On 22 January 2025, Mr Justice Henshaw handed down a 429-page judgment in one of the longest-running and most high-profile cases in the Commercial Court, Arcadia v Bosworth, Hurley & Kelbrick. The Claimants, formerly known as Arcadia Petroleum Limited and now trading as Alta Trading UK, had pursued claims brought under English and Swiss law over a period of ten years, alleging a US$325 million fraud in connection with 144 crude oil transactions conducted between April 2007 and May 2013, which originated in West Africa.
The claim arose out of the business operations of the Arcadia Group, once one of the world's leading oil traders, with a global presence including offices in London, Geneva, Singapore, and the United States. The group was owned and controlled by Farahead, a company linked to John Fredriksen, a Norwegian-Cypriot shipping magnate.
The Claimants alleged that the Defendants orchestrated a fraudulent scheme diverting profits and opportunities away from the Arcadia Group for their own benefit. The Defendants included Arcadia Group's former chief executive (Mr Bosworth), former chief financial officer (Mr Hurley) and a former trader who later operated independently (Mr Kelbrick). A worldwide freezing order was obtained by the Claimants in February 2015. The Claimants alleged that Mr Bosworth and Mr Hurley inserted intermediary entities into crude oil transaction chains involving West African national oil companies. It was these entities which the Claimants said were used as a vehicle for dishonest diversion, extracting profits that would have otherwise flowed to Arcadia. Central to these allegations was the entity known as Arcadia Lebanon.
The Claimants contended that:
- Arcadia Lebanon was beneficially owned and controlled by Bosworth and Hurley.
- Profits totalling US$325 million, plus US$177 million in interest, were dishonestly diverted, amounting to a total claim of US$502 million.
- Payments to Mr Kelbrick's companies were part of the scheme, rather than bona fide service or trading payments.
All the Defendants denied the allegations. They argued that:
- The use of intermediary entities was a legitimate commercial strategy, designed to navigate the compliance and corruption risks inherent in West African oil trading.
- Payments to third-party service providers were necessary and known to the Arcadia Group's ultimate owners.
- Arcadia Lebanon was used as a profit centre and intermediary, and any shares held were for Farahead's benefit, not for personal gain.
Following a ten-week trial held between May and July 2024, all claims including claims alleging dishonesty ([836]-[838]), unlawful means conspiracy ([839]-[842]), breach of fiduciary duty ([843]-[867]), dishonest assistance ([868]-[871]) and knowing receipt ([872]-[875]) were dismissed. Key findings included:
- No fraud had been committed.
- Mr Bosworth and Mr Hurley acted honestly and in the best interests of the Arcadia Group.
- The Court had "no doubt whatsoever" about the honesty of Mr Kelbrick's evidence ([37]).
- Arcadia Lebanon's role was properly disclosed and operated with the knowledge and consent of Farahead and Mr Fredriksen.
Justice Henshaw's judgment was notably critical of the Claimants' conduct and approach to the litigation, finding that:
- John Fredriksen, who authorised the litigation, had convinced himself of fraud and failed to reconsider even in the face of contrary facts ([22]).
- The Claimants had destroyed potentially highly relevant documents during the litigation ([24]).
- The allegations of deliberate deception lacked substance and had been "long-pursued but unmeritorious" ([925]).
The judgment contains considerable discussion of the scope and application of the "no profit" and "no conflict" fiduciary rules which prevent fiduciaries from diverting a company's business and opportunities, ultimately concluding that the Defendants had not violated their obligations. The Defendants were found to have reasonably and genuinely believed they were acting in Arcadia's interests.
Mr Bosworth and Mr Hurley brought counterclaims against the Claimants for unpaid compensation:
- Mr Hurley successfully claimed for US$3 million plus interest.
- Mr Bosworth partially succeeded, receiving US$9.26 million plus interest. However, his claim for a US$20 million retention bonus was dismissed.
These awards added another layer of vindication for the Defendants, demonstrating that they were not only cleared of wrongdoing but were also owed significant sums by their former employer.
The decision brings an end to a decade-long legal battle that spanned multiple jurisdictions and levels of court which showcases the Commercial Court's rigorous approach to fraud claims and fiduciary law. It stands as a comprehensive reaffirmation of the principle that fraud must be proved with clear and convincing evidence.
The judgment serves as a cautionary tale for clients about the importance of robust corporate governance and document management, underscoring the need for clear internal documentation and compliance frameworks. Mr Justice Henshaw critiqued the Claimants' poor document management and selective disclosure as materially weakening their case. Internal controls and record retention during internal investigations, and subsequent litigation, are vital to proving (or defending against) misconduct allegations years later:
- Key witness Dimitris Hannas admitted to shredding 20–25 notebooks of handwritten records even after being told not to (¶54–59).
- Other key individuals were not called to testify despite their central involvement (¶39–46).
- The Claimants lost access to important IT systems (the Trade Capture system), hampering analysis of transactions (¶63).
For clients, the case helpfully illustrates how legitimate commercial strategies in complex international markets can be mischaracterised as fraudulent, especially after changes in ownership or management. Mr Justice Henshaw found that the Defendants' use of intermediaries, "sleeving" arrangements, and special purpose vehicles in West African oil trading—though complex—were consistent with industry practice and not dishonest (¶66–74, ¶376–384). This highlights that, in high-risk sectors like commodity trading, business structures not fully understood in their operational context can be entirely lawful and commercially rational.
This case has broad implications for commercial litigation, particularly in the context of:
1. Long Running International Disputes
The case demonstrates the extraordinary difficulty of proving multi-jurisdictional fraud claims years after the alleged events. It serves as a stark reminder to clients and representatives alike of the dangers of initiating high-stakes litigation without a strong evidential foundation. The Claimants pursued aggressive fraud claims and obtained a worldwide freezing order yet despite voluminous documentation and a multi-year litigation effort, failed to establish their case. Given over a decade had passed between the transactions pertaining to the allegations, and trial itself, the Claimants' case was weakened by fragmented evidence and the absence of key witnesses who either settled or were not called (¶39-46). Notably, the Court found the Defendants' evidence more credible, particularly that of Mr Bosworth and Mr Hurley, highlighting issues with the Claimants' witness credibility and document preservation. Litigators must carefully assess the viability of claims where key individuals or documents are unavailable due to time, jurisdictional barriers etc. Long-running investigations can become counterproductive without early pre-emptive measures.
2. The Use of Freezing Order and their Potential Abuse
The Claimants obtained a worldwide freezing order in 2015, based on an affidavit that later proved inaccurate or incomplete (¶41, ¶60-61). The Court highlighted that the affidavit was not supported by first-hand evidence and contradicted by documents later disclosed. The judgment hints at possible future claims by the Defendants for damages arising for wrongful injunction, particularly given the Defendants' ultimate success (¶41). Litigators should take heed: the Court is prepared to scrutinise the good faith and accuracy of evidence supporting freezing injunctions and overuse or misuse of such orders – particularly based on untested or third-hand affidavits – exposes claimants to liability. Starting high-value fraud litigation without robust proof can lead to major cost and reputational consequences. Lawyers must ensure full and frank disclosure not least when relying on investigatory evidence.
3. The Evidential Burden on Claimants in Alleging Fraud
The case reaffirms the heavy evidential burden placed on Claimants in fraud litigation. Allegations of dishonesty and fraud must be substantiated with compelling, reliable evidence. The judgment clearly highlights the risks of over-reliance on belief and narrative in complex commercial disputes, especially when unsupported by solid documentary or factual evidence. The Claimants heavily relied on complex reconstructions by experts and assertions about industry practice, which the Court found speculative without contemporaneous business records and direct links to the accused individuals. The fact that the Claimants failed to call any witnesses with direct involvement in the 144 transactions (¶39) ultimately undermined the factual foundation of their case; expert reports cannot replace primary factual evidence, especially when the allegations concern dishonesty.
The extent to which fraud claims are difficult to prove should not be overlooked. Courts will not infer dishonesty simply on the basis that business structures appear opaque or high profits were made. This is particularly the case in complex, high-risk industries like oil trading as in the instant case.
4. The Duties & Protections Afforded to Corporate Fiduciaries
The Claimants accused Mr Bosworth and Mr Hurley of breach of fiduciary duty, asserting they diverted business and acted dishonestly. The Court rejected this and:
- Found both men credible and honest witnesses who had made commercial decisions aligned with group strategy, especially regarding the use of intermediaries in West Africa (¶28–30, ¶66–74).
- Noted that structures like Arcadia Lebanon were commonly used to mitigate compliance risks, not to conceal fraud (¶70–74).
- Rejected the premise that Mr Kelbrick owed fiduciary duties at all — he was not a director, officer, or employee of the companies in question (¶13).
The case affirms that corporate fiduciaries are entitled to latitude in commercial strategy, particularly when their actions are consistent with industry norms and approved (explicitly or tacitly) by company leadership. Accusations of disloyalty or conflict of interest must be backed by clear breaches and concealment, not merely suspicion or hindsight criticism.
Originally published May 2025
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.
