with NNPC would be renewed.”
“45. I acquired AOIL [Attock Mauritius] jointly with Mr Salem Mounzer, who had previously worked with Mr Decker at one of his other companies, Tristar. Mr Mounzer and I were of equal seniority at AOIL, I cannot recall what formal titles we used at the time. I knew Mr Mounzer through Mr Decker. Mr Mounzer had provided financing services to Tristar, and I think he may also have been Tristar’s accountant. Purchasing AOIL made total commercial sense for me; Mr Mounzer and I could each carry on the same type of work we were already doing but become principals in the business. 46. AOIL was such an attractive investment because it already had contracts with national oil companies, and already had credit lines with banks that would enable it to lift cargoes. AOIL had extensive credit lines with Credit Agricole, Credit Suisse, ING, and Société Générale. Mr Mounzer and I therefore acquired a ready-made business, which we continued to run. AOIL already regularly sold cargoes to Arcadia, which also continued after we acquired the company on26 September 2009 . 47. AOIL and Arcadia were therefore counterparties in the transactions which the Claimants now object to. I expand on how AOIL’s business operated elsewhere in this statement. At all times AOIL acted in accordance with its own commercial interests. It was not required to act in accordance with Arcadia’s own commercial interests. Mr Mounzer and I acquired the company on a 50/50 basis and granted AOIL subordinated loans totalling US$6 million in the process.”
“48. To the best of my knowledge, neither Mr Bosworth nor Mr Hurley has ever had any interest or control over AOIL. They certainly had no ownership or control over the company after its acquisition by Mr Mounzer and me.”
“Shares - he has created some complicated transfer rules. Pre-emption rights exist at the moment. We could a provision that where a shareholder want to sell and there is no 3rd party offer shares be offered to existing shareholder and an independent auditor fixes value if the shareholders can’t agree amongst themselves. Tag along rights might be worth considering if you think it likely that there might be a sale to a third party in the future.”
“Attock Mauritius, Attock Lebanon and Arcadia Lebanon all operated out of premises at 308 Sursock Street, Beirut, in which building both Mr Decker and Mr Bosworth also owned properties. In light of the overlap of staff between the three entities, the Claimants aver that it is likely that all three companies were in fact operated out of the same premises (by the same people).” (§ A42) Mr Bosworth denied that he had any interest in Attock Lebanon. He confirmed that, having worked for Arcadia for a time, Mr Morgado went to work for Attock. There is in my view no cogent evidential basis for the suggestion that Mr Bosworth had an interest in Attock Lebanon, and I accept his evidence on this point. The Claimants also suggested, in their written closing, that Mr Kelbrick gave “false information” in his witness statement, where he said: “Sergio Morgado was Ms Azzariti’s husband. Mr Morgado was also employed by AOS and also occasionally provided operational services to AOIL. I transferred the shares in AOS to Mr Morgado in 2011 as I understood from Mr Mounzer at that time that the owner of a Lebanese company had to be resident in Lebanon under local law.”
“The requirements were aligned. I needed Attock when I bought to make money. Arcadia needed to buy the oil from Attock to make money. Q. It wouldn't have needed to buy the oil from Attock if it had made the term contracts for its own benefit, would it? A. You and I said should it have so wished it could have gone and done it. If it had set up its own office in Nigeria, if it had hired somebody like me, then that would have been a lot of money.”
“Looking at it now I do not find it surprising that West African trading was included in the draft bonus scheme. This is because, as I noted above, I was aware that at some point Arcadia conducted trading in West Africa and I was never told or became aware that this had stopped, so it would make sense for that trading, like the other trading, to be included in a bonus scheme.”
“Deals in which Crudex was the contract holder came about as a result of a local sponsor in Nigeria called Tony Anenih. I got Tony Anenih’s phone number from someone at NNPC while I was in Nigeria because somebody told me he was going to have a contract for the supply of crude oil. I rang his mobile, introduced myself and he invited me to meet with him. Tony Anenih was a very respectable man and I sat down with him and explained how I would operate a contract. I know that, at that time, Total, Vitol and BP were also actively pursuing Tony Anenih for his contract rights. Tony Anenih gave me the name Crudex as the name of the company he would sponsor to lift oil. He told me to go away and make sure it happens. I therefore incorporated Crudex in January 2010. At Mr Mounzer’s suggestion, Mr Lance and the Cornhill Group Limited provided administrative support. It is a measure of my relationship with Tony Anenih that the Crudex contract was regularly renewed. [Arcadia Mauritius] (via [African Oil Services]) paid Tony Anenih a referral fee in return for his sponsorship and for bringing the contract to [Arcadia Mauritius] (using Crudex as the contract holder).”
“We as the Arcadia Group of Companies wish to convey our sincere thanks for opening a dialogue and consummating business together in the form of the 30,000 bbls/day Crudex contract. We also wish to underline our commitment to you in this matter by stating that where cargoes are scheduled by NNPC under the NNPC/Crudex contract, we as Arcadia Group commit to lifting said volumes irrespective of prevailing market conditions.”
“No. I think Mr Lance, that is an error, why he put there, I don't know. Crudex was Chief Anenih's -- well, my company that Chief Anenih sponsored, we then took the oil into Attock and then sold it to Arcadia. It wasn't an Arcadia company. Q. And he reflects the fact that it was Arcadia who had arranged for the Crudex company to be set up. A. Arcadia hadn't, no. I had told Salem to set up Crudex and he said it will be in Mauritius. I believe that he had -- he used Mark Lance to do that, because I think that is what Cornhill -- that was their business. And that's that. There was no mention of Arcadia.”
“This was paid to lift a third-party cargo (Crudex). The$2.5m will be deducted from a cargo being loaded in June (scheduled). NNPC demand a prepayment of$2.5m on all new contracts. We have paid previously or new contracts and renewals and have always recovered.” and in his oral evidence said: “Why wouldn’t we do that? It seems perfectly normal…the trader may have agreed to make that payment on behalf of Attock, if they were receiving the cargo which…I suspect we [the Arcadia Group] may have done”
“(A) The Service Provider is a company incorporated in Nigeria and by virtue of its activities globally has developed extensive expertise and knowledge specifically in relation to Crude oil, products and oil derivatives. (B) As a direct result of the services and extensive work performed by the Service Provider, a supply contract was awarded to Crudex Oil by NNPC for the delivery of Nigerian crude oil of 30,000 bbls per day, and that said contract shall be exclusively executed and operated by Arcadia Petroleum Limited. (C) The Service Provider has developed an extensive business network of professionals and subcontractors located globally on whose expertise it can call. (D) Arcadia Petroleum Limited to benefit from the Service Provider’s activities and expertise for the purpose of assisting Arcadia Petroleum Limited in oil and products trading business globally, including assistance in logistics and operations as well as in the smooth performance of concluded contracts.”
“Morning Salem, please find attached crude contracts which banking details are provided on the second page. Please commence with Crudex Azenith please prepare but don't do anything as of yet. Any questions please speak with SK.”
“114. Cathay Petroleum was the contract holder in 5 transactions of the 144 Transactions after Mr Mounzer and I acquired AOIL in September 2009. Cathay Petroleum operated slightly differently to Azenith and Crudex, as I did not own the company. My memory of Cathay Petroleum is poor, but to the best of my recollection, Cathay Petroleum was a company owned by, or at least associated with an individual named Jason Chen, who I knew from his dealings with Arcadia, through Mr Gibbons. 115. Otherwise, the deals operated in a similar fashion to those where Azenith or Crudex was the contract holder. Cathay Petroleum and AOIL entered into a lifting agreement, and Cathay Petroleum sent letters of authorization to AOIL’s banks confirming that AOIL was authorized to open letters of credit using Cathay Petroleum’s name, in favour of the NNPC, and at AOIL’s risk”
“I can tell you exactly how it came about because this was a period of flux in Nigeria in terms of the power of sponsors, the arrival potentially of -- there was a new oil minister and so everything in terms of cargoes, everything in NNPC was up in the air. It was a time of real -- what's the word, not foment. It was just a chaotic time and NNPC knew that I would operate anything that they gave to me. I don't know how many, there weren't many contracts -- sorry, liftings under the Cathay contract so I think that indicates that when all the sponsors had finished their turf wars etc, Cathay didn't have a sponsor. It was a name I had given to NNPC and they gave me those liftings, I don't know how many liftings, half a dozen liftings I think it was. That is how it came about. Q. You say "NNPC knew I would operate anything that came to me" and that is because they knew you had the backing of the Arcadia Group? A. It's not because of that, it is because they knew Steven Kelbrick. Q. Jason Chen was a friend of Mr Gibbons, wasn't he? A. I don't know how friendly they were, but he was involved, I think, in the Far East. Q. And Mr Gibbons worked for Arcadia Singapore? A. Post Arcadia London, yes, I believe anyway. I don't know where he was employed but I started with him. I was in London with him when I started with Arcadia. He had joined before me. And then I think he went to be head of Singapore.”
“Pete didn’t get Cathay a Nigerian contract. Now, whatever Gibbons says or intends or whatever, there, I can’t speak for him. Nor was I copied on any of this because had I been copied on it, I would have corrected him immediately” and: “Q. And you haven't explained in your witness evidence how you got either of them. A. I would have thought it was fairly evident the amount of time and efforts I put in as to who exactly obtained these. Given that Bosworth was seldom in Nigeria, seldom on the ground, was seldom in NNPC Towers, then as far as I’m concerned, I know what I did and I obtained both of these contracts.”
“Well, I didn’t get Cathay the contract. I don’t know the sponsor for Cathay’s contract. I think what happened here was Mr Kelbrick asked if we could provide them or assist them with a company name and I put forward, having spoken to Gibbons, Cathay to him and hence the confusion as to whether it was Arcadia’s contract or Kelbrick’s contract. But in all the circumstances I did not get Cathay the contract. Mr Gibbons, sitting in Singapore, I would understand him not being close to this and thinking that I did but I didn't. Mr Kelbrick was responsible for getting the contract. I may have assisted him or we may have assisted him in introducing him to Mr Chen for the use of that name. But I didn't get Cathay the contract.”
“Q. … So no reference to any arrangement with Mr Bosworth but you are saying you are being paid by Cathay for helping them with their financial arrangements? A. I had to give a reason to the bank as to why I was receiving the money and Cathay I think wanted it to be as a consultant or service fee, something of that nature. I gave them the details and it's not -- I had helped Cathay or Arcadia Petroleum Limited as a group had certainly helped Cathay in the past as well. So a part of that is a justification. But that is not -- it's not the only reason. It is Cathay providing the money to me and I'm going to say as a loan, because if all of the bonus payments came in, I would expect Cathay to be repaid. … Q. And what you are telling them, information to be provided to a bank as to a reason for payment to Collafin, is that you are to [be] paid by Cathay for having helped them in relation to finance – the business including arranging finance facilities and that is the truth, isn't it? A. No, it's not. It is the fact that it is a loan being made to me but Cathay wanted it as a service or consultancy agreement. Q. There is no reference to any loan there? A. No, there isn't, because we have said what it is for, which is for helping them in other services but the real purpose is a loan. Q. This is a reference to the work you did for them in connection with the arrangements with Attock Mauritius? A. That is simply not true. Q. It was part of the profit share arrangement with Mr Bosworth and Mr Kelbrick? A. Also not true.”
“Q. Why in this document are the bonus payments for Mr Antonucci and Mr Striano different from the bonus payments that we saw in the September 2009 schedule? A. The amounts that we’ve got here -- this is Mr Francisco’s schedule, so I’m suggesting he has been through the payroll records and found this is what was paid by the group. Q. And can you recall why there would be a change in Arcadia’s records, the group’s records, of the bonuses for Mr Striano and Mr Antonucci? A. Yes, because they were paid from somewhere else. Q. And where was that? A. Arcadia Lebanon. Q. Via? A. Via Scantic.”
“244. Arcadia Lebanon made payments for expenses in connection with exploration and production blocks owned by the Arcadia group which included blocks in the Falklands, Namibia and Australia. All of these assets I believe started within the group and at various stages were either removed and put back in, or removed altogether. This is because at a certain point John did not want them to be in the group. I believe that Namibia was removed out of the group and then put back in. I recall John requested that the Falklands assets be removed from the group as John had certain interests in Argentina and faced a number of queries about these assets. Various members of Arcadia management had interests in these projects – when John decided that he didn’t want Farahead or Arcadia to invest, he was happy for us to take them forward on the basis that he could always tell us to give them back or require us to pay him a share of the returns. The [above] payments were made in relation to such projects.”
“To me this will result in shifting management and control out of Cyprus with all possible adverse tax consequences. This is a very serious issue”
“110. Azenith was the contract holder in 9 of the 144 Transactions after Mr Mounzer and I acquired AOIL in September 2009. There are two companies with near identical names – Azenith Energy Resources Ltd, Nigeria (“Azenith Nigeria”) and Azenith Energy Resources Ltd, Mauritius (Azenith). Azenith Nigeria was the company of Mr Akpata; he was a former consultant for Arcadia and a contact of Mr Bosworth, which is how I first met him in around 1999. When Mr Akpata moved away from Arcadia, he started trading a number of things including products, doing business with Total and BP. 111. Azenith Nigeria secured a crude contract with NNPC but did not have the credit lines to lift the cargoes. Mr Akpata came to me and we agreed that I would incorporate Azenith to operate the contract, using AOIL’s credit lines. I was the owner of, and controlled, Azenith. AOIL (via AOS) paid Azenith Nigeria a fee for sourcing the contract and allowing me to use the Azenith name.”
“Around 2000, a company called Arcadia Nigeria was set up. Peter and Mohammed Asibelua were the original shareholders. Later that year, Mitsui became a shareholder. Eventually, it was only myself and Mohammed who were the shareholders. The idea was to have a company in Nigeria that Mohammed and myself could use to bid for business opportunities. At the time, the Arcadia name carried a lot of weight in the market; there was a lot of brand recognition. 47. As well as my Arcadia UK business card, I also had an Arcadia Nigeria business card. It was useful to have both of these cards. They could be used as a shortcut to show that I had a bona fide connection with Arcadia. Sometimes, if you weren’t sure of the people that you were approaching for a potential deal were serious, or they hadn’t yet been properly vetted, I would give them my Arcadia Nigeria card. If things developed, I would then share the details of Arcadia London so that we could move things forward. In this way, we were able to effectively engage with opportunities that may or may not lead to a deal, without having to rope in London unless the deal was a serious one. Arcadia Nigeria itself never did any transactions, but it was a useful vehicle nonetheless for the reasons I have just described.”
“Not to my knowledge. I think Osagie had sponsors that were the ones that helped him get the contract rather than anything to do with, you know ... there is, even when you are applying for a contract, they only ask for turnover etc, etc. They don't ask for who you are selling to. They need to know that you are a bona fide company, which Attock was. So, what Osagie did in the period of military leadership of the country from 2000 onwards, until the interim government came in about 2008 I can't speak to.”
“[Mr Akpata] didn't have the ability to open an LC, to my knowledge. And then we would have to open the LC for and on behalf. As far as Mounzer told me, the banks would only do it if we had full control of the company. So that is why Crudex was -- sorry, Azenith was set up. … Azenith Mauritius was set up so that Salem and I, as far as I can recall from Salem, we would be able to show that we had control of it so that we could open an LC and then there was an agreement signed between Azenith Nigeria and I think -- I think Azenith Mauritius somewhere that shows that I think Osagie [i.e. Mr Akpata] knew from the start. There was no need to hide anything from Osagie.”
“Q. So, in this paragraph he is talking about working with Mr Kelbrick as someone working with Arcadia, all the way through to 2013, isn't he? A. I kept working with him until 2013. And he said -- you will have to ask him about the timing of these things. It would not surprise me, he is the first point of call for trading matters. Mr Kelbrick was the West African trader when he worked for us and they continued the relationship.”
“Q. But he is acting for Arcadia at this time? A. Perhaps, yes. Q. And he has a copy of the term contract? A. Yes. Because if he is in the office and we have just won a term contract or whatever, he is there. He is right there. The first person one of my staff may have given a copy to is him and send to your people because we would have got in touch with a number of trading companies to say, oh, we have a contract. But in my mind, I was always sure it was going to go to Steve, in my mind. It was always going to go to my group which is either Steve, Arcadia, or one of them. Q. In your mind, you said, it was always going to go to Steve? A. Yes, Steve Kelbrick. Why? Because I had already had a discussion with Arcadia, and they unfortunately were not ready to help with the financing in terms of my company going its own way. For that to happen, they needed to basically join -- we needed to join together and do a joint finance arrangement, but Arcadia were not ready to do that for me, whereas Steve was. So that was the main -- it was not about -- even if another company offered a bit more money, in this instance I wouldn't have gone for it. It was important to grow to be independent and that meant you needed to get your own finance. Q. So you say got this for Mr Kelbrick? A. I didn't get it for him. I got it for myself, but when I realised I got it, I offered it to him.”
“Basically what happened, which is what I was saying, when Steve and I discussed this contract, he had suggested that we would be able to get finance from ING in Switzerland and in order to do that, obviously Azenith is the principal of this finance so obviously you would need Azenith papers, CAC, which is registration documents and all the vital details in order to present them to ING. And that is what I did, I gave to him. In the first instance, he is like, oh, it is still taking some time, we are going to have it to do it like this. Then in the end, it was they are not going to do it, and then it turned out that he had done Azenith Mauritius as the way of getting across Azenith having finance in its name. And that is the point I got pissed off -- excuse the language, I got bothered and, yes, I now found out I could get my own finance, which I then did. I got finance on my own for the second year.”
“This is the thing. It was only later I became aware of this contract, as it were. This is my financial -- yes, my accountant person, as opposed to my trader. Yes, so basically in these years, a lot of the back office stuff, a lot of the documentation was done by my staff. I was on the road a lot, like 80% of the time on the road. So a lot of this stuff was done by them and in this base, you have to remember, whether it is Arcadia or Steve, I had known at that point for 13/14 years and worked with. Sometimes documents can come after the fact or whatever. So yes, all I have asked my team is have you signed, yes, but they didn't tell me what they had signed was a service agreement because that was what they were used to and this was the first time we were having our own contract so I guess they didn't think to do a sales/purchase agreement as opposed to a service agreement which they had usually done over the years.”
“I also worked a lot with Steve Kelbrick, a senior West Africa trader who worked for Mr. Bosworth. I interacted with Mr. Kelbrick a lot over the 2000s and 2010s. He was my first port of call for trading matters. I kept on working with him until 2013, when my trading relationship with Arcadia came to an end. Prior to working with Mr. Kelbrick, I had worked with his predecessor, Yasmina, who worked at Arcadia during the 1990s.”
“What emerges is that Mr Akpata obtained the contract for himself and had in mind giving it to Arcadia or SK and it went to Attock Mauritius. Cs maintain that it was agreed between PB and SK that Attock Mauritius should take the benefit of this contract.”
“I have now had time to consider fully my answer to your question, about where we should take the company. We agreed the path forward was either to expand the company or to reduce its size: staying as we are is not an option for the management or shareholders. I would like the opportunity to discuss my ideas, preferences and concerns at your convenience. I feel we have been moving towards a cross roads over the last year or so and it is time for decisive action.”
“(A) Continue with the existing book structures and personnel. To do so would presume that each book/business (i) projects to be cash flow positive, (ii) has known and manageable downside potential, and (iii) has material standalone potential, of say$10 -15M/year or synergy or information advantage to other company business. This is not our belief and therefore is not the recommended way forward.”
“Competitive advantage; pricing optionality, however with the high flat price, potential cash requirements for operating the pricing options have been prohibitive for last year and this. Risk associated with the options and consistently high OSP’s mean we recommend restructuring this business in order to keep the information flow but significantly reduce our exposure. Personnel 1 trader 1 operator (we will let the trader go once we have trained someone internally to manage the physical positions).”
“Competitive advantage; MRS joint venture could give the largest single gasoline short in West Africa, it also allows for a potential investment in the company. Fuel oil sourcing for AFI. Risk factors are high with regard to operational inefficiencies and delayed payment. We recommend keeping this business basis the profit potential$15 million but will not sell to PPMC until payments of outstanding reconciliations are made.Personnel 2 traders 2 operators.”
“Our preferred option- to reduce the company’s footprint as described in (B) above- reaffirms the long term strategy of the company. It keeps the cost base of Arcadia small, the competitive advantage of which is being revalidated in 2011 as larger competitors struggle. Furthermore, this footprint affords good global information and access to a steady stream of both trading and asset opportunity, i.e. it is a cheap "call option".”
“Q. What is the basis to complain about a loan that the current company secretary signed off on? A. I can’t -- I don’t know the details, I’m sorry. Q. There is no basis, is there? A. I don’t know even who authorised that money, so they must have done that on their own. Q. The board? A. I don’t know.”
“A. …It’s a very common way of financing oilfield developments that you actually prepay cargoes and help them getting the oil on-stream. Q. There is nothing unusual about this structure? A. It is the main business for Trafigura and other people. Q. So you understood the structure, didn’t you? A. Yes. Q. You were [not] misled about it in any way? A. No. Q. You knew about Atlantic and Mr Aluko, the chairman, do you remember him? A. As I said, several times, I’m bad at remembering these specific Africans but I confirmed that we approved a US$100 million financing.”
“65. Also in this period, Mr Bosworth and Mr Hurley approached Farahead to seek approval and additional funding to increase an existing loan made by Arcadia Switzerland in September 2011 to a Nigerian entity, Atlantic Oil and Gas Co (“Atlantic”). 66. The enquiries made by Farahead as a result of that request revealed: (a) that the Arcadia Group, at the instance of (at least) Mr Bosworth and Mr Hurley, had made substantial loans to and/or extended substantial credit to, Nigerian entities engaged in the oil and gas business which were long overdue and poorly secured and that, inter alia, left the Arcadia Group exposed to significant losses; and (b) that the true situation in relation to these transactions had been concealed from Farahead and/or Farahead had been misled in relation to the true situation in relation to these transactions. Such transactions included transactions with, at least: Atlantic; Capital Oil & Gas Limited; and Equinox Oil and Gas Limited and Equinox Group Limited. 67. The discovery of the Arcadia’s Group exposure in connection with such transactions, and of the associated concealment and/or misleading of Farahead, resulted in increased scrutiny from Farahead of the business and operations of the Arcadia Group.”
“Q. Mr Bosworth, the assurances you gave Mr Fredriksen about there being excellent collateral were not correct, were they? A. There was good collateral. This is exactly what -- every pre-finance, be it in the North Sea or in West Africa against production is normally a good -- what is the right word ... can't think.” and: “Q. The reason why Mr Fredriksen and Mr Trøim rejected your request for additional funding was because of the large existing exposure; right? A. They said yes on the Friday and on the Monday they say no. Q. And the absence of security? A. There was security in terms of oil coming out of the ground. Q. It's not traditional security? A. Yes, it is in pre-financing oil. Q. And your earlier misrepresentations to them that there was excellent security? A. That is not a misrepresentation. In our business, that was good security. Q. You were unable to say whether Atlantic was good for the 150 million you had advanced it? A. In terms of the offtake, whether they were as a company I couldn't comment, that is not my area of expertise. But in terms of lifting the oil, then we would get our money and we would make money.”
“Q. In relation to the Atlantic deal which we have spoken about, Mr Fredriksen's evidence is that when the loan was first approved, it was on the basis that you and Mr Bosworth had told it him that it was secured with excellent collateral and that a parallel contract gave the Arcadia Group access to Nigerian crude oil on preferential terms. That's right, isn't it? A. I don't recall that wording. Q. Mr Hurley, you thought the collateral was good, didn't you? A. I believe the collateral was good and if you refer to Tom Francisco's message to Tor Olav in June, I think, or July of 2013, I think he agrees with me, to say even if the company becomes insolvent, they expect to be able to lift the oil and be fully repaid. Q. If you look at paragraph 167 of your fourth witness statement, you say the collateral for this deal was the right that Arcadia would have over the delivery of crude oil. But that is just a contractual right, isn't it? A. As opposed to what right? Q. A proprietary right of any kind. A. The way the deal is constructed is through a strategic alliance agreement, I believe, for the volume for Atlantic. So you don't actually have the oil in the ground but you have the oil once it is out of the ground and ready for delivery is my understanding. Q. And you just had a contractual right to that, didn't you? There was no security interest at all? A. I think if we look at Tom Francisco's message to Tor Olav, he will also put that in his explanation which might be useful. Q. There was no charge or proprietary interest in the oil, was there? A. Oil in the ground, I'm not sure, but rights to the oil once it was capable of being delivered, yes.”
“Atlantic Energy Drilling Concept Nigeria Limited (Atlantic) Prepayment- Arcadia Energy (Suisse) SA has a US$150 million pre-payment for Forcados crude oil with Atlantic as at FYE31 March 2013 . Operational problems have caused deliveries of oil for repayment of the loan amount to be erratic. Amortisation of the prepayment facility commenced in May and the balance currently stands at approximately US$146 million . The facility is ultimately repayable in February 2014, at which time the balance is estimated to be approximately US$110 - 120 million. Management is working closing with Atlantic in order to identify a mechanism to allow for early repayment of this facility. Shareholder commentary: The Atlantic and Capital contracts were executed without the shareholders understanding the risks inherent in these deals. In order to address this issue, changes have been made to the Arcadia management team, and additional controls implemented within the business. Management and shareholders are fully focused on the recovery of both of these outstanding balances. As a result of the Atlantic and Capital contracts, there is a risk that payment is not received prior to the expiration or extension of the revolving credit facility (RCF). The shareholders have, within the context of the guarantee agreement with Arcadia, expressed willingness to provide liquidity should the need arise as a result of the timing of these collections.”
“We continue to roll the amount forward to be deducted from a cargo in the future. Standard business practice - we are looking to assist Atlantic in obtaining a bank facility of circ$300m in the near future and will continue to lift the volume and roll the loan during this period.”
“A. It's not a waiver. It's not how I would describe it. It is a rollover. So what you do is you can get yourself more deliveries. So you are rolling the loan continually from one cargo to the next. So if under the agreement you were only going to get for example 10 cargoes, in effect they are paying and then we are relending. It is just a rollover of the loan and that way you get additional volume. And that was known because there is communication with Dimitrios Hannas on that. He knew that that is what we were doing. There is an email or a correspondence with the group auditor. So he was aware that is what we were doing. Q. Whether it is a rollover or whatever, you were waiving your present right to repayment, weren't you? A. No, we were not waiving. We were rolling the loan over. We were extending it. We weren't waiving any repayment, we were changing the time.”
“Q. You seem to have retained the right to apply the USD20 per barrel reduction against future cargoes, if you look down, but what you are not doing is enforcing your present right to repayment? A. No, because I'm rolling it to the month later. The full amount still remains outstanding and we have the right to take USD20 per barrel on future cargoes until the amount is fully repaid.”
“Further to discussions between Atlantic and Arcadia, Arcadia has agreed to waive the$20 /barrel advance payment for the lifting occurring on Bill of Lading date20 February 2012 and shall not deduct this Advance Payment from the purchase price of the 906,027 barrels purchased from Atlantic. Arcadia shall, however, retain the right to apply this$20 /barrel deduction against future cargoes, and this addendum in no way reduces the overall obligation of Atlantic with regard to the Agreement.”
“refer to our conversation earlier today. The shareholders of Arcadia would if possible like to see an earlier repayment of the existing USD 150 million Atlantic loan. In line with what we discussed you will work with Atlantic to seek to arrange a take out of Arcadias existing USD 150 million facility prior to scheduled repayment in 2014. Until such repayment take place it is of vital importance that we stick to the existing agreement which gives Arcadia the right to net USD 20 per barrels of any sale of Atlantics oil cargos. Such proceeds will be used to reduce the outstanding loan balance. Please confirm your commitment to this.” and the following day: “Sorry for being a pain in the neck, however we would appreciate if you can confirm that we will use the USD 20 per barrels net of for all planned Atlantic cargoes, and thereby not wave the right to net of as Arcadia has done so far.”
“I was not able to meet face to face with Atlantic today, due to their travel arrangements. However I had a good discussion and made it clear my priority is to have Arcadia paid back its money as soon as possible. They confirmed they have two NDA’s signed and are negotiating with a view to getting the new off taker/financier to take Arcadia out of its current position. We have agreed to meet next thursday in Swiss to agree a timetable for actions to be taken by both parties. I will update you if I hear anything further and would like to have a call to discuss strategy next wednesday.”
“We appreciate the update. 1. Did you also inform them that Arcadia is likely to use their contractual right to net off USD 20 per barrels for future cargoes? 2. Did you get an overview cargo program including Arcadia lifting’s?”
“I pointed out we had not elected the$20 per barrel discount but did not threaten them. I will request the overview for my meeting next week.”
“Q. And you waived the repayment for the USD20 per barrel mechanism? A. Perhaps on one occasion we may have done, I don't recall. Q. It is on over 4 million barrels of oil which would be special times USD20 per barrel, that is 80 million repayment that had been waived? A. I don't know if that is accurate or not. Q. {I/7146/1} please. Yes. There is the reference to the 4 million on the second paragraph -- A. No, I'm not doubting the volumes. I'm saying -- Q. That is a matter of documentary record which we will refer to. A. I'm not doubting that. Q. Again, this is gross misconduct in relation to the management of Arcadia's money. A. No, it was not.”
“238. Arcadia Lebanon made a number of payments to Azenith Energy Resources Limited and Earnshaw Associates including payments made on20 March 2012 and7 September 2012 of USD 967,030 and USD 250,035 respectively. This was in connection with a contract held by Arcadia Switzerland with Atlantic Petroleum which was fully authorised by Farahead. Pursuant to that contract, there was a profit share agreement whereby Arcadia Switzerland, Azenith Energy and Earnshaw Associates were each entitled to 1/3 of the profits. These payments made by Arcadia Lebanon to Azenith Energy and Earnshaw Associates were pursuant to that profit sharing arrangement with Arcadia Switzerland.”
“63. In the 2000s, the crude oil business in Nigeria began to change a little bit. The traditional form of ‘sponsorship’ by contract holders, often retired generals and traditional rulers, remained, but new players started entering the scene. These were often Nigerian companies which had been granted permission by the Nigerian government to extract and sell crude oil, and were known as private producers. Previously, only NNPC and foreign majors like Shell had been able to extract crude oil from Nigerian oil fields and sell this on the international oil markets. Over time, however, more Nigerians in private business acquired more of the knowhow needed to manage crude oil production. Oil traders would seek to enter into contracts with these private producers just as with NNPC. 64. One of these private producers was a company called Atlantic Energy Drilling Concepts Nigeria Limited. Atlantic was owned by various Nigerians, one of the most influential of which was a man called Kola Aluko. Mr. Aluko was someone I had come to know as a prominent figure in the Nigerian energy sector. Atlantic had been granted licences and an opportunity to extract crude oil from a particular set of oil fields. One of the major deals that I helped Arcadia win was a contract with Atlantic, which was entered into on30 September 2011 . Atlantic been granted the rights to extract crude oil in certain Nigerian oil fields. However, as is often the case with private producers in Nigeria, Atlantic did not have the financial firepower to fund the process that would allow it to exploit the rights it had been granted. 65. Atlantic was therefore looking for a foreign partner to help fund the extraction and lift the crude oil. Atlantic could have offered the opportunity to any number of oil traders. I know, for example, various of the big oil traders, such as Trafigura, were competing for the opportunity. 66. The kind of contract that Atlantic was contemplating entering into was a “pre-finance” contract. A pre-finance contract is where a buyer advances to the producer the sums of money necessary to start producing the crude oil. The outside investor is then repaid in barrels of crude oil once production comes online. Arcadia did a pre-finance deal with Atlantic, in which it advanced USD 150 million to Atlantic. This became the Atlantic contract. 67. I was, I think it is fair to say, instrumental in securing the Atlantic contract for Arcadia. A couple of years before the Atlantic contract, I became aware of what Atlantic was doing and that it was looking for a partner. In order to try and win this opportunity for Arcadia, I spent many months working hard to persuade Mr. Aluko and Atlantic that Atlantic should work with Arcadia as their lifter when production started. The process of securing Atlantic’s favour towards Arcadia was long and took a lot of effort. I handled this work for Arcadia, which, essentially, consisted of fronting its bid for the Atlantic contract. I arranged for and attended a number of meetings with Atlantic at which I advocated for Arcadia to be granted the Atlantic contract. Critical meetings took place with Arcadia both in London and in Switzerland between Atlantic and Arcadia from an early stage. I arranged lots of those meetings but I did not always participate. What they were negotiating was technical and specific and that part I had to leave to them, it was outside my expertise. In many respects, this work was similar to the work I did in trying to obtain sponsorship for Arcadia from contract holders in respect of oil contracts, when it bid for crude oil contracts with NNPC or products contracts with PPMC. 68. Mr. Bosworth and the other traders at Arcadia were not very involved in this work, just as they were not normally involved in most of the negotiations for other crude oil contracts or products contracts. They left this work to me. As a Nigerian active in the Nigerian oil sector, I was far better placed than Mr. Bosworth or his colleagues in London and Geneva to do this work. I don‘t think they could have done it to themselves, even if they had had the time to around their day jobs as oil traders. I chased the business down, especially with Mr. Aluko. All in all it was about two years of work. And in the end, Arcadia beat off other bids from other major oil traders to win the Atlantic contract. 69. I would normally expect to be paid a substantial fee by Arcadia for my work securing the Atlantic contract on the barrels lifted under the Atlantic contract. But instead, I negotiated a profit share, and everyone was receptive to that. From memory, a third was kept by Arcadia, a third went to Mr. Aluko, and a third went to me. On this occasion, Arcadia did pay me my share of the profit share and the fee I was due.”
“Q. Now you are paying side payments to the owner of Atlantic? A. That is what he requested. Q. For no legitimate commercial purpose? A. It was the joint venture that we had with him in order to be able to get the contract and if we hadn't done it, for sure our competitors would have done.”
“This I agree is now pure judgment call as to whether we release any further volume my concern is that unpaid amounts on vessel plus accrued charges plus 20 kt of product removes any real leverage in terms of collateral value we would otherwise have.”
“Be assured that we are monitoring the situation within Amcon and Capitol from various outside and inside sources. I am personally in regular dialogue with the Chairman of Capitol and the CEO/MD of Amcon. Unfortunately patience is required in these circumstances because of the bureaucratic nature of the Nigerian government and the highly political nature of such transactions. However I firmly stand by my schedule outlined earlier today and believe any aggressive intervention at this point in time would be counter productive to ensuring a full and timely repayment of the debt.”
“… there were a number of large independent distributors of product into Nigeria and what we were trying to do was to expand our business profile in Nigeria away from just dealing with government on delivering products. This is gasoline and gas oil. And we had concentrated up until then, and probably were still continuing to do so, on working with a company called MRS. We were introduced to capital as another significant distributor, both of them probably in terms of size were in the top three or five distributors in Nigeria. And Mr Okeke assisted us in developing that business with a gentleman called Patrick Ubah. They came from the same village, in the east”
“Q. And then in February 2013, you learned that capital was seeking to settle claims of over USD100 million against it, didn't you? A. I think -- when? February? Q.6 February 2013 . I'm going to show you a draft settlement agreement between Capital -- A. I think we were aware of issues with him prior to that. Q. Can you tell us what those issues were before February2013? A. I think we moved the vessel some time towards end of 2012 out of the territorial waters of Nigeria, or it was moved and it went to Rotterdam. And either the ship or the cargoes were arrested at that time by Access Bank. Q. Right, so problems emerge in December 2012. A. I don't know which month it was. I'm saying it was towards the end of 2012. Q. I see. If we go to bundle {I/7177.2/1} this is an email from Mr Ubah to you asking you to comment on a draft settlement agreement that has been prepared for him, with Access Bank. And if we look at -- so you see that? You have actually been asked to comment on the draft settlement agreement so you are going to now review the settlement agreement which you can find at bundle {I/7177.3/1}? A. I didn't quite see where I comment on it. Q. No, he is asking you to comment on it. So, this is the attachment and if you go to {I/7717.3/3} paragraph 5, you can see that it is referring to the fact that Capital owes 133 million. A. Okay. Q. And none of this at the time is disclosed to Farahead. A. No.”
“No, my behaviour doesn't cause a problem with a company that is not paying for a ship or the ship gets arrested or, I think, an integral part of the difficulty to pay or to ship was that I believe the Nigerian Government removed the subsidy. So you couldn't deliver product in without taking a huge loss whilst the subsidy was removed. ”
“Arcadia Petroleum Limited has a successful physical oil trading track record in Nigeria spanning several decades. Arcadia would like to build on the successful oil trading track record and strong relationships in Nigeria by increasing the refined products trading opportunities in Nigeria, both imports and exports. Arcadia recognises that the competitive nature of refined products trading increasingly requires the investment in mid-stream infrastructure e.g. pipelines, tankage, in order to create a sustainable competitive advantage. Arcadia together with a local partner has identified the opportunity to design, construct and operate a refined products depot in the free trade zone (FTZ) in Calabar. The investment in depot infrastructure in Nigeria creates net asset value for Arcadia, provides the physical infrastructure to sustainable enhance the refined product trading activities in Nigeria and surrounding areas and serves to strengthen key local relationships.”
“This is post Mr Okeke having left, retired from the corporation some time in the middle of 2011. We had enlisted him to assist us with working with independent distributors in Nigeria, one of which was Capital and he had a very close relationship with him. And this was a payment to him for those ongoing services. He requested it to go into what had I think by that time had become solely their own project. We were not going ahead with it corporately. And he requested we pay it to a company called Cakasa and Cakasa was an old and publicly quoted engineering entity, I remember the name of the CEO, although I never met him, he was a man called Mr Yaro. So he requested his payment for his consultancy services to be paid into Cakasa Nigeria.”
“The owners took this opportunity to reiterate their commitment to Arcadia, but ordered a review of the company’s operations. They have endorsed a plan in which we will continue with the core crude oil trading run from Europe and the crude and products trading from Singapore. The Group will exit from our existing West African crude and products portfolio and no longer pursue West African development projects. Simplifying the portfolio allows us to consolidate into fewer offices and significantly reduce overhead expenses. …”
“He just continues to avoid answering what we’re asking about. We don’t have a choice, we have to pick someone. “Bloodhounds” during the week…….I’ll talk to Paul...”
“Q. Is it fair to say that that is really what motivated this claim, that you lost a lot of money on Atlantic and Capital; is that fair? A. That’s correct.”
“25.05.2011 Peter Bosworth 30,000,000”
“DH [Mr Hannas] to check – to exclude – may have – may have been rec’d & then paid. [He or We] did not find anything”
“Pete Bosworth: There is no change in this balance from the prior period. The total balance is expected to be recovered in full when amounts are paid owed to him by Farahead. It is our understanding the position within the group is actually in a net liability position….”
“A. Yes. But that is back to what I said in my witness statement which reflects that when that deal was entered into in 2005, there was a general understanding that if this business became very, very good for us and things were developing properly, that there was a bonus to be paid to Pete Bosworth, I think that is what we talked about yesterday which you then kind of said was 20 million, which was never agreed as the amount, but I think it was in the 10/20 million depending upon the results. I think we have now seen nothing of 64 million or whatever it was but forget that -- I'm standing by and I might have a different view than Fredriksen on this but I am standing by that there was a commitment because he didn't have a finders' fee when we got it originally. Then you showed me yesterday that we had already at that time advanced a host loan but that was a loan; that it was not a gift. So he had – in bringing us the transaction, he had not been paid$1 from that time. Q. If you go to page 1, please, the auditors' view is sent to you by Mr Hannas; do you see that? A. Yes. Q. And it is right, isn't it, that Farahead/Arcadia owe Mr Bosworth money, don't they? A. It doesn't say here. But can you -- Q. That is my question to you. In the light of this document, Farahead, the Farahead group, owes Mr Bosworth money; correct? A. No, that is not correct with what happened. It would have been correct if he had kind of delivered a solid project without any fraudulent transactions and without trying to hidden deals, but that disqualifies everything.”
“Q. And in order to check the position, Mr Hannas, you looked in 2013 at your notebooks, didn't you? A. Maybe I did. Q. And when you were looking at your notebooks, you drew up a note that focused on the 15 million Arcadia Beirut dividend, didn't you? A. Yes, I may do that. Q. And that is why you highlighted the entry in the {I/8802.2/1}. Correct? A. Maybe that is the reason but maybe, as I said, it was highlighted because it was the subject of discussions with somebody within the group.”
“Q. You wrote the Hannas note, the original version, as part of the investigation into whether or not that dividend had been paid; correct? A. The 15 million? Q. Yes. A. No, it was not because of that. Q. And it happened before these proceedings commenced in February 2015; correct? A. Correct. Q. So you created the note before these proceedings commenced in February 2015? A. That is what my recollection.”
“153. I was verbally dismissed in Trøim’s office. During the same meeting, I asked him about the USD 3 million bonus, to which Trøim said “sue me”
“142. Mr Hurley resigned in September 2013, pre-empting his being fired. John and I had decided that it would be best if Mr Hurley was fired. I am reminded by an email from Mr Adams to me I have been shown that this decision had been made by1 September 2013 . I had invited Mr Hurley for a meeting for those purposes, although I do not remember the precise date of that meeting or timing of his resignation.”
“As I said, you need to make sure you do kind of what we said from the shareholders that we have no faith in you any longer and we will probably kind of talk to our shareholder representative to get you dismissed, but that is the way it has to act. But I think kind of in general you describe we had no trust in him and from that point, we had a kind of hard part forward.” and:- “We felt probably, and me in particular, responsible for the security package, felt that the Farahead Group which at that time was coming up to be around USD16 billion in value had significant power to get that banking group to kind of back us and not back a guy who we effectively felt had carried out unauthorised trading”
“Q. The reason why there is a notice of termination, from the official position, is Mr Hurley is still employed at the 26th and therefore you terminate his employment, don't you? A. The board terminates it.”
“A. I was forced to resign. I was fired so then I arranged for a resignation letter to follow that. That was on Mark Lance's suggestion, by the way. Q. You had not yet been fired, you took action to pre-empt that. A. I was verbally fired and they were waiting and I think eventually they got Hannas to sign a letter that fired me. So I was fired and I submitted the resignation letter once I left the meeting. I was verbally fired and then they followed that up with a letter. I was fired. I did not want to resign and I was shocked.”
“don’t like Liberia (it triggers enhanced due diligence) and the Marshall Islands is an unknown”
“Early in 2013 the long-standing group CEO, Peter Bosworth, resigned from the company following a review and restructuring initiated by the owners. The outcome of this was the to cease all new business in West Africa, with the result that the offices in Switzerland and Dubai were closed and about 40 staff left the company.”
“34. In the second half of 2013, I became aware that GE Petrol had nominated Arcadia Lebanon to lift a cargo for it. I did not think it would be appropriate for Arcadia Lebanon to lift the oil given that it had entered a liquidation process (or was about to). I recall at least one conversation with Mr Kelbrick, who was one of the people who ran Attock Dubai, at about this time in which I asked whether it was possible for someone other than Arcadia Lebanon to lift the cargo. Mr Kelbrick told me it was too late to renegotiate with the seller. Attock Dubai handled the operational, financial, and all other aspects of the trade. I was not involved. Arcadia Lebanon received a pass-through payment from Attock Dubai of about 3.6m, which it later paid onto another company controlled by or associated with Attock Dubai’s owners. This can be seen in bank accounts for that company, named Greenfields Services Limited Offshore, which (without prejudice to any privilege) I understand from my solicitors are exhibited to Mr Kelbrick’s Ninth Affidavit dated31 January 2019 and exhibited for ease of reference at [PMB4/152-159]. [KS_002449] Arcadia Lebanon did not receive any fee or benefit for its role in this trade. 35. I am not sure exactly when these exchanges occurred, but I note that Mr Mounzer says that Attock Dubai started the trade “in July 2013”
“By October 2013, Arcadia Lebanon’s business had ceased. Mr. Mouzannar and I were just waiting for the necessary time to pass before liquidating the business. 14. Sometime around then, either Arcadia Lebanon’s bank (Bank Med) or one of Salem Mounzer or Steve Kelbrick, called me saying that Arcadia Lebanon would soon receive money from a trade and that the money should be paid onto a company called Greenfields. I called Mr. Bosworth because I was alarmed and upset that I was being asked to deal with a payments relating to an oil trade. To be clear, I had no part in the operational aspects of the trade at all. By the time I heard about it, it was already underway. I had believed that there would be no more trading activity. I did not sign up for that. I do not know how to run an oil trading company and my expectation when I agreed to help liquidate Arcadia Lebanon was that there would be no operational work at all. 15. I remember that Mr. Bosworth got very angry when I told him that Mr. Kelbrick and Mr. Mounzer had set up this transaction. He said that the company was meant to have stopped operating and that it should not be taking on new business. We had several calls. Eventually, Mr. Bosworth told me that he had found out that the deal was meant to be a pure pass-through and that Arcadia Lebanon would not receive any financial benefit or have to actually do anything. It would just receive a payment that it would pay onto Greenfields. I received the invoice with the necessary bank details for the payment to be made to and from Arcadia Lebanon. Although I felt uncomfortable about it, because again as previously said, this was not what I signed for when I accepted to take the shares, I asked Bank Med to make the payment to Greenfield, and that was the end of it. There was no more operational work to do after this. This happened over a period of a few weeks or months. I do not remember the exact dates.”
“… the way that Arcadia Petroleum SAL would become ultimately wound down was to go into something of a dormant phase but this residual transaction had to go through that company for the reasons he discussed with you, that he couldn't cancel that particular lifting and I think if you did that, and it was associated in any way with Arcadia's name, that that from a reputational point of view would be extremely bad for the group; you fail to perform on a contract with a state oil company”
“he went mad as well because he didn’t know had about coming, about this thing. And because he wanted – he stopped all the operations in the company and suddenly we had this and we wanted to put the company into liquidation, yes.”; and “[Mr Bosworth] was frustrated. And then he found out it was a pass through Arcadia and we keep nothing for Arcadia.”
“28. Ms Achkouti describes an instance in which monies were received by Arcadia Lebanon for a transaction which took place in October 2013, after the company had stopped operating (Achkouti 2 53). [CJAWS_02/9] The monies were paid on to a company owned by me, Greenfield Services Limited Offshore, which I set up specifically for a new opportunity with GEPetrol. 29. The background to this transaction is that at some point in 2013, GEPetrol had learned that Mr Bosworth had left Arcadia and that Arcadia was no longer trading in West Africa. I do not know who told GEPetrol this, but it was not me. I received a call from GEPetrol explaining that there was a cargo that had previously been allocated to Arcadia but which was now available, and GEPetrol offered it to me. 30. The offer of this cargo was made to me, I believe, because of the relationships I had spent many years building in West Africa. I accepted the GEPetrol offer, acting always in my own commercial interests, and met the GEPetrol representative in Madrid to sign the relevant papers. 31. I do not know how the funds ended up being paid to Arcadia Lebanon, I assume there was some kind of mix up. As Ms Achkouti says, the monies were paid straight to my company Greenfields and that was the end of it.”
“Q. But in terms of the assignment that is being referred to, which is the assignment of the Arcadia obligations under the Zafiro term contract to Attock, there is no suggestion that Attock should start paying Sonergy? A. I think that if you are doing business in that part of the world, then there were some well known service providers and I think that if you were going to lift Zafiro on some sort of −− it says here term contract, then one would expect to pay the same. So I would expect to pay the same service providers as I did for example on the Ceiba”
“204. There are also payments to Collafin, Atlantic and Equinox. As I explain elsewhere, these are all non-Arcadia payments. Money came in before money went out. They went through the Arcadia or Arcadia Lebanon bank accounts, but had nothing to do with the Arcadia Group at all. None of them were related to Arcadia Group business or Arcadia Lebanon business. For Arcadia Nigeria and Collafin, as I explain below, these were payments related to Arcadia Upstream Assets Limited, which didn’t have its own bank account. So the amounts came through Arcadia Lebanon.”
“No, we treated it as if it were a company that we owned the shares of but on behalf of Mr Fredriksen. We were ensuring as part of this is concerned that there were absolutely no exposures to Arcadia Lebanon and therefore in the same way that we would have treated a group company, there is no exposure to Arcadia Lebanon because as I say earlier, the money came in before any money went out and it was not related to Arcadia business.”
“31. To the best of the Claimants’ present knowledge and belief (as detailed above and further below), the fraud perpetrated on them has, subject to the variations and differences detailed further below, taken in broad terms the following form: 31.1. In the course of trading transactions in which an entity within the (legitimate) Arcadia Group was buying and/or selling crude oil, entities that were not part of the Arcadia Group but rather were beneficially owned by and/or controlled by and/or associated with some or all of the Individual Defendants (including in particular Arcadia Lebanon, Arcadia Mauritius and Attock Mauritius), were, at the instance of, on the instructions of, with the knowledge of and/or with the involvement of the Individual Defendants, “inserted” into the chain of transactions between the legitimate Arcadia Group entity and its buyer and/or seller. 31.2. These entities so “inserted” into the relevant transactions extracted profit that would otherwise, but for the “insertion”, have accrued to the entity within the (legitimate) Arcadia Group, whilst often leaving the entity within the (legitimate) Arcadia Group in question (or another entity within the (legitimate) Arcadia Group) bearing all or part of the expenses associated with the transaction (such as transportation and insurance costs) and/or the risks associated with the transaction and/or otherwise providing support for the transaction in some fashion. 31.3. Furthermore, trading transactions into which an entity within the (legitimate) Arcadia Group would or could have entered, were, at the instance of, on the instructions of, with the knowledge of and/or with the involvement of the Individual Defendants, diverted to, and entered into by, other entities that were not part of the Arcadia Group but rather were beneficially owned by and/or controlled by and/or associated with some or all of the Individual Defendants (including in particular Arcadia Lebanon, Arcadia Mauritius and Attock Mauritius), with the result that profits that would and could have accrued to an entity within the (legitimate) Arcadia Group instead accrued to those other entities. 31.4. In addition, entities within the (legitimate) Arcadia Group entered, at the instance of, on the instructions of, with the knowledge of and/or with the involvement of the Individual Defendants, into loss-making transactions for the sole or dominant purpose of ensuring that profits accrued to and/or losses were avoided by other entities that were not part of the Arcadia Group but rather were beneficially owned by and/or controlled by and/or associated with some or all of the Individual Defendants. 31.5. Other fraudulent transactions, whether or not similar to the foregoing and whether or not involving entities other than those presently identified, may well have been entered into; the Claimants’ investigations remain are ongoing and their position continues to be is reserved.”
“The Claimants’ claim as set out in the RRRRAPC is in essence that Mr Bosworth and Mr Hurley, the ringleaders: (i) inserted entities (the “Inserted Entities”) that they owned, controlled and/or from whom they received benefits into oil trading transaction chains in which the First to Third Claimants (the “Arcadia Claimants” or “Arcadia Group”) ultimately purchased oil; (ii) diverted profits on those transactions from the Arcadia Claimants or some of them to the Inserted Entities and/or third parties to whom the Inserted Entities made payments; (iii) themselves received diverted profits or their benefit; and (iv) thereby perpetrated a serious and sustained trading fraud upon the Claimants, in particular in breach of the fiduciary and other duties Mr Bosworth and Mr Hurley owed to the Arcadia Claimants or some of them. ”
“71.4. … acted for the purpose of and/or with the intention of enriching themselves and/or the other Individual Defendants, and also with the purpose of injuring or causing financial loss to the Claimants. 71.5. … breached the fiduciary duties that they owed to Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore. In this regard, it is averred that they: 71.5.1. Failed to act with single-minded loyalty to Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore or any of them; 71.5.2. Failed to act in good faith and honestly in the best interests of Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore or any of them; 71.5.3. Placed themselves (and deliberately placed themselves) in a position in which their interests and the duties they owed to Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore and each of them would (and did) conflict; 71.5.4. Made unauthorised and/or secret profits and/or commissions (and/or otherwise received sums as a result of their breaches of fiduciary duties) without the informed consent of Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore or any of them; and 71.5.5. Failed to disclose their own misconduct to Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore or any of them.” 71.5.1. Failed to act with single-minded loyalty to Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore or any of them; 71.5.2. Failed to act in good faith and honestly in the best interests of Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore or any of them; 71.5.3. Placed themselves (and deliberately placed themselves) in a position in which their interests and the duties they owed to Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore and each of them would (and did) conflict; 71.5.4. Made unauthorised and/or secret profits and/or commissions (and/or otherwise received sums as a result of their breaches of fiduciary duties) without the informed consent of Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore or any of them; and 71.5.5. Failed to disclose their own misconduct to Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore or any of them.”
“At or around the time that Farahead acquired the Arcadia Group, the Individual and Corporate Defendants, entered into a combination or understanding with each other with an intention to injure or cause financial loss to the Arcadia Group (as it existed at that time and as it would come to exist in the future upon the formation or incorporation of any future entities or subsidiaries within the Group) and/or to Farahead by use of unlawful means and/or reached an understanding to embark upon a course of concerted action with an intention to use unlawful means to injure or cause financial loss to the Arcadia Group (as it existed at that time and as it would come to exist in the future upon the formation or incorporation of any future entities or subsidiaries within the Group) and/or to Farahead, and as a consequence loss and damage was in fact caused to the Arcadia Group and/or Farahead.” (RRRPC § 76.1) The unlawful means are said to have included the alleged breaches of fiduciary duty, dishonest assistance, knowing and/or unconscionable receipt, aiding and abetting tortious acts under Swiss law and the making by Mr Bosworth and Mr Hurley of “the continuing deceitful statements and/or continuing fraudulent misrepresentations set out in paragraphs 51-52, 53-55 and 61-63 above.”
“The manners in which Mr Bosworth, Mr Hurley … breached such duties are set out in paragraphs 71 and 72 above”
“in the event that Mr Bosworth, Mr Hurley, … or any of them were to make an unauthorised and/or secret profit and/or commission in breach of his fiduciary duties owed to Arcadia London, or to receive sums as a result of such breaches of fiduciary duty, not only would he be liable personally to account to Arcadia London for such unauthorised and/or secret profit and/or commission and/or sums received, but also any such unauthorised and/or secret profit and/or commission and/or sums received would be held by him on trust for Arcadia London” (RRRRAPC § 21, my emphasis) Similarly, in § 82 the Claimants say that: “As to the claims advanced by the Claimants in respect of the unlawful means conspiracy pleaded and/or the breaches of fiduciary duty pleaded and/or the breaches of contractual duty pleaded and/or the claims for dishonest assistance pleaded and/or the claims for knowing (and/or unconscionable) receipt pleaded: 82.1. As noted above, Arcadia London and/or Arcadia Singapore assert all relevant and available proprietary claims in respect of all secret and/or unauthorised profits and/or commissions obtained by Mr Bosworth, and Mr Hurley, and Mr Gibbons and Mr Lance, and/or all sums received by them as a result of their breaches of fiduciary duties owed to Arcadia London and/or Arcadia Singapore or any of them (subject always in the cases of Mr Bosworth and Mr Hurley to the limitations set out in paragraphs 77.A1 and 77.A2 above). 82.2. Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore assert all relevant and available entitlements to orders for accounts to be taken and for the payment of all sums found to be payable by such accounts. Accordingly: 82.2.1. Arcadia London and/or Arcadia Singapore seek as against Mr Bosworth, and Mr Hurley, and Mr Gibbons and Mr Lance orders for an account of all secret and/or unauthorised profits and/or commissions obtained by them, and/or all sums received by them as a result of their breaches of fiduciary duty or any of them, and an order for the disgorgement of such monies (subject always in the cases of Mr Bosworth and Mr Hurley to the limitations set out in paragraphs 77.A1 and 77.A2 above); 82.2.2. Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore seek as against Mr Bosworth, Mr Hurley, Mr Gibbons, Mr Lance, Mr Kelbrick, Mr Mounzer, Arcadia Lebanon, Arcadia Mauritius, and Attock Mauritius and The Cornhill Group, orders that each such Defendant do account to them for the loss caused to them by the breaches of fiduciary duty in which they have dishonestly assisted, and an order that they do pay them all sums found to be due on the taking of such accounts; and 82.2.3. Arcadia London and/or Arcadia Switzerland and/or Arcadia Singapore seek as against Mr Bosworth, Mr Hurley, Mr Gibbons, Mr Kelbrick, Mr Mounzer, Arcadia Lebanon, Arcadia Mauritius and Attock Mauritius orders that each such Defendant do account for the value of the benefit each of them has knowingly (and/or unconscionably) received, and an order that they do pay them all sums found to be due on the taking of such accounts. ”
“(5A) A declaration that each of the First and Second Defendants has dishonestly assisted the breaches of fiduciary duty on the part of the other Defendants owing fiduciary duties and accordingly that each of the First and Second Defendants is liable personally to account to the First and/or Third Claimants for the loss caused to them by the said breaches of fiduciary duty and/or for the value of the benefit that each of them has received. (5B) An order that each of the First and Second Defendants do account to the First and/or Third Claimants for the loss caused to them by the said breaches of fiduciary duty and/or for the value of the benefit that each of them has received…; … (5D) A declaration that each of the First and Second Defendants has knowingly (and/or unconscionably) received proceeds of the breaches of fiduciary duty on the part of the other Defendants owing fiduciary duties and accordingly that each of the First and Second Defendants is liable personally to account to the First and/or Third Claimants for the value of the benefit each of them has received; (5E) An order that each of the First and Second Defendants do account to the First and/or Third Claimants for the value of the benefit each of them has received, and an order that they do pay the First and/or Third Claimants all sums found to be due on the taking of such accounts”
“81.1.1. That Mr Kelbrick and Mr Mounzer deliberately participated in the fraud perpetrated on them, thereby dishonestly assisting Mr Bosworth, Mr Hurley, … in their breaches of fiduciary duty as set out above; and 81.1.2. That Mr Kelbrick and Mr Mounzer have knowingly (and/or unconscionably) beneficially received proceeds of the fraud perpetrated on them. … 81.1A.1 That each of Mr Bosworth, Mr Hurley, … also dishonestly assisted the other three fiduciaries in their respective breaches of fiduciary duty as set out above; and, 81.1A.2 That each of Mr Bosworth, Mr Hurley … also have knowingly (and/or unconscionably) beneficially received proceeds of the fraud perpetrated on them. 81.2 … the Corporate Defendants all also deliberately participated in the fraud perpetrated on them, thereby dishonestly assisting Mr Bosworth, Mr Hurley, Mr Gibbons and/or Mr Lance in their breaches of fiduciary duty set out above. …”
“6 The Claimants’ claim as set out in the 4APOC is in essence that Mr Bosworth and Mr Hurley, the ringleaders, in combination with and/or assisted by Mr Kelbrick, Attock Mauritius and the other Defendants: 6.1 Inserted entities (the “Inserted Entities”) that they owned, controlled and/or from whom they received benefits into 144 oil trading transaction chains in which the First to Third Claimants (the “Arcadia Group”) ultimately purchased oil (save in 2 instances); 6.2 Diverted profits on all 144 transactions from the Arcadia Group or some of them to the Inserted Entities and/or third parties to whom the Inserted Entities made payments; 6.3 Themselves received diverted profits or their benefit; and 6.4 By some or all of these means, perpetrated a serious and sustained trading fraud upon the Claimants. 7 The Claimants have identified 144 such transactions, being the 144 transactions.”
“13 By way of background, as particularised in the 4APOC, the other pleadings mentioned in paragraph 2 above and (as to each of the 144 transactions) in Part C above, the Claimants’ case is in summary that: 13.1 The 144 transactions, and the opportunity and/or information required for the Inserted Entities to participate in them, arose by virtue of Mr Bosworth’s and Mr Hurley’s positions as Group CEO and Group CFO of the Arcadia Group ... 13.2 The Defendants together combined to carry out the 144 transactions, as pleaded in, for the reasons set out in and with the knowledge and/or intentions alleged in the 4APOC and, in the case of Mr Kelbrick and Attock Mauritius, in the D5/D9 RFI Response. Without prejudice to the generality of the foregoing, as set out in those pleadings, Mr Bosworth and Mr Hurley assisted one another, and Mr Kelbrick and Attock Mauritius assisted Mr Bosworth and Mr Hurley, in carrying out the 144 transactions, and each received the proceeds of the 144 transactions, with the knowledge and/or intention there pleaded. 13.3 The Inserted Entities (or some of them) received significant amounts from their participation in each of the 144 transactions (as particularised in Part C above). 14 In the case of each of the 144 transactions, in the circumstances set out in paragraph 13 above: 14.1 The transaction, including the involvement of and receipt of amounts by the Inserted Entities, constituted the exploitation of an opportunity and/or information arising by virtue of Mr Bosworth’s, Mr Hurley’s, Mr Lance’s and/or Mr Gibbons’ fiduciary positions; and/or 14.2 In any event, the amounts received by the Inserted Entities were not received for or on behalf of the Arcadia Group (or any of them) and, accordingly, their profits were secret profits received by those entities and/or diverted from the Arcadia Group to those entities by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them). 15 Further or alternatively, in the case of each of the 142 Arcadia transactions (being all but EY Deals 2 and 71): 15.1 There was no legitimate reason for, or commercial benefit to the Arcadia Group from, the inclusion by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them) of any of the relevant Inserted Entities in the transaction; 15.2 Further or alternatively, the opportunity to participate in the transaction without any of the Inserted Entities, including to receive such profits as each Inserted Entity received, was diverted by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them) from the Arcadia Group (and each of them); 15.3 Further or alternatively, had the Inserted Entities not been included in the transaction by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them), the Arcadia Group could and would have participated in the transaction and received such profits as each Inserted Entity received; 15.4 Further or alternatively, there was no legitimate reason for, or commercial benefit to the Arcadia Group from, the inclusion by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them) of more than one Inserted Entity in the transaction (as occurred in all but 21 of the 144 transactions, namely, all but EY Deals 58, 62, 67, 73, 79, 82, 84, 88, 91, 94, 99, 100, 101, 102, 108, 112, 115, 120, 127, 131, 138); 15.5 Further or alternatively, the opportunity to participate in the transaction without more than one of the Inserted Entities, including to receive such profits as the additional Inserted Entities received, was diverted by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them) from the Arcadia Group (and each of them) in the 123 transactions identified in paragraph 15.4 above; 15.6 Further or alternatively, had more than one of the Inserted Entities not been included in the transaction by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them), the Arcadia Group could and would have participated in the transaction and received such profits as the additional Inserted Entities received in the 123 transactions identified in paragraph 15.4 above; 15.7 Further or alternatively, any legitimate reason for, or commercial benefit to the Arcadia Group from, the inclusion by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them) of each of the relevant Inserted Entities in the transaction (which reason and benefit is denied) did not provide a commercial justification for the amounts (and profits) received by each Inserted Entity, having regard in particular to the level of profit of the Arcadia Group entity relative to that of the Inserted Entity or Entities; 15.8 Further or alternatively, the opportunity to participate in the transaction without each of the Inserted Entities receiving any amount (and profit) that was not commercially justified, including to receive those amounts (and profits), was diverted by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them) from the Arcadia Group (and each of them); and 15.9 Further or alternatively, had the Inserted Entities not been included in the transaction by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them), the Arcadia Group could and would have participated in the transaction and received such commercially unjustifiable amounts (and profits) as each Inserted Entity received. 16 Further or alternatively, as to the 2 of the 144 transactions in which no entity from the Arcadia Group was included (EY Deals 2 and 71): 16.1 There was no legitimate reason for, or commercial benefit to the Arcadia Group from, its exclusion from the transaction; 16.2 Further or alternatively, the opportunity to participate in the transaction, including without any of the Inserted Entities and to receive such profits as each Inserted Entity received, was diverted by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them) from the Arcadia Group (and each of them); 16.3 Further or alternatively, had the Arcadia Group been afforded the opportunity to participate in the transaction and/or had the Inserted Entities not been included in the transaction by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them), the Arcadia Group could and would have participated in the transaction and received such profits as each Inserted Entity received; 16.4 Further or alternatively, paragraphs 15.4–15.9 above are repeated mutatis mutandis in respect of these transactions and the exclusion of the Arcadia Group from them by Mr Bosworth, Mr Hurley, Mr Lance and/or Mr Gibbons and the other Defendants (or some of them). 17 The Arcadia Group did not give its fully informed consent to the matters in paragraphs 13–16 above. ”
“30. However, I will say this: if the Claimants wish to go so far as to advance their own positive case in relation to West African oil trading, then a positive case would require an amendment to the pleading, and they would be well advised to make any such application at the same time as they were serving any expert evidence, but I cannot bind them as to the approach they adopt, and I make no order in that regard. Equally, it could be that there are simply certain matters of West African oil trading practice that the Claimants want to correct or clarify, as it were, so not so much a positive case, but simply pointing out the areas where something was not accepted, and where their own expert would be explaining why that wasn't correct. That would not necessarily require an amendment to their pleaded case.”
“35. By way of riposte, the defence say that that is really just not the right way to go about it. There should be a pleading supported by a statement of truth in relation to the matters underlying these transactions, and once that has been done, that can be responded to. Having explored the matter with the Claimants in oral argument, Mr Pilbrow sees the force of that submission and the judicial indication in that regard that I do consider that there should be a freestanding pleading in relation to these transactions setting out the Claimants’ positive case with a weather-eye on the matters identified in the RFI, because this document is going to be used as a pleaded vehicle for the Defendants to respond to. It is to be hoped that if the Claimants plead with proper particularity, and then the defence plead back in a proper manner with proper particularity, and pleading a positive case and not simply denying or not admitting things (which would be an inappropriate approach), then such defence pleading should obviate the need for the Request for Further Information.”
“Farahead, including Mr Fredriksen, Mr Trøim and Mr Hannas, did not know about, and did not authorise or agree to, the use of “sleeve” entities for the Arcadia Group’s trading activities, including the use of Arcadia Lebanon as a “sleeve”
“In the course of oral Opening Submissions, Cs conceded that the USD 5 million paid by PB and CH to Fulham Properties in April/May 2009 had indeed been the payment of a profit share (or Dividend). Between them, PB and CH received USD 8,099,760 in dividends. The USD 5 million – more or less – reflects the split that had been discussed.”
“… PB and CH no longer wanted to share the profits made under Term Contracts with Farahead and instead diverted opportunities for new Term Contracts from the Arcadia Group to Attock Mauritius which had previously functioned only as an Intermediary between Arcadia Lebanon and Arcadia London.”
“71:13 …Mr Kelbrick had asked, I believe me and a number of people, if there was a – he had a partner in terms of the sponsor that needed, a local company, and I asked Etete whether he had one and these are the things that Mr Kelbrick required. I’m giving him assistance. Q. Because you have an interest in getting term contracts for Attock Mauritius. A. No, I had an interest in getting term contracts for Arcadia if Attock got them, as best we could. They were a junior partner. That is what you do in business, you help people. Q. When you say ‘they’ were a junior partner, that is 72:1 Attock you are referring to? A. Yes, they were a – we worked with them. They were smaller than we were. So if you can give – I probably used the wrong word ‘partner’. In the legal terms, that is not correct, but you give them assistance. Q. It accurately reflects your relationship, which is one of partnership? A. No.”
“The only explanation offered for Attock Mauritius’s ability to do so is the advantage of deciding on a price averaging period one day closer to the laycan. This was afforded to Attock Mauritius by agreement between PB and SK as the terms on which Arcadia bought oil from Attock Mauritius required it to give 7 days’ notice of its nomination rather than 6. That appears to have made all the difference, no other account being provided of how SK was able consistently to outwit Arcadia’s traders.”
“419 While Attock Mauritius allowed Arcadia the option of choosing the price averaging period in its contract with Attock Mauritius, SK knew that PB was allowing Attock Mauritius an advantage over Arcadia by agreeing that Arcadia would give 7 days’ notice of its nomination of the price averaging period rather than 6 days. Apart from this one day of difference, no explanation has been provided as to how SK was able regularly to take advantage of more favourable price averaging periods compared to Arcadia’s chosen period.”
“901. The Claimants' case is that the defendants were all parties to a dishonest conspiracy to deprive them of their REC Shares and then payment for them. As I stated in ED&F Man v Come Harvest and others[2022] EWHC 229 (Comm) , I bear in mind at all times that where fraud is alleged, cogent evidence is required by a claimant to prove it. 902. In Foodco UK LLP v Henry Boot Developments Ltd[2010] EWHC 358 (Ch) , at [3] Lewison J stated that: "The burden of proof lies on the [claimants] … Although the standard of proof is the same in every civil case, where fraud is alleged cogent evidence is needed to prove it, because the evidence must overcome the inherent improbability that people act dishonestly rather than carelessly. On the other hand inherent improbabilities must be assessed in the light of the actual circumstances of the case." 903. In other words, the cogency of the evidence relied upon must be commensurate with the seriousness of the allegation: JSC BTA Bank v Ablyazov[2013] EWHC 510 (Comm) per Teare J at [76]. See also Bank of St Petersburg PJSC v Arkhangelsky[2020] EWCA Civ 408 at [44]-[47] per Vos C and [117] per Males LJ. 904. I also bear in mind that as to inferring fraud or dishonest conduct generally: a. It is not open to the Court to infer dishonesty from facts which are consistent with honesty or negligence, there must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved: Three Rivers District Council v Bank of England[2001] UKHL 16 ;[2003] 2 AC 1 , [55]-[56] per Lord Hope and [184]-[186] per Lord Millett. b. The requirement for a claimant in proving fraud is that the primary facts proved give rise to an inference of dishonesty or fraud which is more probable than one of innocence or negligence: JSC Bank of Moscow v Kekhman[2015] EWHC 3073 (Comm) at [20] per Bryan J; Surkis & Ors v Poroshenko & Anr[2021] EWHC 2512 (Comm) at [169 (iv)] per Calver J. c. Although not strictly a requirement for such a claim, motive "is a vital ingredient of any rational assessment" of dishonesty: Bank of Toyo-Mitsubishi UFJ Ltd v Baskan Sanayi Ve Pazarlama AS[2009] EWHC 1276 (Ch) at [858] per Briggs J. By and large dishonest people are dishonest for a reason; while establishing a motive for conspiracy is not a legal requirement, the less likely the motive, the less likely the intention to conspire unlawfully: Group Seven Ltd v Nasir[2017] EWHC 2466 (Ch) at [440] per Morgan J. d. Assessing a party's motive to participate in a fraud also requires taking into account the disincentives to participation in the fraud; this includes the disinclination to behave immorally or dishonestly, but also the damage to reputation (both for the individual and, where applicable, the business) and the potential risk to the "liberty of the individuals involved" in case they are found out: Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Sanayi Ve Pazarlama AS[2009] EWHC 1276 (Ch) at [858], [865] per Briggs J. …” "The burden of proof lies on the [claimants] … Although the standard of proof is the same in every civil case, where fraud is alleged cogent evidence is needed to prove it, because the evidence must overcome the inherent improbability that people act dishonestly rather than carelessly. On the other hand inherent improbabilities must be assessed in the light of the actual circumstances of the case." a. It is not open to the Court to infer dishonesty from facts which are consistent with honesty or negligence, there must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved: Three Rivers District Council v Bank of England[2001] UKHL 16 ;[2003] 2 AC 1 , [55]-[56] per Lord Hope and [184]-[186] per Lord Millett. b. The requirement for a claimant in proving fraud is that the primary facts proved give rise to an inference of dishonesty or fraud which is more probable than one of innocence or negligence: JSC Bank of Moscow v Kekhman[2015] EWHC 3073 (Comm) at [20] per Bryan J; Surkis & Ors v Poroshenko & Anr[2021] EWHC 2512 (Comm) at [169 (iv)] per Calver J. c. Although not strictly a requirement for such a claim, motive "is a vital ingredient of any rational assessment" of dishonesty: Bank of Toyo-Mitsubishi UFJ Ltd v Baskan Sanayi Ve Pazarlama AS[2009] EWHC 1276 (Ch) at [858] per Briggs J. By and large dishonest people are dishonest for a reason; while establishing a motive for conspiracy is not a legal requirement, the less likely the motive, the less likely the intention to conspire unlawfully: Group Seven Ltd v Nasir[2017] EWHC 2466 (Ch) at [440] per Morgan J. d. Assessing a party's motive to participate in a fraud also requires taking into account the disincentives to participation in the fraud; this includes the disinclination to behave immorally or dishonestly, but also the damage to reputation (both for the individual and, where applicable, the business) and the potential risk to the "liberty of the individuals involved" in case they are found out: Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Sanayi Ve Pazarlama AS[2009] EWHC 1276 (Ch) at [858], [865] per Briggs J. …”
“(3) The general duties are based on certain common law rules and equitable principles as they apply in relation to directors and have effect in place of those rules and principles as regards the duties owed to a company by a director. (4) The general duties shall be interpreted and applied in the same way as common law rules or equitable principles, and regard shall be had to the corresponding common law rules and equitable principles in interpreting and applying the general duties. (5) The general duties apply to a shadow director of a company where and to the extent that they are capable of so applying.”
“66. … it must be an opportunity which the company/person to whom duties are owed is "actively pursuing". In this case this potentially feeds in to complex factual debates about the latter phase of SCPI's relationship with the Family and whether the opportunity had been essentially abandoned. The Defendants say that a director or other fiduciary will cease to owe duties in respect of an opportunity if the company decides not to pursue the opportunity, leaving the director or other fiduciary free to do so and rely on Queensland Mines Ltd v Hudson (1978) 18 ALR 1 and Peso Silver Mines Ltd v Cropper[1966] SCR 673 . The Claimants submit that these cases are best seen as cases where there was no breach because the principal had given informed consent. 67. I accept these submissions in broad terms. The Queensland case does indeed seem to have been a case about consent, with Lord Scarman expressly referring to the facts of full knowledge and assent. The Peso Silver Mines case however is in my view much more akin to In Plus in that it was a case where the business opportunity was effectively at an end, in that it had been definitively rejected by the board of the company. I conclude that while "active pursuit" will be fact sensitive, the cases indicate that a clear dissociation of the principal from the opportunity will be necessary to justify a conclusion that there is no longer active pursuit of a business opportunity which would otherwise be regarded as a maturing one.”
“It was further said that Gulliver must account for whatever profits he may have made indirectly through his share holding in the two companies, and that an inquiry should be directed for this purpose. As to this, it is sufficient to say that there is no evidence upon which to ground such an inquiry. Indeed, the evidence so far as it goes, shows that neither company has distributed any part of the profit. Finally, it was said that Gulliver must account for the profit on the 200 shares as to which the certificate was in his name. If in fact the shares belonged beneficially to the Swiss company (and that is the assumption for this purpose), the proceeds of sale did not belong to Gulliver, and were rightly paid into the Swiss company's banking account. Gulliver accordingly made no profit for which he is accountable. As regards Gulliver, this appeal should, in my opinion, be dismissed.”
“1575. As I have said, in Regal (Hastings) Ltd v. Gulliver , Mr Gulliver was held not to be accountable for profits made by companies in which he had shareholdings. Lawrence Collins J [in CMS Dolphin v. Simonet[2001] 2 BCLC 704 ] said of that case that it was not authority “for the proposition that where a director puts the profit into a company in which he has an interest he is not accountable for profits”
“31. In Gencor ACP Ltd v Dalby[2000] 2 BCLC 734 , the plaintiff made a large number of claims against a former director, Mr Dalby, for misappropriating its funds. For present purposes the claim which matters is a claim for an account of a secret profit which Mr Dalby procured to be paid by a third party, Balfour Beatty, to a BVI company under his control called Burnstead. Rimer J held, at para 26, that Mr Dalby was accountable for the money received by Burnstead, on the ground that the latter was “in substance little other than Mr Dalby's offshore bank account held in a nominee name”, and “simply … the alter ego through which Mr Dalby enjoyed the profit which he earned in breach of his fiduciary duty to ACP.”
“Further, even within the established categories, the scope and content of the fiduciary duties which are presumed to be owed can be modified and attenuated by the agreement of those to whom they are owed. In the case of the relationship between director and company, Articles of Association may define the director’s duties in specified situations and provide for a narrower duty than might ordinarily apply, or exclude the application of a particular duty in those situations altogether: for example, the standard form Articles of Association inTable A of the Companies Act 1948 and 1985 relaxed the self-dealing rule for directors (as to which see paras 11-086–11-088 below), provided that disclosure of the nature and extent of the director’s interest was made to the Board. An agreement made between all of the shareholders and the company itself and which is stated to take precedence over the Articles of Association is also capable of modifying the duties which would otherwise rest on a director. Moreover, “agreement” in this context is not limited to contracts in the strict sense: what is permissible within the bounds of a fiduciary’s duties will be affected by considerations such as the terms of any contract of engagement, the scope and nature of the business in which his principal is engaged, his role within that business and any understandings between the parties (which may fall short of having contractual force and may be manifested only in a course of dealings) as to the other activities in which he might properly engage.” (footnotes omitted) The last sentence quoted above cites the Privy Council’s decision in New Zealand Netherlands Society “oranje”
“There remains to consider the case of Garton. He stands on a different footing from the other respondents in that he was not a director of Regal. He was Regal's legal adviser; but, in my opinion, he has a short but effective answer to the plaintiffs' claim. He was requested by the Regal directors to apply for 500 shares. They arranged that they themselves should each be responsible for£500 of the Amalgamated capital, and they appealed, by their chairman, to Garton to subscribe the balance of£500 which was required to make up the£3,000 . In law his action, which has resulted in a profit, was taken at the request of Regal, and I know of no principle or authority which would justify a decision that a solicitor must account for profit resulting from a transaction which he has entered into on his own behalf, not merely with the consent, but at the request of his client.”
“The position of the respondent Garton is quite different. He was the solicitor of the plaintiff company and in no sense a trustee for it. True, he made a profit, as did the four directors, but he subscribed for his shares not only with the knowledge, but at the express request, of his clients, and I know of no principle on which he could be held accountable to them for any resultant profit to himself.”
“Like all rules of equity, it is flexible, in the sense that it develops to meet the changing situations and conditions of the time …”
“… In this summary ‘statutory duty’ means the statutory duty imposed by s 175 of the 2006 Act. (i) A company director is in breach of his fiduciary or statutory duty if he exploits for his personal gain (a) opportunities which come to his attention through his role as director or (b) any other opportunities which he could and should exploit for the benefit of the company. (ii) If the shareholders with full knowledge of the relevant facts consent to the director exploiting those opportunities for his own personal gain, then that conduct is not a breach of the fiduciary or statutory duty. (iii) If the shareholders with full knowledge of the relevant facts acquiesce in the director’s proposed conduct, then that may constitute consent. However, consent cannot be inferred from silence unless: (a) the shareholders know that their consent is required, or (b) the circumstances are such that it would be unconscionable for the shareholders to remain silent at the time and object after the event. (iv) For the purposes of propositions (ii) and (iii) full knowledge of the relevant facts does not entail an understanding of their legal incidents. In other words the shareholders need not appreciate that the proposed action would be characterised as a breach of fiduciary or statutory duty.”
“The members of the board of directors and third parties engaged in managing the company’s business must perform their duties will all due diligence and safeguard the interests of the company in good faith.”
“Q. But the standard of care needs to be assessed in the context of taking entrepreneurial risks, doesn’t it? A. Yes, of course. Q. And in a high risk business, the standard of care might be different from a low risk business? A. That is true, but maybe if I might make an addition regarding risk. Risk has a lot to do with the company itself, the company we are talking about, it has a lot to do with the capability of the company to take risks. It has to do with the necessity to take risks in view of the goals of the company etc. So risk has to be seen and looked at with respect to the particular company, its possibilities, its financial means etc. Q. You refer to the goals of the company so I want to look at that. The purpose of the business may require the assumption of particular risks and that would not be a breach necessarily of article 717, would it? A. It would not, of course. Q. In fact, to fulfil the duty, you might need to take the risk? A. Absolutely.”
“Q. But to determine what is in the interests of the company, that is an assessment that the director takes. It is in his view what best promotes the interests of the company, assuming the director acts in good faith? A. It is, as a practical question, but of course the board members have to ask themselves what is in the best interests of the company. It’s not that they are free to decide whatever they think, but they have to strive to find out what pursuing the interests of the company means in any particular situation. Q. But that is why there is a wide discretion is given to the directors; yes? A. Yes, I agree.”
“Q. And so you first of all talk about (ii), a duty to act in good faith and honestly in the best interests of Arcadia Switzerland; yes? A. Right. Q. And we need to read into that a duty to act in good faith and honestly in the way a director considers to be to promote the best interests of the company; yes? A. As I said before, as a practical matter, it is for the board members to determine what in a particular situation is in the best interests of the company but that is not exactly the same as to say the board is free to determine what is in the best interest. Q. But there is a large measure of discretion? A. There is, of course. Q. So assume that the decision-maker acts in good faith and takes a decision in the normal course of trading; yes? Make that assumption. But for whatever reason, that decision turns out badly for a company, there is a loss. Maybe it’s a huge loss. The fact that the decision turns out badly does not mean there is a breach of article 717; correct? A. That’s correct.”
“Q. … You were asked by Mr Eschwege about the circumstances in which the business judgment rule would apply and the degree of deference that a court would accord to a decision taken by a factual organ. And do you see at the start, you say when assessing a potential violation of the duty of care, can I first ask: does the business judgment rule apply when you are considering breaches of the duty of loyalty? A. It does not. Q. What does that mean in practical terms, when a court is adjudicating upon a dispute in Switzerland, what – if the business judgment rule does not apply, what degree of deference will it accord to the decision that is under challenge? A. So if it is then a case of the duty of loyalty and if we are dealing with a case where conflicts of interest are in question, the court would consider whether there was a conflict of interest and whether it was appropriately managed. The business judgment rule does not apply, neither to the question of whether there is a conflict of interest, nor does it technically apply to the question whether the conflict was properly managed if there was one. Q. So will the court decide whether the decision was in the best interests of the company for itself? A. You mean in a duty of loyalty case? Q. Yes. A. Well, in a duty of loyalty case, it will define what is the interest of the company and whether the person who was potentially acting under a conflict first of all disclosed it and whether then appropriate measures were taken. That is the analysis to be conducted. MR JUSTICE HENSHAW: Can I just ask a question on that. Can there be circumstances where deciding what is in the company’s interests is itself a question of business judgment? And if so, will the court necessarily substitute its own view as to that for the view of the company’s management? A. Thank you. So, first of all, to confirm, step one is of course to identify what are the company’s interests in any particular matter, that is absolutely correct. Technically as what the business judgment rule is as crafted by our Supreme Court, it does not apply to this question. But of course, there is vast discretion as for the board members and management to define what corresponds to the interests of the company in a particular situation. It is just not technically a business judgment rule matter because we are not talking about duty of care.”
“Q. I'm now going to ask you some questions about the application of article 717. And what I would like you to consider is whether there would be a breach; whether the factual organs of a company commit a breach of article 717 in the following circumstances. So, suppose you have an organ of a company who diverts profits away from a company, do you consider that this would be a breach of article 717's duty of loyalty? A. Yes, I agree. Q. And what about circumstances in which an organ diverts corporate opportunities away from a company? Do you consider this to be a breach of article 717? A. Well, this is more difficult to be answered. I mean, theoretically you have an enormous amount of opportunities and it may well be that you decide to follow/pursue one of these opportunities and to omit to pursue the other one. Q. But if pursuing the corporate opportunity is in the best interests of the company which you are an organ of, it is a prima facie breach of the duty of loyalty to divert that opportunity away from the company. A. Yes, if you say divert, I agree. If you just have an opportunity, then being the organ of two companies having to decide where to appropriate it, I would not agree. Q. Would it in your evidence be a breach of article 717 if, the consent of the company, the organ diverted profits to a company which he owns or controls? A. Yes. Q. And what about if he diverts corporate opportunities to a company he owns or controls, would that breach the duty of loyalty? A. Again, this is more difficult to be answered. If it is from a bench of opportunities open to both companies, and you select one or the other one, this might be okay and this might have to be accepted in a situation where you have a board member which is also a member of other boards, but if no such wave of interests is needed, then yes.”
“The members of the board of directors and all persons engaged in the business management or liquidation of the company are liable both to the company and to the individual shareholders and creditors for any losses or damage arising from the intentional or negligent breaches of their duties.”
“Where agency activities were not carried out with the best interests of the principal in mind, he is nonetheless entitled to appropriate any resulting benefits….”
“(1) Any person who unlawfully causes damage to another, whether wilfully or negligently, is obliged to provide compensation. (2) A person who wilfully causes damage to another in an immoral manner is likewise obliged to provide compensation.”
“Any person who by law, an official order, a legal transaction or authorisation granted to him, has been entrusted with the management of the property of another or the supervision of such management, and in the course of and in breach of his duties causes or permits that other person to sustain financial loss shall be liable to a custodial sentence not exceeding three years or to a monetary penalty.”
“(1) Where two or more persons have together caused damage, whether as instigator, perpetrator or accomplice, they are jointly and severally liable to the person suffering damage. … (3) Abettors are liable in damages only to the extent that they received a share in the gains or caused damage due to their involvement.”
“Any person who wilfully assists another to commit a felony or a misdemeanour shall be liable to a reduced penalty.”
“Complicity objectively requires that (a) the principal offence is (b) supported by the accomplice. Subjectively (c), the accomplice must be proved both to have acted with intent in relation to the support and the principal offence. As with the principal offence, (d) unlawfulness and (e) culpability must also be established here.”
“if you want to take that on to the next step, Arcadia London sold to somebody else. Are you saying that they funded it as well [?] I don’t understand your—the line which goes that Arcadia London funded it. Arcadia London would have received – let’s call it USD100 or USD100 million from their purchaser and they are not the funder of Arcadia Lebanon.”
“1) From a commercial perspective, if you can avoid fixing into the contract an obligation to pay a fixed fee per barrel for every barrel lifted, then I can see that this would be advantageous for you, as it gives you the flexibility to reward the S/P if the cargoes have been profitable, and not to reward the S/P, if they have not… 3) I think you had in mind that you could cover all this by building into the lump sum payment for the office costs, a substantial margin and reward the S/P an annual discretionary bonus (or even a discretionary fixed fee per barrel, agreed at the outset of each quarter, based on the profitability of the cargoes lifted in the previous quarter)… 4) We have suggested paying office costs and a basic fee for carrying out the services, and thereafter, a discretionary bonus (quarterly or whenever).”
“I had known these people since 1998. I had worked closely with them since 1998 as an employee and as a consultant…I had arranged their cargoes for years on end. So, I mean, once again not everything was documented”
“was simply putting in place letters of credit to enable Arcadia Lebanon to take delivery of the oil. In return, [Attock Mauritius] charged Arcadia a modest fee which was commensurate with the services it provided Arcadia Lebanon (most significantly, opening a letter of credit in its favour). As a result, and given our respective expertise and focus, I was much less involved in the Financing Transactions than in [Attock Mauritius’s] proprietary trades. Mr Mounzer was far more involved in the Financing Transactions.” and: “Arcadia Lebanon asked [Attock Mauritius] to be involved in these trades to provide the finance. As Arcadia Lebanon was a new company, it would not have had its own credit lines that would allow it to lift the crude. At the time, it was a chance for [Attock Mauritius] to work more closely with Arcadia. I believe [Attock Mauritius] was providing Arcadia with a valuable service by giving Arcadia Lebanon access to [Attock Mauritius]’ credit lines, also leaving the Arcadia Group’s other credit lines free for other business, and by providing further distance between Arcadia Lebanon and the Arcadia Group.”
“129. Following the termination of Arcadia’s relationship with AOIL and South Energy, I learned from Mr Bosworth and Mr Hurley that they were owed tens of millions of dollars from the Claimants in unpaid bonuses. They had also lost their source of income. This was not the case (at that stage) for AOIL, which began to trade with BP. I loaned Mr Bosworth US$2,200,000 in 2014 to support him at this time. This was not the first time I had advanced sums I understood were owed to Mr Bosworth and Mr Hurley by the Claimants: 129.1 In September and October 2008, Proview (under my ownership) made two payments totalling US$1,000,017.72 to Mr Hurley. 129.2 In December 2009, Proview (under my ownership) paid US$250,029.74 to Mr Hurley. 129.3 On27 October 2011 , I made a payment of US$1,000,000 to Mr Bosworth. 129.4 In October 2011 and January 2012, I made two payments totalling US$1,885,775.61 to a lawyer called Ms Zarina Khan. I now understand that these funds were used to purchase a property in Barbados beneficially owned by Mr Hurley. 130. As stated above, I made these payments at the request of Mr Bosworth and Mr Hurley. They advised me that they were owed the sums by the Claimants in the form of bonuses and would repay me once they were paid by the Claimants. I agreed to make the payments, I did not ask what the payments were for. I did not think there was a risk of non-repayment, but assumed that the sums which were owed to Mr Bosworth and Mr Hurley had caused them cash-flow issues. I had known Mr Bosworth and Mr Hurley for a long time and trusted them and knew that they were good for the money. Moreover, I always had in mind that I would likely work with (and even potentially for) Arcadia in the future, and therefore it made sense to assist the company’s CEO and CFO where I could. Although not something I discussed with either of them, my bigger aspiration was that, in the future, Mr Bosworth and Mr Hurley might potentially want to join AOIL as principals and that we could grow the company together, including by expanding into paper trading. It felt good to have worked myself to a position where I was able to loan these sums to Mr Bosworth and Mr Hurley when asked to do so, not least as it was Mr Bosworth who I had shadowed at the beginning of my career in West Africa.”
“Q. Wouldn't you have had to disclose this loan in your asset disclosure if you had advanced a loan to Mr Hurley? A. I thought I had disclosed everything. Q. … And if we go over the page, you don't refer to any other loans. So that, if that had been a loan to Mr Hurley, you would have disclosed it, wouldn't you? A. I would have thought so, yes. Q. But you didn't, because it wasn't a loan, was it? A. As far as I'm concerned, it was. Q. That is now what you have come up with as an explanation, but the money you pay Mr Hurley was never to be repaid, was it? A. Yes, it was. Q. And you don't consider yourself to be entitled to be repaid it? A. Yes, I do. Q. You have never asked him to repay it? A. I have asked. Q. Nothing in writing asking him to repay it? A. No, there is nothing in writing. Q. It was an outright transfer of funds from Proview to Mr Hurley? A. As a loan.”
“322. As CEO of the Arcadia Group, Mr Bosworth was paid a salary and various bonuses by the Claimants. 323. As set out at paragraph 239 above, in respect of asset-investment projects, Farahead required and/or expected the Arcadia Group’s senior management and/or senior traders themselves to participate in the relevant asset project and/or contribute their own funds or capital towards the acquisition and/or investment costs for the assets. In particular: (1) The “Farahead Group Asset Investment Schedule” records that such assets projects had a “Farahead Participation” and a “Required Management Participation” on an approximate 70/30 split between the capital contributions of Farahead and those of the Arcadia Group’s senior management. The relevant participations and/or capital contributions of Farahead and “Management” were also set out in the Arcadia Asset Investment Monthly Management Reports provided to Farahead. (2) Any profits (and likewise any losses) from the asset projects were split between Farahead and the Arcadia Group management on a 70/30 basis. A proportion of the bonuses of the Arcadia Group’s senior management and/or senior traders was therefore used towards participation and/or investment in various Arcadia Group asset projects. 324. In 2008, Mr Bosworth, Mr Fredriksen and Mr Trøim discussed a project to construct storage and tank facilities for West Texas Intermediate oil, which was to be based at Cushing, Oklahoma, USA (the “Cushing Storage Project”). 325. Farahead proceeded to invest in the Cushing Storage Project and did so on a 70/30 basis with the Arcadia Group senior management and traders. Accordingly, at the direction and/or instigation of Farahead (and Mr Fredriksen and Mr Trøim in particular), in around late 2008 or early 2009 Mr Bosworth agreed with Farahead to defer payment of US$2m of his 2008 bonus, and in the second half of 2009 to defer payment of US$5m of his 2009 bonus on the basis that: (i) these deferred bonus payments would be invested in and/or contribute to the Cushing Storage Project; and (ii) Mr Bosworth would receive his deferred bonuses payments together with a pro rata share of 30% of any profits (or losses), as allocated to the Arcadia Group senior management and traders, upon the disposal of the Cushing Storage Project. 326. Construction of the storage facilities for the Cushing Storage Project began in 2008 and the tanks were completed in 2009. Two Arcadia Group companies, Parnon Gathering Inc and Parnon Storage Inc, held the relevant equity interests of both Farahead and the Arcadia Group management in the Cushing Storage Project (as shown in the Arcadia Asset Investment Monthly Management Reports). 327. On14 March 2012 , Mr Hurley reported to Mr Trøim that JP Energy Partners LP (“JPE”) had approached the Arcadia Group to purchase Parnon Gathering and Parnon Inc. On2 August 2012 , at Farahead’s instruction, Parnon Gathering and Parnon Inc were sold to JPE, generating a significant profit for the Cushing Storage Project. 328. A Farahead Investment Allocation document shows that the contribution of Mr Bosworth’s 2008 and 2009 bonuses to, and his share of profits on the disposal of, the Cushing Storage Project amount in total to US$11.7m . The same document shows shares of profits due to James Dyer, Paul Adams and Nicholas Wildgoose, the other senior traders involved in the Cushing Storage Project. 329. In breach of the aforesaid agreement in paragraph 325 above, Farahead has failed to pay and/or procure payment to Mr Bosworth of the 2008 and 2009 deferred bonuses awarded to him and/or pay to Mr Bosworth his US$11.7m share of profits on the disposal of the Cushing Storage Project or any part thereof.”
“234. When it came to business development costs associated with investment opportunities, John and Tor requested (which was not as far as I recall ever recorded formally in writing) that Arcadia management and Arcadia employees who wished to invest in additional projects should split these costs with Farahead and any proceeds out of those investments were to be split usually on around a 65/35 or 70/30 basis in favour of John and Tor Olav. Sometimes we used our personal money to invest in these projects, but usually we would forgo bonuses / salaries owed by the company and trusted that we would be made whole in due course. This request was made by Farahead because they were usually willing to invest their own money alongside us and to “win or lose” with us. One example of this was Parnon, which was a project to construct storage and tank facilities WTI oil, which was to be based at Cushing, USA. I invested into this project, alongside Jimmy Dyer, Nick Wildgoose and Paul Adams from Arcadia, and Farahead also invested. I never received from Arcadia what I was owed in connection with this investment following my resignation from the group in March …”
“Q. And if we go, please, to page {F/82/13}, there was an email to you that gave the details of the bid and the potential return. And it is right, isn't it, Mr Trøim, that there was an agreement in place between Farahead and the traders that when Cushing was sold, the traders would get back the bonuses they had invested plus any of the upside. That was the agreement, wasn't it? A. I don't remember the agreement specifically, as I said, about now. But I find it natural that what you are saying is correct.”
“48 This shows the distribution for the entire profit associated with Gathering and Storage. 49 In 2010 a distribution was taken from Storage in the amount of$3.29m and added to the WTI bonus pool. This amount must now be deducted from the WTI bonus pool.”
“Pete, I think amounts due are Asset sale 4.7m net Bonuses WAF 2013 1.8m Against this issues probably raised would be Dubai receivable for you 890k Mo/Chief Advances 680k Merck Kiymetli 1.lm - chief investment Think these both should be recovered but aren’t yet You/me 2013 1.7m (not yet confirmed) 2012 5.55 Withheld as part of 15m from you/me 0.5 …”
“209.2 Those annual bonus payments were absolutely discretionary and not contractual in nature. In particular, if a staff member left the Arcadia Group before any bonus had been paid, they did not (and had no entitlement to) receive it. (Alternatively, this was a term of any contractual agreement, which is denied.) … 209.4 Senior managers’ participations in assets by foregoing their bonuses was of the same absolutely discretionary nature or, alternatively, subject to the same terms.”
“333. In 2005, while Farahead was negotiating with Mitsui the acquisition of Arcadia London, Mr Fredriksen and Mr Trøim also discussed with Mr Bosworth and Mr Hurley the future direction and management of Arcadia London’s business: see paragraph 196(2) above. In the course of those discussions, Mr Fredriksen and Mr Trøim negotiated with Mr Bosworth the terms on which they planned to retain him as Arcadia London (later Arcadia Group) CEO. Mr Fredriksen and Mr Trøim repeatedly told Mr Bosworth that he would become entitled to a substantial bonus upon Farahead’s completion of its acquisition; the parties discussed a sum of US$20m . 334. At this time, upfront and/or joining and/or retention bonuses of this magnitude were not uncommon in the oil trading industry. The amount of the retention bonus reflected Mr Bosworth’s seniority and market standing and the fact that Farahead wanted Mr Bosworth to preside over the global expansion of Arcadia London and its profitable trading activities for several years at least. 335. In about summer 2005, Mr Bosworth requested that, in addition to any bonus, Mr Fredriksen and Mr Trøim make a mortgage loan available to him so as to enable him to purchase a new residence. Mr Fredriksen and Mr Trøim agreed, and on11 August 2005 Fulham Properties (a Fredriksen company) advanced a loan of£10,583,455 to Mr Bosworth and his wife, to acquire their new residence (and secured against it). 336. In the light of the aforesaid discussions, in early 2006 in the course of several meetings between Mr Fredriksen, Mr Trøim, and Mr Bosworth Farahead (Mr Fredriksen and Mr Trøim) agreed with Mr Bosworth that Mr Bosworth would become entitled to a bonus of US$20m upon the completion of the acquisition. The precise date(s) on which the bonus would be paid to Mr Bosworth was left open, but the parties agreed that the bonus would, so far as practicable, be paid out of the Arcadia London (late Arcadia Group) profits in the subsequent years. The fact that payment of the bonus would take place over the coming years reflected its nature as a retention bonus, i.e. it was designed to retain Mr Bosworth’s services for the Arcadia Group. 337. Farahead’s acquisition of Arcadia London completed on16 March 2006 . In accordance with the aforesaid agreement, Mr Bosworth became entitled to the US$20m bonus. 338. Following Farahead’s acquisition, Mr Fredriksen and Mr Trøim regularly discussed with Mr Bosworth the means by which they would pay Mr Bosworth his retention bonus. Mr Fredriksen and Mr Trøim wanted to ensure that payment (whether structured as one or a succession of payments) was made out of the Arcadia Group’s profits/cash without Farahead having to pay over any cash that Arcadia Group had paid to it as a dividend (or otherwise). In particular, over the course 2006 to 2013, Mr Trøim regularly asked Mr Hurley, as the Group CFO, to devise a means of achieving this outcome. 339. Without prejudice to the generality of the foregoing and pending disclosure, Mr Fredriksen and/or Mr Trøim discussed with Mr Bosworth and/or Hurley possible ways of paying Mr Bosworth the US$20m bonus on at least the following occasions: (1) On10 June 2008 , Mr Fredriksen’s secretary Maria Turnbull sent an email on behalf of Mr Fredriksen to Mr Hurley, copying in Mr Fredriksen, Mr Trøim and Mr Bosworth, in respect of a meeting with Mr Fredriksen and Mr Trøim the following day. There were a number of agenda items about the allocation of bonuses, including “outstanding amount to Pete Bosworth”
“162. Separately from the [Fulham Properties] loan, I agreed in my early conversations with John – it is hard to remember exactly when, but we talked about it more than once in the early meetings in about 2006 – that I would receive a USD 20 million retention bonus to be paid in due course. I don’t think we agreed when it would be paid except that it would not be on signing – as I have said, I wanted to show that I was willing to work before I was paid. …”
“I did not agree to pay Mr Bosworth a retention bonus (of US$20 million or otherwise) when Farahead was negotiating to buy Arcadia London. There were some discussions to the effect that Mr Bosworth would be compensated if the acquisition of the Arcadia Group was a success, but there was never any discussion of the quantum of such compensation, nor any solid understanding as to what might trigger such a payment, I was aware that John agreed to loan Mr Bosworth US$20 million to purchase a house in London. That was not any kind of bonus (or a gift). I had understood that this loan was made personally by John to Mr Bosworth, not through the business.”
“A. “The important thing was to −− I think there was even discussed at this stage −− I think I have in my witness statement that there was an overall agreement with or not an agreement, an understanding that when Pete Bosworth brought this into us, he initiated the deal and he came and there was a discussion between Pete Bosworth, John and me that if this became very, very successful, he would have some kind of extra compensation at some stage. I don’t think any specific numbers were mentioned but US$10 million /US$20 million , something like that. I think in connection with this, which was a company he owned, the easiest way would be to say you can take over that company, that is the cash and you don’t need it back again because that was the compensation.” “Q. You discussed with Mr Fredriksen how to get the Arcadia Lebanon dividend payment from Lebanon to Farahead; yes? A. What I said earlier which is in line with what I said two minutes ago, we were considering how to get that profit out from Arcadia Lebanon. One thing, if there was USD15 million there, was to effectively let them take the company which they already owned and they took the 15 million and then we would have that retention bonus which I talked about several times. Another alternative was effectively to forgive that Fulham Properties property loan at some stage if you felt it had been a successful business, to compensate their obligation which was there −− undocumented from 2005 if this turned out very good, that there should be some extra money for Pete Bosworth.” “And that's right, isn't it? The 5 million was used to pay part of Mr Bosworth's bonus, wasn't it? A. I have said that several times. Q. So the answer is yes? A. No. I have said this was not the final settlement of Mr Bosworth, but it was a kind of intermediate – the balance was 20 million. We reduced the balance to 15 but they didn't kind of give away the possibility that you can still come back and claim for the 20 again.” “Q. You said earlier there was a 20 million retention bonus that had been agreed with Mr Bosworth? A. No, I never said that. I said there was an amount, there was no specific amount but there was an understanding that it was USD10/USD20 million is the best kind of recollection I have, if this became very successful. Of course, we paid Mr Bosworth serious amounts of money during the whole operation. He received massive amounts of money out of Arcadia because of the profitability.” “Q. And because the 20 million sum bonus reflected the loan amount that Mr Fredriksen had loaned, that is the reason why the 5 million was set off against the Fulham Properties loan; correct? A. Yes. Those 5 million which came in was used to reduce the loan balance. Q. Because the 20 million loan reflected the 20 million retention bonus? A. No, no. That was just -- it was not like the retention bonus was set at exactly like the price you bought the house for. I think the retention bonus was totally discretionary. There was not any kind of specific amount. We discussed some things because we paid the broker a lot to do the deal as well. Then Pete says if this goes well, I would have some extra money on it. And then we talked about an amount that was 10/20 but this 20 has nothing to do -- there was no agreement, there was nothing in there which kind of linked that to that specific amount at the time.” “If you remember what I said three minutes ago, I said that I'm surprised how little focused he was on that retention bonus but he had, contrary to my recollection, outstanding the house loan which had been there all the time so he felt probably that was some kind of guarantee, that he is pretty safe.” [In relation to the26 March 2012 email referred to above] “Q. There was a deal, wasn't there, the initial deal; yes? A. I described it in my witness statements. But there was a soft deal. There was never any kind of specific amount or a contract linked to this one. Q. The initial deal was USD20 million; correct? A. No, that is what you have assumed and that is not correct. I think it is -- I appreciate if you are not listening to me when I'm saying that, because it is the third time you have put words into my mouth when it comes to the 20 million.” “ … when that deal was entered into in 2005, there was a general understanding that if this business became very, very good for us and things were developing properly, that there was a bonus to be paid to Pete Bosworth, I think that is what we talked about yesterday which you then kind of said was 20 million, which was never agreed as the amount, but I think it was in the 10/20 million depending upon the results. I think we have now seen nothing of 64 million or whatever it was but forget that -- I'm standing by and I might have a different view than Fredriksen on this but I am standing by that there was a commitment because he didn't have a finders' fee when we got it originally. Then you showed me yesterday that we had already at that time advanced a host loan but that was a loan; that it was not a gift. So he had – in bringing us the transaction, he had not been paid$1 from that time.”
“I did not agree to pay Mr Bosworth a retention bonus (of US$20 million or otherwise) when Farahead was negotiating to buy Arcadia London. Nor, to my knowledge, did Mr Trøim. There were some discussions to the effect that Farahead would make sure that Mr Bosworth and his team were appropriately compensated if the acquisition of the Arcadia Group was a success, but we never discussed or agreed any specific payment. My view is that Mr Bosworth was very amply compensated for what the work he did in any event. As I have explained above, I agreed that Mr Bosworth would have a loan of US$20 million to purchase a house in London. This was not, however, a bonus or gift.”
“Consolidated profits for 2007/08 indicates total bonus of maximum$3million according to old agreement. However, due to new agreement with WTI trading team and separate agreement with Charlie and Frode and the general staff, Farahead confirms willingness to consider bonus up to$15.8 million to sort things out and get renewed employment contracts under the new scheme.”
“One thing, if there was USD15 million there, was to effectively let them take the company which they already owned and they took the 15 million and then we would have that retention bonus which I talked about several times. Another alternative was effectively to forgive that Fulham Properties property loan at some stage if you felt it had been a successful business, to compensate their obligation which was there −− undocumented from 2005 if this turned out very good, that there should be some extra money for Pete Bosworth.”
“25.05.2011 Peter Bosworth 30,000,000”
“In March 2013, Mr Bosworth resigned as Arcadia Group CEO. At or around this time, Mr Hurley considered resigning as well. 352. In circumstances in which Farahead was reviewing and reorganising the Arcadia Group operations and management, Mr Trøim sought to persuade Mr Hurley to remain and/or stay as Arcadia Group CFO and work for the Arcadia Group for at least another year in order to help manage the leadership transition. Mr Trøim offered Mr Hurley a US$3m bonus if he would do so. Mr Hurley accepted the offer. 353. Thus, by an oral agreement in or around March 2013 Mr Trøim (on behalf of Farahead) and Mr Hurley agreed that Farahead (or a Farahead entity at Farahead’s direction) would pay Mr Hurley a bonus of US$3m bonus on the basis that Mr Hurley would not resign but agree to continue as Arcadia Group CFO for at least another year. 354. In accordance with the aforesaid agreement, Mr Hurley did not resign as Arcadia Group CFO, but continued his work in his role as Arcadia Group CFO. 355. In September 2013, Mr Trøim summoned Mr Hurley to Mr Fredriksen’s Sloane Square office. At the meeting, Mr Trøim told Mr Hurley that he was dismissed and he would shortly receive a letter to that effect. Mr Hurley asked for payment of his US$3m bonus (as agreed). In response, Mr Trøim refused, and told Mr Hurley that he would have to sue for it. On or around26 September 2013 , Farahead (wrongly) terminated Mr Hurley’s employment and/or role as Arcadia Group CFO.”
“152. There was a USD 3 million bonus that was agreed with Trøim in April 2013, for me staying on after Pete left. This was in lieu of my participation in the bonus pool, and that regardless of any result, I would get USD 3 million for staying on for another year. My understanding was that this would be paid on or around April 2014, but Trøim fired me, and never paid the bonus. They tried to say that I resigned, which is why they weren’t paying it, but that’s not true. 153. I was verbally dismissed in Trøim’s office. During the same meeting, I asked him about the USD 3 million bonus, to which Trøim said “sue me”
“159 I understand from Grosvenor Law that Mr Hurley alleges that, after Mr Bosworth resigned from the Arcadia Group around February 2013, I agreed that he should be entitled to a US$3 million bonus if he remained in post for a year. 160 I am not aware of any such agreements, although I do recall that there may have been some general discussions around additional compensation for Mr Hurley given his importance following the departure of Mr Bosworth. Given the passage of time, I do not recall any specific details of these discussions.”
“The$3 million bonus payment referred to at paragraph 158 of Fredriksen 4 … was something that I agreed with Trøim around February 2013 when I agreed to stay on and work under Paul Adams. My understanding was that this was an incentive for me to assist Arcadia in its transition to a new CEO.”
“I will meet him but I don't like his negotiation tactics particularly with the Atlantic money still not repaid. The responsibility for the bank lines comes back to the shareholders' credibility anyway and if needed, Farahead could be prepared to help”
“Q. The discussion was to finalise the package that Mr Hurley was going to get for him to remain in the group; yes? A. I think this also had -- there were two reasons to keep him there afterwards or to have a kind of relationship with him. Obviously one thing was to sort out this thing which had he set up to a large extent, and also the fact that we had banking lines outstanding which was sizeable which was leveraged against the 300 and we wanted that one to -- the banks indicate not to be too influenced by what was coming on. Q. So it was important for Mr Hurley to stay in the group to maintain banking confidence in the group; would that be fair? A. If the chief executive and the chief financial officer goes at the same time, it raises a big question about lines and you would see banks withdrawing the lines and effectively you have to be forced to accelerate out of the position and that would create a lot of problems and that could hurt the kind of collateral which I have talked about several times. Q. To avoid those sorts of problems, in April 2013 you agreed with Mr Hurley that Farahead would pay him a USD 3 million bonus for Mr Hurley to remain for the following calendar year; yes? A. I don't remember the amount but I remember there was some discussion about having some retention on him if he stayed on and helped us with this thing. I don't specifically remember the number. Q. But there was an agreement for him to stay and be compensated? A. I think the people who dealt with the agreement was Paul Adams but I think generally kind of I think both Mr Fredriksen and I were supportive to the fact that if he stayed on and had value in order to unwind his position and to keep the quietness in the bank, that should be compensated. Q. It was Mr Adams who agreed on behalf of Farahead? A. Paul Adams was not Farahead, he was of course Arcadia at that time. But he was then appointed I think at that time as a chief executive to run the business after Pete left if I remember right, or at least he was kind of the man we related to. I don't know who had the physical position but he was the one who then negotiated with Colin on these things. … Q. ... Mr Hurley's evidence is that there was a USD3 million bonus agreed with you in April for staying on after Pete left; that's right, isn't it, you agreed that bonus with Mr Hurley? A. I don't specifically recollect the USD 3 million amount but I specifically can confirm that there was an agreement that he should have a compensation if he stayed on and this is obviously subject to the fact that he had done a diligent job and there was no fraud in there in the job he had executed to that date.” “As I said, you need to make sure you do kind of what we said from the shareholders that we have no faith in you any longer and we will probably kind of talk to our shareholder representative to get you dismissed, but that is the way it has to act. But I think kind of in general you describe we had no trust in him and from that point, we had a kind of hard part forward. When it comes to the 3 million bonus which I can confirm that there was an understanding of a bonus if he helps us out, we felt that if you discover that people have executed fraud, you are not obliged to pay bonus.” “Q. If the termination was wrong, should never have taken place, then Mr Hurley should have got his bonus, shouldn't he? A. If he was absolutely clean on that thing, then there was a bonus to be paid according to the agreement we entered into when he continued to work for the group earlier in 13.”
“Between at least July 2005 and February 2009, Mr Bosworth used Arcadia London to pay for an array of personal expenses totalling US$2,260,753.55 , which are particularised in Annex E below and include: (i) purchases at retail shops, interior and landscape designers, an art gallery, a bookseller specialised in rare and antique books, a car dealership; (ii) transfers of funds to a real estate agency in Verbier, where Mr Bosworth used to have a property; and (iii) multiple payments to Mr Bosworth’s then wife and for the restaurant she ran at the time (in which Mr Bosworth had a 50% interest).”
“Q. And you didn’t refer to any of these points in your witness statement, I think. A. It’s possible I didn’t. You would have to look quite frankly, I think at the end of each year to see what was reserved in the accounts. Q. ... The total is USD2.26 million. And then we give some credit I think for some payments in the following paragraphs. But you haven’t taken issue with that table? A. I can’t comment. I can comment that the amounts were drawn down by me, but what I can’t comment on is at the end of each year, these would not have been rolled over from an accounting perspective. I’m not an accountant but normally those things wouldn’t be. So they may already have been applied. ”
“1. Farahead’s proposed alternative claim, set out in RRRRAPoC §§ 81A to 81D, is not arguable, based on the paragraphs of the Defence on which it is premised, nor (if relevant) on the evidence. Permission to amend is refused and the conditional permission granted at the PTR is withdrawn. Alternatively, the alternative claim must be struck out. 2. In any event, the proposed alternative claim falls withinCPR 17.4 , it being (at least) reasonably arguable (even after considering the Claimants’ contention in Amended Reply § 200A.2 that section 32(1)(a) and/or (b) of theLimitation Act 1980 applies) that the proposed alternative claim is brought after the end of an applicable limitation period. The proposed alternative claim would add a new claim that does not arise out of the same facts or substantially the same facts as are already in issue on a claim in respect of which Farahead has already claimed a remedy in the proceedings. Accordingly, the amendment to plead the alternative claim cannot be permitted. That constitutes a further ground on which permission to amend must be refused and the conditional consent granted at the PTR must be withdrawn, alternatively the alternative claim must be struck out. 3. It follows that the basis on which permission was granted to make consequential amendments to the Defence, and in due course to the Reply, falls away. Permission to make both those sets of amendments is accordingly also refused, and the conditional permission granted at the PTR for them is withdrawn. Alternatively, both sets of amendments must be struck out. 4. I would in any event have concluded that the amendments to the Reply (apart from §§ 182A, 182B, the first sentence of § 182C, § 182C.3 and §200A) were not consequential on the amendments made to the Defence consequentially upon Farahead’s alternative claim, and were therefore made without permission. 5. I refuse the Claimants’ applications, made to me, for permission to amend. 6. The Claimants are not entitled to cross-examine the Defendants or their witnesses on the basis of unpleaded allegations of dishonesty or other intentional wrongdoing (including such allegations for which there is no subsisting plea pursuant to rulings 1-5 above), save to the extent that the court may in its discretion permit such cross-examination on matters going purely to credit and not to any of the issues in the case. 7. Pursuant to 6 above, the Claimants are not entitled to cross-examine on the basis that any of the Defendants dishonestly or deliberately wrongfully obtained/exercised the opportunity to select retrospectively the pricing basis for crude oil trading transactions. More generally, consistently with the marker laid down by Bryan J at the CMC, the Claimants are not entitled to cross-examine on the basis of any unpleaded case on oil trading practice, nor any unpleaded objection to the terms of any of the 144 Transactions. 8. Nothing in trial to date has precluded the Defendants from seeking, or the court from making, rulings on the above matters at this stage of the trial.”
“My Lord, we haven’t discussed it. The position is what has happened is, as your Lordship knows, these amendments were not served in draft at all. We haven’t had a time for proper disclosure [or] the witness evidence. I accept of course that there is material in the bundle that goes to them and so to that extent, my learned friend may wish to put questions. I suggest that we deal with that in closing, frankly. I am going to make a strong objection to an attempt by the claimants to allege dishonesty in respect of particular invoices which have not been alleged before. It’s not appropriate in a reply to say an invoice is not [genuine] or to accuse people of very serious allegations of dishonesty. That should be in the particulars of claim, not the reply. But, my Lord, I need to be pragmatic, we need to get on with the witnesses. My view is we should deal with it ultimately in closing; we will have a much better idea of where the trial is at that point, but I will be objecting to this attempt by the claimants to bring in these serious allegations at this late stage after the PTR. It’s not appropriate, my Lord.”
“MR HAYDON: Look, I agree with my learned friend that we should be proceeding to witnesses. Obviously we have very different ideas about the amendments and whether they are permitted within the existing order or whether they are consequential etc. But if you are content, my Lord. MR JUSTICE HENSHAW: It will be, frankly, much easier for me to deal with it at that stage than trying to do it now. MR HAYDON: You will have a much better idea of the case as a whole. MR JUSTICE HENSHAW: Yes. Thank you very much.”
“81A. Mr Bosworth and Mr Hurley dispute the Claimants’ case set out in paragraphs 53-54 above as to Farahead’s understanding of the limited purpose to be served by Arcadia Lebanon, contending, in paragraph 205 of their Defence, that Arcadia Lebanon was to conduct higher risk aspects of the Arcadia Group’s West African business and in paragraph 206(2) that it was agreed that Farahead would receive at least the proportion of Arcadia Lebanon’s trading profits that it received from the net trading profits made by the Arcadia Group (the “Alleged ArcLeb Agreement”). The Claimants’ case as to these allegations is set out in paragraphs 158 and 159 of their Reply. 81B. The true profits made by Arcadia Lebanon were wholly concealed from the Claimants until disclosure of its bank statements was made in these proceedings and remain obscure pending an account of the payments made and received by Arcadia Lebanon. 81C As stated in Section H of the Reply: (a) it is denied that Mr Bosworth and Mr Hurley have either paid, or procured Arcadia Lebanon to pay, any “dividend” payments or shares of profit to Farahead or to third parties at Farahead’s direction; and (b) it is denied that payments made by Arcadia Lebanon to third parties were made for the benefit of the Arcadia Group and/or at Farahead’s direction. 81D If (which is denied, in paragraphs 107, 149, 158 of the Reply inter alia) the Alleged ArcLeb Agreement was made, then: (a) on Mr Bosworth and Mr Hurley’s own case, Farahead is entitled to 70% of all of Arcadia Lebanon’s trading profits made before around 2009 and 65% of Arcadia Lebanon’s profits made thereafter; (b) Mr Bosworth and Mr Hurley are in breach of contract for failing to pay Farahead the sums it was and is entitled to receive; and (c) Farahead is entitled to payment of the sums due or, alternatively, damages to be assessed for breach of the Alleged ArcLeb Agreement. Farahead is unable presently to particularise the amount to which it is entitled pending Mr Bosworth and Mr Hurley’s account of payments made and received by Arcadia Lebanon.” (a) it is denied that Mr Bosworth and Mr Hurley have either paid, or procured Arcadia Lebanon to pay, any “dividend” payments or shares of profit to Farahead or to third parties at Farahead’s direction; and (b) it is denied that payments made by Arcadia Lebanon to third parties were made for the benefit of the Arcadia Group and/or at Farahead’s direction. (a) on Mr Bosworth and Mr Hurley’s own case, Farahead is entitled to 70% of all of Arcadia Lebanon’s trading profits made before around 2009 and 65% of Arcadia Lebanon’s profits made thereafter; (b) Mr Bosworth and Mr Hurley are in breach of contract for failing to pay Farahead the sums it was and is entitled to receive; and (c) Farahead is entitled to payment of the sums due or, alternatively, damages to be assessed for breach of the Alleged ArcLeb Agreement. Farahead is unable presently to particularise the amount to which it is entitled pending Mr Bosworth and Mr Hurley’s account of payments made and received by Arcadia Lebanon.”
“Mr Fredriksen and Mr Trøim repeated the instructions in paragraph 205 during the course of further meetings with Mr Bosworth and Mr Hurley. During the course of those discussions: (1) Mr Fredriksen and Mr Trøim did not want Mr Bosworth and Mr Hurley to receive a share of Arcadia Lebanon’s net trading profits which was greater than the share of the Arcadia Group’s net trading profits given to the Arcadia Group traders under the Arcadia Group profit share/bonus arrangements with Farahead. As to those arrangements, in 2006 the Arcadia Group traders were allocated 30% of the Arcadia Group’s net trading profits (from 2009 at the latest it was 35%). After a much smaller (and variable) bonus provision was made for staff other than traders, the remaining balance (i.e. the majority of the net trading profits) was to Farahead’s benefit: see paragraph 197(1) above. Mr Fredriksen and Mr Trøim wanted the same arrangement to apply to Arcadia Lebanon. (2) Mr Bosworth and Mr Hurley wanted to receive a share of Arcadia Lebanon’s net trading profits which was higher than the share which applied in the Farahead/Arcadia Group traders split because of the personal risks which they assumed in holding the Arcadia Lebanon shares and acting as its directors (such as the risks arising from Arcadia Lebanon’s involvement in paying AL Service Providers). The precise split was never finally agreed with Mr Fredriksen and Mr Trøim, although it was to be at least the level that applied in the Farahead/Arcadia Group traders split. (3) The Arcadia Lebanon profit share reflected the fact that Arcadia Lebanon was ultimately under the control and direction of Mr Fredriksen and Mr Trøim via Farahead. Farahead had the power to dictate what happened to the vast majority of Arcadia Lebanon’s net trading profits and/or distributable profits, and exercised such power: see paragraph 230 below.”
“As noted in the Claimants’ affidavit evidence and in paragraph 54.2 of the RRRRAPOC, Farahead discussed with Mr Bosworth a dividend of between US$10 -US$15m from Arcadia Lebanon to Farahead and/or Mr Fredriksen’s companies. This discussion took place after the US$5m payment to Farahead in April 2009: see paragraph 230 above. After the payment of that dividend to Farahead, Mr Fredriksen, Mr Trøim, Mr Bosworth and Mr Hurley discussed payments by Arcadia Lebanon as a way of returning Arcadia Lebanon’s net profits to the Arcadia Group. In particular, on one occasion in 2009, following a request from Mr Fredriksen and/or Mr Trøim, Mr Bosworth informed Mr Fredriksen and Mr Trøim that Arcadia Lebanon had US$11m in available net profits to distribute. Mr Fredriksen and Mr Trøim agreed that Arcadia Lebanon should continue to use part of its net profits from crude oil trading to pay commissions and other expenses on behalf of the Arcadia Group. This effectively transferred Arcadia Lebanon’s net trading profits to the Claimants (because Arcadia Lebanon’s profits were used to pay expenses that the Arcadia Group would otherwise have had to pay itself, and Arcadia Lebanon’s net profits were thereby reduced).”
“36.Section 35 of the Limitation Act 1980 provides, at sub-section (1), that "any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced …on the same date as the original action." Sub-section (3) provides that a new claim will not be allowed after the expiry of any time limit, save as provided for in sub-section (4) and (5). Sub-section (5) permits the addition of a claim involving a new cause of action "if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made." 37. These provisions are given effect byCPR 17.4 , which provides: "(1) This rule applies where – (a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and (b) a period of limitation has expired under – (i) theLimitation Act 1980 ; (ii) theForeign Limitation Periods Act 1984 ; or (iii) any other enactment which allows such an amendment, or under which such an amendment is allowed. (2) The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings." 38. It is conventional to say that four questions need to be answered when considering r.17.4 (see Ballinger v Mercer Limited[2014] EWCA Civ 996 ;[2014] 1 WLR 3597 and Hyde v Nygate[2019] EWHC 1516 (Ch) ). They are: i) Is it reasonably arguable that the opposed amendments are outside the applicable limitation period? ii) Did the proposed amendments seek to add or substitute a new cause of action? iii) Does the new cause of action arise out of the same or substantially the same facts as are already in issue in the existing claim? iv) Should the Court exercise its discretion to allow the amendment?” "(1) This rule applies where – (a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and (b) a period of limitation has expired under – (i) theLimitation Act 1980 ; (ii) theForeign Limitation Periods Act 1984 ; or (iii) any other enactment which allows such an amendment, or under which such an amendment is allowed. (2) The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings." i) Is it reasonably arguable that the opposed amendments are outside the applicable limitation period? ii) Did the proposed amendments seek to add or substitute a new cause of action? iii) Does the new cause of action arise out of the same or substantially the same facts as are already in issue in the existing claim? iv) Should the Court exercise its discretion to allow the amendment?”
“200A.1 The Alternative Claim arises out of the same or substantially the same facts as are already in issue on the Claimants’ other claims. 200A.2 In any event, section 32(1)(a) and/or (b) of theLimitation Act 1980 applies since Mr Bosworth and Mr Hurley: (a) fraudulently failed to account to Farahead for the trading of Arcadia Lebanon, the money received by it, and the proceeds of its investments; and failed to pay the amounts due to Farahead to it; and/or (b) deliberately concealed the same from Farahead.” (a) fraudulently failed to account to Farahead for the trading of Arcadia Lebanon, the money received by it, and the proceeds of its investments; and failed to pay the amounts due to Farahead to it; and/or (b) deliberately concealed the same from Farahead.”
“As set out therein, in 2009 Mr Fredriksen and Mr Trøim agreed that Arcadia Lebanon should continue to use its net profits from crude oil trading to pay commissions and other expenses on behalf of the Arcadia Group, such that Arcadia Lebanon’s net trading profits were effectively transferred to the Claimants. For the avoidance of doubt, Mr Bosworth and Mr Hurley did comply with all such profit share arrangements with FH in respect of Arcadia Lebanon. In the premises, the alternative claim does not arise on Mr Bosworth’s and Mr Hurley’s case as alleged, but advances and pleads a different case from that set out in the Amended Defence (but without giving proper particulars).”
“Paragraph 81B is denied. At Farahead’s request, it was provided with Arcadia Lebanon’s audited financial statements. Arcadia Lebanon’s audited financial statements set out authoritatively Arcadia’s Lebanon’s profits, in particular any net trading profits that were subject to the profit share arrangement with Farahead. Further, Farahead, including at a minimum Mr Trøim and Mr Hannas, sought and received such information regarding Arcadia Lebanon’s profits and available cash as it required from Mr Hurley (at a minimum) and Mr Bosworth. Accordingly, it is denied that any profits were concealed from Farahead.”
“As to paragraph 81D(a), it is denied that the matters alleged are Mr Bosworth’s and Mr Hurley’s “own case”
“Paragraph 76 above is repeated”