A recent Court of Appeal decision highlights the principles a court will apply when deciding whether a benefit received by a victim of fraud reduces its recoverable loss. The court in this case decided that the claimant's damages for an unlawful means conspiracy could be reduced to reflect any benefit it had obtained by negotiating a settlement limiting its onward liability to a third party – although on the facts no such benefit had been obtained: ED&F Man Capital Markets Ltd v Come Harvest Holdings Ltd and others [2022] EWCA Civ 1704.

A victim of fraud is entitled to damages in a sum that represents all the losses directly flowing from the transaction caused by the fraud. A benefit received by a claimant may be taken into account in assessing damages if it resulted from that transaction, as distinct from some independent separate dealing. In a fraud scenario involving a chain of events, that question will turn on how broadly the court defines the fraudulent transaction.

While each case will depend on its facts, the Court of Appeal's decision in this case confirms that the court should consider the context and substance of the transactions in question rather than purely their legal form when deciding whether they are separate dealings. It also suggests that the relevant factors may include whether a transaction could be expected to have been within the contemplation of the fraudsters and so could be considered part and parcel of the fraudulent scheme.

The question of when a benefit will be taken into account in assessing damages may be an important factor for a victim of fraud to consider as part of its overall strategy to deal with the fallout of the fraud – including when contemplating any settlement of its own potential liability to third parties affected by the fraud.


The claimant was a global financial brokerage business (MCM) who, over a period of time, had entered into multiple nickel repurchase ('repo') contracts with two Hong Kong companies (the HK companies).

Nickel repo transactions are financing arrangements where the owner of the nickel raises funds by selling it to the financer and agreeing to repurchase it in the future at a higher price. What is physically delivered to the buyer/financer is usually not the metal itself but a receipt issued by the metals warehouse storing it, endorsed in favour of the buyer and entitling it to claim the metal upon presentation to the warehouse. Although not title documents, warehouse receipts have a similar role and may be on-sold (with updated endorsements) down a chain of transactions.

Under the repo contracts, MCM paid a total of $284 million for multiple warehouse receipts. It sold them on to a third party financial services company (ANZ), for a total of $291 million.

However, when ANZ presented the receipts to the warehouse to claim the nickel, it emerged that they were in fact worthless copies of the genuine documents. They had been sold to MCM as part of a fraudulent scheme involving the HK companies and the holder of the genuine documents (Straits).

Shortly after the fraud was uncovered, MCM entered into a settlement agreement with ANZ dealing with its liability for its (innocent) on-sale of the forged receipts. The settlement included MCM paying a sum that was undisclosed but stated in the judgment to be less than the $291 million MCM received from ANZ, and also less than the $284 million MCM had paid the HK companies.

MCM then commenced proceedings against various parties including the HK companies and Straits. The claim against Straits, who was the only defendant to participate in the action, included a claim for the tort of unlawful means conspiracy.

The High Court found in favour of MCM. This post on our Banking Litigation Notes blog reports on the court's findings on liability, which included a useful discussion of the elements necessary to establish unlawful means conspiracy.

As to damages, Straits argued that MCM's recoverable loss should be limited to the amount for which it had been able to settle its liability to ANZ. The judge rejected that argument, based on his view that the on-sales of the receipts to ANZ were separate transactions to the fraudulent transactions in which MCM bought the receipts. A key part of his reasoning was that each transaction was in the form of a standalone agreement between principals, rather than MCM acting as an agent or broker for ANZ. Accordingly, any benefit flowing to MCM from its dealings with ANZ arose independently of the circumstances that caused the loss and was irrelevant. The court awarded damages in the amount of the $284 million MCM had paid for the worthless receipts.

Straits appealed the assessment of loss.


The Court of Appeal (Males, Popplewell and Nugee LJJ) upheld the High Court's damages award, though for different reasons.

The court viewed its task as to identify the transaction that caused MCM to acquire the receipts and then identify any benefits it received from that transaction.

Based on the trial judge's findings of fact, the court noted that each of MCM's purchases of the receipts was structured in such a way that the on-sale to ANZ was confirmed in advance and MCM only paid for the receipts when it received its payment from ANZ. The court accepted that Straits was aware of ANZ's involvement and knew that, as well as deceiving MCM, the HK Companies were also deceiving ANZ.

The court therefore disagreed with the trial judge that the on-sales could be treated as separate to the circumstances that had caused the loss. There was a single transaction and a single fraud. Accordingly, any benefit or mitigation of loss flowing from MCM's dealings with ANZ, including the settlement, could be taken into account in assessing MCM's recoverable loss.

However, the court went on to find that the settlement agreement did not in fact limit MCM's liability to ANZ. Rather, it reformulated relations between them regarding the fallout of the fraud, including an agreement that MCM would pursue the proceedings and reimburse the balance of ANZ's actual loss from any damages awarded. The settlement therefore did not give MCM any relevant benefit that reduced its recoverable loss, which remained at the $284 million it had paid for the worthless receipts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.