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Commodities Company Pays $40 Million Price of Oil Shipping Fraud

Unlike a civil claim, fraud is a criminal offence for which there is no limitation in relation to a claim.  It is a fairly confusing overlap.  The case below however shows clearly that court’s are willing to order damages, well after the fraudulent event has taken place.  In this case, some 23 years after.

Sharp practices and deceit are sadly not uncommon in commerce – but one Court of Appeal case involving numerous shipments of mis-described crude oil showed that the law can catch up with perpetrators no matter how long after the event the truth emerges.

The case concerned 32 bulk shipments of what purported to be particular types of high grade crude to a state oil company (the buyer) between 1993 and 1996. The oil delivered was not in fact of the types specified in the shipping contracts, but was a blend of various forms of cheaper and lower quality oil that was designed to imitate the characteristics of the more expensive crude.

The company that provided the oil (the seller) created a sophisticated trail of false documents which succeeded in taking in the buyer and others. The fraud was not revealed until several years after the event by an oil trader who had formerly worked for the seller but who had turned whistleblower. The buyer launched proceedings in London and its claim in deceit was upheld by a judge, who found that the seller’s defence was wholly unsustainable.

The seller was ordered to pay $40,071,913 in damages to the buyer. Subject to a $1 per barrel discount, that sum reflected the difference between the open market value of the oil that the buyer should have received and the blend which was in fact delivered. The facts of the case emerged as the Court of Appeal dismissed the seller’s challenge to the amount of the award.

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MLA 2017 18 Shortlisted 2