Neutral Citation Number: [2007] EWHC 1267 (Comm)

Case No: 2004 FOLIO NO: 282
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 25/05/2007

Before:

THE HON. MR. JUSTICE TOMLINSON
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Between:

	(1)	Abu Dhabi Investment Company
(2)	Al Shira’a Marine Investments Company LLC
(3)	Al Suffun Holding Company LLC	Claimants	
	- and -		
	(1)	H Clarkson & Company Limited
(2)	G G Lucas & Company Limited
(3)	ADX Shipping Limited
(formerly Norasia Shipping Limited)
(4)	ADX Services SA
(formerly Norasia Services SA)
(5)	Johann Wilhelm Steiger
(6)	Hartmut Menzel
(7)	Kreditanstalt Fur Wiederaufbau	Defendants	

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Mr. R. Salter QC, Mr. A. Fletcher QC, Mr. G. Chapman & Ms. C. Dixon 
(instructed by Holman Fenwick & Willan) for the Claimants
Mr. A. Baker QC & Mr. M. Ashcroft 
(instructed by Ince & Co.) for the First Defendant
The Second and Fourth Defendants do not appear
The Third Defendant is unrepresented
Mr. M. Hoyle & Ms. A. Laney 
(instructed by Le Boeuf, Lamb, Greene & MacRae) for the Fifth & Sixth Defendants
Mr. A. Popplewell QC & Mr. C. Smith 
(instructed by Stephenson Harwood) for the Seventh Defendant

Hearing dates: October 3-5, 10-12, 18-20, 23-26, 30-31 
November 1-3, 6-9, 13-16, 20-23, 28-29
December 1, 4-7, 18-20
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Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

.............................

MR. JUSTICE TOMLINSON

Mr. Justice Tomlinson: 
Introduction 
1.	There are three Claimants in this action although the second and the third are special purpose subsidiary companies formed by the first named Claimant for the purpose of investing in what was essentially a joint venture between Abu Dhabi Investment Company and Norasia Shipping Limited, i.e. the First Claimant and the Third Defendant.  The joint venture was a vehicle for the investment in and operation of ten relatively small but fast container ships of innovative if not revolutionary design.  The joint venture was an abject failure although it is a moot point what part in the failure was played by possible shortcomings in the design concept.  It was a failure because not long after it had been put together one party thereto discovered that it had been misled by the other joint venturer, with the result that the joint venture could not survive the inevitable breakdown in trust.  Abu Dhabi Investment Company, to which I shall refer hereafter as “ADIC” seeks to recoup its investment therein.  ADIC is, as its name suggests, an investment company.  It is jointly owned by the Abu Dhabi Investment Authority and the National Bank of Abu Dhabi.  Its assets are substantial, albeit by the standard of its owners modest.  In the year to 31 December 1998 ADIC and its subsidiaries had assets of about US$270M.  Norasia Shipping Limited is part of the Norasia group of companies, to which I shall mostly refer as simply “Norasia”.  Norasia was at any rate until the year 2000 well-known in the world of container shipping as a hitherto successful and innovative company operating in niche markets rather than in direct competition with the giants of the industry.
2.	Both the action and, for the first 23 days thereof, the trial involved parties other than those who were the immediate participants in the joint venture.  ADIC sought redress from not just its contracting partner Norasia but also from Norasia’s bankers, Kreditanstalt Fur Wiederaufbau, to which I shall refer as “KfW”, who played a significant role in the transaction, and furthermore they sought redress from their professional advisors, Messrs H Clarkson & Company Limited, “Clarkson”, and Messrs GG Lucas & Company Limited, “Lucas”.  The fourth-named Defendant, as its name suggests, is a service company, which was never served with the proceedings.  Messrs Lucas were served and did participate in the action but proceedings against them were discontinued before trial.  
3.	The trial began on Tuesday 3 October 2006.  Just days before it began on 27 September 2006 all of the members of Norasia Shipping Limited petitioned the court in Bermuda where Norasia Shipping Limited is registered to wind up the company on the ground that effectively it had ceased to trade and was insolvent.  The petition was supported by an affidavit of the fifth-named Defendant Mr. Steiger which exhibited a Board Resolution signed by both him and the sixth-named Defendant Mr. Menzel.  Simultaneously therewith the instructions to London solicitors who had hitherto represented Norasia Shipping Limited in this litigation were withdrawn.  The Claimants are sceptical about the alleged insolvency of Norasia Shipping Limited, so much so that they regarded it as worthwhile to pursue the company and at trial they sought to prove their case against it and they seek judgment accordingly.  
4.	Mr. Steiger is to all intents and purposes the alter ego of the Norasia group of companies which at all material times he effectively controlled.  Mr. Menzel was at all material times a director of Norasia Shipping Limited and, to put it colloquially, was Mr. Steiger’s right-hand man.  Mr. Menzel had no financial interest in Norasia Shipping Limited.  Mr. Steiger and Mr. Menzel were both involved in the negotiations with ADIC which preceded entry into the joint venture.  Both made representations on behalf of Norasia Shipping Limited which unquestionably were intended by them to be relied upon by ADIC with a view to inducing ADIC to enter into the joint venture transaction.  The representations are said by the Claimants to have been made by both Mr. Steiger and Mr. Menzel with deliberate dishonesty.  Notwithstanding their representations were made on behalf of Norasia Shipping Limited, both are sued personally in the tort of deceit.  The Claimants rely upon the by now hallowed words of Lord Hoffmann in Standard Chartered Bank v Pakistan Shipping Corporation 2003 1 AC 959 at page 968, where a fraudulent director sought to escape personal liability by reliance on the representative capacity in which he uttered his falsehoods: 
“No-one can escape liability for his fraud by saying: “I wish to make it clear that I am committing this fraud on behalf of someone else and I am not personally liable”.”
5.	In the alternative the Claimants say that Mr. Steiger and Mr. Menzel were negligent.  They accept that in order to succeed against them under that head they must prove a personal assumption of responsibility, an assumption of a duty of care owed to the Claimants - see Williams v Natural Life Limited 1998 1 WLR 830 at page 835 per Lord Steyn.
6.	On either showing the Claimants claim that Norasia Shipping Limited is answerable for the representations made by Mr. Steiger and Mr. Menzel.  Norasia Shipping Limited in its defence admits and indeed positively avers that at all material times Mr. Steiger and Mr. Menzel were acting on its behalf.  There can be no real debate but that if Mr. Steiger and/or Mr. Menzel made any relevant representation either dishonestly or negligently Norasia Shipping Limited is potentially liable in damages in respect of representations so made on its behalf.  The Claimants also have claims against Norasia Shipping Limited in contract and pursuant to the Misrepresentation Act 1967.  
7.	When the trial began the Claimants were also vigorously pursuing claims against the first-named Defendants Messrs Clarkson and against the Seventh Defendants KfW.  
8.	Clarkson are well-known shipping consultants based in London.  There was a dispute between ADIC and Clarkson as to the ambit of the latter’s retainer by the former but on any showing Clarkson were retained by ADIC to produce and did produce a report which contained advice on the operation of container ships in general and in particular as to the operation of the 10 specialised container ships which were to be the subject of the joint venture.  The Claimants alleged that Clarkson’s advice to them was negligent.  
9.	KfW is a German state-owned bank.  Norasia was a long-standing customer for whom it had financed the building of many vessels, including the 10 ships in respect of which NSL sought and obtained investment by ADIC by way of participation in the joint venture.  From the very outset of the relationship between Norasia and ADIC KfW, as Norasia’s bankers, took an active indeed a proactive role in relation to the negotiations, attending various meetings at which the bank’s officers expressed strong support at the very least for Norasia although allegedly for and of the proposed project itself.  The Claimants alleged that their participation had involved KfW in making statements about Norasia’s financial performance that were either untrue or were a misleading half-truth.  To this I would add that the very manner of KfW’s involvement of itself conveyed, in my judgment, a strong endorsement of the suitability and reliability of Norasia as a prospective joint venture partner.  It was not alleged by the Claimants that KfW by its officers had acted dishonestly – the allegation was one of negligence brought about by an error of judgment as to what could legitimately be said.  
10.	As a state-owned bank KfW presented an attractive and solvent target.  Having regard to the nature and seriousness of the allegations against it, the sudden absence and alleged insolvency of Norasia Shipping Limited and the fact that Mr. Steiger and Mr. Menzel were sued in their personal capacity, it seemed from the outset of the trial that it would be KfW against whom the heaviest fire would initially be directed and upon whom the principal burden of the defensive effort would fall.  With some encouragement from me it was agreed that the Claimants’ witnesses of fact would for the most part be cross-examined first by Mr. Popplewell QC for KfW, then by Mr. Baker QC, as happily he became between Days 6 and 7 of the trial, on behalf of Clarkson and finally by Mr. Hoyle on behalf of Mr. Steiger and Mr. Menzel.  The potential for each of the Claimants’ witnesses to be cross-examined three times required of the Defendants’ counsel for their part restraint and cooperation and of the court patience.  The Defendants’ counsel responded appropriately.  The upshot of the exercise was however inevitably that for the most part Mr. Hoyle cross-examined the Claimants’ witnesses at significantly shorter length than did Mr. Popplewell and Mr. Baker.  Furthermore at the stage at which the Claimants’ factual witnesses were giving their evidence the court was faced with the daunting prospect of, in addition to the Claimants’ own potential 14 factual witnesses, 8 factual witnesses on behalf of KfW and 3 on behalf of Clarkson in addition of course to Mr. Steiger and Mr. Menzel themselves, not to mention 12 expert witnesses in the fields of marine engineering, ship valuation and consultancy, forensic accountancy and the law of the United Arab Emirates.  All this in a trial scheduled to be accommodated in the 48 working days available between the beginning of term and the Christmas vacation.
The Settlement on Day 23
11.	On Monday 13 November 2006, which was Day 23 of the trial, at the conclusion of the evidence of the Claimants’ 9th and, as it proved, final witness of fact, the Claimants, KfW and Clarkson settled their differences.  Shortly thereafter there were discontinued all claims to contribution as between Mr. Steiger and Mr. Menzel and KfW and Clarkson, and all claims to contribution by the departing Defendants against Norasia Shipping Limited – the latter had never asserted claims to contribution against anyone.  There was therefore no need for Clarkson or KfW to take any further part in the trial as no relief was sought against them under any head.  This very welcome development reduced from 13 to 2 the number of outstanding factual witnesses and halved the number of expert witnesses.  It also however meant that the trial assumed a somewhat unbalanced shape.  It meant that whilst Mr. Steiger and Mr. Menzel were each cross-examined only once, their cross-examination was conducted in an atmosphere in which there was little or no pressure of time over and above the ordinary desire to proceed expeditiously since it was apparent that the trial could and would be concluded comfortably within the estimated time, as indeed it was.  In practical terms the effect was that, through no fault of Mr. Hoyle, in broad terms Mr. Steiger and Mr. Menzel were cross-examined at much greater length and in much greater detail about their allegedly dishonest representations than were the Claimants’ witnesses about their alleged reliance thereupon.  To put it into context, both Ms. Hammoudi for ADIC and Mr. Menzel were cross-examined for three and a half days (Mr. Steiger for six) but the three and a half days of Ms. Hammoudi’s cross-examination (where as it happens Mr. Hoyle cross-examined second in turn and for about one day) included cross-examination as to the discrete aspects with which Clarkson and KfW were principally concerned.  The witness in respect of whom it seems to me in retrospect Mr. Steiger and Mr. Menzel may perhaps most have been disadvantaged was Mr. Agarwal.  Once the spotlight of the trial was focused upon the misrepresentations attributed to Mr. Steiger and Mr. Menzel as opposed to the contribution of Clarkson and KfW, so the role played by Mr. Agarwal, an accountant entrusted with the accounting aspects of the Claimants’ due diligence, assumed much greater prominence.  Mr. Agarwal was the penultimate witness for the Claimants, called at a time by which it had begun to appear that the Claimants’ evidence was taking a disproportionately long time.  As it happens Mr. Hoyle cross-examined Mr. Agarwal second in turn too, albeit for only about one and a half hours.  I raise these matters not because I consider that the trial was thereby rendered unfair nor because I consider that the Defendants lacked a proper opportunity to put their case.  Undoubtedly the atmosphere in which Mr. Hoyle cross-examined Mr. Agarwal was more constrained than that in which Mr. Salter QC cross-examined Mr. Steiger and Mr. Menzel.  In fact the scope for detailed cross-examination of Mr. Agarwal was limited by a lack of relevant documentation (ironic in a heavily over-documented case) and by a failure on either side to have kept a record of what it was that Mr. Agarwal had been shown.  As it happens there were suggestions made by Mr. Menzel in his oral evidence as to explanations proffered by him to Mr. Agarwal which suggestions were never put to Mr. Agarwal in cross-examination.  In weighing the inevitable submission that Mr. Menzel’s evidence was in this regard belated invention I have borne in mind the constraints under which Mr. Hoyle was operating, and indeed more generally I have tried to bear in mind the unbalanced shape of the trial.  
The issue at trial
12.	Ultimately the trial resolved itself into an inquiry whether Mr. Steiger and Mr. Menzel made a series of dishonest misrepresentations about the performance of the ships whilst in the service of Norasia.  In evaluating the evidence I have borne in mind the unlikelihood that men of their stature would so behave, the more so where Mr. Menzel had no or no substantial financial interest in the outcome of the joint venture and where Mr. Steiger, although he did have such an interest, had a correspondingly wider reputation as a business man of integrity to preserve.  I also have well in mind that both may well have thought, indeed I am sure that they did think, that in the event that the freight market improved sufficiently from where it then stood, so the rewards to be made from operating these vessels would be sufficient to cover financing and operating costs with a decent return on capital on top.  I also bear in mind that Mr. Steiger and Mr. Menzel quite quickly became frustrated at the speed with which an essentially bureaucratic rather than entrepreneurial organisation moved and that they formed the view, rightly, that those individuals with whom they were dealing had little understanding of the shipping industry.  Reluctantly I have been forced to conclude that there is no explanation for certain things said, or left unsaid, by Mr. Steiger and Mr. Menzel other than that they embarked upon a deliberate policy of misleading ADIC as to the performance of the ships and their financial return to date.  At the end of the day the facts speak for themselves.  However Mr. Steiger and Mr. Menzel did not assist themselves by variously asserting in relation to various matters that ADIC was not interested in them, that if they had been they would have asked questions about them and that ADIC was a sophisticated investment house which ought to and would verify information on the basis of which it was minded to invest.  None of these unattractive assertions justify the giving of false information nor renders it unreasonable for ADIC to have accepted at face value the natural interpretation of what they were told. 
Mr. Hans Steiger
13.	Mr. Steiger is a Swiss national who is now 62.  After training as a fighter pilot with the Swiss air force he turned to accountancy.  In 1982 he bought a large parcel of shares in Norasia Lines Limited, a company registered in Hong Kong.  The shares were bought through his family trust the IWEBA Foundation of Liechtenstein.  In 1983 he joined the company as Executive Vice President in its newly opened administrative office in Fribourg, Switzerland.  He had responsibility for treasury and accounting matters.  Between 1983 and 1990 Mr. Steiger acquired the shares of other shareholders as they became available.  In 1990 he acquired the final 41% of the share capital and became the Chairman and Chief Executive Officer.  The shares were all acquired through the foundation.  Mr. Steiger told me that in addition to himself other family members were also beneficiaries of the trust by which the shares were held.  The trust had been formed by his father.  Mr. Steiger accepted that since 1990 he personally had had effective control over the Norasia group of companies.  It is unclear to me what is the real extent of his personal financial interest, or potential interest, in the trust property, and it probably does not matter.  It is not suggested that anyone other than family members has an interest.  Tellingly in a key document which he himself prepared in February 1999 Mr. Steiger describes himself as the sole shareholder of Norasia.  It is for these reasons that I have already described him as the alter ego of Norasia, which is how at all times he behaved and how, as I understood him frankly and effectively to acknowledge, he would have been perceived.  
The Norasia Group
14.	The same document described the development of Norasia, stating that in 1999 the group of companies had an equity capital of about US$100M.  The structure of the group is of some importance to the issues which I have to decide since the Claimants allege that Mr. Steiger and Mr. Menzel used it in order to further their dishonest design.  The structure which was in place at all material times until May 2000 is represented by an organigram created by Mr. Taylor, the Claimants’ forensic accounting expert, which I gratefully adopt and reproduce here: 
At the head is the main holding company, Norasia Holdings Limited, a Bermuda company.  It had three principal sub-groups as depicted.  Norasia Lines (Malta) Limited, “NLM”, was incorporated in Malta in 1994 and took over from Norasia Lines Hong Kong the operation of Norasia’s liner services in the market.  This move was prompted by Mr. Steiger’s perception of the risks involved in the run-up to the handover of Hong Kong to the People’s Republic of China in 1997.  Quite late in the history with which I am concerned, although shortly before ADIC became irrevocably bound to the transaction in July 2000, the business of NLM and the name “Norasia” was sold to the Chilean Compania Sudamerica de Vapores SA, “CSAV.”  This sale is of no immediate relevance to the relationship with ADIC although it is reflective of the poor financial returns made by Norasia in the conventional container trade in a depressed market in which it had been yet further squeezed by the large global carriers.  By May 2000 when this sale was achieved all of the alleged misrepresentations upon which the Claimants rely had long since been made.  
15.	Norasia Shipping Limited “NSL” was also incorporated in Bermuda in 1989.  NSL was the vehicle through which the group conducted its shipowning activities.  The ships which Norasia owned were registered in the name of one-ship companies, typically Gibraltar companies, each of which was a 100% subsidiary of NSL.  Also within this sub-group was N-Xpress Limited, similarly registered in Gibraltar.  The presence of this company within the sub-group is of significance, since the vessels which were to become the subject of the joint venture were, on delivery to their respective single ship-owning companies, time chartered to N-Xpress for a period of 5 years at a rate of US$15,000 per day.  There were then further marketing arrangements between N-Xpress and NLM which I shall have to describe in due course in some detail.  None of these transactions were ordinary commercial transactions conducted at arm’s length.  The use of the corporate structure in this way meant that perfectly legitimate group accounting treatment could obscure the reality of the return achieved by Norasia on their operation of these vessels.  At a time when the Norasia group as a whole was in financial difficulties, reflecting in large part the poor returns on container ship operations, the audited results of Norasia Shipping Limited gave an impression of profitability without revealing that that success was posited on the recovery from NLM of receivables which NLM was in no position to pay, not least because the amounts contracted to be paid by NLM were unrelated to the returns available in the market.  It was the accounts of NSL which were routinely proffered as being relevant since that was the company in which resided ownership of the vessels whose financial performance was of interest to potential investors.  The accounts of NLM which actually reflected the performance of the vessels in the market were deliberately withheld from potential investors.
16.	The third sub-group of companies within the group was that headed by Norasia Investment Est. Vaduz.  Boxco Ltd. Gibraltar handled the containers on behalf of NLM.  Ganymed Ltd. Malta acted as managers of the Norasia vessels.  Mr. Menzel held 30% of the shares in Ganymed, the remaining 40% being held by an associate of Mr. Steiger, Mr. Barfuss and by Mr. Scholz, the General Manager.  
Mr. Hartmut Menzel
17.	Mr. Menzel is a German national and has since the trial ended retired.  He has a sea-going background with Hapag Lloyd obtaining his Master’s ticket in 1970.  In 1973 he joined Hapag Lloyd’s shore organisation on the operations/commercial side of container shipping.  He worked in various locations and roles, ultimately as managing director of a consortium of container lines before joining Norasia Lines Hong Kong as Vice President Operations in 1984, working out of the Fribourg office.  In 1991 he became President of NLM.  At all times material to this action he was a director of Norasia Shipping Limited, of each of the one-shipowning companies, of N-Xpress and of NLM.  Mr. Salter submitted that Mr. Menzel had thrown in his lot with Mr. Steiger with whose fortunes he was by 1999 inextricably bound up.  Mr. Menzel for his part observed that he looks forward to recourse in retirement to a pension fund quite independent of Mr. Steiger.  Whilst I would not myself wish to portray the position pejoratively, Mr. Salter’s suggested appraisal was in my judgment broadly correct.  Mr. Menzel allied himself to Mr. Steiger’s cause to the extent that he had become his indispensable right hand man who provided continuity of management during Mr. Steiger’s frequent absences travelling on business.  Mr. Steiger’s early training in flying translated into ownership of a private jet aircraft, a point which I mention since a later proposal to dispose of it in order to raise funds for the business is said to be indicative of the dire financial straits in which Mr. Steiger found himself.  Furthermore whilst I treat with some scepticism Mr. Steiger’s attempts to distance himself from everyday familiarity with the performance of the component parts of the group, there is no doubt that Mr. Menzel concerned himself with the day-to-day management and accounting aspects of the business in a manner which Mr. Steiger would have found unattractive had he had himself to adopt it, he being constitutionally more inclined towards strategy and the broader picture.  Their complementary skills made for a formidable partnership, Mr. Steiger’s urbanity counterbalanced by Mr. Menzel’s omniscient competence as the manager of a shipping operation. 
The Ships of the Future
18.	There is no doubt that Mr. Steiger was something of a visionary.  He was by nature inventive and innovative.  Thus between 1985 and 1989 Norasia commissioned the building at the yard of Howaldswerke Deutsche Werft AG, hereinafter “HDW” of 10 new containerships of about 1800-2000 TEU capacity, “TEU” meaning twenty foot trailer equivalent unit, which were known as “Ships of the Future”, a designation derived from a research programme sponsored by the German Government.  They were said to be the first vessels with computer controlled navigation and operation.  An automated bridge was said to ensure safer navigation, a free-fall lifeboat improved safety for the crew.  An asymmetric stern led to low fuel consumption.  In his February 1999 document to which I have already referred, and which at the trial was described as the “Business Plan”, Mr. Steiger asserted that the technology introduced by these vessels was by then standard for any modern containership.  I have no reason to doubt any of these claims.  Four of these vessels were registered in Sharjah and flew the UAE flag.  These vessels were owned by or through AML Arabian Maritime Lines Limited, hereinafter “AML”, a company incorporated in Sharjah in which a Mr. Remu Nagji was a shareholder and of which he was a director.  Mr. Nagji’s company Great Circle Line Limited acted as Norasia’s agents in Dubai.  The vessels were time chartered to Norasia for a period of 12 years.  The success of the “Ships of the Future” led Sealand to choose Norasia in 1989 as a joint service partner in the operation of a weekly liner service between the Far East and Europe.  In this enterprise Norasia was one of the first companies to include calls to ports in the Arabian Gulf en route to the Far East.  This business strategy resulted in Norasia becoming well-known in the Arabian Gulf with good customer support.  In due course Norasia replaced part of its fleet with 4 newbuildings of yet further innovative design including features to reduce the aerodynamic resistance of the vessels – bigger and faster than their predecessors they were also without hatch covers. The scale of the business can be gauged from the financial statements of Norasia Holdings for the period ending 31 March 1996.  Fixed and non current assets were of the order of US$391M, current assets US$81M matched by current liabilities of US$89M financed in part by shareholders’ funds of US$110M.  
19.	Throughout this period of sustained business development Norasia had been supported by KfW which between 1985 and 1997 financed the construction of 10 vessels of between 1700 and 3000 TEU.  As a state-owned bank KfW had a particular interest in funding projects which generated business for German industry – here the shipbuilding contracts with HDW of Kiel.  The total value of the orders was US$0.5 billion and the typical loan to value ratio was 60%.  The period of the loans varied from ten and a half to twelve years.  Norasia performed all of its obligations under the various loan agreements.  The debt was serviced in accordance with the terms thereof.  
The feeder vessel strategy
20.	By the mid 1990s it had become clear to Mr. Steiger that there was over-supply in the container shipping market, caused in large part by competition among liner companies to reduce unit costs which they sought to achieve primarily by the introduction of increasingly large vessels.  The market had also been distorted by the introduction in certain countries of tax incentives to support the local shipbuilding industry.  Against this background, which had produced or contributed to a slump in an in any event notoriously cyclical freight market, Mr. Steiger considered that the way forward for Norasia lay not in attempting to compete with the major global operators but in carving out a niche position as an owner and possibly operator of a new generation of fast but relatively small containerships which would act as “feeder vessels” to the principal East-West trade routes, connecting major hub ports with regional ports and operating regular liner services on North-South routes or other routes where trade volume, size or infrastructure restrictions precluded the use of the largest container vessels.
21.	Initially Mr. Steiger came up with his so-called “triangle plan,” envisaging a new form of fast containership which would have a 30 knot service speed provided by 30 MW of power and would cost US$30M to build.  At 30 knots or possibly even a little more the vessels would undoubtedly have added something to the market and would have had a competitive edge, albeit limited by reference to the trades in which realistically they could in fact operate competitively.  With the assistance of “a British ship designer, Nigel Gee” Mr. Steiger explored the possibility of a “pentamaran” – a hull supported by 4 stabilising sponsons which could achieve speeds in excess of 30 knots.  However the shipping industry is notoriously conservative and Mr. Steiger found that so bold a concept met only with scepticism.  Eventually he compromised, instructing Nigel Gee to design a series of conventional mono-hull vessels capable of carrying up to 10,000 tonnes of cargo at an operating speed of 25 knots.  This speed was to be achieved on a power output of less than 20 MW to be provided by two medium speed diesel engines driving a single controllable-pitch propeller (“CPP”).  These vessels’ sleek hulls were to be unhindered by bilge keels – in their stead the vessels were to have an anti-rolling ballasting device manufactured by a company called Intering.  For reasons which are unclear to me a feature of the design was that the stern of the vessels extended significantly beyond the aft perpendicular, a feature which was to make them susceptible to wave impact.  Mr. Gee’s design was for a nominal capacity of 1384 TEU, included within which was a capacity to accommodate 300 refrigerated containers, a relatively high proportion of the overall space.  This nominal capacity was however unachievable in real terms.  The homogeneous capacity of a container vessel is the maximum number of containers that can be loaded taking into account the vessel’s deadweight on the assumption that the containers are full to an average weight of 14 tonnes.  On this basis the vessels’ capacity was about 845 TEU.  The vessels were gearless, of “open top” design, i.e. without hatch covers and were fitted with cell guides, all features designed to assist in achieving a fast turnaround time in port and to increase the vessels’ versatility.  
22.	On 23 November 1996 Norasia placed an order for five of these vessels, which became known as the “S” Class or fast feeder boxships, “FFB’s,” with the Chinese Jiangnan shipyard.  The basic price of each vessel was US$32.5M.  The contracts called for delivery of the first vessel by 15 December 1998 and of the last by 20 September 1999.  They also provided for a minimum speed of 25 knots on trial with the main engine developing 90% MCR (maximum continuous rating).  
23.	News of the contracts placed with the Chinese yard persuaded HDW to reduce the price which it had previously quoted for construction of five of these vessels.  On 17 February 1997 Norasia placed an order with HDW for five further vessels to be built, substantially, to the same Nigel Gee design.  The basic price for each vessel was here DM 35,800,000 plus US$20,252,000.  Again the contracts provided for a minimum speed on trial of 25 knots, here expressed to be at a power output at the propeller of 18,330 kW.  Delivery was scheduled to take place between June and December 1998, i.e. before the Chinese vessels were to come on stream.  
24.	The financing for this programme of construction was exclusively provided by KfW.  In May 1997 Norasia and KfW jointly made a presentation to a number of German banks who they hoped might take part in a syndication of the lending but no interest was shown.  With the exception therefore of some limited guarantee of the indebtedness furnished by the State of Schleswig Holstein, in which territory Kiel and thus HDW is situated, the risk of default by Norasia lay entirely with KfW who alone funded the fast feeder project.  
25.	Initially, in December 1996, Norasia approached KfW to provide US$51M funding during the construction of the Chinese vessels, a guarantee for US$81M and final funding for the purchase of the vessels of US$130M.  Mr. Uibeleisen of KfW recommended approval, noting that “until now Norasia has always had a good feel for new market developments.”  The KfW Board approved the request on the basis of a presentation dated 13 January 1997 prepared by Mr. Seissinger.  The presentation proceeded upon the basis that the vessels would from delivery for the whole term of the loan be chartered to NLM.  The cash flow forecast was based on an assumed time charter rate of US$12,500 per vessel per day payment of which would be guaranteed by Norasia Holdings Limited which, it was noted, “in turn is owned by Hans Steiger from Switzerland, known to us for many years as a competent ship owner.”
26.	Approval for the funding of the HDW vessels was given by the KfW Board on the basis of a further presentation by Mr. Seissinger dated 22 March 1997.  Similar in terms to the previous presentation, the cash flow forecast this time was based upon a charter rate of US$14,000 per vessel per day.
27.	Although there were earlier facility agreements and Heads of Terms, the formal Loan Agreements were themselves not signed until 4 September 1997.  As one would expect these are complex agreements.  Relevantly however they incorporated the following structure.  The borrower under each agreement was Norasia Shipping Limited, NSL.  The bank took an assignment of all rights and claims of the Owner, NSL, arising from the “respective charter agreement” to be executed between the Owner and the Charterer and to be approved by the bank with notice of assignment to and confirmation thereof by the Charterer in accordance with a draft attached to the Loan Agreement as Annex 4.  Annex 4 recited that the Owner had chartered the ship on a long term basis to Norasia Lines Malta Limited, NLM “or to another charterer acceptable to KfW.”  In order to perfect the assignment the Loan Agreements further required an earnings account for each vessel to be opened at Citibank Zurich into which all hire payable under the charters was to be paid.  Finally there was required of Norasia Holdings Limited a parent company guarantee in respect both of the obligations of the Borrower under the Loan Agreements and of the obligations of the charterer under the long term time charterparties.  
28.	When these vessels were ordered Mr. Steiger had no clear idea as to how or by whom they would be employed.  They were very much his project – with the exception of Mr. Menzel, Mr. Steiger seems not to have consulted his senior management team concerning the wisdom of ordering 10 vessels of this nature.  Certainly Mr. Kerner was not consulted.  Admittedly between 1993 and 1996 he was based in Hong Kong, responsible for sales and marketing for Norasia in the Far East region.  He was however a senior member of the management team who in 1998 became Vice President of commercial operations for Norasia based in Fribourg.  He was one of several former senior employees of Norasia who gave evidence at the trial on behalf of ADIC.  Another was Mr. Vikas Khan who by 1995 was also a Vice President based in Fribourg with responsibility for the overall operations of NLM.  He first heard of the fast feeder boxships in around 1996 or 1997 from talk around the office and then from a casual remark made by Mr. Steiger.  An effort was made at trial on behalf of Mr. Steiger and Mr. Menzel, although not I think by them themselves, to portray Mr. Kerner, Mr. Khan and others including Mr. Zitz as disaffected former employees with a grudge against Norasia or perhaps more accurately against Mr. Steiger.  I found this unconvincing.  To have acquired so many former senior employees whose evidence was apparently to be disregarded as tainted was suggestive rather of some shortcoming on the part of their former employer.  In any event all three were careful and impressive witnesses, Mr. Kerner and Mr. Zitz especially so.  Mr. Khan gave his evidence by video link from Hong Kong.  Somewhat unexpectedly Mr. Steiger appeared at the video conference suite in Hong Kong very shortly before Mr. Khan was due to give his evidence.  He was of course perfectly entitled to attend.  At one time it looked as if Mr. Khan was going to be accused of dishonestly colluding with a Mr. Safdar in removing confidential documents from his previous employers CSAV with whom he was now in competition by virtue of a business he had established since leaving them.  Happily this suggestion was eschewed by Mr. Hoyle, wisely as it seemed to me once I had had an opportunity to read a judgment of the Hong Kong Court of Appeal in certain proceedings between CSAV and Mr. Safdar.  As I have already indicated, I found Mr. Khan a careful witness who whilst giving his evidence conducted himself with some dignity in trying circumstances.  
29.	It was the evidence of Mr. Kerner that these vessels were not an exciting prospect.  Even at 25 knots, which in the event they could not achieve as a consistent service speed, he regarded them as not particularly fast, bearing in mind that there were at that time a number of 6000 TEU vessels which could achieve a nearly comparable speed.  Their inability consistently to achieve 25 knots in service compounded the problem.  They were often full with only 900 TEUs on board, particularly in their first employment in the North Atlantic where, due to the nature of the trade, the average weight of cargo carried is very heavy.  In his view the vessels were never going to make money – economically and commercially they were white elephants.  They were too slow, too small and too expensive to operate.  His evidence was blunt – “the fast feeder boats were a financial disaster from the day that they were delivered.”  In cross-examination he accepted that the S-Class concept could have been a good one if the vessels had been operated in a niche market as intended, but they never were.  Moreover he could identify no market, niche or otherwise, in which the vessels could in fact have been profitably employed.  The feeder concept he regarded as wholly flawed.  Since the feeder leg is by definition only the adjunct to a longer voyage, it is not a leg on which in his view a premium for speed was achievable.  As well as being careful Mr. Kerner was both knowledgeable and balanced.  I found his evidence authoritative and convincing.  Perhaps more pertinently, it was borne out by Norasia’s efforts to employ the vessels.  Equally pertinently, notwithstanding his obvious enthusiasm for the project, it is I think inconceivable that Mr. Steiger cannot himself privately have reached much the same conclusions in the course of 1999.  The S-Class vessels were at best a step on the road towards his triangle plan.  Mr. Menzel I suspect, from his position of greater objectivity, must have reached these conclusions even earlier.
Attempts to charter the vessels in the market
30.	The first vessel, Norasia Samantha, Hull No. 336, was delivered from the HDW Yard in July 1998.  In the period leading up to delivery Norasia had explored a number of avenues with a view to finding employment for the vessels.  Attempts had been made to charter the vessels out.  As early as July 1997 Norasia was in discussions with Mediterranean Shipping Company and SeaLand.  Attempts were also made to interest Moller/Maersk and Evergreen.  According to Mr. Kerner Mr. Steiger told him in early 1998 that he could not secure a charter in the open market for US$15,000 per day and he was therefore looking to employ the ships in one of NLM’s liner services.  The evidence certainly justifies a finding that at all material times no operator would have been prepared to charter the vessels at US$15,000 per day if that is what Mr. Steiger and Mr. Menzel were seeking.  Mr. Menzel said expressly in his evidence that “I was not successful in chartering the vessels at US$15,000.”  He went on to say “I am sure we could have done a deal probably between US$12,000 and US$13,000, at least with Maersk.”  Mr. Steiger for his part said that “Maersk showed an interest at a charter rate of I think it was US$13,000.”  Both of these assertions were to put it charitably hopelessly over-optimistic.  The only foundation for them in the documentary evidence before me is a letter from AP Moller dated 25 February 1998.  The natural reading of that letter is that Moller in fact had no interest in chartering the vessels, although by way of softening the message they indicated that calculations showed that in any event only a charter rate of about US$13,000 could be justified, below Norasia’s “earlier rate indications” which I take to have been at US$15,000 per day.  This was a polite brush-off not an expression of interest.  Whether Mr. Steiger would have been prepared to consider chartering the vessels out at this stage at less than US$15,000 per day I do not know, although in view of the talismanic quality which the figure of US$15,000 per day later achieved, the manner in which Mr. Steiger expressed himself to Mr. Kerner and the fact that Mr. Menzel was expressly looking for a rate of US$15,000 per day, I doubt if Mr. Steiger would have been prepared to fix the ships at below this rate.  However this is perhaps beside the point.  Presumably some time charter employment could have been found at some rate but on the basis of the evidence before me I cannot safely conclude that there was in fact at any material time any container shipping operator expressing a serious interest in chartering these unconventional ships at any price.  CSAV employed some of the ships for a short while after acquiring the line in 2000, but only in order to ensure continuity of the services which they had thus acquired.  That the situation was quite desperate is borne out by the fact that, as it seems to me, Mr. Steiger was again somewhat over-optimistic when he explained to KfW the status of negotiations which he had had with SeaLand with a view to some sort of cooperative venture using the fast feeder boxships.  His letter of 22 April 1998 reads: 
“At a meeting between the undersigned and John Clancy, the CEO of SeaLand, held on 2 April 1998, SeaLand stated that it was prepared to enter into a joint venture agreement for the operation of the 10 new ships, with the deployment of the ships being coordinated between Norasia and SeaLand, and with SeaLand taking over around 5 of the ships under a time-charter arrangement.  An agreement to this effect has not yet been set down in writing.  SeaLand would like above all to take over new buildings 3-5 under a time-charter arrangement for its own use.  We have agreed a time-charter rate of US$15,000 per day.  We have been told to expect a definite go-ahead at the end of April.”
Only two weeks later on 5 May 1998 Mr. Sforza, Vice President of Strategic Planning and Business Development at SeaLand wrote to Mr. Steiger in these terms: 
“Confirming our telephone conversation of earlier today, SeaLand is in the final stages of our evaluation for the potential usage of 3 fast ships.  As indicated, if we move forward, SeaLand would require all three vessels in September upon delivery of the third vessel.
I will contact you next week and update you on the progress.  Hopefully we will be at a stage where we can pursue further discussions relative to charter terms and conditions.”
Nothing came of this – indeed Mr. Khan gave unchallenged evidence to the effect that in the early summer of 1998 Mr. Menzel told him that all the plans for the vessels had fallen through and that Norasia had therefore itself to find employment for them.  Mr. Menzel’s solution was a route from Europe to Canada, the Canadian Express or “CEX” service.  Mr. Kerner gave it as his opinion that this service was devised by Mr. Menzel by calculating how far the fast feeder boats could travel in a week and simply choosing ports to serve within that range.  However that may be, by the time that the decision was taken to employ the first two vessels in this way Norasia had only a very short time within which to make the necessary arrangements to set up the service, a situation exacerbated by Norasia’s poor credit history which led for example to one of the two terminals in Montreal indicating to Mr. Khan that they would deal with Norasia only if it paid in advance for using their services.  On 13 July 1998 Mr. Steiger met with Mr. Reich, Dr. Klaus, Mr. Uibeleisen, Mr. Seissinger and Mr. Proeve of KfW.  He reported that the first two ships would be used in the newly established N-Xpress service on the Antwerp-Felixstowe-Montreal route.  Mr. Proeve’s note of the meeting includes the following: 
“As yet there are obviously no clear plans for the use of the other ships.  Mr. Steiger admitted being in discussions with various potential charterers, including SeaLand, Chiquita and a South African orange juice producer.  In summary, it must be stated that there is nothing concrete.”
Mr. Steiger did not accept that this last comment was accurate.  He said that he had very concrete plans for the first 5 ships to put them on the service Canada-North Europe-Mediterranean and back.  It was only in relation to the next 5 ships that he was canvassing further possibilities.  I cannot accept this evidence.  Mr. Kerner said that it was out of desperation what to do with the further vessels as they became available that the CEX service was extended to include the Mediterranean.  On 18 June 1998 Mr. Steiger and Mr. Menzel executed an agreement and an addendum thereto between N-Xpress and NLM to which I must refer in greater detail in due course.  It dealt with the marketing of slots on the vessels.  As Mr. Menzel explained in evidence these agreements were unworkable by reference to a service which included legs from Northern Europe to the Mediterranean and the Mediterranean to Northern Europe.  The agreement was only amended to cater for this extension to the service on 5 October 1998.  It seems to me likely that the decision to extend the service into the Mediterranean was taken rather later than Mr. Steiger asserts, probably in early October shortly before the third vessel was delivered.  The second vessel had meanwhile been delivered on 6 August.  This at the least enabled Norasia to offer a weekly service which hitherto they had been unable to achieve.  
Norasia’s financial difficulties 1996-1998
31.	I have already set out a snapshot of Norasia’s financial position as at 31 March 1996, the last reporting period before in November 1996 and February 1997 Norasia committed itself to the 10 S-Class vessels.  Whilst the balance sheet was strong, it should perhaps be noted that the financial statements for NLM, the main operating arm of the group, show for the year ended 31 March 1996 a profit before tax of only US$11,327 on a turnover of in excess of US$350M.  However during the financial year from 1 April 1996 to 31 March 1997 Norasia was hit hard by the collapse in freight rates, KfW expressing the view internally that Norasia did not have sufficient substance to survive a long-term collapse in the market.  NLM suffered an operating loss of almost US$30M and whilst this was to an extent covered by the parent company through results in other divisions, cash payments and other loans, Norasia Holdings itself showed a loss of US$7.7M.  A particular running sore for Norasia was created by its relationship with Conti, a German tax shelter company based in Munich with whom it had entered into sale and leaseback transactions in respect of 4 vessels.  The upshot was that by 1997 NLM had on 5 year charter from Conti four Fribourg Class ships of 3200 TEU at rates which were way above the prevailing market.  The daily hire commitment was about US$100,000, producing for Norasia serious cash flow problems.  On 23 December 1997 KfW approved a liquidity loan to Norasia of US$6M in order to facilitate the payment of charter hire to Conti.  Outstanding hire was said at this time to be US$6M and DM 6M.  Inevitably with the market showing no sign of improvement so Norasia’s position worsened.  In the year to 31 March 1998 NLM made an operating loss of US$48.3M.  Norasia Holdings recorded a loss of US$16.8M and an excess of current liabilities over current assets of US$9.8M.  KfW’s assessment of the situation as at 15 December 1997 was that the collapse of freight rates had hit Norasia hard before it had been able to complete its planned withdrawal from the operation of large containerships.  
32.	Throughout 1998 the financial position worsened, now exacerbated by heavy costs incurred in hastily setting up the CEX service, costs which Mr. Steiger estimated as being at least US$10M, and heavy losses incurred in actually operating the S-Class vessels in the CEX service as they were delivered.  The HDW vessels, alone relevant for present purposes, were delivered as follows: 
Samantha 16 July 1998
Savannah 6 August 1998
Salome (sometimes known as Shamsaa or Shamsha) 8 October 1998
Sheba 3 November 1998
Scarlet 28 January 1999.
Losses on the CEX service between July 1998 and 31 March 1999 were calculated by Mr. Taylor, the Claimants’ expert forensic accountant, as being US$11,234,611, a calculation which Mr. Steiger and Mr. Menzel did not attempt to challenge.  Their expert forensic accountant witness was instructed not to consider the issue.  Initially a weekly service between north Europe and Montreal performed by two vessels, by February 1999 all 5 HDW vessels were operating a 5 week round voyage as follows: 
Week 1 Depart Montreal Eastbound
Week 2 depart Le Havre Southbound
Week 3 the vessel reaches Alexandria, the furthest point served in the Mediterranean 
Week 4 depart Genoa Northbound
Week 5 depart Zeebrugge or Southampton Westbound.
The slot marketing contract between N-Xpress and NLM
33.	I must next describe the strange internal contractual structure set up by Norasia pursuant to which the vessels operated whilst in the CEX service.  In the context of the allegations made in this case this is of some importance.  Without a full explanation of the structure, which was never offered to them, ADIC had little chance of understanding the significance of some of the figures which were provided to them as being allegedly relevant to an evaluation of the financial performance of the vessels.
34.	It will be recalled that the Loan Agreements called for a long-term charters to NLM or to another charterer acceptable to KfW.  Each of the HDW vessels was in fact as from delivery from the yard chartered by its single shipowning company to N-Xpress Limited Gibraltar.   Each charter was on the Boxtime form of charterparty for 5 years at a daily rate of hire of US$15,000.  It will also be recalled that N-Xpress Limited Gibraltar is a 100 percent wholly owned subsidiary of NSL, of which in turn the individual shipowning companies were themselves 100 percent subsidiaries.  The charters were dated as follows: 
Samantha and Savannah 20 May 1998
Salome 20 August 1998
Sheba 20 October 1998
Scarlet 11 January 1999.
Although not documented in the evidence before me KfW must have approved of this arrangement.  Mr. Steiger said that this structure was in fact required by the bank.  This seems to me wholly implausible.  There is no reason why the bank should have required it.  Mr. Menzel could supply no reason for the interposition of N-Xpress between NSL or the shipowning companies and NLM.  He said simply that it was a structure that Mr. Steiger discussed with the bank.
35.	The Chinese vessels did not operate in the CEX service and the first of them, Sultana, was not delivered until 7 September 1999.  At any rate the Sultana and the Selina, delivered on 4 December 1999, were like the HDW ships chartered as from delivery for five years at US$15,000 per day to N-Xpress Gibraltar by charterparties of 9 July 1999 and 24 September 1999 respectively.  It can also be noted that the first four Chinese ships were in fact owned by two companies, rather than by four, whilst the fifth vessel, the Sabrina, delivered on 14 November 2000, was sold directly by NSL to ADCL without even passing through a NSL subsidiary shipowning company.  
36.	On 18 June 1998, i.e. shortly before delivery of the first HDW vessel, N-Xpress in the shape of Mr. Steiger and NLM in the shape of Mr. Menzel executed an agreement relating to the operation of the vessels.  Recitals D and E provided: 
“(D) Certain of the Newbuildings (elsewhere defined to mean all 10 Newbuildings) will be time chartered by their respective Owners to companies outside of the Norasia Holdings Limited group of companies and the remainder will be time chartered to N-Xpress (such of the Newbuildings which are time chartered to N-Xpress being hereinafter called the “N-Xpress Ships”).
(E) N-Xpress intends by this Agreement to appoint Lines (elsewhere defined as Norasia Lines (Malta) Limited) as its agent to market the hire of Slots on the N-Xpress Ships on its behalf.”
The agreement proceeded by its terms to do just that – N-Xpress appointed NLM to act as its agent for the hiring out of slots on the N-Xpress Ships.  NLM was not without the express consent of N-Xpress to hire out any slot at a rate below such minimum rates as were from time-to-time to be specified by written instruction or in an addendum to the agreement.  Reflecting the term in the Loan Agreements regarding the setting up of dedicated earnings accounts for the vessels at Citibank Zurich, NLM was to procure, as a term of all slot charters entered into by it on behalf of N-Xpress, that all monies earned from the hire of slots on N-Xpress Ships pursuant to such charters be paid directly by the slot charterers to a bank account in the name of N-Xpress with Citibank Zurich.  For its services NLM was to be paid by N-Xpress a commission of 5 percent on revenue received by N-Xpress from the hiring out of slots on the ships.  For an internal agreement there was a law and arbitration agreement of some formality – the agreement was governed by English Law and disputes were to be resolved by arbitration under the auspices of the International Chamber of Commerce.  Mr. Steiger said in evidence that this agreement had been drafted by Mr. George Hodgkinson, a partner in Messrs Sinclair Roche and Temperley, the solicitors who acted for KfW in connection with the Loan Agreements and indeed Mr. Hodgkinson’s initials “GHH” appear at the foot of each page of the agreement.  
37.	On apparently the same day, 18 June 1998, Mr. Steiger and Mr. Menzel executed an addendum to this agreement.  Although it was not I think noticed at trial the second and final page of this addendum in fact also bears Mr. Hodgkinson’s initials, albeit here with a different reference number.  That notwithstanding Mr. Menzel said in evidence (Day 29 page 147) that Addendum Number 1 was, in contrast to the agreement itself, prepared within Norasia.  Mr. Steiger for his part gave an answer (Day 29 page 66) which in retrospect I can see may have been intended to convey that Mr. Hodgkinson drafted this first addendum to the agreement as well as the agreement itself.  In view of this confusion it would not be right to infer, as I was invited to by the Claimants, that KfW was not informed about the first addendum although it seems unlikely that they can have known or approved of the manner in which the agreement was in fact operated since they subsequently claimed that no monies appeared to have been remitted to the earnings accounts.  What is important however is that the addendum, somewhat ambiguous on its face, was apparently intended to transform the nature of the original agreement.  On the face of it the purpose of the addendum was simply to supply the minimum authorised rates at which NLM could sell slots on the vessels.  Clause 2 read, so far as material, “[NLM] shall not without the…consent…of N-Xpress conclude any contract for hiring out any slot below the following minimum rates” and there then followed a list of rates which included “US$105 per Leg per TEU for unused slots up to max. 750 TEU’s/vessel.”  “Leg” was defined as a voyage from a port in Europe to a port in Canada or vice versa but even with this elucidation the provision is on the face of it senseless since NLM would hardly be concluding contracts for slots which were to be unused.  However the intention was apparently that NLM should be under an obligation to pay for unused slots on the basis that on each Leg a minimum of 750 slots should be utilised.  The evidence given concerning this agreement was confused and confusing, compounded by the fact that it was not until Day 28 of the trial, the penultimate day on which Mr. Steiger gave evidence, that Norasia disclosed a file of debit and credit notes generated by N-Xpress and NLM which demonstrated how the agreement had in fact been operated in practice.  On 5 October 1998 Mr. Steiger and Mr. Menzel entered into a second addendum to this agreement which dealt with the forthcoming extension of the service into the Mediterranean, a development to which I have already adverted.  A further tariff was introduced for voyages including Mediterranean ports and the charge for unused slots was increased to US$112.50, now expressed to be per week rather than per Leg.  The trigger remained “for any unused slots up max. (sic) 750 TEU/vessel/week.”  It is not entirely clear to me why in fact this second addendum was executed, bearing in mind that according to Mr. Steiger, and as borne out by the belatedly disclosed documents, the arrangements with differential price structure turned out to be “too complicated” and they were in consequence simplified.  The “simplified arrangements” had the effect that at one stage NLM paid a flat rate slot cost of US$275 per TEU up to 500 TEU’s, US$250 per TEU if the volume was above 500 and they were charged also for the shortfall below 750 TEUs at US$105 per TEU.  At other stages the fixed but arbitrary charges were different.  NLM seem also to have had to pay N-Xpress a fixed cost for repositioning empty containers.  As far as I can see the agency agreement was never in fact operated according to its terms at all, i.e. it never operated as an agency agreement and the pricing structure adopted did not follow the addenda.  Mr. Steiger said that he thought that this “simplification” had been put into writing but if there was such a document it has not been disclosed.  
38.	The upshot of all this is that the revenue which in consequence accrued to N-Xpress from NLM was not the vessels’ earnings in the market.  NLM received the vessels’ true income generated in the CEX service.  The revenue of N-Xpress, all derived from NLM, was wholly unrelated to the actual performance of the vessels in the prevailing market conditions.  By these agreements or arrangements, as they were interpreted and operated, N-Xpress was guaranteed a certain income irrespective of the volume of cargo actually carried and the rates paid by cargo interests for its carriage.  NLM not N-Xpress carried the market risk, at any rate theoretically, since NLM was of course in no position to pay N-Xpress money which it had not in fact generated in the market.  Thus according to the belatedly disclosed documents in the period from commencement of the CEX service in July 1998 until 31 March 1999 N-Xpress raised charges on NLM of US$18,452,480, broken down as US$12,951,982 for used slots and US$5,399,580 for unused slots.  This figure is close to that of US$18,742,000 shown in the NSL consolidated statement of income for the year ended 31 March 1999 as “charter hire.”  (It is possible that this latter figure includes income generated in the short introductory period during which the service was operated with chartered-in conventional tonnage.)  Although the accounts did not reveal it, about US$8M out of the total US$18.7M had not been paid, and NLM was in no position to pay.  
39.	It is worth noting that the total sum which in consequence accrued due from NLM to N-Xpress equates to more than US$15,000 per vessel per day.  However since the vessels were not in fact chartered to NLM, N-Xpress bore the cost of bunkers, port charges etc. in addition to the ordinary operating costs and the US$15,000 per vessel per day payable by it to the single ship-owning companies.  No accounts of N-Xpress have been disclosed, but, as is clear from the foregoing, financial statements of neither that company nor of NSL reflected the financial results or outcome of the operation of the S-Class vessels in the CEX service.  Information as to the performance of the vessels was however at all times available to Mr. Steiger and to Mr. Menzel in the shape of internal management accounts prepared for NLM by a Mr. Theodor Pauw.  Although management accounts were apparently produced on a weekly basis, only a few have been disclosed.  It is said that as a result of the sale of the business of NLM to CSAV these are all that could be located.  However that may be, in order to be useful management accounts must have been produced with a frequency sufficient to render them, as Mr. Menzel described them, an “interim tool for the management to monitor financial performance.”  Obviously the “nearly contemporaneous snapshots of the performance of Norasia’s business” which they afforded were by their nature provisional since invoices might be received or income and expenses referable to a particular period ascertained or assigned only some time after the period to which it or they related.  As I have already set out above, analysis of such management accounts as are available together with the further information concerning how in practice the agreement between N-Xpress and NLM was operated reveals that the CEX service made a loss of US$11,248,611 between July 1998 and 31 March 1999.  It was no doubt because of these mounting losses that at the end of March 1999 Norasia decided to switch the S-Class vessels into a transpacific service from South East Asia to the West Coast of North America, to become known as the “APX” Service. 
40.	The S-Class vessels were transferred to the new service in June 1999, beginning sailings in July.  The CEX service was continued with first 7 then 6 conventional vessels which were chartered in.  Despite the lower operating costs of these vessels the CEX service continued to make heavy losses until it was closed down in February 2000 with the heavy start-up costs in consequence also unrecovered.  From July 1999 until May 2000 the S-Class vessels continued to serve in the APX service.  In May 2000 Norasia sold its liner business (and brand name) to CSAV.  NSL and the S-Class ships were not included in the sale.  Six of the ships were time chartered to CSAV for relatively short periods (in 4 cases 180 days, otherwise 20 and 30 days) to enable them to continue to operate the service in the short-term.  Others of the ships began in July 2000 to operate in a newly established Hong Kong to Trieste service.  By now however ADIC had become contractually committed to invest or to procure the investment of US$80M in order to enable the newly created ADCL to purchase the ships from Norasia.  I must next turn to summarise the critical situation in which Norasia found itself in the early months of 1999 which in turn led Mr. Steiger to search for a partner willing to invest in the S-Class vessels.  
Norasia’s financial difficulties 1998-1999
41.	I have already described the heavy losses suffered by Norasia in the year to 31 March 1998.  It was against this background that the S-Class vessels began to be delivered and to commence operations in the CEX service.  In particular, Norasia began to experience severe cash flow embarrassments and the evidence of the former employees bore testimony to their difficulty in juggling the demands of the various creditors.  By July 1998 Norasia had fallen into default of its obligations under its container leasing agreement with Transamerica.  Norasia was four months in arrears.  Something of the order of US$3.5M was outstanding.  On 29 July 1998 Transamerica threatened legal action unless they received an immediate payment of US$2.5M and weekly payments of US$200,000 thereafter.  On 31 July they followed up their threat by arresting the containers onboard the Samantha at Antwerp which of course contained cargo which Norasia had contracted to deliver.  This was an inauspicious start for the Samantha on her second voyage and a serious embarrassment to the Line.  By August 1998 the arrears to Conti had again reached US$6M.  Norasia asked KfW to reinstate the liquidity loan to its original US$6M, in effect an advance by the bank of a further US$4M.  KfW agreed, not just because they wished to support a hitherto reliable customer in whom they had trust and confidence but also because they did not wish the liquidity problems to affect the whole Fast Feeder project to which they were of course by now committed.  By November 1998 Norasia was not in a position to pay US$2M due to HDW on the delivery of Hull 339, the Sheba.  At a meeting with KfW and the yard on 4 November, at which meeting HDW agreed to defer payment of the outstanding amount until 31 March 1999, Norasia in the persons of Mr. Steiger and Mr. Menzel explained that they did not anticipate in the short term any improvement in the market which would resolve their difficult situation.  Norasia was said to be in active negotiations with a view to finding a partner to join them in the Fast Feeder project and with whom they hoped to be able to continue to operate the 5 HDW vessels.  KfW and the yard were told that Norasia expected the negotiations to be successful by January 1999, with the prospective partner joining within that timescale.  In such circumstances Norasia would repay all amounts outstanding to HDW and reduce its indebtedness to KfW.
Norasia’s search for a partner
42.	Although Mr. Steiger was in evidence inclined to downplay both the necessity for a financially strong partner and the urgency of the search, I have no doubt that both the need and the urgency were real and were communicated at the time by Norasia to KfW and HDW.  On the other hand Mr. Steiger was unable to recall any very concrete discussions which would have justified the prediction of a successful outcome by January 1999.  There were discussions with an American company concerning a possible sale and leaseback but nothing came of this.  In early October 1998 Mr. Steiger had a first meeting with Mr. Dahm and Mr. Perry of Credit Agricole Indosuez – hereinafter “CAI.”  CAI acted as advisors for clients who had “offset” obligations under contracts to supply military hardware to the UEA.  Apparently these substantial contracts imposed upon the suppliers an obligation to invest a certain percentage of the contract value in the UEA.  Investments had to be made within a certain timeframe otherwise the supplier had to repay to the buyer the sums not invested.  CAI was considering the setting up of a shipping company in Abu Dhabi in which their clients could invest as shareholders together with local partners.  The scheme was similar to that in which Norasia had participated with AML Arabian Maritime Lines Limited.  In connection with this proposal on 7 January 1999 Mr. Steiger prepared a short, 8 page presentation document to which he gave the title Abu Dhabi Container Lines Limited (“ADCL”).  That document proposed the use of the 10 “new type of container vessels” under the umbrella of ADCL in a regional distribution network based in Abu Dhabi.  Nothing came directly of the offset proposal although indirectly it led to Norasia and ADIC being introduced.  Mr. Steiger discussed the offset proposal with his old friend and business associate Mr. Nagji.  Mr. Nagji in turn introduced Mr. Steiger to his friend Mr. Richard Cox who was evidently well connected in Abu Dhabi.  In particular Mr. Cox had a personal connection with Sheikh Sultan or at any rate with his office, Sheikh Sultan being the son of the then Ruler of Abu Dhabi Sheikh Zayed.  Sheikh Sultan was at the time himself a person of great possibly central importance and influence in the commercial life of Abu Dhabi.  It was Mr. Steiger’s evidence that at a meeting on 25 January 1999 Mr. Cox mentioned to him that it would be helpful to have a more detailed presentation regarding the proposed formation of ADCL and that he accordingly produced the document of 1 February 1999 with appendices (“Enclosures”) which at trial was referred to, possibly somewhat inaccurately, as the “Business Plan.”
43.	Norasia, by Mr. Steiger, was involved in meetings and discussions between October 1998 and April 1999 with various potential “offset” partners including the Oasis Group and the French groups GIAT Industrials and Dassault Aviation.  Ultimately these discussions were fruitless but through them and possibly through the offices of Mr. Cox in early April Mr. Steiger met in Dubai with Sheikh Saeed, the Chairman of the Abu Dhabi Port Authority.  Evidently the port of Abu Dhabi, “Mina Zayed,” was regarded at the time as an underused facility, ripe for development.  Sheikh Saeed welcomed the ADCL project and promised support from both the Port Authority and the Government.  In due course through the good offices of a Mr. Jamal Souaiss Mr. Steiger was introduced to ADIC.  Mr. Cox made the arrangements for the first meeting which took place on 12 April 1999.  I have no doubt that by the time Mr. Steiger met with ADIC, of whom he said he had never heard before early April 1999, he had the firm impression that the ADCL project which he was taking to them had the backing of not just the Port Authority but also of Sheikh Sultan himself.  
44.	On any view by the time that Mr. Steiger met ADIC all other avenues explored with a view to finding a partner had come to nothing.  A situation which was bad when in early November 1998 Norasia first told KfW of their search for a partner had deteriorated still further.  Shortly after that meeting KfW discovered that the hitherto trustworthy and reliable Norasia was not performing the Loan Agreements in accordance with their terms – there was virtually no credit balance in the earnings accounts at Citibank Zurich into which the charter hire of US$15,000 per day due from N-Xpress was required to be paid, having been assigned to KfW as part security for performance of the agreements.  It is perhaps from this incident that one can date a growing impatience on the part of KfW with Mr. Steiger with whose interests they were however closely allied.  Whilst pointing out the irregularity concerning the earnings accounts on 17 November 1998 KfW found it necessary also to point out that the first payments of principal and interest were due in mid January 1999 and they enquired what plans Norasia had for servicing the loan.  Whilst perhaps a small point, it is indicative of the depth of Norasia’s problems that as from November 1998 they began to fall into arrears in the payment to KfW of fees due in respect of the Fast Feeder facilities – fees due to lawyers and in connection with the provision of the Schleswig Holstein state guarantee.  Fees accruing due and unpaid in November 1998 totalled DM 160,447, US$11,606 and £19,947.  These were fees which KfW had disbursed, non-payment of which was likely to be a source of irritation out of proportion to their size.  It is for that reason that non-payment by Norasia is perhaps telling.  It was in this context that KfW reported to the relevant agency of the state of Schleswig Holstein that Norasia was looking for a financially strong partner in order to overcome the difficulties in the long term.  On 8 February 1999 Norasia was unable to and did not pay to the bank an instalment of US$2M principal and interest which fell due on that day.  Mr. Steiger suggested to Mr. Seissinger that he might make payment out of the proceeds of refinancing his private jet aircraft, a Falcon.  Mr. Seissinger did not reveal to Mr. Steiger that Conti had approached KfW direct to discuss Mr. Steiger’s failure to honour promises to reduce Norasia’s outstanding liability to them, which now stood at around DM 11M.  At a meeting in Fribourg on 1 March 1999 KfW asked for an audited status report on Norasia Holdings, Norasia Shipping and Norasia Lines Malta as well as a liquidity forecast for 1999/2000.  In a fax sent to Mr. Steiger seven days later summarising the outcome of the meeting KfW said this: 
“Moreover, we would ask you to advise us of the position regarding the discussions held with potential investors.  What period is it realistic to expect a final decision to be made?  The timing is something we regard as exceptionally significant given Norasia’s tight liquidity situation.  What precautions have you taken in the event of negotiations going on for longer than expected or else breaking down altogether?
The payment of the instalments for the HDW Fast Feeder due on 08.02 and 08.04 should, according to your information, be covered by the proceeds of refinancing your aeroplane.  You are expecting to receive the money by 31.03.1999.  What is the current state of play with debts and can the timeframe be respected?”
Again Mr. Steiger tended to downplay the significance of these requests but the plain fact is that the pressure was increasing.  On 26 April 1999 Mr. Menzel in a fax to KfW sought to excuse Mr. Steiger’s failure to provide certain information on the basis that “finalising negotiations in the Middle East has absolute priority.”  That was an accurate appraisal.  Whilst the bank was more patient than Conti, whose negotiating position as the owner of four ships on time charter in a declining market was in any event weak, it is clear that both were persuaded by Norasia to stay their hands pending the outcome of the discussions with “the Arab investors.”  Norasia had by now no one else to whom to turn.
Technical problems with the vessels before April 1999
45.	I have not so far mentioned the technical problems by which the S-Class vessels were from the beginning assailed.  There is no doubt that the significance of these problems increased with time and as it became apparent, as in my judgment it did, that they could not be dismissed as mere teething problems.  Ultimately what acted as the trigger for the final breakdown in the relationship between ADIC and Norasia was ADIC’s realisation in April 2001 that they had been throughout deceived by Norasia who had told them nothing about what were by then catastrophic technical problems with the ships.  In the early stage of the story, and in particular during the period April to October 1999, during which the initial misrepresentations about the ships were made upon which ADIC placed reliance in making their decision to invest, the technical problems although not of the same severity and effect were nonetheless important.  They were important not just because they cast doubt upon the integrity and robustness of the design but also because the constant irritating breakdowns which they caused were wholly inimical to the maintenance of a reliable liner schedule.  ADIC was principally concerned with the financial viability of the project presented to them, key to their consideration being whether the vessels had the capacity to generate and had demonstrated a capacity to generate earnings of an order which would be sufficient not just to finance the projected borrowings but also to produce a worthwhile return on capital.  Representations as to the ability of the vessels to do that or the extent to which they had demonstrated themselves to be so able have to be viewed in the light of technical shortcomings which had already manifested themselves and were in every relevant sense disabling.  The technical problems which manifested themselves in the early months included vibration and excessive rolling, which appear to have caused or at the least contributed to other problems, notably hull cracking and clutch and coupling failures and the vessels’ inability to maintain a service speed of 25 knots.  I take the following account of the problems as they manifested themselves before April 1999 very largely from Paragraphs 106-127 of the Claimants’ Closing Submissions.  
46.	Even before delivery of the first vessel, Samantha, problems had surfaced.  In June 1998 it was reported that the delivery of Samantha would be delayed because of problems with her gearbox.  Following a visit to the HDW yard to attend one of Samantha’s sea trials, KfW’s technical consultant Dr. Schreiver reported that the gearbox problems had also led to vibration difficulties but that he considered that these had been resolved following alterations.  Initially this proved to be the case.  Reports from the maiden voyages of both the Samantha and the Savannah indicated that they had performed well.  Matters however soon took a turn for the worse.  
47.	On 1 September 1998 Mr. Menzel was notified that Samantha was proceeding on one engine as a result of a damaged exhaust gas compensator.  About a week later Mr. Menzel was notified that Savannah had suffered similar damage and as a result was running 5 days late.  Two weeks later Mr. Menzel was notified that Savannah was again running on one engine this time because of a leak from a fuel pipe.  
48.	On 2 October 1998 it was reported to Mr. Menzel that one of Samantha’s generators was damaged.  
49.	The third vessel Salome was added to the route on her delivery from the yard on 8 October 1998.  On that same day the Masters of the Samantha and the Savannah were reported as saying that their vessels had behaved: 
“Extraordinarily restlessly on heavy seas and high winds…in extreme cases, the ships “rolled” by up to 30 degrees on each side.  The stabilisation system could obviously not compensate for this.  Moreover, continuous, strong, impacts and poundings were experienced against the ship’s structure in these heavy seas, which could be felt solidly in the engine room and had been amplified on the bridge, where the crew had problems with stability.  The fear was expressed that these extreme loads could lead to long-term damage to the ships.  The rescue boat of one ship had been severely damaged by these impacts…the described phenomena were intensified by comparable strong vibrations of the ships.”
This account is taken from notes of a meeting between the Masters of the two vessels and Mr. Proeve of KfW on the occasion of the delivery of the Salome.  
50.	The day-to-day operational problems continued.  On 21 October 1998 it was reported in an e-mail copied to Mr. Menzel that Samantha’s bow thrusters were out of operation and that she required tug assistance, while three days later the same vessel suffered damage to the Vulkan coupling on one of her main engines.  On 9 November 1998 Mr. Menzel was sent a report by the Master of Savannah which stated that the vessel was rolling by up to 40 degrees in 10 metre waves.  Later that same month matters had become sufficiently serious for Norasia to prepare, at any rate internally, the claims that it was contemplating bringing against HDW in respect of vibration and of the defects with the freefall lifeboat and davits.  These claims were said to be of the “utmost importance” to the safety of the vessels’ crew.  On 15 December 1998 Sheba, which had entered service on 3 November, had to stop her main engines at sea because of clutch damage.  Two days later Mr. Menzel was informed that the Samantha was proceeding with only one main engine as a result of a further failure (following that in October) of a Vulkan coupling which caused delay of over a day.  
51.	On 19 January 1999 KfW produced an in-house status report on the HDW vessels which detailed a variety of resolved and unresolved technical problems including: heavy rolling, extreme vibrations in the deckhouse, damage to lifeboats and davits, gears, compensators, clutch, Intering installation and elastic bedding of the main engines.  On the same day Salome suffered damage to her Vulkan coupling.  On the next day, 20 January 1999 Mr. Menzel was provided with details of the delays so far incurred by the HDW vessels which were: Samantha, exhaust gas bellows – 22.5 hours; Savannah, exhaust gas bellows – 4 days 30 minutes; Samantha, Vulkan coupling – 1 day 2 hours and 42 minutes and Salome, again Vulkan coupling.  In fact the Samantha suffered her third Vulkan coupling failure on 23 January 1999 leading to a delay of over 1 day 20 hours.  Sheba too suffered delay arising of a gear clutch problem.
52.	On 26 January 1999 the vessels’ classification society Germanischer Lloyd reported the results of superstructure vibration tests on the Scarlet to HDW, tests at which Dr. Schreiver had also been in attendance.  Following this voyage Dr. Schreiver gave it as his opinion that the vibration levels could impair the well-being of the crew on a continuing basis.  
53.	With the onset of March problems in reaching the required speed of 25 knots and the discovery of cracks in the hulls of the vessels began to dominate the reports.  Thus on 8 March 1999 it was reported within Norasia that, despite fine weather, Salome was proceeding at only 22.9 knots rather than the expected 24 knots.  Only three days later Mr. Menzel was informed that the Samantha likewise was not performing in terms of speed.  She appears according to a report of that day to have achieved 21.75 knots, although on 19 March Mr. Zitz reported to Mr. Menzel that Samantha’s speed through the water was less than 20 knots and that her Master “seriously doubted” whether she would be able to achieve 24 knots when fully loaded.  
54.	Mr. Steiger said in evidence that he took up the speed problem with the yard.  He discovered that the pitch setting for the propeller had been adjusted to enable the vessels to make the speed of 25 knots on their trials and had then been altered back before delivery.  Mr. Steiger accused the yard of “cheating him” an accusation which they rejected but as a result of which the pitch was re-set to a higher level.  Although Mr. Steiger said in evidence that the speed problem thereafter became a secondary issue that is not in my judgment an accurate assessment.  However it is true to say that the speed problem only really surfaced as a major issue shortly before Mr. Steiger first met ADIC.  I should perhaps here mention briefly an issue on which I heard considerable evidence from the technical experts Mr. Gibson and Mr. Fyans, although it is fair to say that the issue only crystallized somewhat late in the trial.  The suggestion made by the Claimants through Mr. Gibson is that the belief that the vessels were technically capable of a service speed of 25 knots, for which clearly they were designed, may have derived from an erroneous extrapolation from the sea trials data by Nigel Gee.  With all due respect to the experts, this issue was not approached in quite the way in which it would have been approached had it been a central issue in the litigation or had the experts had the time and the opportunity to research it as they would have wished, including no doubt the opportunity to go back to those who had been principally concerned in the exercise in the first place.  On the other hand, had an exercise of this sort been conducted, I have no doubt that there could have been a long trial on this issue alone.  Since I do not regard a conclusion on this point as essential to anything which I have to decide it would I think be unwise to express any concluded view upon it, especially since the suggestion is of an error made by a professional man.  As I understood the argument, the suggestion is that Mr. Gee erred in his adjustment of certain model test results recorded by Marintek.  Mr. Gee adjusted these figures because Marintek had used a stock propeller for its tests rather than a model of the LIPS propeller which was in fact fitted to the vessels.  The two types of propeller would have a different open water efficiency.  A question also arises whether an adjustment to increase propeller efficiency should have led to a corresponding deduction in the efficiency of the hull.  Conventionally, it should, although as Mr. Fyans pointed out, there may be a question whether the approach in fact adopted by Mr. Gee was justified by the rather peculiar hull form.  Mr. Fyans had not done the calculation, which I have no doubt is complex.  There were in evidence results from tests on “as built” models carried out by HSVA and Potsdam which appeared to predict a lower maximum speed of 24.25 and 24.19 knots respectively.  It is I think appropriate that I record that the material before the court, as expounded by Mr. Gibson and Mr. Fyans, was sufficient at any rate to cast doubt upon the accuracy of Mr. Gee’s extrapolation, a doubt  which if made good would explain the difficulty experienced by the vessels in maintaining their expected speed even in benign conditions.  It is not of course suggested that either Mr. Steiger or Mr. Menzel had any reason to believe that any error had been made.  
55.	On 12 March Mr. Menzel was informed that the Savannah had suffered a crack in a weld in the shell plating.  In a message to him Mr. Lefkaditis of the Managers Ganymed commented that these cracks were not as simple as Norasia would like to think.  He pointed out that the initial shell weld crack had penetrated into the web frame (wash bulkhead) and had cracked it both port and starboard.  He also reported that he had a letter from HDW, for which he had asked, to give to the agents etc. to dispel rumours.  He went on “but the letter is a smokescreen.  Maybe you can decide if you want it shown around.”  Six days later it was reported to Mr. Menzel that the Scarlet, delivered only six weeks or so earlier on 28 January, had a crack through which heavy fuel oil was penetrating into the cargo hold.  
56.	On 26 March 1999 Mr. Hoffman, Norasia’s Project Director, wrote a four page letter to HDW in which he summarised Norasia’s understanding as to the vessels’ technical shortcomings which he arranged under the headings Coupling Failures, Engine Stoppers Mountings, Free Fall Life Boats, Vibrations and other outstanding matters including speed, an “issue critical to our scheduled operation.”  Whilst it is right to say that Mr. Hoffman expressed Norasia’s confidence in HDW’s ability to rectify the problems, he also stressed that in light of the gravity of some of the problems this would take some time.  He concluded by insisting that the guarantee period for all five ships should be extended to one year after satisfactory completion of the necessary rectifications.  Mr. Steiger would not accept that these should be characterised as more than teething problems.  He did nonetheless acknowledge, realistically, that repeated problems of this sort were particularly damaging to a liner operator attempting to maintain a tight schedule.  I have already set out the losses incurred by the vessels whilst performing in the CEX service.  It would be idle to pretend that the cause of the vessels being loss-making was anything other than a combination of reasons including the poor market and the fact that these vessels could not compete effectively with larger more traditional vessels operating on the North Atlantic route.  However the disruptions to the service caused by the technical problems which I have described undoubtedly played their part.  Furthermore, even leaving on one side the financial aspects, the technical defects of themselves made it impossible truthfully to represent to prospective investors in the vessels in April 1999 that they had a service speed of 25 knots at which they had operated successfully in the CEX service.  That however is precisely what Norasia proceeded to do.  
Norasia and ADIC meet on 12 April 1999
57.	Mr. Steiger’s meeting with ADIC on 12 April 1999 was an introductory meeting but it is the Claimants’ case that at it Mr. Steiger made some important representations which were both central to their ultimate acceptance of his proposal to participate in the joint venture and fundamentally false.  Before dealing with that meeting I should first say a word about ADIC which is, as I have already described, an investment company which was at the material time jointly owned by the Abu Dhabi Investment Authority and the National Bank of Abu Dhabi.  
58.	ADIC’s role was described in its Annual Report for 1998, a document which was in due course annexed to the Shareholders’ Agreement executed on 3 July 2000 by ADIC and Norasia.  The Chairman’s statement in that document explained that the Projects and Investments Division’s efforts concentrated on “identifying joint ventures in line with its objective to promote the industrial and commercial development of the country.”  The relevant reporting structure at the time was as follows.  The Head of the Projects and Investments Division was Mr. Abdul Majeed Al Fahim.  Mr. Al Fahim reported to the Deputy General Manager, the “DGM”, who was at all material times Sheikh Hamed.  The DGM in turn reported to the General Manager, who was at all material times Mr. Humaid Darwish.  The Management was in turn answerable to a Board of Directors.  
59.	Mr. Al Fahim, in accordance with the normal practice, put together a Project Team to consider the Norasia proposal.  The team was headed by Mr. Adel Saudi, who had joined ADIC as a Projects Manager in the Projects and Investments Division as recently as 1 April 1999.  Mr. Saudi was a finance graduate of the Pepperdine University in Malibu, California and had worked for Manufacturers Hanover in New York, the ABC group in Hong Kong, and had a number of other financial posts and interests including employment with Kidder Peabody before joining ADIC.  He was born in Libya, but has dual Libyan and UK nationality.  Mr. Saudi appeared to me to have a good understanding of general financial matters although he had no specialist experience of shipping.  Initially the team contained only one other ADIC employee, Ms. Nada Hammoudi.  Ms. Hammoudi was a UAE national who in April 1999 was 31 years old.  She was a graduate of King’s College London.  She had joined ADIC in 1994 having worked first for the Centre for Global Energy Studies in London and then for a Tunisian bank for a period of about a year.  In late May 1999 the team was joined by Mr. Santosh Agarwal.  Mr. Agarwal is an Indian national who in May 1999 was 33 years old.  He had lived and worked in Abu Dhabi since September 1992.  Mr. Agarwal had trained as an accountant qualifying in 1991, and had then worked for major accounting firms including Price Waterhouse in Delhi and Ernst and Young in Abu Dhabi.  He joined ADIC in July 1995 and was appointed as Senior Financial Analyst in about January 1998.  His role in the Project Teams in which he worked was described in the evidence as “number crunching.”  Although all three team members worked closely together and consulted one with another, I had the impression that Mr. Agarwal confined himself fairly strictly to his assigned role.  Although deferring to Mr. Saudi who was senior to her in the organisation, a little older and more experienced and the designated Team Leader, Ms. Hammoudi appears in fact to have played a role which was effectively equal to his own.  
60.	ADIC disclosed no formal investment guidelines.  However the evidence showed that ADIC had a policy of restricting its own cash exposure to any project in which it invested to US$6M, save in exceptional circumstances.  Furthermore, although this was not, unsurprisingly, an inflexible policy, in general ADIC aimed for an investment return of 15 percent.  One specific and relevant exception to this approach was that if a project was perceived as having some benefit to the economy of Abu Dhabi ADIC was prepared to accept a lower rate of return, of the order of 10 percent, but no project would be accepted unless it was commercially viable.  
61.	ADIC itself had limited experience of investment in shipping enterprises, and effectively none in terms of the operation or deployment of vessels.  One of the attractions for ADIC in the proposed joint venture with Norasia was that Norasia could supply the shipping knowledge and experience that ADIC itself lacked, and, from the outset of the negotiations that led to the joint venture, ADIC looked to Mr. Steiger and Mr. Menzel to explain to them the shipping-related aspects of the proposal.  The ADIC personnel explained to Mr. Steiger at the outset that they were not experienced in shipping.  Mr. Steiger said that he took this into account in the way in which he structured his presentation and explanations.  It is likely that he reported accordingly to Mr. Menzel.  As a corollary, it was an important part of Mr. Steiger’s strategy, as Mr. Menzel also appreciated, to convince ADIC of Norasia’s standing in the market as a reputable, successful and innovative shipping company.  None of this should of course detract from the fact that notwithstanding its lack of relevant experience in the field, ADIC was the subsidiary of a major investment company and had the resources to buy in relevant external professional advice, as indeed in relation to this transaction it did.  In this transaction there was no contest between the relevant accumulated business acumen, expertise and sophistication of Mr. Steiger and Mr. Menzel on the one side and of Mr. Saudi, Ms. Hammoudi and Mr. Agarwal on the other.  This does not mean that ADIC is to be judged by anything other than the standards reasonably and objectively to be expected of an investment company operating in the market.  It does however throw into somewhat sharp relief various telling observations which Mr. Steiger and Mr. Menzel from time to time made which indicated that they were acutely aware of the inexperience of their interlocutors.  I have in mind frequent observations in evidence to the effect that if ADIC had been interested in a topic they could have asked questions about it, in circumstances where as Mr. Steiger and Mr. Menzel well knew ADIC did not appreciate that a question needed to be asked and moreover, in some cases, had not been given the basic information without which no one could have appreciated that further enquiry was required.  An example of the latter is when they were denied the notes to the NLM accounts which might have at least alerted them to have enquired further as to the true nature of what was represented as NSL’s earnings.  I also have in mind an astonishingly cynical e-mail message which Mr. Menzel sent to Mr. Scholz, General Manager of Ganymed, on 19 January 2000. Mr. Scholz was about to visit Abu Dhabi where he would meet ADIC personnel.  Mr. Menzel instructed him: 
“You know that ADIC as a shareholder is a Government organisation and not a collection of entrepreneurs that means we don’t have to put on too much of a show there.  The only thing that’s actually important is that Ganymed has been there.
…
Regarding the qualities of the vessels, you can talk away as long as you want, but please only about the qualities and not the problems we have.  Up to now it has not penetrated there just what problems we previously had with the HDW vessels and in no way should a discussion [of] these begin now.  It is vital for Ueli [Barfuss] to know this too.”
This speaks for itself.  Its message was in no way blunted by Mr. Menzel’s attempt in evidence to explain at any rate part of it as being prompted by the notorious loquaciousness of Mr. Scholz.  
62.	The meeting on 12 April 1999 was attended by Mr. Al Fahim, Mr. Saudi and Ms. Hammoudi for ADIC and by Mr. Steiger, Mr. Cox and Mr. Nagji for Norasia.  Mr. Al Fahim may have attended the whole of this meeting but his role was often limited to greeting visitors to ADIC, attending only the early, introductory part of meetings and no doubt effecting introductions and perhaps hosting entertainment at lunch or dinner afterwards.  I do not say this critically.  Mr. Al Fahim had broader responsibilities and did not claim to have studied Norasia’s proposal in depth himself.  He was a dignified and careful witness whose evidence was not of central importance, although corroborative of Mr. Saudi and Ms. Hammoudi in some significant respects.  Mr. Cox and Mr. Nagji had prior to this meeting been given business cards by Norasia on which they were described as directors of Norasia based in Dubai.  They were not in fact directors of Norasia although the fact that they were so held out is of no great significance.  Although obviously active in the UAE business world, and in the case of Mr. Cox apparently enjoying some entrée into the ruling family, they were hitherto unknown to the ADIC personnel who at all times understood them to be the Dubai representatives of Norasia.  Mr. Nagji’s manner was as quiet and undemonstrative as that of Mr. Cox was flamboyant.  Although the evidence and in particular the cross-examination of Mr. Cox and Mr. Nagji generated much sound and fury at the trial it likewise was not ultimately of central importance to the issues which remain for me to resolve.  
63.	Although it was not in evidence how precisely this had occurred, or at what level, it is plain that the proposal which Mr. Steiger brought to ADIC for investment as partners in a prospective Abu Dhabi Container Lines Limited had indeed been commended to ADIC by the Abu Dhabi Port Authority.  However it is also clear on the evidence that this recommendation did not make acceptance of the proposal a fait accompli.  For one thing it did not meet ADIC’s investment criteria as it proposed an equity injection of more than US$6M and a yield of less than 15 percent.  However there was a possibility of placing the bulk of the investment with third parties and thereby earning placement fees.  Furthermore, it is plain that Mr. Steiger held out the prospect of a yield of 10 percent on the investment, a prospect which he probably described as guaranteed.  I leave out of account how precisely such a statement should be analysed, i.e. whether it amounted to a representation, since it is not a statement on which reliance is alleged to have been or was placed, but a yield of 10 percent on a project calculated to confer economic benefit on Abu Dhabi would be acceptable within the guidelines.  It was for these reasons that Mr. Al Fahim was encouraged by both his Project Team and his senior management to look into the project in further detail.  
64.	ADIC called no member of the Board to give evidence.  I shall have to describe the decision making process in due course.  However, whilst it may have been a proposal that was likely to receive a fair wind I am quite satisfied on the evidence that the Board would nonetheless not have approved the proposed investment had not the Project Team recommended its acceptance.  ADIC is a commercial organisation and the evidence does not even begin to bear out the veiled suggestion that in this case because of the perceived wider benefit to Abu Dhabi ADIC was prepared to and did act in an uncommercial manner.  Furthermore I reject any suggestion that acceptance of the proposal by the Project Team was dictated or even unduly influenced by the consideration that the proposal had the backing of the Port Authority and possibly even backing at a level above that.  ADIC had quite an aversion to spending money in securing outside assistance in evaluating investment proposals and the professional assistance which they did here obtain, on the insistence of the Board, was in my judgment of somewhat dubious value but that was not to be known in advance.  I do not consider that the protracted exercise through which the Project Team went was an expensive charade designed simply to bring about a pre-ordained conclusion.   There are criticisms or observations which can be made about the expertise or insight which the members of the Project Team brought to their task but at the end of the day I was left in no doubt that it was a genuine exercise designed to evaluate the proposal as a commercial proposition just as any other proposal would have been evaluated.  
65.	At the meeting Mr. Steiger handed over a copy or copies of the “Business Plan” of 1 February 1999 to which I have already referred.  
66.	The Business Plan comprised:
(1)	A 13 page covering memorandum with 14 headings including:
1: Preview
2: Concept
4:  Investment
5: Financing
6:  Operation
(2) 	Enclosures as listed in an Index including:
(a)	01: Cash flow projections 1999 - 2004
(b)	04: Budget 1999 of the CEX Service
(c)	15 & 16: Financial statements of NSL (but not NLM or 	Holdings) for periods ended 31 March 1997 and 1998.
67.	The investment proposal outlined was the purchase of the 10 Vessels at a total price of US$400,000,000. The price was calculated as the sum of the contract prices and associated costs. The sum was to be financed by mortgage debt of US$240,000,000, leaving equity of US$160,000,000 of which 51% or US$81,600,000 was to come from “UAE nationals”. The Business Plan had been drafted before ADIC was identified as the prospect; but at all times after ADIC was identified it was envisaged that the equity share to be provided by ADIC was to be this amount.  Because of the US$6M limit imposed by ADIC on its own exposure, the method of provision of this equity share evolved as US$6M in cash from ADIC, and the remainder to be raised via a subsidiary, in the event two subsidiaries, the Second and Third Claimants to which I shall refer hereafter as “ASMIC” and “ASH” respectively. It was in the event ASMIC which borrowed the balance of about US$77M from a syndicate of banks led by Paribas.
68.	The Business Plan explained that the requisite long-term financing was in place from KfW, and annexed at Enclosures 02 & 03 were repayment schedules for the HDW and Chinese Vessel facilities.  It was said that Norasia had maintained an excellent relationship with KfW of over 12 years and a credit volume in excess of US$1 billion.  Norasia’s relationship with KfW was indeed in April still good although by now a little more strained than once it was.  Since 8 February 1999, only 7 days after the document had been drafted, Norasia had in fact been in breach of its repayment obligations under the Loan Agreements as I have already described, although the bank had not as it could have done declared an event of default.  
69.	In section 2 the concept was pithily expressed: 
Due to the speed of the vessels we can service most destinations on a weekly round trip where all other feeder operators need two (02) vessels to provide the same but much slower service.

The Business Plan twice referred to the CEX service:

Another successful application of this concept is the trade from Montreal …. to North Europe, the Mediterranean and vice versa. 

With the delivery of the first German newbuildings Norasia started a service between North Europe and Montreal. … Since November 1998 this has been extended from North Europe into the Mediterranean, allowing multiple use of the container slots and avoiding transhipment of destination containers. At today’s low freight rates the vessels are able to earn a daily charter rate of approximately [US$15,000]. With an improvement of the market conditions in 2-3 years this figure could improve substantially.

70.	N-Xpress was to manage the vessels and provide an income deriving from their operation to ADCL:
N-XPRESS (a fully owned subsidiary of [NSL] will manage the vessels for ADCL commercially and operationally. It will guarantee a minimum income to ADCL to cover the operation costs (crew, maintenance, insurance, drydocking etc.), the finance costs (interest and amortisation, the corporate administration (staff rent etc) and to pay a yearly dividend of 10% to the shareholders. Any profits in excess of above will be split 50/50 with ADCL and N-Xpress. This formula secures a guaranteed dividend to the shareholders in addition to sharing of profits. Shareholders will further benefit from increased value of the vessels.

71.	The proposed financial returns to ADCL (of which ADIC was to have 51%) were set out in the Estimated Cash Flow calculation (Enclosure 01).  Its key features were:
1)	Income to ADCL (the owner) was calculated on the basis of US$15,000 per vessel per day for 360 days a year, escalating at the rate of US$500 per day per year for 5 years. Thus for example:
a)	In the year 99/00, the German vessels are shown as earning US$27,000,000. This represents 5 vessels x 360 days x US$15,000 = US$27,000,000.
b)	 In the year 00/01 the German vessels are shown as earning US$27,900,000, which represents 5 vessels x 360 days x US$15,500 = US$27,900,000.
2)	Operating costs (to the owner) were calculated on the basis of US$3,000 per day, escalating at US$200 per day per year for 5 years.

3)	On these core assumptions, the cash flow showed a dividend of 10% on ADCL’s equity investment of US$160,000,000 i.e. US$16,000,000, with an accumulated surplus of US$20,961,000 by 31 March 2004.
72.	Thus, central to the Estimated Cash Flow calculation was the assumption of earnings from the vessels at the daily rate of US$15,000 from April 1999 onwards for 360 days a year. The underpinning for these suggested earnings came from Enclosure 04 described as “Budget 1999 (Canada – North Europe-Med Service 5 Vessels)” (the “Business Plan Budget”).   This stated that it covered the period of 46 weeks from February to December 1999: i.e., a period that had already been running for more than two months at the time when Norasia and ADIC first met in April 1999.
73.	The Business Plan Budget showed a profit for the 46 week period of US$199,000, comprising:
1)	Net revenue of US$74,393,000
2)	Less:
(a)	Variable costs of US$66,565,000

(b)	Fixed costs of US$7,629,000.

74.	The variable costs included a line for “Slot Costs CEX” in the sum of US$42,320,000.  A separate breakdown of this was supplied, which identifies weekly charter hire costs of US$525,000 (i.e. 5 Vessels x US$15,000 x 7days).  Thus the profit figure for the CEX service of US$199,000 for the 46 weeks from February to December 1999 was presented as net of charter hire to the owners of US$15,000 per vessel per day for all 1,610 vessel days (i.e. 46 weeks x 7 days x 5 Vessels) covered by that 46 week period.
75.	The Business Plan Budget was the keystone of the Business Plan. If it was viable, the figures in the Estimated Cash Flow calculation were viable. If however, operational experience to date had materially failed to match the returns suggested in the Business Plan Budget, then not simply was there no support for the Cash Flow estimate, but also actual experience would have demonstrated that it was not capable in current circumstances of being achieved.
76.	The Claimants contend that the key statement in the Business Plan Budget “At today’s low freight rates the vessels are able to earn a daily charter rate of approximately [US$15,000]” needs to be read, in particular, in the context of two other aspects of the Business Plan:
1)	The statement that the CEX service was a “successful application” of the Fast Feeder Concept.	
2)	The Business Plan Budget, showing the Vessels managing to pay charterhire of US$15,000 per Vessel per day on the CEX route from February 1999 onwards.
77.	The Claimants’ case is that Mr. Steiger knew when he wrote the Business Plan in February 1999, and when he provided it to ADIC in April 1999, that it was fundamentally misleading because:
1)	The Business Plan Budget did not reflect Norasia’s current management budget for the CEX service.
2)	The CEX service had in fact been loss making, and
3)	The Vessels had failed to generate US$15,000 per Vessel per day.
78.	It is the Claimants’ case that Mr. Menzel was fully aware of the contents of the Business Plan, and that he also knew that it was fundamentally misleading in those three respects.
79.	Having regard also to what is alleged to have been said at the meeting by Mr. Steiger, the Claimants’ case, in outline, in relation to the meeting on 12 April 1999, is that: 
1)	It was represented in the Business Plan that “at today’s low freight rates the vessels are able to earn a daily charter rate of approximately US$15,000”
2)	It was represented orally by Mr. Steiger to ADIC that:
a)	The Vessels were capable of - and were in fact - earning in excess of US$15,000 per Vessel per day.
b)	The five HDW Vessels had operated successfully on the CEX Atlantic route.
c)	The Vessels had operated successfully on the CEX Route, were operating successfully at 25 knots and that this speed made them particularly attractive and, indeed, unique in the market such that they were able to command a premium over the rates earned by conventional tonnage.
3)	These representations were untrue:
a)	As to the vessels’ earnings, the Vessels were not then earning, and were not in the immediate future capable of earning, US$15,000 per vessel per day.
b)	The Vessels had not performed successfully on the CEX route, but had made losses on that route.
c)	As to the state of the Vessels, the true position was that the Vessels suffered from serious defects which had impacted, and continued to impact, adversely upon their ability to trade as planned or at all.  
4)	The true position, and thus the falsity of the representations made to ADIC, was known to Mr. Steiger and Mr. Menzel as at 12 April 1999.
5)	The Claimants relied on these representations when determining to invest in ADCL and in closing the transaction.
80.	Although his evidence on this was not easy to follow, it was I think Mr. Steiger’s case that the Budget appended to the Business Plan had been prepared in or just before February 1999 and was based on actual freight rates achieved and actual costs incurred.  On an average weekly load factor of 2739 TEU it showed an operational profit of US$4,326 per week, a little short therefore of US$2 per TEU.  The budget showed “Boxco” costs at US$146,674 or about US$54 per TEU.  Boxco costs are costs related to the containers themselves, some of which were owned by Norasia but most of which were leased in.  Boxco costs are made up of various expenses – container hire, container maintenance and costs for repositioning empty containers.  When for example containers were carried inland from their destination port Norasia would have to pay for their return from their ultimate destination and of course to pay hire on the containers for the duration of the trip even whilst empty.  The costs are described as “Boxco” costs because it was Boxco Ltd Gibraltar, administered from Hong Kong, which handled the containers for Norasia Group.
81.	I cannot accept that the Budget in the Business Plan can have been based on actual figures available on or shortly before 1 February 1999.  The Norasia Defendants have disclosed two sets of NLM management accounts which span the critical 1 February 1999 date, both created by Mr. Pauw, the first on 23 November 1998, the second on 24 March 1999.  The second of these documents, created just 19 days before the 12 April meeting, also contains a 1999 Management Budget for the CEX service.  Leaving on one side for one moment the fact that Mr. Steiger presented on 12 April a Budget allegedly prepared on 1 February rather than the more up to date document, the comparison between the figures contained in these three documents demonstrates that it is simply impossible for actual figures available to Norasia as at 1 February 1999 to have been such that the Budget in the Business Plan could have been derived therefrom.  The management accounts for 23 November 1998 showed for the second quarter an operating profit on the CEX service of the order of US$311 per week, something rather less than US$1 per TEU carried.  The actual Boxco costs there shown are US$121 per TEU.  The situation did not thereafter improve – it deteriorated, as Norasia undoubtedly so perceived at the time.  The budget against which actual performance in weeks 6 – 9 was measured in the 24 March 1999 management accounts predicted an average weekly loss of US$370,334 or about US$138 per TEU carried, on assumed Boxco costs of around US$143 per TEU carried.  Actual performance in the four weekly reporting periods was worse than expected – an average weekly loss of US$509,605 or US$265 per TEU carried.  Actual Boxco costs averaged US$156 per TEU.  In the light of this it is simply not credible that Norasia can have had available to it at the end of January 1999 actual figures from which the Budget in the Business Plan could have been derived.  Quite apart from anything else, the Business Plan budget figure for Boxco costs is completely aberrant.  Indeed it is the figure for Boxco costs which provides the most striking contrast between the Business Plan budget and that apparently in use within Norasia in March 1999.
82.	In any event Mr. Steiger’s position that the Business Plan budget derived from figures available as at 1 February 1999 was not supported by Mr. Menzel.  He said that he thought that that budget had been produced at the end of 1998, and that it was believed to be accurate at the time.  The apparent anomaly of presenting to ADIC in April 1999 a budget already known to be out of date and unjustified by actual performance he sought to excuse by saying that when at the end of March 1999 it was decided to switch the vessels out of the CEX service little attention was thereafter devoted to the CEX budget and the numbers were simply left as they had been previously.  Whilst this latter suggestion is a wholly inadequate explanation for the provision of misleading information, I cannot accept that the budget attached to the Business Plan was in fact produced at the end of 1998.  The budget predicted a profit per TEU carried of roughly double that shown in the November 1998 management accounts for the second quarter.  Furthermore both Mr. Steiger and Mr. Menzel gave evidence to the effect that they did not expect the vessels to make a profit in the CEX service during the first year or two of operations following start-up.  Mr. Steiger said that it was only when he had the figures for week 15 in 1999, the week commencing 12 April 1999, that he felt comfortable that a level had been reached at which the ships could achieve earnings sufficient to pay charter hire of US$15,000 per day.  In these circumstances it is impossible to see how a bona fide budget drawn up at the end of 1998 could have been predicting this outcome on the basis of results thus far.  Finally there is again the question of the Boxco costs, the figure for which simply cannot have been one derived from experience at the end of 1998.  Mr. Menzel could not explain why “such low Boxco costs were inserted here.”
83.	The natural and intended meaning of what is said in the Business Plan is that the vessels have proved themselves capable in service over time in a low freight market of consistently making earnings which equated to a time charter equivalent of US$15,000 per day, i.e. an amount which would enable an operator to pay such a daily rate of hire to the owner in addition to meeting the costs of operating the line.  Looked at from an owner’s point of view, the representation was that the vessels had proved themselves consistently capable in service of securing to the owner earnings of US$15,000 per day before payment of financing expenses and such expenses as would normally devolve upon the owner of a time chartered vessel.  That is in my judgment the natural meaning of the words used “at today’s low freight rates the vessels are able to earn a daily charter rate of approximately United States dollars 15,000 (US$15,000).”  That natural meaning is reinforced by the context in which the words were used, and particularly by the support proffered, a 46 week February to December 1999 budget which any reader would reasonably infer was based upon the actual performance of the vessels in the “successful application of the concept” which was the CEX service.  There was no real debate about what Mr. Steiger had in this regard said at the meeting.  He accepted that what he said was designed to persuade ADIC that they could be confident that the ships would in their (part) ownership generate earnings of at least US$15,000 per day.  What he said was not and was not intended to be simply a prediction for the future.  It was and was intended to be a forecast in which one could have confidence by reason of the fact that the vessels had already in difficult conditions shown themselves consistently capable of achieving time charter equivalent earnings of US$15,000 per day.  
84.	Mr. Menzel knew that the figures in the Business Plan were going to be presented to ADIC for this purpose.  Both Mr. Steiger and Mr. Menzel knew that on the basis of the actual results of the CEX service to date and on the basis of the current management budget it was as at 12 April 1999 untrue and seriously misleading to suggest that the vessels were then able to earn a time charter equivalent of US$15,000 per vessel per day in the CEX service.  These representations as to the vessels’ proven earning capacity were central to ADIC’s evaluation of the proposal.  ADIC relied on these representations not as an unsubstantiated forecast of what the vessels might in their service achieve but as a clear and unequivocal statement of what they had achieved to date on the basis of which they could be confident for the future.  
85.	Mr. Steiger accepted that one of the pillars of his sales pitch to ADIC at the meeting was that the vessels had a service speed of 25 knots and that they were operating successfully in the CEX service, by which would reasonably be understood that they were consistently operating at their 25 knots service speed.  Mr. Menzel knew that it was likely that Mr. Steiger would say this at the meeting.  The Business Plan itself emphasised the speed of the vessels, stating that it would allow them, when combined with their fast turnaround time, to generate approximately the same revenue during a weekly service as could be achieved by two slower less sophisticated vessels, and moreover at a lower overall cost.  The way in which Mr. Steiger put this at the meeting was that by virtue of their service speed of 25 knots the vessels could command a premium in the market.  In fact I think it likely that Mr. Steiger may have allowed himself in his enthusiasm to say that the vessels had a maximum speed in excess of 25 knots, and that he may have mentioned a figure of 27 knots.  Certainly Mr. Cox and Mr. Al Fahim recollected a distinction being drawn between a top speed of 27 knots and a cruising or service speed of 25 knots.  I also think it likely that Mr. Steiger genuinely believed that the vessels might in due course command a premium on account of their speed.  However the suggestion, clearly made, that the vessels had demonstrated in service an ability reliably and consistently to operate at a speed of 25 knots was simply untrue.  As I have already explained the belief that the vessels were technically capable of a service speed of 25 knots, for which clearly they were designed, may have derived from an erroneous extrapolation from the sea trials data by Nigel Gee.  In that respect I think it possible that Mr. Steiger and Mr. Menzel had been inadvertently misled.  However they both knew as at April 1999 that, for whatever reason, and a number of reasons were apparent, the vessels were not in fact in service achieving the 25 knots speed which had been an essential part of the design brief.  I have already referred to the fact that as recently as 26 March 1999 Norasia had written to HDW demanding that the principal defects by then identified be put right and that the guarantee period be extended to one year after satisfactory completion of remedial measures.  Mr. Steiger and Mr. Menzel did not at this stage know precisely why the vessels could not consistently maintain a service speed of 25 knots and knew that the more obvious problems such as the vibration, stern slamming, rolling, coupling failures, exhaust gas compensator problems etc had in any event prevented the vessels from giving reliable service, let alone at 25 knots.  It was disingenuous to suggest, as they both did, that ADIC was uninterested in the technical performance of the ships.  It is true that the ADIC personnel knew little about shipping and probable that they manifested little interest in the minutiae of the technical performance.  ADIC were however very interested in the vessels as profit-earning chattels.  They were finance people.  Central to the presentation to them was that the speed of the vessels was an unusual feature which gave them an advantage over other competing vessels, which was and would be reflected in an ability to command a premium in the market.  Insofar as Mr. Steiger and Mr. Menzel knew, as they did, that the vessels had in fact in operation been unable to achieve a service speed of 25 knots, achieving this speed only spasmodically and in favourable conditions, the presentation offered both in the Business Plan and at the 12 April meeting was seriously misleading.  If the vessels could potentially command a premium in the market on account of their speed, it was not an advantage which they had so far been able to demonstrate in service.  To suggest that the vessels had to date been operated as 25 knot vessels, i.e. as vessels capable of maintaining a schedule drawn up by reference to a service speed of 25 knots was, in my judgment, both wholly misleading and wholly inexcusable.  My conclusion that Mr. Steiger and Mr. Menzel set out deliberately to mislead in this respect is reinforced by their concealment later in the history of what were by then catastrophic breakdowns of the vessels associated with their controllable pitch propellers.  Mr. Steiger and Mr. Menzel knew in April 1999 that the inability of the S-Class vessels to date reliably and consistently to maintain a service speed of 25 knots, as they had been designed to do, was something which, if drawn to ADIC’s attention, would be damaging to their prospects of persuading ADIC to invest in the vessels.  It would at a stroke have removed a central pillar of the sales pitch.
The Memorandum of 23 April 1999
86.	Mr. Saudi followed up the meeting of 12 April 1999 by sending a fax in the following terms to Mr. Cox on 20 April 1999: 
“It was a pleasure to meet with you and here (sic) about your interesting proposal during the meeting that was held on our premises on the 12th April 1999.  
With respect to the abovementioned proposal, we list below some of the points that need some clarification:
1.	The exact organisation structure of Norasia Group.
2.	Ship ownership and management system and structure.
3.	A well defined proposition for ADCL including but not limited to: legal structure, investment in kind and cash, Financial 5 years complete set of financial projections (incl. Income Statement and Balance sheet) along with the underlying assumptions.
…
7.	Current shipping rates vs. ADCL’s target rates
To address all issues properly we suggest holding a meeting to have a discussion session that would enable us to better understand the proposal.  Looking forward for your response.”
87.	Mr. Steiger responded to this fax in extremely short order by sending to Mr. Saudi a fax of 22 April in which he said that Norasia was in process of preparing the required documents and information which Mr. Steiger would like to hand deliver to ADIC at a further presentation (including a video) which Mr. Steiger proposed should take place the following week beginning Monday 26 April.  
88.	Before considering the meeting itself it is convenient to summarise the Memorandum which Mr. Steiger caused to be prepared in response to Mr. Saudi’s queries and which he handed over and to which he spoke at the 27 April meeting.  The covering document is a seven page Memorandum dated 23 April 1999.  There was an Index of Enclosures listing 18 such attachments.  The attachments themselves run to 223 pages.  Under the rubric “Ship Ownership and Management” Mr. Steiger gave a description of the arrangements between N-Xpress and NLM as follows: 
“Each ship is registered in a single purpose owning company, registered in Gibraltar and flying the Liberian flag…
All vessels are time-chartered from the owning company to N-Xpress Limited who in turn sells the slot space available on each ship to interested parties, mainly Norasia Line.
Each owning company is responsible for the debt service and vessel operating costs (crew, maintenance, insurance, dry-docking etc.) financed by time-charter income.
N-Xpress Limited is responsible for charterhire payments to owners, fuel, port charges and time-charterers insurance premiums, financed by the slot charter income.”
The original slot marketing agreement dated 18 June 1998 between N-Xpress and NLM was a little later on in the document, under the rubric “Agencies, Associations and Agreements details for the Group” referred to expressly as “Slot charter agreement between N-Xpress Limited and Norasia Lines (Malta) Limited (copy attached).”  It was referred to again in the Index of Enclosures as item 11 – “Copy of Slot Charter Agreement between N-Xpress Limited, Gibraltar and Norasia Lines (Malta) Limited.”  The original agreement of 18 June 1998 was indeed attached.  However Mr. Steiger neither referred to nor attached either Addendum 1 of 18 June 1998 or Addendum 2 of 5 October 1998 which, as I have already described, had transformed the nature of the original marketing agreement.  
89.	The description given by Mr. Steiger of the operation of the vessels was wholly misleading.  It gave the impression that N-Xpress was the operator of the vessels bearing the risk of inability to market slots and indeed bearing the market risk more generally.  It gave the impression that the earnings of N-Xpress would be expected to represent the earnings of the vessels generated by operating in the market.  The reality was very different as I have already set out in paragraph 38 above.  NLM had been debited by N-Xpress arbitrary charges for both used and unused slots.  For the year just ended at 31 March 1999 NLM had not paid, and was unable to pay out of its own earnings without subvention from the holding company, US$8M out of the total US$18.7M debited.  The (partially unreceived) earnings of N-Xpress bore no relation whatsoever to the vessels’ performance in the market.  
90.	The 23 April Memorandum introduced for the first time reference to a new entity N-Xpress Limited Abu Dhabi, but did so in terms suggesting that its role was to be the same as that of N-Xpress Gibraltar, as the charterer from the single ship owning companies and the operator of the vessels in the market.  These matters form the important backdrop to certain later representations as to the performance of N-Xpress which the Claimants allege to have been seriously misleading.  However what is alleged to constitute a direct misrepresentation in the 23 April Memorandum is contained under the rubric Current Shipping Rates vs. ADCL Target Rates, where Mr. Steiger addressed Mr. Saudi’s point 7.  
91.	Under this rubric Mr. Steiger said: 
“Attached you will find a budget comparison with actuals on the Canada service for Week 15 (April 12 through 18).  The comparison shows the variance in volume and average revenue for each trade lane, however total volume and revenue budgeted are very close to actuals.  These figure (sic) prove that the vessels earned a time-charter equivalent of US$15,000 p.d.”
Enclosure 14 was “comparison between Budget and Actuals on Canada Service for Week 15.”  Mr. Menzel thought that he had helped Mr. Steiger with the figures contained in that comparison.  
92.	The Week 15 comparison set out in two columns figures for TEUs and Revenue as follows: 
1)	Weekly Budget figures, derived from the Business Plan Budget, a further copy of which, in identical terms, was also attached to the 23 April Memorandum; 
2)	Figures said to be “actual” for Week 15.
The figures were indeed very close.  What was suggested therefore was that since volume and revenue were up to budget, by definition the vessels were earning a time charter equivalent of US$15,000 per day since the budget posited a small profit after payment of charterhire.  
93.	This exercise was wholly misleading for two independent reasons.  First, the Business Plan Budget was not and never had been the true budget for the CEX service by reference to which management was operating.  Meeting this budget therefore told one nothing about the ability of the vessels to earn US$15,000 per day.  Second, the “actual” figures simply cannot have been supported by information then available to the management.  
94.	I have already dealt with the first of these points when dealing with the presentation of the Business Plan Budget at the 12 April meeting.  However by 23 April 1999 Mr. Steiger and Mr. Menzel had available to them a yet further piece of management information in the shape of the Preliminary Norasia Management results processed by Mr. Pauw on 15 April 1999.  These showed that in the third quarter, i.e. October to December 1998, average weekly losses on the CEX service had been US$149,998.  Whatever therefore may have been the position as to earlier reliance on the results of the vessels as shown in management reports in November 1998, as to which I have already made my findings, these figures demonstrated that those results had not been sustained in the following period.  This was therefore yet further information available to Mr. Steiger and Mr. Menzel reinforcing what they already knew to be the position, that the Business Plan Budget was completely unrealistic.  
95.	Under pressure Mr. Menzel conceded that as at 23 April 1999 demonstration that the load factor and revenue posited in the Business Plan Budget had been matched did not provide any indication that the vessels were earning a timecharter equivalent of US$15,000 per day, not least because Boxco costs were greater than included in that budget.  He accepted that the Business Plan Budget should have been “adjusted” or not presented to ADIC on 23 April because it was “by then not actual anymore.”  He again came up with the unconvincing explanation that for Norasia the CEX service was no longer of any great importance because of the decision to switch the S-Class vessels into the APX service.  This is simply no answer to the point that performance in line with an incorrect (or even with an out of date) budget was being put forward as proof that the vessels had earned the US$15,000 per day timecharter equivalent for which the budget made allowance.  Furthermore it fails to deal with the point that others within the Norasia management were plainly not in April 1999 operating by reference to the Business Plan budget, if indeed they ever were, which is in my view unlikely.  Mr. Pauw’s management reports processed on 24 March 1999 show that he was then operating by reference to a CEX 1999 budget which posited an average weekly loss of US$370,334 or US$138 for each TEU carried.  Even if the Business Plan Budget had once been a management tool, which in my judgment is unlikely, it is simply not plausible that Mr. Steiger and Mr. Menzel can alone have been continuing to work to a budget which differed from that to which the rest of management was working.  Again I do not doubt that both Mr. Steiger and Mr. Menzel may have believed that in time, and given an upturn in the market, the vessels might well earn a timecharter equivalent of US$15,000 per day.  However to suggest on 23 April 1999 that performance in line with the Business Plan Budget demonstrated that this had already been achieved was simply dishonest, a conclusion which is reinforced by consideration of the provenance of what were at the same time put forward as the “actual” figures by reference to which it was said that the budget target had been met.  
96.	The document appended to the 23 April Memorandum as the “Week 15 comparison” is in an unique format which does not correspond to any other management information disclosed by the Norasia defendants.  It was plainly a document created for the purpose of being shown to ADIC.  Unlike other management information it does not bear the initials of whoever generated it, and, as already noted, it correlates the “actual” figures to budget figures which are not derived from the budget then being used by management.
97.	Neither Mr. Steiger nor Mr. Menzel could identify any management information as even a possible source of the “actual” figures in the week 15 comparison.  The evidence did demonstrate that management information was prepared on both a weekly and a quarterly basis.  The suggestion is that the relevant management information must have been handed over or lost when the line was sold by Norasia to CSAV.  The management information actually disclosed does not include any information current as at 23 April 1999 reporting the results of the CEX service for week 15.  In fact the earliest management figures disclosed which do bear on the position in April 1999 are those processed by Mr. Pauw on 3 December 1999.  They show in April an average weekly loss of US$465,894.  Neither Mr. Steiger nor Mr. Menzel suggested in evidence that these results presented to them in December 1999 came as a surprise.  They represent, as it seems to me, a natural downward progression from the budget figures current as at 24 March 1999 which projected a weekly loss of US$370,334, a downward progression indicated not least by the figures for weeks 6-9 which revealed an average weekly loss of US$509,605, but also by the general experience that as expenses came to be more accurately identified and allocated so they tended to grow.
98.	Mr. Steiger denied authorship of the week 15 comparison document, which he described as a management report notwithstanding its unique format.  He said that he was not familiar with the details and suggested that questions should be directed towards somebody qualified to answer them, by which he could only have meant Mr. Menzel.  
99.	Mr. Menzel’s evidence on this topic was simply lamentable.  He attempted to reconcile the figures with certain management information which was virtually contemporary; the preliminary NLM management report prepared on 14 June 1999 of volumes and revenue, which sub-divided the total figures by reference to the individual trade lanes and the vessel utilisation reports likewise, I think, prepared on 14 June 1999.  In the course of this exposition it became somewhat unclear to me whether Mr. Menzel supported what I thought was Mr. Steiger’s evidence, that the week 15 result reported related to actual cargo carried or whether rather, in an attempt to explain discrepancies, he was inclined to regard the figures as relating only to bookings.  Neither explanation is however remotely convincing in the light of the documentation.  The week 15 comparison reported volume as 2736 TEUs.  The 3 December management report showed that the weekly average volume in April was 2121 TEUs.  This ties in closely with the figure which can be extracted from the vessel utilisation reports for week 15 which is 2092.  The volume report of 14 June throws up a still smaller figure, 1724 TEU.  Whilst it may be conceded that this latter figure seems likely to be wrong in the light of both the vessel utilisation reports and the 3 December 1999 average weekly figures, it adds no credence to the figure of 2736 in the week 15 comparison.  The short point is that, try as he might, Mr. Menzel could come up with no convincing explanation for the source of the 2736 figure.  Even his exercise which satisfied him, although not me, that during that week the lifting must have been “around 2500 TEUs” fell short of an explanation for adoption of the 2736 figure.  Mr. Menzel maintained that this comparison document had been created by the Commercial Department, from which he distanced himself, although he could provide no explanation why anyone in that department would set out a comparison of those figures with a budget which was at best out of date.  
100.	Whatever the provenance of the week 15 comparison document it seems likely that it was created specifically for the purpose of presentation to ADIC as support for the proposition in the Business Plan that even “at today’s low freight rates” the vessels were able to earn a daily charter rate of US$15,000.  Mr. Steiger and Mr. Menzel both knew that the document gave no actual support to this proposition because the budget figures against which the “actuals” were compared were spurious as indeed were the “actuals” themselves.
101.	Indeed the position is even worse than that since the figures were not presented as a one-off achievement but rather as representative of what the vessels had been achieving.  Mr. Steiger and Mr. Menzel knew perfectly well that at the time the vessels were making losses.  They knew that if the vessels had earned US$15,000 per day during week 15 that was not typical of their performance in the CEX service.  Mr. Steiger put forward the familiar mantra that ADIC was not interested in the vessels’ financial performance and Mr. Menzel said that it was “our opinion that it was not relevant for ADIC” to know that the week 15 figures were not typical of the vessels’ performance in the CEX service.  He did however concede that if Mr. Steiger when subsequently speaking to this Memorandum, as he did at the meeting four days later, had not made it clear that the week 15 figures were even if taken at face value unrepresentative, that would have been misleading.  He said that if he had been present at the meeting, which in the event he was not, he would have explained it.  Mr. Steiger gave no such explanation at the subsequent meeting or indeed in the 23 April Memorandum itself.  The inference is overwhelming that, whatever their provenance, Mr. Steiger and Mr. Menzel sought to put forward the week 15 figures as support for the proposition that the vessels were at the time and in the market conditions prevailing able to earn and were earning US$15,000 per day.  Mr. Saudi’s evidence was that, when considering the 23 April Memorandum, he noted in particular the representation that figures for week 15 “proved” that the vessels were earning a time charter equivalent of US$15,000 per day.  Mr. Saudi did not look at the enclosures in any detail or seek to analyse the figures, and Mr. Agarwal who joined the team later never saw the 23 April Memorandum.  But Mr. Saudi did note that he was being told that the ships were earning US$15,000 per day.  For Mr. Saudi and his team this was the critical figure as the whole of the ADCL Business Plan was based upon it.  Mr. Steiger and Mr. Menzel intended that ADIC should rely on what was said about the week 15 earnings in precisely the way that ADIC subsequently did rely upon it.
The Meeting of 27 April 1999
102.	The meeting of 27 April 1999 was attended by Mr. Steiger, Mr. Cox and Mr. Nagji for Norasia and by Mr. Saudi and Ms. Hammoudi for ADIC.  At this meeting Mr. Steiger made a further presentation to ADIC in the course of which, as well as giving a slide and video presentation, he re-presented the Business Plan and presented the 23 April Memorandum.  
103.	The Claimants allege that at this meeting Mr. Steiger represented that:
1)	The 5 HDW vessels had operated successfully on the CEX route.
2)	On the CEX route the vessels were capable of earning in excess of US$15,000 per day and were in fact already doing so and that over the next couple of years the vessels would be generating income of US$17,000 per day.
3)	The budgeted figures for the APX 8 Service were “conservative” and equivalent to an additional time charter hire of US$5,000 per vessel/day (i.e. a time charter equivalent of US$20,000 per vessel per day).
104.	Mr. Saudi, Ms. Hammoudi, Mr. Cox and Mr. Nagji gave evidence which was mutually consistent and supportive the substance of which was that Mr. Steiger at the meeting represented that the vessels were actually achieving US$15,000 per day, and expressly used this claim to give apparent credence to the cornerstone proposition of the Business Plan that the vessels would in the ownership of ADCL generate a minimum of US$15,000 per vessel per day.  
105.	The flavour of their evidence emerges clearly from the four passages from their witness statements extracted by the Claimants at paragraphs 401-404 of their Closing Submissions.  I reproduce those passages here: 
“Ms. Hammoudi: 
“During the course of the meeting, Mr. Steiger said that by reason of these special features the five S-Class vessels that had already been delivered were actually obtaining revenues of greater than US$15,000 a day on the routes they were currently running.”

Mr. Saudi: 

“Because of the speed of the ships, so Mr. Steiger told us, the ships could command and were commanding a premium over other conventional container ships in the market. Accordingly he said he was confident about the rate of US$15,000 a day, as this was the rate that was being achieved by the ships on the routes they were operating.”

Mr. Cox: 

“Mr. Steiger also stated that the ships were performing very well, which is why they were able to achieve the US$15,000 a day.”

Mr. Nagji

“I recall very clearly that Mr. Steiger emphasised that the whole plan was based on US$15,000 a day charter hire and that the vessels were currently earning at that rate consistently on the Canada service.” ”

106.	This evidence was not challenged in the cross examination of any of Mr. Saudi, Ms. Hammoudi, and Mr. Cox.  Mr. Nagji, alone, was questioned on this point but his evidence was quite unshaken:
                                                                 Day 11 page 137
 1   Q.  You were not certain of the date, Mr. Nagji.
 2   A.  Mr. Hoyle, I am very certain he has told me, and I know
 3       for certain that I heard him say that we can even go to
 4       27 knots and the ships can earn $15,000, and has been
 5       earning.  In hindsight, you know, I trusted him, I never
 6       asked him for the accounts, which only I came to know
 7       later on that they were not earning on the Atlantic
 8       service.  But that was in the hindsight.
 9   Q.  Let me just make sure that I at least understand exactly
10       what you are saying about the $15,000 a day, because you
11       just said that the ships can earn $15,000 a day, but
12       point that I made to you earlier is: did Mr. Steiger say
13       that they were and had been earning $15,000 each day?
14       Because there is a fundamental difference, as I am sure
15       as a shipping man you know.
16   A.  Yes, I do, and in fact I had asked him specifically that
17       it is a great responsibility to ensure $15,000 plus
18       10 per cent dividend, which I felt was really, really
19       a very heavy responsibility.  But he has confirmed it.

Mr. Nagji was a careful witness.  He was owed money by Mr. Steiger but it was not my impression that he allowed this consideration to compromise his integrity.  Indeed, were he unscrupulous it would probably have suited Mr. Nagji’s interest the better to have sided with Mr. Steiger.  I think that with his experience Mr. Nagji appreciated better than others the extraordinary nature of a claim that a minimum income could be guaranteed to ADCL from their operation of the vessels in the market, or rather from their operation by N-Xpress on their behalf.  That is precisely what is said on page 4 of the Business Plan and it is to my mind entirely plausible that that is a claim which Mr. Steiger repeated at the meeting.  If he said that it is inherently likely that he would seek to buttress it by reliance upon the vessels’ current earnings, just as again was done both in the Business Plan and in the 23 April Memorandum.  
107.	In his evidence about this meeting Mr. Steiger also recognised, in my judgment realistically, that he set out to persuade ADIC that the vessels were capable of earning US$15,000 per day.  The cash flow projection attached to the Business Plan for the period 1 April 1999 to 31 March 2004 presupposed a revenue or time charter equivalent income of US$15,000 per vessel per day for 360 days of the year, in fact escalating by US$500 per year.  The supporting budget for the 46 week period February – December 1999 presupposed earnings sufficient to pay a charterhire of US$15,000 per vessel per day.  The cash flow calculation Mr. Steiger described in evidence in this way: 
“…this cash flow calculation is a demonstration to non-shipping people, to a financial institution, what it means, what is the revenue, what kind of costs you have and what is the bottom line.  That is what it does.”
Mr. Steiger also agreed that he needed to persuade ADIC that the vessels were capable of earning enough after expenses to pay US$15,000 per vessel per day on average year round.  At the very least Mr. Steiger appreciated that what he had said in the Business Plan and in the 23 April Memorandum would be interpreted by ADIC, and reasonably interpreted, as a representation that the vessels were already consistently earning in the CEX service a time charter equivalent of US$15,000 per day, that being the basis upon which one could be confident that at least that level of earnings would be achieved in the future.  He said nothing to disabuse ADIC of that impression.  In my judgment however it is overwhelmingly likely that Mr. Steiger went further and indeed said at the meeting words to the effect that the vessels, as put by Mr. Hoyle, “were and had been earning US$15,000 each day” by which was meant that this was what the vessels had consistently and on average achieved.  When pressed with the inaccuracy of what was in any event said about the CEX service in the Business Plan and in the 23 April Memorandum Mr. Steiger tended to downplay the significance of that information to ADIC by reliance on his having told them at the meeting on 27 April that a decision had already been taken to remove the vessels from the CEX service and to redeploy them in the APX service.  Indeed Mr. Steiger went so far as to say that “the CEX service was absolutely irrelevant for ADIC.”  This of course begs the question why in that case ADIC was told anything at all about it.  To my mind Mr. Steiger’s attempted downplaying of the significance to ADIC of the CEX service was symptomatic of his recognition that he had misled them as to the vessels’ performance in that service.  Possibly at the time he justified his conduct to himself by reliance on the fact that ADIC knew, because he had told them, that generation of the US$15,000 daily income would not in the future be dependent upon the vessels’ performance in the CEX service.  That does not however excuse the untruth, or render it any the less dishonest.  Indeed, if Mr. Steiger, as he says, told ADIC that the ships would be redeployed in the APX service because Norasia was “convinced we make more money in the Pacific” that if anything compounded the lie since it carried with it the representation that money was already being made whereas it was not.  Mr. Steiger knew that the vessels were making losses in the CEX service.
108.	Mr. Steiger accepted that in the course of this meeting he told ADIC that the ships that had been delivered were operating very well.  He described the vessels as “the Mercedes of their kind,” an expression which he volunteered in evidence could be transposed in English terms as “the Bentley of shipping.”  This evidence was not altogether surprising given that Mr. Steiger had accepted in his witness statements that at this meeting he said the ships were fast and designed to be able to achieve an operating speed of about 25 knots in normal sea conditions.  This is consistent with the evidence of the Claimants’ witnesses (which, again, was left without serious challenge) save that the qualification “in normal sea conditions” is not something that any of them seem to remember Mr. Steiger adding. Mr. Steiger had also said in his statements that he told the meeting on 27 April 1999 that the Vessels had a number of attractive features (most obviously, he says, their speed) which meant that they could command a premium.  This is also the recollection of the Claimants’ witnesses.  
109.	Again, as with the 12 April 1999 meeting, what was represented to the Claimants was that the Vessels had a 25 knot service speed and were operating successfully (i.e. at 25 knots and without problems or difficulties) on the CEX Service.  These were plainly important representations because they were understood (as they were intended to be) to explain why the Vessels could obtain a premium in the market and earn US$15,000 per Vessel per day on average throughout the year.  Thus, Ms. Hammoudi’s evidence on this point was as follows:
“Day 17, page 43
 8   Q.  What did you understand by that?
 9   A.  I have just indicated, if it is operated, that means 25
10       other than -- we have had a number of discussions with
11       Mr. Steiger on the speed, particularly when it came to
12       valuations.  So when we are talking about actually
13       travelling at 25, that is the 25 I am talking about.
14   Q.  But do you accept that that does not mean that the ships
15       were going to do an average speed of 25 knots?
16   A.  I cannot -- from my perspective it is supposed to be
17       able and have been operated at 25, which is the reason
18       why they were able to fetch the 15,000 that has been
19       presented to us in some of the faxes as actuals.”
I am not sure that a question in terms of average speed was necessarily helpful.  However that may be Ms. Hammoudi had a sufficient grasp of the notion that a service speed of 25 knots involved being able to operate consistently at that speed, and more importantly that this was the feature which meant that the vessels could and did command a premium in the market.  
110.	These representations were false.  As I have set out above, the vessels suffered from defects and were unable to operate at 25 knots from the outset.  The position had not changed (at least not for the better) since the 12 April 1999 meeting.  In fact, developments in April suggested that the position was even worse than might otherwise have been feared.  In particular, HDW wrote to Norasia on 7 April 1999 in response to Dr. Hoffmann’s letter of complaint of 26 March 1999 and suggested that, at least as regards the excessive vibrations, there were “no other measures left” to try.  Further, HDW seemed to suggest that the vibrations in the deckhouse might be attributable to the design which was the responsibility of Nigel Gee.  This was a point made more strongly, perhaps, in HDW’s letter to KfW of the same date which suggested that the vibrations were caused by the design of the hull.  The problems persisted, there was no remedy on the horizon and the yard had suggested that the vibrations at least were caused by a design defect.  This was plainly not a “teething” problem: it was an inherent defect (or feature) in the design of the vessels which had a detrimental impact on their operational performance. 
111.	One of the consequences of excessive hull vibrations was hull cracking.  The effects of this were demonstrated in the period between the 12 and 27 April meetings in a report sent to Mr. Menzel on 20 April 1999.  This confirmed the hull cracking and hull deformation on Savannah and Samantha and the recommendations made by GL in relation to the same.  The involvement of Class speaks to the severity of the problem here.  Two days later, however, Mr. Menzel was informed that Savannah and Samantha would have to be taken out of service for three days because the patch-up work done on the cracks during port stays had proved to be insufficient. 
112.	There is little or no dispute that Mr. Steiger and Mr. Menzel knew about each of the defects from which the vessels suffered when, or shortly after, these defects appeared and certainly by the meetings of 12 and 27 April 1999.  The vessels were unreliable.  The defects impacted upon the ability of the vessels to keep to their service schedules. Quite apart from the manifest defects it was obvious that the vessels could not in any event maintain a service speed of 25 knots.  Quite why that was so was not known, but that it was so was known and was a matter of dispute between Norasia and HDW.  As recently as 26 March 1999 Mr. Steiger had complained to HDW: 
“The speed associated with engine outputs as being reported by our captains does not correspond to the tables provided by HDW after trials, nor does fuel rack position seem to correspond to max. output shown.  This issue is critical to our scheduled operation and must be thoroughly investigated.  It is our opinion that the problem is associated with the propeller pitch setting!”
Developments following the April meetings
113.	Following the April meetings the Norasia Defendants sought to progress matters with expedition.  Plainly, the pressure to conclude a deal was building still further and, for example, KfW wrote on 5 May 1999 to Norasia asking them to agree binding proposals for repayment of arrears then totalling US$4,398,039.58 and DEM 1,984,571.70.  Meanwhile, KfW had taken advice from Sinclair Roche and Temperley as to whether any events of default had arisen on which they could rely to demand repayment from Norasia of the FFB loans.  
114.	Mr. Steiger was naturally keen to have written confirmation of the discussions thus far and ADIC for its part was, according to Mr. Saudi, keen to set down in writing its interest in the proposal which it had received.  On 31 May 1999 ADIC signed a Letter of Intent addressed to Mr. Steiger as Chairman of Norasia Services SA to which on 8 June 1999 Norasia in the shape of Mr. Steiger added its signature.  Although not discussed at the trial, there may be an issue as to whether Mr. Steiger signed this letter on behalf of Norasia Shipping Limited or Norasia Services SA.  I will revert to this point in the context of an independent claim in contract which is brought by ADIC against NSL pursuant to the terms of the letter.  In view of its importance and because it serves as a useful summary of the overall structure of the proposed transaction I reproduce it here in full:-
“Subject: Letter of Intent for the Proposed Abu Dhabi Container Lines LLC
Dear Sir:
This letter of Intent (“the letter”) confirms the verbal understanding between Abu Dhabi Investment Company (“ADIC”) and NORASIA Shipping (“NORASIA”) for the purpose of establishing Abu Dhabi Container Lines (“ADCL” or the Company”).
In that respect, ADIC and NORASIA agree, subject to comprehensive due diligence and approval of the respective Board of Directors’ on the terms listed below:
1.	NORASIA & ADIC shall from the Company, which shall be incorporated as a UAE company under UAE law (as amended).  The purpose of the Company is to acquire and operate TEN high-speed and flexible container vessels.  The vessels shall carry the UAE flag with (Mina Zayed-Abu Dhabi) being the homeport.
2.	Based on NORASIA’s representations, the total capital requirement for ADCL is US$400 million inclusive of working capital and vessels purchasing costs to be funded by 60/40 debt/equity split.  The vessels to be purchased are described hereto.
2.1	5 	Vessels each of 1400 TEU capacity built in 1998 by HDW (Howaldtswerke Deutsche Werft AG, Kiel Germany) at a purchase price of US$42.6 million per Vessel subject to valuation.
2.2	5 Vessels each of 1400 TEU capacity built in 1999/2000 by Jiangnan Shipyard, Shanghai (PRC) at a purchase price of US$36 million per Vessel subject to valuation.
3.	ADIC and its U.A.E. co-investors will share in the equity for not less than 51% (US$81.6 million) and NORASIA will share in the equity for not more than 49% (US$79.4).
4.	NORASIA agree to grant ADIC an exclusive private placement mandate to raise the 51% of the equity from UAE nationals.
5.	ADIC will act exclusively as a financial Advisor for the Company for a fee of AED 50,000 per month up and until an IPO is made.
6.	NORASIA have organized the long term financing for all TEN vessels through KfW Bank (Kreditanstalt Fuer Wiederafbau Bank), Frankfurt-Germany.  The final terms and conditions to be reviewed and approved by ADIC.
7.	NORASIA’s subsidiary, N-Xpress Ltd, shall enter into a long-term contract with ADCL to charter the TEN Vessels at a daily rate of US$15,000 per vessel plus escalation.  In addition, N-Xpress shall share 50% of its profits with ADCL.  Further, it has been agreed that the UAE partner(s) would have the option to acquire 50% of N-Xpress shares.
NORASIA will also make available to ADIC all financial and other information concerning the ships business and operations and the Proposed Financing.  NORASIA shall also provide reasonable access to NORASIA’s officers, directors, employees and legal counsel.  ADIC shall be entitled to rely without investigation upon all information that is available from public sources as well as all other information supplied to it by or on behalf of NORASIA or its other advisors and shall not in any respect be responsible for the accuracy or completeness of, or have any obligation to verify, the same or to conduct any appraisal of assets.  To the extent consistent with legal requirements except as otherwise set forth in the Offering Materials, all information given to ADIC by NORASIA, unless publicly available to ADIC without restriction or breach of any confidentiality agreement (“Confidentiality Information”), will be held by ADIC in confidence and will not be disclosed to anyone other than ADIC’s advisors without NORASIA’s prior approval or used for any purpose other than those referred to in this letter.
NORASIA also agrees to, jointly and severally, indemnify and hold harmless ADIC and their respective affiliates directors, officers, agents and employees for and against any losses, claims, damages, judgments, assessment, cost and other liabilities and will reimburse each indemnified party for all fees and expenses as they are incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation, whether or not in connection with pending or threatened litigation.
This letter shall not give rise to any expressed or implied commitment by ADIC to purchase or place any securities and will remain valid for a period of 6 months from the date of execution.
After reviewing this letter, please confirm that the foregoing is in accordance with NORASIA’s understanding by signing and returning the duplicate of this letter attached hereto.
Sincerely,
ABU DHABI INVESTMENT COMPANY”
For completeness, I should add that Mr. Steiger’s signature was appended under the rubric “Norasia Services SA” of which he was described as Chairman. 
115.	It is fair to say that ADIC’s formal expression of interest in this manner appears to have come as something of a relief both to Norasia and to their bankers KfW.  Both however manifested considerable impatience to finalise the deal.  ADIC for its part gave early warning that the sort of timescale which Mr. Steiger had in mind was simply not achievable.  Thus on 12 June 1999 Mr. Saudi wrote to Mr. Steiger: 
“…with the best interest of the project in mind, we would like to inform you that the time horizon suggested by you is practically impossible, if we wish to structure the deal in a way that adds value to the shareholders, the business and the prospects of a future IPO.
It is our intention to take the time necessary to undertake a proper due diligence exercise and select the perfect legal and financial structure that would secure our boards’ approval, attract strong partners and ensure achieving the worthy strategic and financial returns.  
Moreover, to enhance the strategic high profile status of this project, and attract the attention and support of key officials and top authorities, we should exercise extreme intelligence in selecting the perfect launching time, e.g. National Day on 2 December.”
Even this timescale proved over-optimistic.  There is no doubt that Mr. Steiger became increasingly frustrated and indeed irritated at the delay on the ADIC side in taking the matter forward.  I fear that his irritation may have been responsible in part for his cavalier approach to the disclosure of information although as I have already indicated I find that he had already before this time deliberately misled ADIC.  What the history in fact demonstrates powerfully is that ADIC is a bureaucratic organisation in which corners cannot be cut, or at any rate in which corners were not cut in the evaluation and ultimate approval of this proposal.  Furthermore approval by the Board was not the end of the story since establishment of ADCL required, by reason of the applicable local law, express permission of the Executive Council of the Emirate of Abu Dhabi.  This was not an issue which could be rushed and any attempt so to do would have been counter-productive.  A yet further problem emerged which contributed significantly to the overall delay in completion of the project.  It was from the outset the intention on the ADIC side that its special purpose vehicle would sell shares into the local Abu Dhabi market after ADCL had established itself.  However ADIC was advised that as a matter of Abu Dhabi law a founder member of a public joint stock company could not sell its shares within two years of incorporation.  This created a difficulty for ADIC as the intention was for the joint venture to sell shares into the market within a shorter timescale.  The solution ultimately reached, after some discussion, involved the establishment of a second special purpose vehicle.  The first special purpose vehicle, ASH, was to be the vehicle through which ADIC made its investment in ADCL.  ADIC subscribed the US$6M share capital of ASH.  ADCL became a joint venture between Norasia and ASH, as evidenced by the Shareholders’ Agreement between them ultimately signed on 3 July 2000.  The capital of ADCL was thereafter to be increased, with ASH not exercising its right to subscribe thereto.  Instead the shares would be subscribed for by and issued to a second special purpose vehicle, in the event ASMIC.  ASMIC’s purchase would be financed by the syndicated loan from Paribas.  ASMIC, not being a founding shareholder in ADCL, would be free to on-sell its shares within the two year period.  
116.	On 20 June 1999 the Projects Committee, which comprised Mr. Al Fahim, Mr. Saudi and Mr. Koinis submitted to the DGM an Investment Memorandum which had been prepared by the Project Team and countersigned also by Mr. Al Fahim and Mr. Koinis.  The Memorandum was in fact itself dated 21 June 1999.  The purpose of the Memorandum was to obtain the blessing of the Board for the Projects and Direct Investment Division to continue to look into the proposal.  The Memorandum recommended, subject to the satisfactory conclusion of a due diligence exercise, to make an equity investment of US$6M and the consideration of the further mezzanine financing, internally or externally, of the balance of US$81.6M, for resale at a premium within one year.  It was indicated that the long term investment of US$6M was expected to generate an IRR of 20%, based on annual cash dividend and proceeds from exit in 2005 assumed at 10 times EBITDA.  The short term financing offered at least the prospect of ADIC earning fees as the lead manager of and advisor for a potential IPO and, if undertaken internally, a capital return.
117.	It would overload this judgment to reproduce all parts of the Investment Memorandum.  However key passages include: 
“Background
•	Abu Dhabi Port Authority has presented to us a proposal to set up a national container shipping line, Abu Dhabi Container Lines Limited (ADCL), in association with Norasia, a 20 years old, reputed Swiss shipping group.
•	Of the total US$400million project cost, funding of US$318.4 million (80%) has already been secured by Norasia, representing their US$78.4 million (49%) equity contribution and US$240 million long term debts from KfW, a AAA rated German bank, at Libor + 1.125 %, repayable within 7-12 years.
•	During a pre-feasibility meeting shipping experts from Citibank has endorsed the reputation of Norasia group and mentioned that securing the long term debts, from elsewhere, at the credit terms offered by the German bank is not possible.
•	Following the Port Authority’s commitment to provide all necessary support to Norasia for the proposed business, ADIC has successfully executed a Letter of Intent with Norasia, securing as follows:
1.	Exclusive mandate to raise UAE Nationals’ 51% equity contribution of US$81.6 million.
2.	An annual advisory fee, for ADIC, of Dh600,000 (Dh50,000 p.m.) for three years from the start of operations.
3.	Appointment of ADIC as a lead manager and advisor for a potential IPO in the near future.
Proposal
Subject to the satisfactory conclusion of due diligence exercise, this memorandum is for the principle approval of ADIC:
i)  to make an equity investment of US$6 million, as one of the founding shareholders, in Abu Dhabi Container Lines Limited                                                                             This long term investment in Abu Dhabi Container Lines Limited is expected to generate an IRR of 20%, based on annual cash dividend and proceeds from exit in 2005 assumed at 10 times EBITDA.
ii)  to consider the financing (internally or externally) of the equity capital of US$81.6 million, for re-sale at a premium within one year when all the ships will start operations         This short term financing structure is expected to generate a capital profit of about US$7-10 million.
…
Project
The Norasia Group proposes to set up a shipping company in Abu Dhabi called Abu Dhabi Container Lines Limited (ADCL).  This entity will own through its subsidiaries 10 high-speed flexible container vessels with a capacity of 1400 TEUs and designed speed of 25 knots for each vessel.  ADCL’s goal is not to compete with the big global carriers but to add value to their service and therefore work as their partners rather than as a competitor.
Shareholding Structure
It is proposed that ADCL shall be owned 51% by UAE Nationals and 49% by Norasia Group.  The companies owned by ADCL will acquire 10 vessels on a cost-to-cost basis.  ADCL will charter these vessels to N-Xpress, a company to be set up in the UAE and owned by Norasia.  However, ADIC has an option to acquire a share in N-Xpress.
Foreign Partner
The Norasia Group, established 20 years ago, consists of shipping related companies incorporated in various jurisdictions for the purpose of shipowning and operating activities.  In 1986, Norasia formed Arabian Maritime Lines Limited in Sharjah with the UAE Nationals as partners and operated 4 vessels until they were sold at profit in 1994.  Hans Steiger is the Chairman and CEO of Norasia.  He has the track record of developing the Norasia from a negative capital of US$6 million in 1982 to a group of companies with an equity of US$100 million.
…
Project Cost
Total cost of the project is US$400 million.  The cost of 5 vessels, manufactured in Germany by Howaldtswerke-Deutsche Werft AG, is US$213 million.  These vessels have already been delivered to Norasia Group.  The remaining 5 vessels, scheduled for delivery in 1999/2000, are under construction in China by Jiangnan Shipyard and are estimated to cost US$180 million.  Estimated transaction costs and working capital requirements are US$4 million and US$3 million, respectively.
Financing Plan
The project will be financed through a mix of equity US$160 million (40%) and long-term debts US$240 million (60%).  Norasia Group has already arranged long-term financing, split into DM debts and US$ debts, through a Government owned and AAA rated bank, Kreditanstalt Fuer Wiederaufbau (KfW), in Frankfurt.  The long-term debts have been negotiated by the Norasia at Libor + 1.125% repayable over a period ranging from 7-12 years.
Risks
The major risk associated with the project is related to downturn in the market.  Any dramatic fall in charter rates or an over supply of vessels can significantly affect the numbers of ADCL and N-Xpress adversely.  However, this risk is mitigated by the strong commitment from Norasia through their 49% equity contribution in ADCL.  Risk of competition, though important, has not been considered significant due to the fact that ADCL targets to cater a niche market capitalizing on Norasia’s 20 years’ experience and a client base of 10,000 scattered over 60 ports.
Financials
Projected financial statements for the next six years indicate that the cumulative turnover of ADCL will exceed US$358 million.  This includes 50% profits of N-Xpress transferred to ADCL.  Total dividend paid during this period is estimated to be US$87.5 million.  An equity investment in ADCL would yield an IRR of 20% from dividends and proceeds from exit in sixth year based on a multiple of 10 time of EBITDA.
…
Background
Container shipping industry is in the process to adapt to global economy.  Due to the size of the new generation container vessels, the most heralded round-the-world-services of the 80’s are already obsolete.  The services today are pendulum services from US-West Coast to Asia to Arabian Gulf to Mediterranean to North Europe and to the US-East Coast.  For regional distribution new fast container vessels are required to provide an efficient service to customers.  In order to meet the future requirements, Norasia developed a new type of container vessels capable of 25 knots speed and due to its hatchless design with fast turnaround times in ports, 300 reefer plugs and a range of 6000 nautical miles allows for very versatile use of these ships.
Abu Dhabi Container Lines Limited
Norasia proposes to establish Abu Dhabi Container Lines (ADCL) as a limited liability company in Abu Dhabi.  ADCL will purchase from Norasia 10 fast container vessels of 1400 TEU capacity, built in Germany (Nos. 5) and China (Nos. 5).  Each ship will be registered in a single purpose owning company.  The single ship per company is a protection for eventual claims against the vessel owner, whereby the risk is limited to the one vessel instead of the whole fleet.  It is proposed that these single ship companies will be registered in Abu Dhabi and fully owned by ADCL.
The primary objective of ADCL is to become the leader in regional distribution by providing the fastest and most cost efficient service in every region in intends to operate.  ADCL’s goal is not to compete with the big global carriers but to add value to their service and therefore work as their partners rather than as a competitor.
It is proposed that ADCL shall be owned 51% by UAE Nationals and 49% by Norasia Group.
Norasia Group
Norasia’s philosophy is to own/operate modern and cost efficient ships through use of the latest technology in shipbuilding.  In the 20 years of its existence it was the first company which developed, built and operated; ‘ship of the future’ vessels, hatchless container vessels with rain shelters and 25 knots fast container vessels for regional trade.
The Norasia Group is split into 2 groups: Norasia Lines (Malta) Limited, and ancillary business activities like container repair facility, container ownership, container management company, agencies, etc. through Norasia Investment Limited, Vaduz.
…
ADCL’s Operation Mechanism
Norasia proposes to provide a time charter employment of each of 10 vessels owned by ADCL through N-Xpress Limited, an Abu Dhabi based company.  This entity will charter the vessels at US$15,000 per day, increasing each year at US$500 per day.  This entity will manage the vessels for ADCL commercially and operationally.  It will guarantee a minimum income to ADCL to cover the operation costs (crew, maintenance, insurance, dry-docking etc.) the finance costs (interest and amortization), the corporate administration (staff, rent etc.) and to pay a yearly dividend of 10% to the shareholders.  Any profits earned by N-Xpress will be split 50/50 between ADCL and N-Xpress.  This formula secures a guaranteed dividend to the shareholders of ADCL in addition to sharing of profits.  Shareholders will further benefit from increase in value of the vessels.
The first five of the 10 vessels, constructed in Germany by Howaldtswerke Deutsche Werft AG have already been delivered between July 1998 and January 1999 to Norasia.  The remaining five vessel are scheduled for delivery in 1999/2000 and are being constructed in China by Jiangnan Shipyard of Shanghai.
Management
The responsibility for overall management rests with Hans Steiger, the Chairman and CEO of Norasia.  He has the track record of developing the Norasia from a negative capital of US$6 million in 1982 to a group of companies with an equity of US$100 million.  Hartmut H. Menzel joined Norasia, as Vice President Operations in 1984 and currently is the President and COO of Norasia.  He started his sea-going career in 1961 and has held various senior management positions including Operations Manager in San Francisco for Hapag Lloyd.
Ownership of N-Xpress
Initially, Norasia proposed in their presentation that N-Xpress shall be established with a share capital of US$5 million owned 100% by them.  However, recently, Norasia in principle has agreed to grant an option to ADIC to acquire 50% ownership share in N-Xpress.  We intend to acquire a direct interest in N-Xpress with a proposal that ADCL should also be a shareholder in this special purpose entity.  This type of arrangement will ensure that                  - the results of N-Xpress are transparent to us                        -   we can share the increase in value of N-Xpress after a   certain period.
…
Means of Financing
Means of finance to fund the cost of the project comprises equity US$160 million and long term debts of US$240 million, resulting into a debt equity ratio of 3.2.
Long-term financing of US$240 million for the 10 vessels has been arranged by Norasia through a AAA rated bank, Kreditanstalt Fuer Wiederaufbau in Frankfurt.  The bank is owned by the German government and has a portfolio of over DM15 billion.  Norasia maintains an excellent relationship with the bank for over 12 years.
…
Risks
The major risk associated with the project is related to the downturn in the market.  Any dramatic fall in charter rates or an over supply of vessels can significantly affect the numbers adversely.  However, the risk is mitigated by the strong commitment from Norasia through their 49% equity contribution in ADCL.  Risk of competition, though important, has not been capitalizing Norasia’s 20 years experience and a client base of 10,000 scattered over 60 ports.”
118.	On 20 June 1999 the DGM in turn sent an Internal Memorandum to the GM recommending approval in principle and subject to the satisfactory conclusion of a due diligence exercise.  However the GM was not prepared to countenance an equity investment of more than US$6M.  Whilst he agreed in principle to ADIC’s investment of the maximum permitted US$6M, he was adamant that ADIC should make no commitment on raising the remaining equity.  At a meeting with Mr. Saudi on 22 June the GM indicated that the only structure he would agree to would be one securing external financing against ADIC’s investment in Norasia.  He indicated that the following structure would be acceptable: 
“ADIC will establish a SPV and capitalise it with US$6M.
The SPV will seek to raise the remaining equity for the investment in Norasia via external mezzanine financing. 
As collateral ADIC will pledge the shares of the SPV.
ADIC’s maximum risk will be the US$6M investment.”
119.	The matter was presented to the Board of Directors of ADIC at its meeting of 27 June 1999.  The GM attended the meeting.  Mr. Al Fahim, Mr. Koinis and Mr. Saudi were also present during discussion of the Norasia proposal although they withdrew at the decision-making stage.  The Board gave approval in principle to ADIC’s participation in the joint venture and to investment of US$6M in the proposed capital, subject to “a consulting firm specialised in this field to be appointed for the preparation of a valuation study of this project before being committed to investing US$6M.”  As to the balance, the Board plainly envisaged that this would be raised through an IPO to be subscribed to by UAE investors.  The Board authorised the Projects Division to seek from Norasia a period of 60 days within which it could approach potential investors in order to gauge the potential response.  
120.	Mr. Saudi reported this to Mr. Steiger by letter dated 28 June 1999 which read: 
“In reply to your fax dated 16 June 1999 and the subsequent meeting held you and Messrs Nagji, Cox and Seissinger on 23 June 1999, I am pleased to inform you that our Board has approved an investment of US$6M subject to due diligence and final closing documents.
Meanwhile, with regards to the additional amount the Board has decided that it cannot give a firm commitment at this stage of time.  Thereby, we would require a 2-3 months for pre-marketing on a best effort basis following which we could confirm our commitment.”
It was the evidence of Mr. Steiger that this indicated to him that ADIC themselves only wanted to invest a relatively small amount (sc. US$6M) and that they would place the rest of the investment with other investors.  However at the meeting with Mr. Saudi on 23 June to which reference is made in the first paragraph of Mr. Saudi’s letter which I have just set out, Mr. Steiger had become aware, if he was not already, that one way in which ADIC might secure its participation in the proposed structure was by arranging, in the first instance, bridge financing for the balance of the UAE 51% equity contribution in ADCL over and above the US$6M which was the maximum which ADIC could commit of its own funds.  The bridge financing would enable completion to take place before funds became available from the proposed IPO.   By 29 July 1999 Paribas had offered fully to underwrite the US$77.5M bridge financing facility to be provided to the ADIC SPV for the purpose of funding its investment into ADCL.  Accordingly on 31 July Mr. Saudi faxed Mr. Steiger to “confirm, that ADIC, through the creation of a special purpose vehicle, will be arranging the 51% UAE equity contribution in ADCL, subject to the satisfactory outcome of the due diligence exercise.”
121.	I should say a word about the meeting of 23 June 1999 between Mr. Saudi and Mr. Steiger to which I have already referred.  In addition to Mr. Cox and Mr. Nagji it was attended also by Mr. Seissinger of KfW.  He was at this time a Department Manager for KfW’s Ship Finance Department.  Until December 1999 when he handed over to Dr. Wiebers he had responsibility for the relationship with Norasia, reporting to Mr. Uibeleisen, the First Vice President.  In view of the settlement with KfW the Claimants made no submissions in closing about the role played by KfW in inducing ADIC to enter into the transaction.  KfW met with ADIC on at least seven occasions, 23 June 1999, 28 September 1999, 19 October 1999, 7 & 8 December 1999, 25 January 2000, 6 June 2000 and during closing on 2/3 July 2000.  The Claimants expressly disavowed any suggestion that Mr. Steiger had owed a duty to them to correct anything incorrect said to them in his presence by KfW, and equally any suggestion that by not demurring therefrom Mr. Steiger had joined in any misrepresentation made by KfW concerning the state of its relationship with Norasia.  Mr. Hoyle in closing said nothing about the role of KfW either.  No doubt he recognised that, if it could be shown that any misrepresentations by Mr. Steiger or Mr. Menzel played a substantial or a significant part in inducing ADIC to invest in ADCL, it would profit them nothing to show that any representations or conduct of KfW played an equal or even a greater part, a fortiori if Mr. Steiger and Mr. Menzel had acted dishonestly.  
122.	In these circumstances it is unnecessary for me to make concluded findings about what was said by KfW on these occasions insofar as that was in controversy.  I heard the evidence of all the ADIC witnesses on what transpired at these meetings including therefore sustained cross-examination on behalf of KfW in the course of which the account of the then proposed KfW witnesses as set out in their witness statements was of course properly put to them for their comment.  At the conclusion of this evidence the dispute between the Claimants and KfW was compromised in consequence of which I did not hear the KfW witnesses and Mr. Steiger was not cross-examined about what KfW had said in his presence – I am not sure that Mr. Menzel was ever present at any relevant meeting.  In fairness however to Mr. Steiger and to Mr. Menzel and to the absent Norasia corporate defendant and because the story would otherwise be incomplete I should briefly record that in my judgment the role played by KfW in inducing ADIC to invest in ADCL was significant, albeit not to the exclusion of the causative influence of the representations made by Mr. Steiger and Mr. Menzel.  As to the first meeting, the very fact that Mr. Seissinger had flown to Abu Dhabi in order to lend the weight of the bank to Norasia’s proposal of itself sent a powerful message to ADIC.  It conveyed the message that Norasia was a highly regarded customer, in good standing, with a project that KfW supported and in which it had faith.  Mr. Steiger’s own assessment of the bank’s contribution was set out in his fax message to Mr. Seissinger thanking him for attending the meeting: 
“As a result of feedback I am happy to assure you that your professional appearance as an ambassador for KfW made a very deep impression at ADIC and has aroused enormous interest in further cooperation.  Please accept my personal thanks for your strong support of Norasia and the project.”
It was common ground at the trial that KfW said nothing at this meeting from which ADIC could have inferred that Norasia was in substantial arrears on its loan obligations to the bank, that the bank was pressing Mr. Steiger for binding proposals as to repayment and that the view of the bank was that Norasia lacked the resources to withstand the downturn in the market.  These considerations placed Mr. Seissinger in a difficult position.  There was significant commercial pressure on him, and on the bank, to achieve a good outcome for KfW from a relationship which, although long-standing and historically good, was becoming seriously and increasingly problematic.  
123.	It was at the meeting on 19 October 1999, again in Abu Dhabi, that KfW made a detailed presentation to ADIC.  By then Norasia were in arrears to KfW on the Fast Feeder loan facilities to the extent of about US$5.3M principal and about US$4.4M interest.  To KfW’s knowledge Norasia also had debts outstanding to HDW of a further US$10M and to Conti of US$4M albeit the former sum had been withheld on account of the technical shortcomings of the vessels about which Norasia and HDW were in dispute.  This last point is of course double-edged.  The bank’s assessment was that the innovative design of the vessels was associated with technical problems some of which were partly conditioned by the design and could not be rectified.  Incoming capital from the potential investors ADIC would enable Norasia to settle all arrears and liabilities and would improve the profitability of the Fast Feeder project by reducing financial leverage.  
124.	This meeting was attended by Mr. Saudi, Ms. Hammoudi and Mr. Agarwal for ADIC, Mr. Steiger, Mr. Nagji and Mr. Cox for Norasia and Mr. Seissinger and Mr. Proeve for KfW.  Each of Mr. Saudi, Ms. Hammoudi, Mr. Agarwal, Mr. Nagji and Mr. Cox gave evidence broadly to the effect that they came away from that meeting under the impression that they had been assured by KfW that Norasia had honoured its obligations to KfW in the past, was continuing to do so in the present and thus that there were no arrears on the current Norasia Fast Feeder loans.  
125.	The case put to each of these witnesses, in accordance with the witness statements of Mr. Seissinger and Mr. Proeve, was that Mr. Proeve, who dealt with this aspect, carefully divided his presentation into two parts, explaining at the outset the structure of what he would say.  The first part related exclusively to the financing afforded to Norasia by facilities extended before 1997.  The second part related to the 1999 Fast Feeder loans.  It was put to the Claimants’ witnesses that Mr. Proeve had stated in relation to the pre-1997 loans “all financings have been debt served without any problems whatsoever” and that this clearly did not relate to the loans in respect of the Fast Feeder vessels.  As to the latter, whilst Mr. Proeve explained the structure of the loans, he said nothing about the performance of Norasia under those loans.  
126.	I can well understand that Mr. Seissinger and Mr. Proeve would have been conscious of the need to avoid giving untrue or misleading information to ADIC and conscious also of the requirement to respect customer confidentiality.  As I have already observed of Mr. Seissinger at the earlier meeting, he and Mr. Proeve were on this occasion also in a difficult and delicate position.  Without imputing to them any dishonesty I agree with Mr. Salter QC for the Claimants that if they wished to speak at all about Norasia’s record in debt servicing without mention of the current arrears then they were embarked upon “mission impossible.”  Where the real gist of a literally true statement is materially altered by other circumstances whose existence is not disclosed then the statement is false notwithstanding its literal truth.  If, as was common ground, Mr. Proeve’s presentation provoked no question from the ADIC personnel on this aspect, then it is likely as it seems to me that notwithstanding his best intentions he succeeded in giving the impression that Norasia’s good record in relation to the “historical” financings had been carried through into the current, post 1997 financings.  The only point of saying anything about debt service was to assure ADIC of Norasia’s reliability in this regard.  To fail to mention large and mounting arrears on the current facilities falsified the message.  A presentation which succeeded in making clear that the assurance was of historical relevance only would have been bound to provoke a question as to the correct position unless the ADIC personnel are assumed to have been either exceptionally dim or completely disengaged.  They were certainly not dim.  Mr. Saudi in particular struck me as rather acute.  Suggestions were certainly made that from time to time the ADIC personnel, or at any rate Mr. Saudi and Ms. Hammoudi, exhibited less than total interest in the minutiae of the project.  Those suggestions were largely self-serving, designed to excuse the failure on the part of Norasia to volunteer relevant information.  But even if there were some truth in the allegation, one would have to posit complete inattention for it to be plausible that the KfW presentation made it clear that any assurances about Norasia’s good record in debt service could not be assumed to be relevant to their current facilities.  Mr. Cox was as I have already remarked a flamboyant character, whose evidence I was invited to approach with caution.  Bearing those strictures in mind, I nonetheless found genuine and understandable his outrage that it had not on this or on any other occasion been explained to ADIC that Norasia was in substantial arrears on the very loan facilities to which ADIC was being invited to become party as a co-borrower.  Disclosure of that fact would in my judgment have fundamentally altered the dynamics of the proposed transaction.  Indeed I doubt if ADIC would in such circumstances have proceeded. 
Developments after the Letter of Intent
127.	Following the signing of the Letter of Intent ADIC pursued their interest in the proposal in three ways.  Firstly as part of the due diligence exercise they sought from Norasia in correspondence clarification of various matters.  Secondly they went about identifying “a consulting firm specialised in the field” in the event identifying and appointing two such firms, Clarkson and Lucas, whose task was to assist in the due diligence exercise.  Thirdly they had discussions and negotiations with Paribas with the outcome which I have already described.  Norasia for their part in accordance with the earlier decision transferred the S-Class vessels to a new transpacific Asia to Vancouver service which became known as the APX service.  Initially this was operated, as from 3 May 1999, with chartered-in tonnage but the five HDW built S-Class vessels were introduced into the service as from late June and fully integrated during July.  It is unnecessary for me to deal in detail with these various developments, particularly having regard to the fact that I no longer have to consider allegations against Clarkson and Lucas.  I do however need to set in context the remaining pleaded allegations of misrepresentation by Norasia, Mr. Steiger and Mr. Menzel which induced ADIC to close the transaction on 3 July 2000.  Leaving aside the allegation that, assuming them not earlier to have known the falsity of certain of their representations, Norasia, Mr. Steiger and Mr. Menzel nevertheless came under a duty between December 1999 and 3 July 2000 to correct those misrepresentations, the remaining allegations can be summarised under four heads: 
1)	Misrepresentations contained in a fax sent by Mr. Steiger to Mr. Saudi on 9 August 1999 in response to detailed queries set out by Mr. Saudi in a fax of 2 August, which latter was largely drafted by Mr. Agarwal.
2)	Misrepresentations made by Mr. Menzel in a meeting with Mr. McLellan of Clarkson and in a follow up fax message of 11 October 1999, which representations were intended to influence Clarkson in the advice which they gave to ADIC and to be reflected in their evaluation of the project.
3)	Misrepresentations made by Mr. Menzel in a fax of 9 October 1999 sent to Mr. Saudi and 
4)	Misrepresentation made by Mr. Steiger to Mr. Lucas over the telephone on 15 October 1999, which representations were intended to influence Mr. Lucas in the advice which he gave ADIC as to the value of the vessels and to be reflected in the reasons which he gave them for revising an earlier opinion and valuation.
I shall deal with each of these allegations in turn.
128.	Mr. Saudi had followed up the meeting of 27 April with a fax to Mr. Steiger of 3 May.  After setting out a number of “queries on issues that need more elaboration” Mr. Saudi included “N-Xpress’s past performance, capital, funding structure and projections” and “Comparison between US$15,000 income per vessel per day and what other operators pay.”  It must have been obvious to Mr. Steiger that questions were being asked about N-Xpress because ADIC was under the impression, assiduously created by Norasia, that N-Xpress was the company operating the vessels in the market whose financial results would reflect the success of past trading and whose capital funding structure would be relevant to its ability to absorb the market risk and maintain daily hire payments of US$15,000 out of which financing costs had to be met.  N-Xpress had been so described in the Business Plan, in the 23 April Memorandum, in the original slot marketing or charter agreement of 18 June 1999 which was supplied to ADIC without either addendum and in Mr. Steiger’s fax of 3 May 1999, referring to N-Xpress as the time charterer of the HDW vessels without any reference to the arrangements pursuant to which N-Xpress was paid for unused slots.  
129.	Mr. Steiger replied on the same day with a fax running to 4 pages with 20 pages of enclosures.  The fax read, in part: 
“1.	Financial.
(a) In order to minimise the operational and commercial risks of ADCL we propose a two tier revenue structure: 
(aa)	Time-charter agreements with N-Xpress Limited to cover all financial, operational, administration cost and enough cash surplus to pay a 10% dividend.
(bb)	Profit sharing with N-Xpress.
This additional income will fluctuate with the industry.”
Mr. Steiger’s response on the topic of N-Xpress was this: 
“(a)	N-Xpress Limited, Gibraltar, was only formed in 1998 as time-charterer of the German vessels.  It will close its books on 31.03.1999 for the first year of operation.  We expect a small profit.”
Although not pleaded as a separate actionable misrepresentation, this was in fact highly misleading.  Firstly, the income of N-Xpress was in part illusory as I have already explained.  Secondly however N-Xpress would not even have shown an illusory paper profit if account had been taken of its obligation to pay charterhire to the single ship-owning companies.  This answer did continue to give the impression that it was the role of N-Xpress to operate the vessels in the market and thus relevant to consider its profitability.  Considering that Mr. Steiger knew full well that the vessels had been making substantial losses in the period to 31 March 1999 it was in my judgment seriously misleading to respond in this manner.  Only three days later Mr. Steiger is likely to have seen the Preliminary Norasia management report drawn up by Mr. Pauw for the fourth quarter of 1998/1999, i.e. the period January – March 1999, which showed an operating loss for the CEX service of US$3,944,107.  This can have come as no surprise.  
130.	On 2 August 1999 Mr. Saudi sent to Mr. Steiger the fax to which I have already referred above as being largely the work of Mr. Agarwal.  So far as immediately relevant it read: 
“As we have now received the approval of our Board and have commenced the due diligence exercise, you are requested to clarify the following points and provide the relevant documents: 
N-Xpress
12. Projected financial statements of N-Xpress UAE for minimum next 5 years.
13.   What is the assurance regarding the projected performance of N-Xpress?  
14.   Historical performance of N-Xpress Gibraltar.
15.   List of key prospective customers of N-Xpress, UAE and copies of long term arrangements, if any, made with them so far.”
131.	Mr. Steiger’s response by fax of 9 August included the following passages by way of response to the numbered questions: 
“N-XPRESS Ltd.
12. It is unrealistic to prepare financial statements for N-XPRESS for 5 years for following reasons:
(a) N-XPRESS results are depending on market fluctuations.
(b)	Employment of vessels might change since we shall employ them where we can achieve maximum profitability.
…
13.	There is no guarantee for the projected performance however there is more than 20 years of experience in the operation of container liner business standing behind N-XPRESS.  We can not beat the market but get the maximum out of prevailing market conditions.
14.	The result of the 5 vessels from date of delivery until March 31, 1999, are as follows:
Charter hire revenue			US $ 18,742,000
less:					
Operating expenses			(US $ 10,788,000)
Interest expenses			(US $  5,508,000)
Operational profit			 US $  2,446,000
...
17.  The new vessels were delivered from HDW in Kiel (Germany) at following dates:
Norasia Samantha				16.03.1998
Norasia Savannah				06.08.1998
Norasia Shamsha				08.10.1998
Norasia Sheba					13.11.1998
Norasia Scarlet				29.01.1999
With the delivery of above vessels we started a new service from North Europe to Canada and back.  After the start of operation of the 2nd vessel we could offer a weekly service in each direction.  Soon after the start of the service these ships established a new record from the berth in Montreal to the berth in Antwerp in less than 6 days.  Also on the return leg we could achieve transit times unheard of so far.  It was just natural that these achievements of a newcomer were not welcomed by the competition.  Despite heavy fire from the competition and some minor warranty problems the ships performed very well during the harsh winter period.  With the delivery of vessel No. 3 and No. 4 the service was extended to the West Mediterranean and with the delivery of No. 5 we could extend to the East Med and complete the fleet of 5 vessels, required to run the service.  For your info all our competitors run separate services to the North Continent from Canada with 3 ships and to the West Med with 4 ships.  With the high speed we could compensate the longer distance from the Med via the North Continent to Canada and still benefit from multiple slot sales on a round trip.  For example:
North Europe – Med			630 TEU
Med – North Europe			450 TEU
Med – Montreal				392 TEU
North Europe – Montreal			398 TEU
Montreal – North Europe			478 TEU
Montreal – Gulf/Asia		   	  48 TEU
Montreal – Med				229 TEU
Total volume per round trip	       2 625 TEU
Vessel capacity			       1 000 TEU
Utilisation per slot			 	    2.625 TEU
The service reached the break even for the period until March 31, 1999.
Considering the build-up of the service, the change of ports called during build-up period and poor administrative performance of North European and Canadian agents we are dissatisfied but not unhappy about the result.  In respect to financial performance please revert to item 14.
18.	All vessels in the Canada – Europe – Med service (CEX) have been transferred to the Pacific during the months of June and July 1999 where profitability is much higher than on the North Atlantic.  They operate now a weekly service with following port rotation:
Vancouver – Busan – Keelung – Hong Kong – Laem Chabang (Thailand) – Port Kelang (Malaysia) – Singapore – Jakarta – Hong Kong – Keelung – Busan – Vancouver.
With the delivery of the 2nd and 3rd China newbuildings above port rotation will be extended to inc. Nava Sheva (India) – Khor Fakkan – Abu Dhabi – Dammam – Bandar Abbas.
For the employment of the last 2 vessels we have the option to use them on an Express service Montreal to North Continent or a US port to North Continent.  Final decision will be made ca. end of 1999.”
132.	The foregoing answers are all alleged by the Claimants to have been deliberately misleading and to have amounted to or to have contained misrepresentations.  
133.	What was asked for under question 14 was “the historical performance of N-Xpress Gibraltar.”  It is plain that the reason why that was asked was because ADIC thought that the historical performance of N-Xpress Gibraltar would reflect the performance of the S-Class vessels in the market.  That is also plainly how Mr. Steiger understood the question.  In answer he gave “the result of the 5 vessels from date of delivery until 31 March 1999.”  However the figures given were nothing of the sort.  They were not the results of NLM, the operators of the vessel in the CEX service.  They were also not the results of N-Xpress as a stand-alone company.  The figures were, in the words of Mr. Daniel, the expert forensic accountant witness for Mr. Steiger and Mr. Menzel, “merely extracts” from the consolidated results of the NSL group of companies.  They are not even the results of NSL, because the audited results of NSL include an additional figure of US$5M for depreciation which is a cost of ownership conventionally included as part of operating expenses.  Finally the figure of US$18.74M was in no real sense charterhire nor, as to about US$5.4M, was it revenue in any sense of the word which ADIC could possibly have understood.  It was the figure, to which I have already referred above, invoiced by N-Xpress to NLM pursuant to the “Slot Charter Agreement” and the addenda thereto as that agreement had in the event been operated as between N-Xpress and NLM, i.e., it represented arbitrary charges not at arm’s length, so levied in respect of slots which were unused and therefore by definition had generated no income to Norasia.  Furthermore of the total “charterhire revenue” US$8M was unpaid and NLM was quite unable to make payment, without subvention from Norasia Holdings or elsewhere, since the vessels had earned insufficient in the market to sustain payment of these arbitrary charges whether for used slots let alone those which were unused.
134.	In circumstances where Mr. Steiger knew that the vessels had been heavily loss-making, provision of these carefully selected figures in support of an alleged operational profit of US$2.446M is in my judgment incapable of any explanation except dishonesty of a wholly cynical nature.  I am afraid that this inescapable conclusion was simply reinforced by Mr. Steiger’s evasive and wholly unimpressive evidence in relation to this exercise, in the course of which he attempted to suggest that ADIC reached the conclusion that N-Xpress was the operator of the vessels only by reason of their failure to read the documentation supplied to them and in the course of which he repeated the familiar mantra that ADIC was not interested in the performance of the vessels in the CEX service.  Mr. Steiger fully appreciated that the historical performance of the vessels, even on a route different from that in which they were for the future to be employed, provided an important pointer as to the earning capabilities of the vessels upon which a potential investor could and would reasonably rely.  Mr. Steiger had himself deployed that very material for the very purpose of influencing potential investors.  Ultimately, after sustained cross-examination Mr. Steiger accepted that the market performance of the vessels was to be found reflected in the results of Norasia Lines and that all his discussions with ADIC referred to N-Xpress as the charterer and NSL as the owner.  It was for just that reason that the information which he supplied, purporting to be “the result of the 5 vessels” in answer to a question about the historical performance of N-Xpress, the purpose of which he entirely understood, was so very misleading.  
135.	There was considerable exploration in both the expert evidence and in cross-examination of Mr. Steiger on the question whether it was legitimate or illegitimate to have omitted the figure for depreciation of US$5.073M which appeared in the NSL audited statement of income for the year ended 31 March 1999.  Mr. Steiger sought to justify this by suggesting that what was presented was, as he put it, a “kind of cash flow profit” in respect of which, conventionally, depreciation would not be included.  This was unsustainable, because at least US$8M of the revenue was unpaid.  The figures were therefore being presented on an accruals basis, not a cash basis.  The expert evidence was to the effect that the International Accounting Standards required depreciation to be reported as part of total operating costs, and it is obviously a highly significant figure for a shipowner to take into account in determining whether he is making a profit.  To my mind the real significance of this debate is that it demonstrates that considerable thought must have gone into the selection and presentation of the figures that were described as being “the result of the 5 vessels.”  The figures presented could not even arguably be regarded as demonstrating the performance of the vessels whether looked at from the perspective of either the operator or the owner.  It was for this reason that Mr. Menzel, who accepted that he would have seen Mr. Steiger’s fax when it was sent, had as much difficulty as had Mr. Steiger in seeking to defend it.  His evidence on this aspect I found as unsatisfactory as had been that of Mr. Steiger.  Ultimately he resorted to the suggestion that the provenance of the figures had all been explained to Mr. Agarwal on his subsequent visit to Fribourg in the context of a query raised by Mr. Agarwal arising out of the financial statements of Norasia Shipping.  This was not a suggestion made to Mr. Agarwal and it was moreover inconsistent with what Mr. Menzel had said in his two written witness statements.  It is true that Mr. Agarwal had already seen the draft audited accounts of NSL as at 31 March 1999.  A note in those accounts records: 
“Norasia Shipping Limited (“NSL” or “the Company”), which is a wholly-owned subsidiary of Norasia Holdings Limited, Bermuda (“the Group”) was incorporated on January 30, 1989, in Hamilton, Bermuda.  The Group consists of shipping related companies incorporated in various jurisdictions for the purposes of owning and operating container vessels.  The following companies are wholly-owned subsidiaries of NSL:
N-Xpress Limited, registered in Gibraltar, company 100% owned by NSL, entered into agreement with Norasia Lines (Malta) Ltd (“the Line”).  N-Xpress Limited intends by this agreement to appoint “the Line” as its agent to market the hire of slots on vessels owned by Norasia Shipping Limited.”
This is to be contrasted with a note which appeared in the NLM audited accounts, signed off on 8 November 1999, which read: 
“N-Xpress Limited, Gibraltar, a related party, acts as liner server on behalf of the Company [which in this context means Norasia Lines (Malta) Ltd.]  In this respect, the parties have reached an agreement whereby the slot costs will be re-billed to the Company at a fixed rate per container.  The total fees paid by the Company under this agreement amounted to US$18,001,780 for the sailing period ended April 4 1999.  Such costs are included in the position “slot expenses”.”
Had Mr. Agarwal been shown the draft audited accounts of NLM during his visit to Fribourg, and assuming the draft to have contained this note, he might I suppose have worked out what was going on, although that would have been difficult without sight of the addenda to the slot marketing agreement and an explanation as to how in practice the accounting was carried out.  Mr. Menzel did not suggest that Mr. Agarwal had been shown the accounts of NLM and he would not have been.  As early as February 1999 Mr. Steiger had made clear that potential investors in the S-Class vessels were to be shown financial statements of Norasia Holdings and Norasia Shipping but were not to be shown financial statements of NLM – see his fax of 2 February 1999 to Credit Agricole Indosuez.  These were he said “irrelevant.”  The truth was of course that they were the only figures which reflected the vessels’ operational performance, to which as Mr. Steiger and Mr. Menzel both clearly appreciated ADIC’s question 14 related.  The untrue picture of profitability thus painted was underscored in the answer to question 18 where the vessels were said to have been transferred into the Pacific where profitability is higher than on the North Atlantic, thereby implying that the vessels had to date been profitable albeit that profit could be improved upon.  
136.	The answer to question 17, in addition to the untrue statement that the CEX service had reached break-even, contained the statement that the vessels had performed very well in the harsh winter period despite some minor warranty problems.  Again responsibility for this representation was shared in that Mr. Menzel thought it likely that he had drafted this passage or at least had had substantial input into its drafting.  What was said about the vessels’ performance during the winter period was simply untrue on any realistic appraisal of the situation as I have already discussed.  Further, since this was in answer to a question about operations of the vessels since their delivery to Norasia, it is relevant also to consider how the vessels had performed since the winter.  The statement carried with it the implication that the vessels continued to operate well.  This was far from the truth.  
137.	By August there was evidence of accelerated wear in the CPP and the experts agree that by June 1999 NSL was (and so also Messrs Steiger and Menzel were) aware of “a significant wear problem within the CPP system of at least two ships.” 
138.	The position as regards the other defects had worsened since April too.  Thus,
1)	On 3 May 1999 it was reported to Mr. Menzel that the Salome had suffered cracks in the same areas as both the Samantha and Savannah and that the vessels needed to undergo repairs.
2)	On 11 May 1999 it was reported to Mr. Menzel that the repairs done to the free fall boats and davits were not satisfactory and that unless further effort and costs were expended on the vibration issue the repair costs for electronic parts could be huge.
3)	On 22 May 1999 NSL were notified about a meeting which had been held the previous day to discuss the HDW vessels’ CPP. In response Mr. Lefkaditis of NSL stated:
“We have been having problems with the speed for far too long … we expect now definitive solutions and explanations.”
4)	On 28 May 1999 Ganymed informed NSL (cc Mr. Menzel) that inspection of one of the vessels being repaired had revealed further damage and, therefore, the allotted time for repairs might not be sufficient.
5)	On 31 May 1999 HDW rejected a speed claim for US$420,000 which had been made by NSL earlier that month but said that it would be dealt with under guarantee.
6)	On the same day GL faxed Ganymed and HDW reporting that the measurements taken on Samantha following the change in her CPP had not improved her power. Two days later, in an email to Ganymed (cc Mr. Menzel) it was said that it was imperative that Samantha and Savannah do their full speed following the repairs.
7)	Sheba had four day’s worth of repairs by HDW in Zeebrugge from 2 June and on 8 June 1999 her CPP parameter was changed. Samantha’s repairs commenced on 12 June and on 17 June her CPP parameter was changed. Shamsha’s repairs commenced on 23 June and on 29 June her CPP parameter was changed.
8)	In addition to the above, on 12 June 1999 Savannah was delayed due to engine breakdown and, three days later, Shamsaa suffered damage to her power take off unit. 
9)	On 18 June 1999 Ganymed were informed that Samantha’s new oil filter had become blocked after only 33 working hours. In an email to HDW on 21 June (cc NSL) Ganymed noted the high copper content in the oil and that excessive wear would reduce the pitch oil pressure which would ultimately render any pitch adjustment impossible. The results of the copper analysis were indicative of accelerated wear in the propeller.
10)	On 25 June 1999 a meeting (attended by Dr. Hoffman, HDW and Ganymed) was held at which the problems of slamming, speed, vibration (which was damaging the electronic parts) and the copper content of the oil was discussed. Ganymed emailed Mr. Menzel with a note of the meeting and stated that the increased copper content in the oil on Samantha, Savannah and Sheba would need to be monitored.
11)	Savannah had four day’s worth of repairs by HDW in Zeebrugge from 4 July 1999 and on 8 July her CPP parameter was changed. Scarlet’s repairs commenced on 8 July and on 13 July her CPP parameter was changed.
12)	On 9 July 1999 Shamsaa had a blackout on her second main engine. 
13)	On 26 July 1999 GL reported to Ganymed (copied to HDW) that, aside from Scarlet, the engines on the HDW vessels were no longer capable of producing the performance specified.
139.	It is I think something of an arid debate as to whether these various matters could properly be regarded as “teething problems” which is how Mr. Steiger and Mr. Menzel attempted to portray them, Mr. Steiger with I thought rather more enthusiasm than did Mr. Menzel.  I must also guard against the wisdom of hindsight in any evaluation of the CPP problem, which however the marine engineers agreed was by August “significant.”  The short point is however that whether the problems were those typically to be associated with new ships of a new design, or whether they were more deep-seated, their effect had been such as to render it impossible to say that the vessels had performed “very well.”  The reality is that the performance of the ships to date had been to both Mr. Steiger and Mr. Menzel a serious disappointment (and a serious worry) and that so far as concerned at any rate some of the problems they did not know how they were to be rectified.  
Clarkson
140.	It would seem that it was Messrs Hill Taylor Dickinson who in July 1999 effected the introduction between Clarkson and ADIC.  It was Mr. Rogan McLellan of Clarkson Research Studies, a part of H Clarkson and Co. Ltd., with whom ADIC mainly dealt.  Mr. McLellan had long experience in the liner business dealing with breakbulk and container shipping, joining Clarkson Research in 1997 after his retirement in 1996 as General Manager of P&O Containers Business Development team.  After six weeks or so spent clarifying the exact nature of the task and the terms upon which Clarkson would do it, on 17 August ADIC formally appointed Clarkson “for assisting us in conducting our due diligence.”  Mr. McLellan’s initial thoughts were not encouraging.  On 26 July 1999, before even he was formally instructed, Mr. McLellan wrote to Mr. Saudi in these terms: 
“…The new Norasia ships are unique and rely on the trend towards speed as a service enhancement, that has been little evidenced in the way the global fleet has grown recently, but is much talked about in the press as the coming factor.  Conventional wisdom is that vessel upsizing, in order to achieve benefits of scale, is the route that will more reliably yield reward.
Because the ships are unique, assessment of the market, charter rate trends and marketability will be more dependent on judgment than past history. …
Would it affect your thinking at this stage if I say that, without yet having studied the situation in any depth, although I recognise some of their virtues, I am rather sceptical about the competitiveness of these ships, as the liner industry is currently situated?”
It was in part because of the paucity of information made available in the market by Norasia concerning the earnings of the vessels that ADIC suggested at an early stage that Mr. McLellan should meet Mr. Steiger to enable him better to evaluate the Business Plan.  I have reservations as to the wisdom of this strategy, whether from the point of view of ADIC in suggesting it or from that of Clarkson in accepting it, but that is water under the bridge save insofar as I have to evaluate the submission made on behalf of Mr. Steiger and Mr. Menzel that ADIC placed reliance upon the outcome of their due diligence exercise to the exclusion of reliance upon anything said by Mr. Steiger or Mr. Menzel.  It is also right to record that whereas Mr. Steiger appears officiously to have intervened in order to influence the advice given by Mr. Lucas to ADIC, in the case of Clarkson his assistance with the task was actively sought by ADIC.  I should also record that the minutes of the meeting on 10 August 1999 at which this approach was first mooted underscore the importance attached by ADIC to the good reputation in the market of Norasia in general and Mr. Steiger in particular.  The image which Norasia attempted to foster was, perhaps unsurprisingly, that they were experienced, reliable and trusted operators with whom to go into a joint venture.  It is in part because of the obvious importance of this aspect that I have thought it right to record the role which was in my judgment played by KfW in promoting the creation of that image.  
141.	Clarkson provided a draft report to ADIC on 14 September 1999 and it seems that a copy was provided to Mr. Menzel.   ADIC wrote to Clarkson on 21 September suggesting a joint meeting with Norasia to discuss the draft report.   ADIC then wrote to Mr. Steiger also on 21 September 1999 seeking to arrange meetings in London on 27 and 28 September, including a meeting with Clarkson on 27 September at which it was envisaged that Mr. Steiger “and/or [his] representatives” would attend.  Mr. Steiger replied on the same day suggesting that Mr. Menzel would attend the meetings.  It would seem that Mr. Steiger was not available to attend the London meetings and so asked Mr. Menzel to attend in his stead which Mr. Menzel agreed to do.  In preparation for the meeting Mr. Menzel read and annotated a copy of the draft report prepared by Clarkson.  Following the meeting on 27 September 1999 there was an exchange of faxes between Mr. McLellan of Clarkson and Mr. Menzel which discussed further aspects of the proposed joint venture.    
142.	Ultimately there was little if any issue concerning what was said at the meeting on 27 September.  Mr. McLellan had taken notes at the meeting the accuracy of which there is no reason to doubt, apart from an obvious error in recording a stated profit figure as being per annum rather than per week.  Similarly the subsequent exchange of faxes naturally reflected what had been said at the meeting.  Thus on 11 October Mr. McLellan faxed Mr. Menzel in these terms: 
“You may recall that we met in this office to discuss ADCL.  I have been trying to write a clear recommendation ever since. …
What really matters is the ability of the faster ship to achieve a consistently better load factor and/or higher revenue rates than competing vessels.  Here I have no data.  
I wonder, therefore, if I might ask you to be kind enough to comment both on my revised costings and to give me some idea of the potential of the S-Class and the deployment focus on traditionally second or third port of call (like Vancouver and, potentially, Buenos Aires) to achieve higher load factors and better revenue rates.  I am sure that refrigerated cargo – given the very high potential of the S-Class – would go a long way towards creating the sort of profitability that enables Norasia to guarantee the US$15,000 daily hire payment, although I believe that you told ADIC that you had not been making much use of this capability to achieve the US$21,000 per day earnings on the Transpacific.”
Mr. Menzel replied on the same day.  Under the heading “Transpacific Earnings” he said this: 
“It is correct, that the current Transpacific will earn a charterhire of about 21,000 – US$, provided the vessels load more than 1,100 TEUs Eastbound and 400 TEUs Westbound.  On an average, we have achieved about 20,000 – US$ per round voyage, counting from the start of the service until today.  This includes the build-up phase during which cargo was not always booked at the best possible rates.”
143.	The Claimants’ case in outline, in relation to the meeting of 27 September 1999 and the fax exchanges between Mr. McLellan and Mr. Menzel, is as follows:
1)	Representations were made by Mr. Menzel to Clarkson with the intention that those representations would be communicated directly or indirectly via Clarkson’s report to the Claimants.
2)	At the meeting held on 27 September 1999 it was represented by Mr. Menzel that the Vessels could command a premium in the market and that the profit on the 6-ship APX Service was US$250,000 per week in a manner understood by Mr. McLellan to mean profit after payment of all expenses, including the charter hire of US$15,000 per day.  This therefore implied a daily profit after payment of charterhire of about US$6,000 per vessel.
3)	In the fax to Clarkson dated 11 October 1999 NSL represented that earnings on the transpacific route (the APX Service) had amounted to US$20,000 per round trip but that,

This includes the build-up phase during which cargo was not always booked at the best possible rates…
		
And thereby represented that earnings would improve after the service had been “built up”.
4)	These representations were untrue:
a)	The vessels were not earning a profit of US$250,000 per week after paying the internal charter hire of US$15,000 per day.
b)	Far from improving, the results of the APX Service were likely to become worse during the low season.
c)	The APX Service operated at a loss.
d)	The vessels were not operating successfully on the APX Service because they were suffering from defects. 
5)	The true position, and thus the falsity of the representations made to ADIC, was known to Mr. Steiger and Mr. Menzel as at 27 September and 11 October 1999 when the representations were made and these representations were never corrected.
6)	The Claimants relied on these representations in determining to invest.    
144.	Mr. Steiger and Mr. Menzel denied that they had discussed the one with the other what Mr. Menzel would say at the meeting.  The Claimants asked me to reject this evidence as incredible.  I do not regard the denial of Mr. Steiger and Mr. Menzel as necessarily implausible.  Whereas Mr. Menzel acknowledged his contribution to documents prepared by Mr. Steiger and Mr. Steiger for his part acknowledged that he would consult with Mr. Menzel over the provision of figures, I cannot be sure that the converse necessarily holds true.  Mr. Steiger was a busy man who travelled widely.  Mr. Menzel needed no instruction from him as to what was the party line in relation to the S-Class vessels.  Since Mr. Steiger accepted that he knew by 15 October at the latest about the figures supplied by Mr. Menzel to Mr. Saudi by means of a fax sent on 9 October 1999, it is perhaps of little moment in the overall scheme of things what was the extent of discussion between him and Mr. Menzel concerning what was to be said to Mr. McLellan on 27 September, when Mr. Steiger was travelling, and in the follow up fax.  
145.	The notes taken by Mr. McLellan during the meeting record him being told by Mr. Menzel that the Vessels were earning profits of US$250,000 per week (and Mr. McLellan understood this to be after payment of the internal charter hire). While he denied making any such representation in his witness statement, in his oral evidence Mr. Menzel did not really take issue with the suggestion that he mentioned the figure of US$250,000 per week to Mr. McLellan (in fact saying that he was “sure” he spoke about it), preferring instead to suggest that this referred to budgeted rather than actual results.  However, the suggestion that Mr. Menzel and Mr. McLellan were talking about budgeted figures is simply unreal; not least because Mr. McLellan recorded in his final report that the Vessels were “today” earning profits of US$250,000 per week.  Mr. McLellan plainly understood Mr. Menzel to be talking about actual figures and not budgets.  I think that Mr. Salter was correct to suggest that the attempted characterisation of this as a “budget” figure was Mr. Menzel’s way of attempting to evade responsibility for having put forward a figure which could not be justified.  
146.	Mr. Menzel agreed that profits of US$250,000 per week equate to TCE (time charter equivalent) earnings of US$21,000 per vessel per day (US$250,000 divided by 7 days and 6 vessels equals approximately US$6,000 plus US$15,000 charter hire payable internally comes to TCE earnings of US$21,000 per vessel, per day).  This figure of US$21,000 was repeated by Mr. Menzel in his fax to Mr. McLellan of 11 October 1999.  Thus the consistent impression given by Mr. Menzel to Mr. McLellan was that the vessels (and all 6 of them delivered to date) were earning approximately US$21,000 by way of TCE per day in the APX Service.
147.	I have already set out what was said by Mr. Menzel in the fax of 11 October.  By the words used Mr. Menzel implied that earnings would improve after the “build-up” phase.  Although a small point in the overall context, this was a surprising thing to say as Mr. Menzel agreed that July to September were likely to be the best three months in the APX service, when Christmas goods are shipped into the USA from Asia.  It was the desire to exploit that high season which, according to Mr. Kerner, led to the decision to transfer the ships from the CEX service, and indeed to the start-up of the APX service with conventional chartered-in tonnage in May so as to catch the high season trade.  The results were therefore unlikely to improve for many months, if at all.  In fact they became substantially worse.  
148.	What is however of considerably more moment and is the gravamen of the Claimants’ complaint is that the six vessels were not earning US$250,000 per week or US$21,000 each per day or anything like it during the three month period July to September 1999.  In fact they were making losses, as ultimately became common ground between the experts.  The issue is whether as at 27 September and 11 October Mr. Menzel was aware that the information which he was putting forward was incorrect.  In the ordinary way it might be thought that resort to the management accounts would resolve this question.  No relevant management accounts have been disclosed before those prepared on 3 December 1999 and it is therefore necessary to attempt to establish whether it is credible that internal management information current as at 27 September could have shown so markedly different a picture from that which was apparent by 3 December 1999.  In order to address this issue it is convenient to turn next to the figures which Mr. Menzel supplied to Mr. Saudi in his fax of 9 October.  
149.	However before dealing with those figures I should also note that the picture given to Mr. McLellan of successful operation of the vessels in the APX service was again misleading having regard to the operational unreliability of the vessels.  During the period between July and October 1999 the vessels continued to suffer from each of the main defects to which I have already referred, vis vibration, rolling and associated damage such as hull cracking.  There were further failures of the exhaust gas compensator.  There was evidence of CPP problems and in particular there was difficulty in maintaining a sufficient speed during service.  
150.	I have already catalogued the problems as they manifested themselves up until the end of July.  The problems continued into August.  On 29 August Sheba required repairs as a result of contaminated lubricating oil caused by damaged injection valves.  On the same day and during the following week Samantha required engine repairs at sea and had to proceed on only one main engine because of damage to the exhaust gas compensator on her other engine.
151.	On 7 September it was reported to Mr. Menzel that Shamsa’a was losing time due to engine problems.  The following day Savannah suffered damage to both her main engine exhaust gas compensators and had to deviate to Ponte Delgada for repairs.  On 30 September Mr. Menzel was informed of cracking in the hull of the Scarlet.
152.	Apart from these problems, from 19 September Sheba had hull modifications and repairs carried out in Singapore over 3 days. Subsequent analysis of her CPP lubricating oil showed an increased copper content, evidencing the CPP defect from which all of the vessels suffered.
153.	On 6 October an internal Norasia email which was copied to Mr. Menzel complained about the slow speed and high fuel consumption on Sultana which had only been delivered into service from the Jiangnan Shipyard on 9 July.  
154.	Mr. Menzel knew that the Vessels were suffering from defects and were not operating successfully because most, if not all, of the defects which emerged during the period July to October 1999 were reported to him and it is clear that these would also have been discussed with Mr. Steiger.  Mr. Menzel accepted for example that he was informed of the cracking to the hull of the Scarlet and accepted further that this cracking (or at the very least the repairs necessitated by it) had an impact on scheduling (which would, of course, have a consequential impact on earnings).  He also accepted that he knew about the excessive rolling of the vessels.
155.	As regards speed, Mr. Menzel’s evidence was that as at July 1999 he and Mr. Steiger hoped that the modifications had resolved the issue.  However, it soon became apparent that any increased speed would have to be bought at the cost of increased fuel consumption.
156.	Thus Mr. Menzel knew of the defects and knew that they were affecting the operational performance of the vessels.  Further, Mr. Steiger had complained about these defects to Mr. Proeve by letter dated 4 June 1999 and there was no suggestion that they had been rectified by July, August, September or even October 1999.  Importantly, Mr. Steiger described the defects as “serious” and agreed in cross-examination that they affected both the value and operational performance of the vessels.
157.	The overwhelming impression is one of mounting, persistent and serious defects that were having a detrimental impact on the operation of the vessels and causing serious cause for concern at Norasia.  This is entirely consistent with the evidence of the former Norasia employees who spoke vividly of the difficulties encountered in trying to operate the vessels and their inability to operate at the required speed of 25 knots.  It is of note that their evidence in this regard went largely unchallenged in cross-examination.
The 9 October 1999 Fax
158.	At a meeting on 6 October 1999 in Abu Dhabi, Norasia offered to provide information as to the performance of the vessels on the APX route.
159.	Under cover of a fax dated 9 October 1999 Norasia supplied figures described as “the actual results of the present Pacific Service” 
160.	The figures themselves comprise 5 sheets:
(1)	3 pages with weekly results for Calendar Weeks 27 – 38, a total of 12 weeks.
(2)	2 pages of summary.
161.	The ultimate bottom line was that these figures showed a profit for the 12 weeks, after payment of charter hire of US$15,000 per vessel per day, of US$2,358,372, or US$196,531 per week, or US$4,679 per vessel per day.
162.	This was not US$250,000 per week and Mr. Menzel’s covering fax pointed out that there was a drop of $50,000 per week from the Business Plan and stated this was due to 
1)	Increased Bunkers 
2)	Schedule irregularities during the phase in period and 
3)	“We are still in the build up phase.”
163.	The pleaded case is that:
1)	The figures supplied overstated the true profits of the APX service for this period, and
2)	The covering fax implied that the earnings for subsequent periods on the APX Service were likely to improve.
164.	The S-Class vessels began operating on the Pacific service at the end of June 1999, and operated in that service until mid 2000 when a service between Hong Kong and Trieste began. All 5 HDW Vessels were redeployed in the Pacific during June and July 1999. 
165.	The parties’ accountants in their reports used the term “APX” to refer to the Pacific Service generally. In fact the APX (“Asia Pacific Express”) subdivided into a split Transpacific Express (“TPX”) service towards the end of 1999. The management information processed on 26 April 2000 reports results for the period May 1999 to March 2000 under the heading “APX”. However the columns from December 1999 onwards have an additional heading “pnw & psw as per dec”.  Although Mr. Menzel described this as a “totally different service in the weakest part of the year,” for my purposes I can I think ignore this detail.  I am concerned simply with the earnings of the vessels.
166.	Accordingly I use the term APX as generally it was in the evidence to refer to the Pacific Service generally, consistent with the usage in the Norasia management accounts. 
167.	As I have indicated the first S-Class vessel entered the APX service at the end of June 1999.  It needs to be borne in mind in evaluating the figures that in July 1999 whilst only the 5 HDW S-Class vessels were available one conventional chartered-in vessel was also employed.  From August 1999 onwards after a sixth S-Class vessel became available and at all material times thereafter the APX service was operated by the S-Class vessels alone.  
168.	Entry into the APX service heralded a less complex internal arrangement between NLM and N-Xpress: 5 Boxtime charters, on identical terms, signed on 21 June 1999 by Mr. Menzel (for NLM) and Mr. Steiger (for N-Xpress) pursuant to which each of the 5 HDW Vessels was chartered from N-Xpress to NLM at the rate of US$15,000 per Vessel per day. Similar documents were executed as further Vessels came into service.
169.	The management accounts and reports available to the experts to calculate the performance of the Vessels between July 1999 and March 2000 were summarised by Mr. Taylor in his first report.  They are a document of unknown date which may have been attached to an e-mail of 16 August 1999 which dealt with the period 3 May to 4 July 1999; a document again bearing no date but which was attached to the fax of 9 October 1999 dealing with the period 5 July to 26 September 1999; some figures prepared on 17 November 1999 (which Mr. Steiger described as a “summary” of management accounts) which relate to the period 27 September to 31 October 1999 and four Financial Forecasts prepared in similar format on 3 December 1999, 7 December 1999, 9 March 2000 and 26 April 2000, the first three of which deal with the period May 1999 to October 1999 and the last of which deals with the period May 1999 to March 2000. 
170.	The experts were able to achieve a fair measure of agreement as to what was, on the basis of this information, the average time charter equivalent earnings of the vessels in the APX service.  For this purpose time charter equivalent is being used as a measure of whether the vessels’ operators would be able to pay to the owners a daily hire of US$15,000 per vessel, and so the calculation takes into account all of the expenses that the operator must bear and thus which must be deducted from earnings in order to determine whether sufficient is left to cover the charter hire.  Mr. Daniel in his report had called this “Basis C.”
171.	The experts were agreed that on basis C the results for the APX service for the period July 1999 to March 2000 are as follows:
Expert 	TCE	Comment	
Taylor (1st Report) 

	Daily average July 1999 to March 2000:

US$9,623.	Figures updated in Experts Joint Statement	
Daniel (1st Report) 
	Daily average June 1999 to March 2000:

US$9,401	Note:  in June 1999 mostly  conventional tonnage was used. This month is therefore irrelevant	
Taylor & Daniel 
Joint Statement	Weighted average July 1999 to March 2000:

US$9,093	Agreed subject to Mr. Daniel’s contention that February and March 2000 should be excluded as atypical.	
Taylor (2nd Report)
	Weighted average July 1999 to March 2000:

US$9,093

Adjusted to reflect use of  one conventional vessel in July 1999:

US$8,791	Mr. Taylor’s figure of US$8,791 was not challenged in cross examination, or by Mr. Daniel.	

172.	The daily weighted average TCE earnings of the S-Class vessels in the APX service on basis C month by month as finally stated by Mr. Taylor (and not challenged) were as follows:
July 1999		US$ 11,912	
Aug 1999		US$ 14,142
Sept 1999		US$ 13,901
Oct 1999		US$   6,634
Nov 1999		US$   8,235
Dec 1999		US$   9,908
Jan 2000		US$ 11,213
Feb 2000		US$   1,637
Mar 2000		US$      762	
The July to September figures were adjusted to take account of the use of conventional vessels and, at one time, seven vessels rather than six.
173.	What this demonstrates is that the figures sent to ADIC on 9 October were subsequently shown to have been significantly wrong.  Far from making a profit, the vessels were failing to cover the US$15,000 per day charter hire payment which was central to the viability of ADIC’s investment.  The 3 December 1999 management accounts showed the following: a weekly average loss of US$114,000 in May, the start-up month, a profit in June of US$160,000 per week, largely generated by conventional vessels, and a small profit, US$36,000 odd per week in July, a high season month, followed by a relentless decline into loss – an average weekly loss of US$4,200 in August, of US$1,193 in September and of US$349,000 in October.  The year to date in the APX service showed a cumulative loss of US$930,000 or US$35,788 per week.  
174.	The figures supplied on 9 October showed average weekly profits of US$227,000 in July, US$190,000 in August and US$171,000 in September, in each case therefore implying a small surplus after payment of charterhire, albeit falling short of US$6,000 per vessel per day.  The results appended to the 9 October fax are not in the same format as management accounts which have been disclosed with the exception of the 17 November 1999 document which however bears a date, and in particular the appended results bear no clue as to their date of production nor as to authorship.  One obvious question is whether it is credible that there can have been in circulation as at 9 October 1999 management accounts which threw up so different a picture from that thrown up by management accounts prepared only eight weeks later.  Since management accounts were prepared on a weekly basis, as they would have to be to be of any utility, the suggestion that the 9 October 1999 figures represented the then bona fide forecast of the outcome presupposes a radical deterioration in the figures over the relevant eight week period.  In assessing this question I leave out of account for the time being that once the 3 December 1999 management accounts became available Norasia promptly provided KfW with a copy, but said nothing to ADIC.  I shall have to examine separately the suggestion that Norasia was under no obligation to ADIC to correct what they now on any showing knew to have been seriously misleading information as to the vessels’ performance in the APX service.  
175.	The Claimants suggest that the inference that Mr. Menzel manipulated such figures as were available to him on 9 October 1999 so as to present an unduly favourable picture can be derived from three matters.  First, he omitted from the figures which he put forward the figures for the two most recent weeks available to him, weeks 39 and 40, which started to show a less favourable picture.  Secondly, he ignored clear reports from management contained in the week 39 report itself that there was likely to be a downturn, and instead drafted his covering fax so as to give the clear impression that things were going to improve.  Finally, it is said that he used a figure for Boxco costs which he knew was likely to be too low.
176.	Mr. Menzel said in evidence that he took the last three weeks’ figures for the 9 October fax, i.e. weeks 36 to 38, from APX Weekly Report 39, a report faxed to him from Norasia Hong Kong by Mr. Vikram Singh.  This report also contained information for weeks 39 and 40 which however he did not incorporate into his enclosure to the 9 October fax.
177.	Mr. Menzel also said in evidence that the reason for omitting the figures for weeks 39 and 40 was that they related to as yet uncompleted voyages.  This was inconsistent with the approach which he had earlier taken to the impugned figures for week 15 in the CEX service which he had said might have been “forecast, budget or loading” figures, albeit that was an implausible suggestion in the context in which it was made.  It is not a convincing reason for failing to provide the most up to date information available.  
178.	In presenting the figures in his 9 October fax Mr. Menzel made adjustments to the railage and Boxco costs disclosed in Mr. Vikram Singh’s report.  Had he made the same adjustments to the weeks 39 and 40 figures it seems likely that the apparent (modest) profits shown for those weeks would have been transformed into a loss.  Mr. Menzel accepted that this would have been so for week 39.  Some uncertainty over what would have been the appropriate adjustment to railage costs for week 40 enabled him to say that that week would have been at least a break-even week after adjustment.  At the very least, as he accepted, inclusion of weeks 39 and 40 adjusted in like manner as were the figures for the earlier weeks would have shown a downward trend.  Indeed Mr. Vikram Singh’s report itself highlighted reasons why a downturn could be expected: 
1)	It drew attention to the fact that this was “the fag end of the high season” and that the low season was approaching; 
2)	General trading conditions were poor;
3)	Return (i.e. west bound) loads were elusive;
4)	Bunker costs were increasing, and 
5)	The week 39 forecast, a separate table at the head of the e-mail, showed actual TEUs consistently lower than budget.
Yet Mr. Menzel’s fax of 9 October tended to suggest that an improvement could be expected, as did a subsequent fax which he sent to Mr. Saudi on 13 October, in a passage responding to Mr. Saudi’s comment that net profits per vessel per week of US$17,000 were significantly lower than the budgeted profit of US$41,000 per week.  In my judgment Mr. Menzel omitted reference to weeks 39 and 40 because he knew that it would indicate a downturn rather than a likely improvement.
179.	There is no doubt that Mr. Menzel was justified in revising the Boxco costs as they were presented by the management of the line.  As Mr. Menzel explained, there were areas in respect of which there could be legitimate disagreement and those responsible for operating one trade lane within the line would naturally be concerned to minimise the share of Boxco costs attributable to their portion of the overall liner operation, thereby apparently improving the financial performance of the trade lane or lanes for which they were responsible.  By way of example, the figures presented to Mr. Menzel by Mr. Vikram Singh on 5 October included figures for Boxco costs of US$76 per TEU for week 36, US$142 per TEU for week 37 and US$92 per TEU for week 38.  Apart from the inherent reliability of such disparate figures, experience would have told Mr. Menzel that these costs were simply understated.  Mr. Menzel was therefore perfectly justified in revising them, although he would have done well to explain to ADIC what he had done, rather than to describe what he was giving them as “the actual results.”  The actual results, in terms of the Boxco costs, he revised to US$160 per TEU for weeks 27-34 and US$163 per TEU for weeks 35-38.  It is said by the Claimants that the process pursuant to which he arrived at those figures involved adoption by him of the lowest numbers for which some colourable support could be put forward if they were challenged and that he knew that the real costs were or were likely to be very much higher.
180.	Mr. Menzel explained what he had done in paragraph 8 of his third, and corrective witness statement which was dated 14 November 2006, i.e. during the trial and, significantly, five days after Mr. Agarwal had completed his evidence.  The relevant paragraph reads: 
“When I looked at the Weekly Reports from Hong Kong in October 1999 (reports 33/99, 35/99 and 39/1999 which were the reports I had available) I considered that the Boxco costs were too low, given my experience; for example, in some instances the figure entered was zero.  In order to provide meaningful figures to ADIC I undertook an analysis of the management report dated 5 October 1999.  For the purpose of the 12 week statement, I chose the month of July because a full 2 months had passed and the data for this month should have been more up to date than for any later month.  For July, the Boxco costs were recorded as US$672,669 for 4,119 TEUs carried.  This equated to a Boxco cost of US$163.31 per TEU carried.  I therefore applied US$160 for the first 8 voyages and US$163 for the last 4 voyages as being a realistic snapshot.”
The subsequent paragraph deals with an adjustment made to railage costs and ends with the sentence: 
“This was all explained to Mr. Agarwal in Fribourg.”
If by this it was intended to suggest that the adjustment to Boxco costs had been explained to Mr. Agarwal in Fribourg that was not a suggestion put to him in cross-examination.  The management report of 5 October 1999 to which Mr. Menzel refers contains figures for the Boxco costs incurred in the APX service in May, June, July and August 1999.  The May figure at US$530 per TEU may be unrepresentative as being a start-up month.  However Mr. Menzel’s explanation of what he did invites the immediate comment that there is no particular reason why the data for July should be more up to date than that for June, which showed Boxco costs of US$191 per TEU.  Admittedly this was a figure for conventional tonnage, although there is no particular reason why Boxco costs for the S-Class ships should be markedly different, and certainly no reason why they should be markedly less.  For August the figure was US$170 per TEU and if it was in danger of being not up to date, the chances were that it would increase.  Indeed, by the time of the 3 December 1999 Financial Forecast it was reported as US$260 per TEU and the July figure which Mr. Menzel had adopted was by now up to US$331 per TEU.  Looked at as at 9 October, it can therefore be said of Mr. Menzel that he chose the lowest figure of those available to him from the 5 October management reporting.  Indeed he did not even quite do that – for the first 8 weeks, i.e. for July and August, he adopted a figure which was even lower, albeit by only $3, than what he regarded as the most up to date figure, vis, US$163 per TEU which was the figure for July which he applied only to the September month.
181.	From the disclosure it can be seen that there was other information available to Mr. Menzel.  On 3 August 1999 Mr. Menzel carried out a Budget/Actual comparison for Weeks 26-28 on the APX route.  These showed that the Boxco costs for those three weeks were:
1)	Budget: US$205 per TEU
2)	Actual: US$225 per TEU.
The figures supplied with the 9 October fax included two of those weeks, weeks 27 and 28 which were the first two weeks in July.  Furthermore the US$225 per TEU actual figure as compared with US$205 per TEU budget figure was presented to KfW by Mr. Menzel on 4 August 1999 as being “the best figure available to me at that time.”
182.	The 1 September 1999 Boxco costs report for June 1999 discloses APX Boxco costs of US$960,119.  Total TEUs carried in that month on the APX service were 4,540, as I assume Mr. Menzel would by then have known.  This equates to US$211 per TEU.  Again admittedly this related to conventional tonnage but these Boxco costs come from a source which Mr. Menzel regarded as reliable since they came from Boxco itself in Hong Kong which was responsible for containers rather than having the interests of a particular trade lane to promote.  Mr. Sunny So in Hong Kong was the Vice President of container control for the Norasia Group.  His right hand man was Mr. William Wong who sent the report to Mr. Pauw in Fribourg.  
183.	Turning to documents prepared after 9 October, there is a Business Plan for the PNW service which must have been prepared some time late in October or in very early November since it bears an annotation by Mr. McLellan, whose work was complete by 5 November, following his visit to Fribourg on 1/2 November when most likely this document was shown to him.  This shows Boxco costs at US$205 per TEU, the original budget figure for the APX service which Mr. Menzel had utilised in the 3 August budget/actual comparison for weeks 26 to 28 on the APX route.  
184.	Next on a date which is not recorded on the contemporary documents but which is said to have been 3 December 1999 the apparently reliable Mr. Wong of Boxco reported that Boxco costs for October on the APX service were US$262 per TEU.  
185.	No reports from Mr. Wong of Boxco either prepared between 1 September and 3 December 1999 or relating to the months July, August and September 1999 have been disclosed.  Mr. Menzel said that he could locate no other such reports in his files.  The Boxco reports which have been disclosed are both in the same form.  They are sent by Mr. Wong to Mr. Pauw in Fribourg introduced by the words “Theodor please find the attached files for the container costs” in the first case “in June 99” and in the second “for October.”  Mr. Menzel said in his first witness statement that container cost figures would have been provided to the Fribourg office periodically by the container department after receipt of the various cost items, and it seems a fair inference that this is likely to have been regular reporting.  It is to say the least unfortunate that the reports which might cast light upon the integrity of Mr. Menzel’s exercise have not for whatever reason been disclosed.
186.	On the same day as Mr. Wong, in Hong Kong, sent the report of 3 December containing the October Boxco figure Mr. Pauw drew up the Financial Forecast for the APX service for April to October 1999 to which I have already referred as the 3 December 1999 management accounts.  In this document actual Boxco costs are reported as follows: 
May US$219 per TEU
June US$211 per TEU
July US$331 per TEU 
August US$260 per TEU
September US$230 per TEU
October US$262 per TEU.
From this it is apparent that Mr. Pauw has adopted the June and October figures advised to him by Mr. Wong.  The July, August and September figures are substantially in excess of the figures advised by Mr. Menzel to ADIC on 9 October, which, it will be recalled, were US$160 for July and August and US$163 for September.  I agree with the Claimants that the inference is irresistible that Mr. Pauw must likewise have adopted in these 3 December management accounts figures for Boxco costs for July, August and September as advised to him by Mr. Wong.  It is also equally clear that it was these figures, carrying the imprimatur of Mr. So and Mr. Wong at Boxco, which the Norasia management treated as reliable.  
187.	The inference which I am invited to draw is that as at 9 October 1999 Mr. Menzel must have had available to him at the very least the reliable Boxco figures for July as advised by Mr. Wong and very possibly those for August as well.  If such figures had been advised it seems likely of course that they would have been incorporated into an earlier management financial forecast similar to that prepared on 3 December 1999.  However, again, no similar management accounts relating to July, August and September 1999 and prepared before 3 December 1999 have been disclosed.  I am deeply puzzled as to how in all the circumstances Mr. Menzel felt justified in putting forward Boxco costs for the 12 week period which were so significantly below the budget figure, US$205 per TEU, particularly since less than a month later that same budget figure was used for the Business Plan for the PNW service.  That document however was shown to Mr. McLellan, which perhaps would have been unlikely had Mr. Menzel knowingly produced corrupt Boxco costs for the purposes of the 9 October fax.  Of course that could have been passed off, as it was in evidence, as a different service.  Although it was vigorously argued on Mr. Menzel’s behalf that he would hardly have increased the Boxco costs advised by Mr. Vikram Singh had he been attempting to mislead ADIC as to profitability, the fact remains that Mr. Vikram Singh’s figures were simply indefensible and the exercise which Mr. Menzel described involved taking the lowest figure from the 5 October management report and then reducing it still further for the purposes of application to 8 out of the 12 weeks in respect of which he gave figures to ADIC.  These were described as “actual results”, which on any view they were not.  I have already recorded my conclusion that Mr. Menzel deliberately chose to omit reference to the figures for weeks 39 and 40 which were to hand and which, adjusted in a like manner to those for the earlier weeks, would have presented to ADIC an unattractive picture.  I also think it unlikely that the financial forecast as set out in management accounts can have deteriorated so rapidly between 9 October and 3 December 1999.  Mr. Steiger and Mr. Menzel never suggested that the latter figures came as a surprise.  In all the circumstances there is as it seems to me force in the submission that Mr. Menzel must have selected the lowest figure for Boxco costs which he thought he could plausibly defend if challenged, knowing that it was arbitrary and likely to be considerably understated.  He did so in order to paint a more attractive picture of the operational results presented by line management than he knew to be justified.  My conclusion in this regard is reinforced by Mr. Menzel’s failure, after 3 December 1999, to supply to ADIC the updated information in the shape of the most up to date management financial forecast which was however supplied to KfW.  
188.	I think it unlikely that the content of the 9 October fax or of the enclosure thereto was discussed with Mr. Steiger before it was sent, at any rate in any detail.  On the other hand it is clear that Mr. Steiger knew about the “twelve weeks report” and the message which it conveyed within a few days because he says that he was relying upon it in what he said to Mr. Lucas in a telephone conversation on 15 October 1999.  It is to that incident that I next turn.
Lucas 
189.	On 21 July 1999 Mr. Saudi approached Mr. Geoffry Lucas of GG Lucas & Co. Ltd. for his assistance with the due diligence exercise.  Much of the detail of the involvement of Mr. Lucas is now irrelevant for the reasons which I have already discussed.  Mr. Saudi approached Lucas because a valuation certificate issued by that firm is attached to the Business Plan supplied by Norasia in April.  That certificate, dated 27 January 1999, values all 10 S-Class vessels at “at least US$40M each.”  Only 4 vessels had of course by then been delivered, albeit the Scarlet was delivered the next day.  The valuation certificate states on its face “our usual conditions as attached apply.”  The conditions were indeed attached and paragraph 4 thereof reads: 
“4. Unless otherwise stated the vessel is presumed to be free of charter commitments and to be freely transferable.”
190.	Having been contacted by Mr. Saudi Mr. Lucas evidently thought it appropriate to describe his earlier involvement.  He responded by fax of the same day which, so far as relevant, reads: 
“We first valued Norasia’s latest, 1384 TEU, 25 knot new class in April 1998 at US$40M each, based on Norasia’s advice that they had secure employment from “Major Global Carriers either on time-charter at about US$15,000 pd or on slot charter terms equivalent to US$17,500 pd for an initial 5 year period.”
In the light of their advice that these ships had actually costs US$38.5M each, i.e. on the assumption that no one else would build an equally fast series even with a 2-3 year delay for significantly less, and on Norasia’s assurance that they had secure income stream as above, we believe that anyone who preferred to buy rather than charter, should be prepared to pay at least US$40M.  Assuming running costs (excluding finance) of about US$3,500 pd, we trust that you will agree that this would have produced an acceptable rate on the capital thus invested?
We enclose a confidential copy of our letter to Norasia’s in-house consultant on these lines at that time.
In January 1999 Norasia asked us to review this valuation.
We had some discussion about whether the above time-charter/slot charter had actually eventuated; but, again on Norasia’s assurance that the income stream was comparable, we saw no reason to alter our evaluation and therefore, at their request, re-issued it on 27/1/99.
At this point, the time-charter market for ships of about 1384 TEU was at its lowest for about 3 three years and Norasia had already announced/begun their own Transatlantic service using these ships.
Though optimistic reports kept emerging from them, we must admit to growing scepticism about how well they were doing.
Since then of course,
(a)  The containership time-charter market has improved by about 40 percent for this size and 
(b)   Norasia have announced that they are transferring all the ships in this class onto the Transpacific trade.
As far as we are aware, not one has been time-chartered to any “major global carrier” and we should now be surprised to learn that the actual income stream equated to US$17,500 or even US$15,000 pd time charter.
Meantime, new contract prices in South Korea, China and elsewhere have continued to ease.  
Were we to value these ships for you or others today, we should therefore almost certainly put a lower value on them.”
Mr. Lucas did indeed enclose a copy of a fax which he had sent to Norasia’s in-house consultant Mr. Erik Boelling on 8 April 1998.  The first paragraph of that letter read: 
“We understand that this series are costing an average of about US$38,500,000 each and that the employment of all 10 vessels is secured through a co-operation agreement with one of the major global carries either on a time charter at about US$15,000 pd or on slot charter arrangements of an equivalent time charter rate of about US$17,500 pd.  This co-operation agreement is intended for an initial 5 years period.”
191.	The basis on which the 27 January 1999 valuation was given is again mentioned in a fax of 26 August 1999 from Mr. Lucas to Mr. Saudi, a “commentary” which accompanied further valuation certificates, one for the HDW vessels, one for the Chinese vessels, which he issued on the same day, in the sum of about US$35M, again on the same “usual conditions” as before.  In a paragraph dealing with the January 1999 exercise Mr. Lucas said this: 
“…subsequently, when it was apparent that no such charter [long-term time charter commitments at about US$17,000 per day] had yet occurred, they [Norasia] again asked us to value them and assured us that they had trade commitments, presumably in the Transatlantic trade, equating to at least US$17,000 per day.”
192.	With all due respect to him, I doubt if very close consideration was given by Mr. Lucas in January 1999 to the question whether the vessels, five of which were in any event as yet unbuilt, were properly described as “free of charter commitments.”  However on the basis of these virtually contemporary accounts of Mr. Lucas it seems to me that Mr. Lucas was proceeding in January 1999 on the basis that the vessels did not in fact have the benefit of formal time charters by which would sensibly be meant charters concluded at arm’s length with third parties, but that the vessels did have a comparable secure income stream equivalent to US$17,000 per day or at the very least were established in a trade which could be expected to continue to provide income at that level.  The vessels were therefore correctly described as free of charter commitments, putting on one side the internal time charters to N-Xpress which could have been terminated at will without liability on either side.  On the other hand it is obvious from these accounts given by Mr. Lucas, all given before his valuation was challenged by Mr. Steiger, that in giving his January 1999 valuation Mr. Lucas relied upon what he was told by Norasia about the vessels’ then earnings in the CEX service.  Furthermore the earnings which he regarded as secure he obviously understood to be average year round earnings – an ability to earn the relevant amount only spasmodically or in high season would not support his valuation.  
193.	The scepticism of Mr. Lucas in July/August 1999 as to whether the vessels did indeed enjoy an income stream equating to even US$15,000 per day led to his reducing his valuation to US$35M, which was of course US$5M less than the price at which it was proposed ADCL should purchase the vessels from Norasia.  Mr. Lucas explained his thinking in his “commentary” of 26 August: 
“We start from the assumption that Norasia accurately advised us that they were earning the equivalent of US$17,000 per day on the Transatlantic in 1998.  On that assumption, they were, at that time, worth at least US$40M each.
We believe that this is no longer the case and that Norasia’s switch to Transpacific is understandable, assuming that they evidently still failed to achieve any charters.
Let us assume that their initial transpacific trade commitments are equivalent to US$15,000 pd TC.  Then, it would follow that their value may have fallen from US$40 to about US$35M each.  
If they could fix period TCs at this rate, clearly their value would be about the same.  
If however, they could not and if, as we believe, their earning capacity on TP trade cannot be sustained at US$15,000 pd then basis say US$13,000 pd, our valuation would reduce to about US$30M each.”
194.	It seems that in due course Mr. Steiger learned from either Mr. Cox or Mr. Nagji that ADIC had approached Mr. Lucas for a valuation which he had given in a sum less than that in the valuation appended to the Business Plan.  This was obviously a matter of extreme concern to Mr. Steiger and on 15 October 1999 he telephoned Mr. Lucas and expressed his surprise that the earlier valuation had been reduced.  It is a measure of Mr. Steiger’s persuasiveness that by the end of the conversation Mr. Lucas had again revised his valuation, this time back up to US$40M.  Mr. Lucas described the conversation in a fax which he sent to Mr. Steiger on the same day, 15 October 1999: 
“We confirm that, having valued your new ships at not less than US$40M each in January, we began to fear that we had overvalued them, when we learned that none had been chartered out or fixed to any other operator, none had been employed in any north-south trade (for which their large reefer capacity was allegedly designed) and that you had announced that you were moving the first 5, at considerable expense, from the Transatlantic to a new Transpacific service.  
We therefore, cautiously, revised our valuation down to US$35M each; but noting that ADIC had the means to check whether the current earnings were in fact substantially more than the notional time-charter rate of US$15,000 pd, on which our previous valuation of US$40M each was explicitly based.
You have now kindly confirmed that it is currently substantially more.
Therefore, we hereby confirm that the current market value should therefore still be not less than US$40M each.
It is, as you pointed out, extremely difficult to assess the value of your ships more accurately, as there is no market of similar ships from which to draw evidence.”
195.	Mr. Lucas gave a further account of this telephone conversation in a fax to Mr. Agarwal of 22 October.  In that fax he wrote: 
“Since we last met and produced our first valuation…we have had a long call from Mr. Steiger at Norasia expressing surprise that we had reduced our valuation between January and September 1999 from “not less than US$40M” to “about US$35M” each.
We explained that, having received no previous, further communication from Norasia since January, we had been concerned to notice that none of the ships in question had been chartered out or placed in joint services (as originally envisaged) and that all had been transferred from their initial transatlantic employment to transpacific employment, presumably at some not insignificant positioning cost. 
We were also concerned that their principal features – big refrigerated container capacity and fast speed – were not at such a premium on the North Pacific, were many larger ships were also trading at 25 knots or not much less.  
Mr. Steiger replied that they had never intended to charter these new ships out and had in fact been in dialogue with only one potential joint-service partner namely Sealand.  When this joint venture failed, they had placed the ships on their own, new, transatlantic service, where they had been very successful and profitable.  
However, recognising the increase in competition on the Atlantic and noticing a very suitable niche on the improving Pacific, Norasia had nimbly transferred all five German built sisters across to a trade where they were now earning significantly more than the US$15,000 pd time charter criterion on which our January evaluation of not less than US$40M each was based.  
We pointed out that, in down-valuing them to US$35M each, we had made the proviso that this might need upgrading again in the light of actual earnings; but that another important consideration was: how could they be employed, should current employment fall or deteriorate seriously (like the Atlantic had recently).  
Mr. Steiger’s reaction was that, since the time-charter market for them had yet to be tested, there was every reason to suppose that, should it be necessary to test it at some undetermined time in the future, on the present rising market, it was very probably that several north-south trade feeder operators would grasp the chance to replace 3x18 knot ships presently on TC at US$9-10,000 pd and rising with 2x25 knot ships at US$15,000 pd.  
Furthermore, the cost of building similar ships was rising…
…On this basis, we were pleased to agree that lack of current, confidential financial data had led us to be cautious in reducing our valuation to you of these ships and that, on the usual assumption that the information which he had now supplied was correct, we again believe that his ships should have a resale value of not less than US$40M each.
We therefore sent him the attached fax accordingly.  
Of course, whether or not US$40M could be achieved in practice might depend largely on timing.  A “fire sale” probably produced less; but we certainly now feel more comfortably than we did when we last met with the concept that they might be chartered out for at least US$15,000 pd, which we still understand would produce an equivalent income stream to selling for US$40M.”
196.	Mr. Steiger denied that he had told Mr. Lucas that the ships had been “profitable” in the CEX service but I think it overwhelmingly likely that he did.  It was only when he realised that his earlier reliance on the “Week 15 figures” was on any view unsustainable in relation to something said in October (by which time management accounts would inevitably have shown that Week 15 had been far from profitable) that he denied having said that the ships had been very profitable in the CEX service.  Mr. Steiger was prepared to resort to more than one untruth in his conversation with Mr. Lucas.  It was wholly wrong to say that Norasia had never intended to charter out these new ships and had been in dialogue with only one potential joint service partner, Messrs Sealand.  Strenuous efforts had been made to charter the vessels out before resort was had to a transatlantic service for which the vessels were wholly unsuitable.  No doubt Mr. Steiger wished to conceal this from Mr. Lucas lest it confirmed his scepticism about the rate of hire which realistically these vessels could command in the market.  In this he was conspicuously successful – in his fax of 15 October to Mr. Steiger Mr. Lucas said this: 
“It remains true that the question which ADIC asked us is different from the one which you/Erik Beolling have asked: namely, if, for reasons beyond their control, Norasia were unable to continue to pay US$15,000 per day, could the ships be placed elsewhere for a similar amount or for what price might they be sold?
The absence of any relevant market data led us to answer the first half of this question negatively and therefore to revise our assessment of the second half of it from 40 down to 35M.  
The additional fact that you have never tried to market them to anyone other than Sealand puts a different complexion on how easy it might be.”
197.	The gravamen of the complaint about what was said by Mr. Steiger to Mr. Lucas concerns however his admitted statement that the vessels were earning “substantially more” than a time charter equivalent of US$15,000 per day on the APX service.  There is no doubt that Mr. Steiger said this, and equally it is in my judgment clear that he said it in order to induce Mr. Lucas to restore the valuation of US$40M which corresponded to the price by reference to which ADIC was being invited to invest.  Indeed I found very surprising Mr. Steiger’s evidence to the effect that he did not appreciate that Mr. Lucas would place reliance in reaching his valuation on what he was told about the current earnings of the vessels.  A singularly unconvincing feature of this part of Mr. Steiger’s evidence was his insistence that Mr. Lucas always made his valuations on a charter-free basis, by which he meant, I think, to imply that Mr. Lucas placed no reliance upon a vessel’s current employment.  The main significance of the “free of charter commitments” qualification is, as I understand it, that the vessel is presumed to be free of any contractual commitment which will prevent its immediate sale.  Leaving aside any quibble about the exact appropriateness of the Lucas standard form condition, Mr. Steiger knew full well that the January 1999 valuation had been based, in part, on assurances as to the vessels’ then proven ability to command earnings in the CEX service equivalent to time charter earnings of US$15,000 per day.  He also knew, because Mr. Lucas told him, that Mr. Lucas found it difficult to value the ships in the absence of evidence as to the earnings in the market of similar or comparable ships, there being no comparators.  Mr. Steiger fully appreciated that Mr. Lucas would and he intended that he should rely on what he told him about the vessels’ current earnings.  He also appreciated that Mr. Lucas had in fact so relied in revising his valuation to the original US$40M figure.  
198.	If I understood him correctly Mr. Steiger sought to justify what he told Mr. Lucas about the earnings in the APX service by reference to the “12 weeks report” which showed that the vessels made about US$20,000, by which he meant, I think, the figures appended to Mr. Menzel’s fax of 9 October, that being the only “12 weeks report.”  I have already dealt with this document.  I think it unlikely that by 15 October Mr. Steiger was not aware that the weeks 39 and 40 figures which had come forward from Hong Kong showed a downturn, particularly if the Boxco costs were restated on a more realistic basis – Boxco costs as reported by Mr. Vikram Singh were US$55 per TEU for week 39, US$96 per TEU for week 40.  
Overview and discussion
199.	It is, I think, important to stand back and to put into overall context the information available to both Mr. Steiger and Mr. Menzel at the end of September and the beginning of October and to compare it with the impression that they were seeking to give to ADIC, Mr. McLellan and Mr. Lucas.  Both Mr. McLellan and Mr. Lucas had pointed out that very little was known in the market about the vessels’ earnings.  Mr. Steiger and Mr. Menzel fully appreciated that ADIC’s principal concern in their due diligence exercise was to establish to their satisfaction that the vessels’ earnings would be sufficient to enable a daily hire of US$15,000 per vessel to be paid to the vessels’ new owners in which they would have an interest.  This sum in turn was critical to the financial viability of the proposed investment.  Mr. Lucas himself set out in his fax of 15 October 1999 to Mr. Steiger the question he had been asked namely if, for reasons beyond their control, Norasia were unable to continue to pay US$15,000 per day, could the ships be placed elsewhere for a similar amount or for what price might they be sold?  
200.	In this regard it is obvious that what needed to be taken into account was the ability of the vessels to sustain earnings at this level over time.  Management reports as at 15 April 1999 told Mr. Steiger and Mr. Menzel that the vessels had sustained losses in the third quarter of 1998/1999, i.e. October to December 1998, in the CEX service, of US$2M, an average of US$150,000 per week.  Management reports on 6 May 1999 showed that the vessels had in the fourth quarter, January to March 1999, made a loss of US$3.94M, an average of US$300,000 per week.  For whatever reason there is before the court a very limited amount by way of management accounts or similar information produced or “processed” between May and December 1999.  The raw data from the line appeared to show that the vessels made modest profits over a 12 week period in July, August and September although as Mr. Menzel appreciated, even these fragile profits were likely to diminish as costs were restated on a more realistic basis.  As Mr. Steiger and Mr. Menzel well knew, these preliminary high season results were simply no basis for confidence that the vessels were demonstrating their ability to sustain year round earnings sufficient to ensure that a daily hire of US$15,000 per vessel could be paid.  Mr. Menzel presented on 9 October average weekly profits of US$227,000 for July, US$190,000 for August and US$171,000 for September, a downward trend in what could be expected to be the best part of the year.  He can  have had no confidence that these profits would survive refinement of the accounts and he knew that he had incorporated arbitrary Boxco costs which were substantially below the budget figure.  In presenting these figures he made no mention of the line’s report on weeks 39 and 40, which confirmed the downward trend, indeed which after appropriate adjustment showed a loss for week 39 and at best breakeven for week 40.  Mr. Menzel presented the figures with a commentary that suggested that improvement could be expected.  Mr. Steiger relied upon the same information as justifying his telling Mr. Lucas that in the APX trade the vessels’ earnings were substantially more than US$15,000 per day.  Whilst it was true that figures then available appeared to show that during the high season the vessels were earning sufficient to pay a time charter equivalent of US$15,000 per day, both Mr. Steiger and Mr. Menzel must have appreciated the extreme fragility of these figures and the fact that in any event they told one nothing about the ability of the vessels to sustain payment of US$15,000 per day year round and year on year.  The temporary modest profits, even if they proved real, were likely soon to be outweighed by losses, so that looked at on any sensible basis the vessels could not sustain the required daily hire rate.  No operator would charter them at such a rate for year round trading.  
201.	There was in evidence a summary of some management accounts prepared on 17 November 1999.  It showed the performance in the APX service for weeks 39 to 43, including therefore the 2 weeks which Mr. Menzel had omitted from his 9 October presentation.  By now week 39 showed a loss of US$99,000 and week 40 a loss of US$230,000.  This can have come as no surprise to Mr. Steiger and Mr. Menzel nor did they suggest that it had.  When showed it in cross-examination Mr. Steiger said that “with November we were entering into the lower season and, therefore, we expected that the figures will not be as good.”  In fact week 39 is the last week in September.  Mr. Steiger and Mr. Menzel were highly experienced in this trade.  It can have come as no surprise to them that apparent modest profits reported by the line so soon after the conclusion of weeks 39 and 40 had so quickly turned into losses once expenses began to be correctly identified and allocated, or even incurred in the case, for example, of repositioning the containers or bearing the costs of their slow return from inland destinations.  This management  accounting document of 17 November 1999 showed an overall loss for weeks 39 to 43 of US$283,000.  
202.	A similar pattern can be seen at work by reference to the 3 December 1999 management accounts.  Mr. Steiger and Mr. Menzel never suggested that these figures when they came forward came as a shock or even as a surprise.  Of course I do not know what management accounts were available to them before 3 December 1999, with the exception of the disclosed 17 November 1999 figures which in any event relate to a later period without giving any information in relation to weeks 27 to 38.  A cynic might think it surprising that there has survived from 17 November a “summary” of management accounts as at that date which summary begins at week 39 whereas the weeks of particular interest are weeks 27 to 38 upon which Mr. Menzel had reported to ADIC on 9 October.  In any competently run business management accounts would need to be available with sufficient regularity and at sufficient intervals to ensure that management could know whether the business was profitable or not.  Norasia was highly competently run.  
203.	The 3 December 1999 management accounts show that the reported July profit for the 6 vessels in the APX service of US$227,000 per week had reduced to a profit of just US$36,000 per week – by 7 December it had shrunk to US$15,800 per week.  By 3 December August’s profit of US$190,000 per week had already disappeared – it was now a loss of US$4,200 per week which by 7 December had become a loss of US$24,000 per week.  The September weekly profit of US$117,000 had disappeared too – it was now a loss of US$1,194 per week which by 7 December had grown to a loss of US$21,000 per week.  October’s figures were by now truly disastrous – the weekly average loss for October which had been shown as US$46,000 in the 17 November accounts had deteriorated to a weekly loss of US$350,000, which by 7 December had deteriorated yet further to US$387,000, albeit later accounts exceptionally brought that figure back to US$350,000.  What the 3 December figures showed overall was that in 22 weeks of operation of the APX service, notwithstanding profits made by the conventional vessels in June and the modest profit in July, the service as a whole was showing a loss of US$930,000.  
204.	At one point in his evidence Mr. Steiger went so far as to say that there was absolutely no reason to tell ADIC about the pattern of increasing losses as this was revealed by the management accounts “because it was up to Norasia where to employ the ships.  Norasia had to pay US$15,000 that was their obligation.”  This was a disingenuous answer.  Mr. Steiger knew that the concern of ADIC was the ability of the vessels to earn in the market sufficient to enable Norasia to pay US$15,000 per day.  Just as Mr. Steiger was singularly successful in convincing Mr. Lucas on this score so also Mr. Menzel was equally successful with Mr. McLellan.  After talking to Mr. Menzel and receiving his fax of 11 October Mr. McLellan, as he put it in his fax of 12 October to Mr. Agarwal, “changed [his] tune.”  He included as paragraph 9 in his draft synopsis of conclusions which he sent with that fax: 
“The “S” Class have already proved themselves, in that current earnings are more than adequate to cover the US$15,000 per day charter hire guaranteed to ADCL.”
205.	Before discussing the extent to which, if at all, Mr. Steiger and Mr. Menzel came under a duty to correct earlier representations as and when they became aware that they had been false, I should just summarise my conclusions in relation to the 27 September meeting, subsequent communications between Mr. Menzel and Mr. McLellan, the 9 October fax and Mr. Steiger’s conversation with Mr. Lucas on 15 October.  
206.	In the absence of the relevant management accounts, the Claimants have been unable to prove that the representations made on these occasions were known to be false to the same high standard as they have proved knowledge of falsity of the representations made in the Business Plan, the meetings of 12 and 27 April and the faxes of 23 April and 9 August.  I am sure that Mr. Steiger and Mr. Menzel knew that current performance in the high season of the APX service was no guide whatever to the ability of the vessels to earn sufficient to pay a daily charterhire of US$15,000 year in year out and knew therefore that the information which they were giving was of no real value.  It is a matter of surprise to me that both Mr. McLellan and Mr. Lucas revised their opinions on the strength of what they were told.  However that may be, I cannot be sure to the relevant high standard that Mr. Steiger and Mr. Menzel knew that their statements about current performance in the APX service were literally untrue.  To some extent this is academic because it is beyond argument that by 3 December 1999 Mr. Steiger and Mr. Menzel knew that their representations as to the vessels’ earnings in the APX service had in fact been literally incorrect and I have concluded that they were under a duty to correct those misrepresentations before ADIC committed itself in reliance on them.  Nonetheless, in case that latter conclusion is wrong, I should record my further conclusion, proved in my view to the relevant high standard appropriate to an allegation of deceit, that Mr. Steiger and Mr. Menzel made these statements “recklessly, careless whether [they] be true or false” – see Derry v Peek 1889 14 App Cas 337 at page 374 per Lord Herschell.  In my judgment the situation here was exactly that which Lord Herschell described when, in the same passage, he said that a person who makes a statement in such circumstances “can have no real belief in the truth of what he states.”  In my view that description sums up precisely the state of mind in which Mr. Steiger and Mr. Menzel said what they did at this time about the earnings of the vessels in the APX service.  They can have had no real belief that the vessels were even over the timescale about which literally they spoke achieving the returns required to sustain a daily payment of US$15,000 charterhire.  In my understanding of the law that is sufficient to ground a cause of action in deceit.  I should add that I have reached this conclusion without regard to the fact that Mr. Steiger and Mr. Menzel in any event knew that the vessels’ earning capacity was seriously impacted by their unreliability.  Whilst their failure ever to disclose these problems is highly relevant to statements to the effect that the vessels were performing well, it seems to me on analysis that it is not relevant to the literal truth of statements as to current earnings.  It is in my judgment also clear beyond doubt that, if relevant, the matters to which I have referred demonstrate a carelessness when making the representations to the Claimants such as would also sustain a finding of liability in negligence against Mr. Steiger and Norasia Shipping Ltd.  For reasons which I set out briefly later I do not consider that the Claimants can succeed in negligence against Mr. Menzel.
207.	In Clerk and Lindsell on Torts, 19th edition at paragraph 18.22 the law is stated as follows: 
“It may be that a statement was in fact true at the time when made, but before being acted upon by the party to whom it was made had been rendered untrue by reason of later events.  In such a case, then if the defendant was aware of those events he will be liable in deceit.”
Before I state my conclusions as to the applicability of the principle there stated I must deal briefly with two further aspects of the ADIC due diligence exercise and with signature of a Memorandum of Agreement dated 22 November 1999, all of which were accomplished between 9 October and the “processing” of the 3 December management accounts.  As I understand it, it is principally because of the completion of the due diligence exercise and because of execution of the Memorandum of Agreement at the conclusion thereof that Mr. Steiger and Mr. Menzel deny that they came under any duty on or after 3 December 1999 to correct what they by then indisputably knew to be their earlier misrepresentations.  
Brockman 
208.	On 21 October 1999 Mr. Menzel, on behalf of ADIC, retained Mr. Willi Brockmann, a German naval architect practising under that name, to provide a “valuation with inspection” of the S-Class vessels.  Although this was not explored in evidence, I think it unlikely to have been ADIC’s idea that the inspection of one German built vessel and one Chinese built vessel should be conducted by the Germanischer Lloyd surveyor in Hong Kong, although nothing really turns on this.  By the same token nothing turns on the fact that Brockman was a recommendation of Mr. Menzel.  ADIC asked him for his recommendation and in fact sounded out various other organisations before retaining Brockman.  In the event each vessel was inspected, as I understand it, by a non-exclusive Germanischer Lloyd surveyor.  Technical documents and details of operating costs were supplied to Brockmann by Ganymed.  
209.	On 8 November 1999 Brockmann reported.  In fact the report appears to have been prepared, and is signed, by Mr. Ulrich Blankenburg, a naval architect in partnership with Mr. Brockmann.  Both Mr. Brockmann and Mr. Blankenburg were accredited with the Chamber of Commerce in Hamburg as sworn surveyors and valuers.  Accompanying the report were two “Condition Survey Reports.”  The first reports that Mr. Hu inspected the Sheba, an HDW-built vessel, between 08:00 and 13:00 hours on 25 October 1999 whilst she was alongside the container terminal in Hong Kong.  The second records that Mr. Hu inspected the Sultana, a Chinese-built vessel, at the same location between 09:30 and 17:30 hours on 26 October.  The valuation was said to be based on the Condition Surveys.  The report stated on page 10 that the vessels featured a service speed of “over 25 knots” and yet on page 12 indicated, on a comparative evaluation of test results and trial speed measurements, that for the Sheba a speed under service conditions of about 24.35 knots was to be expected whilst for the Sultana the service speed to be expected was 24.1 knots.  The market value for the Sheba was put at US$34.2M and for the Sultana US$33.2M.  At page 20 it was stated: 
“As we were informed, for the “Norasia fast container vessels” a fixed time charter has been concluded with a rate of US$15,000 per day (equals 10.81 US$ with 1,388 TEU) for a period of five years.  This rate per position TEU is above the upper range of the present depressed market.  For comparable ship sizes of 1,340 TEU and 1,450 TEU, the market charter is for the time being within US$4.50 US$/TEU up to US$7/TEU.”
However it was also stated that in view of the speed and the saving for open top loading/unloading procedure a premium could be expected in consequence of which “an average charter rate for the Norasia vessels can be expected about 20 per cent above the market rate, i.e. in the region of US$11,500 per day (for comparison US$8.29/TEU).”  There was also what was described as an “economic” or “utility” valuation.  On the basis of an expected market charter rate of US$11,500 per day which was noted to be lower than the “closed” rate but higher than rates of vessels of same capacity but less speed, the utility values were almost exactly the same as the traditional market valuation.  However the report continued “on base of a charter rate of US$15,000/day as agreed for the next five years, the utility value for MV “Norasia Sheba” will increase up to US$45,365,573.77 and in consequence also the market value for [sic] will increase accordingly.  The same relation can confirmed [sic] for MV “Norasia Sultana.” ”  The attached “Condition Survey Reports” are very superficial documents – perhaps unsurprisingly given the short time available to the attending surveyor.  The report on the Sheba does note some reported deformation of steel structures.  The report on the Sultana made some reference to vibration as follows: 
“According to the Master, the vibration experienced in accommodation area is less when compared to sister vessels during calm sea conditions.  Rough weather performance cannot be accessed [sic] yet as the vessel is only two months old, not yet experienced bad weather conditions; according to the Master, this was due to less high tensile steel used and more substantial structures fitted.”
There was also a brief reference to a problem with the controllable pitch propeller: 
“On 17.09.1999 at arrival Busan: 
Failure of CPP control, local control effected.  
…
According to verbal expression of chief engineer, the CPP pitch failure was due to mechanical problem of a hydraulic component, which was rectified by LIPS representative…”
210.	The central importance to ADIC of the US$15,000 per day earnings figure is perhaps amply demonstrated by the manner in which the Brockman valuation was reported to the DGM by the Project Team at the conclusion of the due diligence exercise.  In an internal memorandum of 13 November 1999 they wrote: 
“Two desktop valuations (Clarkson: US$30M and GG Lucas: US$38-41M) were fairly close to the contracted price adjusted for opportunity and pre-delivery costs.  However, due to the unique design and high specification standards of the new vessels, a physical inspection (by Germanischer Lloyd, one of the top Class Societies) leading to more objective valuation of the new ships was considered to be more prudent.  Based on the physical inspection reports and the earning capacity of the new vessels, the market value of each new built ship is estimated to be US$45.5M, which is US$5.7M higher than the proposed average acquisition price of US$39.7M.”
Mr. Agarwal’s visit to Fribourg 
211.	Mr. Agarwal visited Fribourg between Wednesday 27 and Friday 29 October as part of the due diligence exercise.  He was joined on Monday 1 November by Mr. McLellan and that evening by Mr. Saudi.  On Tuesday 2 November all three of them had a discussion with Mr. Menzel at which, according to Mr. Agarwal, there was discussion concerning the prospects of the new vessels earning the same level of income as they had achieved during weeks 27-38, the weeks covered by the information given by Mr. Menzel under cover of his fax of 9 October, future strategy on deployment of the vessels, bunker rates, fuel consumption, utilisation of reefer capacity and ship valuation.  Had the Claimants’ remedy lain entirely in the tort of negligence it would, I think, be necessary to attempt to examine the nature of Mr. Agarwal’s exercise in a little more detail than is, I think, in the event required.  Each of Norasia Shipping Limited, Mr. Steiger and Mr. Menzel make the unattractive plea that the effective, or at the least a contributory cause of the Claimants or any of them entering into the joint venture and suffering such loss as the Claimants may prove to flow from it was the Claimants’ negligence in failing to verify, if they did, information given to ADIC by Norasia Shipping about the vessels’ past earnings and the viability of the proposed venture, and in particular failing to conduct a proper and/or sufficiently thorough and/or competent due diligence exercise.  It was of course accepted that this plea is no answer to a claim in deceit.  I have already referred to some unsubstantiated assertions by Mr. Menzel as to explanations which he made to Mr. Agarwal, and I must shortly deal with another.  With the exception of these belated and forlorn assertions, none of which were put to Mr. Agarwal for his comment and all of which I unhesitatingly reject, it is not suggested that Mr. Agarwal in the course of this exercise discovered any of the matters of which complaint is made in these proceedings.  In these circumstances it is unnecessary for me to speculate whether Mr. Agarwal might have discovered more had he been more knowledgeable in the field in which he was working.  This is also an area in which I neither received submissions nor heard argument from the Defendants.  In particular in his final written submissions Mr. Hoyle described ADIC as having undertaken a thorough due diligence investigation.  He was also at pains to portray Mr. Agarwal as careful and competent – which he was, although he lacked relevant experience and did not strike me as someone who would aggressively seek out that which was not presented to him.  
212.	The strategy adopted by Mr. Agarwal seems to have been to test the figures for week 38, that being the most recent week in respect of which he had been given information by Mr. Menzel on 9 October.  It is unnecessary for me to decide whether that was a reasonable approach.  I accept that Mr. Menzel showed Mr. Agarwal such material as he asked to see although I reject as unreliable his assertion, not put to Mr. Agarwal, that he provided him also with the results for weeks 39 and 40 and, if that is what he intended to say, week 41.  I think it inherently unlikely that Mr. Menzel would have given Mr. Agarwal something for which he had not asked.  As to the suggestion that Mr. Menzel had available no individual report from Hong Kong for week 38 that may be true, but since there were weekly reports Mr. Menzel would have had available a report in which week 38 was the last week.  In fact I think it unlikely that Mr. Menzel had at trial any real recollection of what documents he had shown to Mr. Agarwal.  In his second witness statement Mr. Menzel had said he could not recall what documents were shown to Mr. Agarwal.  It was only in his third witness statement that he proffered the explanation that his 9 October figures had been taken from the 5 October Hong Kong report, which shows weeks 36-40.  He also said in evidence that he could not remember whether he showed to Mr. Steiger the figures for weeks 39, 40 and 41 before Mr. Steiger spoke to Mr. Lucas on 15 October.  In this state of affairs his belated recollection that he had shown the 5 October weekly report to Mr. Agarwal seems to me unreliable.  
213.	The exercise conducted by Mr. Agarwal prior to his visit to Fribourg is described by Mr. Taylor in paragraphs 5.4.1 - 5.4.3 of his report as follows: 
“5.4.1	A set of weekly results in respect of the APX service for the 12 week period from 5 July to 26 September 1999 was provided by Norasia to ADIC under cover of a fax dated 9 October 1999.  The weekly results ranged from an operating loss of US$163,946 (Week 30) to a profit of US$631,464 (Week 29), with an average weekly profit of US$196,531, or US$32,755 per vessel per week based on six vessels operating on the service per week.
5.4.2	A comparison analysis between the actual results for a selected week (Week 38) and the budget provided by Norasia under cover fax dated 3 May 1999 was performed by ADIC.  This was forwarded to Norasia with a series of questions pertaining to the variances on a line-by-line basis.  Ten of the questions related solely to the performance during Week 38, with a further three questions relating to the 12 weeks of results generally and one question relating to the budget provided on 3 May 1999.  The response received from Norasia on 13 October 1999 was considered satisfactory by ADIC.
5.4.3	Although the results showed a decline in the actual performance from the budget provided by Norasia under cover of a fax dated 3 May 1999, according to Mr. Agarwal, ADIC did not consider the results to be a cause for concern.  On the basis of these results the annual net profit from the service would equate to US$16.844 million, of which ADCL would receive 50% (UD$8.423 million) pursuant to the planned profit sharing arrangements with NSL, whereas the projections for the performance of ADCL, per the Investment Memorandum, included a contribution from the planned profit sharing arrangements in the first full year of operation of US$5 million.  Accordingly, the presented actual results exceeded the projected profit-share and ensured a good amount of provision for contingencies.”
On his visit to Fribourg Mr. Agarwal set out to verify against supporting documents income and expense items for week 38 selected on a random basis.  
214.	As Mr. Agarwal records in his third witness statement, with the support of Mr. Taylor, had he carried out the same exercise in relation to weeks 27-39 as reported in the management accounts on 26 April 2000 as he had conducted in relation to the 9 October figures for weeks 27-38, he would have discovered a loss making business.  Had he been shown weeks 39-40, or even weeks 39-41, he would have been unlikely to have reached the conclusion, recorded in his first witness statement, that “based on these 12 weeks figures, the general trend was profits.”  Similarly if so soon after the completion of his work he had been sent the 3 December 1999 management accounts, if only for weeks 26-38, he would have seen exposed the fragility of the earlier figures and seen confirmed a worrying downward trend.  Had he been shown the full 3 December figures including therefore up to the end of October he would again have been looking at a loss making business.
215.	As it is the outcome of the due diligence exercise culminating in Mr. Agarwal’s visit to Fribourg is recorded in the Project Team’s internal memorandum to the DGM on 13 November 1999 in these terms: 
“The objective of financial due diligence was to establish the fairness of business plan with due consideration given to the results of operating new ships.  To achieve this, we performed the following work:
•	Obtained an understanding of the general controls environment with emphasis on accounting controls
•	Reviewed the actual results of operations for week 38 (end of September 99) with the reports and statements used for compilation
•	Discussed in brief the contents of various reports and matched the reports with information available with us on the performance of new ships
•	Compared the revenue and expense assumptions used in the business plan with the parameters derived from the actual results of operations for week 38.
The outcome of the review was positive reflecting the conservatism of their assumptions for business plan, the strength of Norasia management skills and hence their business.  As mentioned by Clarkson in their final report, business plan of N-Xpress is hardly overstated and its current earnings are more than adequate to cover the US$15,000 per day charterhire for each vessel to ADCL.”
This again underscores the central importance to ADIC of their understanding that the vessels had reliably proved themselves in service able to earn a time charter equivalent of US$15,000 per day.  
216.	By this internal memorandum the Project Team sought the Board’s Final Approval and authorisation to proceed.  The GM in turn sent a short memorandum dated 14 November 1999 to the Board.  It recited: 
“1.	We are pleased to confirm to you that Clarkson one of the leaders in the shipping industry has conducted a due diligence of Norasia, which has been positive with the recommendation of the investments.  
As per the evaluation we had conducted two desktop evaluations and one physical evaluation, all valuations were fairly close and confirm the price when adjusted for opportunity and pre-delivery cost.
2.		Financing ADIC’s participation in ADCL, we have succeeded in securing bridge financing for US$77.5 million in addition to our US$6 million participation from Paribas on very competitive terms with none recourse to ADIC.
3.		Enclosed, the Clarkson’s report along with the vessels’ valuations and the letter of comfort to be signed by ADIC for the bridge financing.
Therefore, we will seek your final approval to proceed with the investment in ADCL.”
217.	The matter was considered at a Board Meeting on 18 November 1999 at which Mr. Al Fahim, Mr. Koinis and Mr. Saudi again attended in part.  Following discussion it was resolved as follows: 
“First:
Resolved to approve the participation in the incorporation of Abu Dhabi Container Lines – ADCL – Ltd. in partnership with the foreign partner M/s Norasia Shipping Group Ltd for a capital of US$400 million representing the total fixed assets and working capital divided as follows:
a)	US$160 million, 51% of which represents Abu Dhabi investment Company’s participation in the sum of US$81.6 million.
and 49% of which represents the foreign partner Norasia Group’s participation in the sum of US$78.4 million.
b)	US$240 million for which a direct loan would be arranged in favour of Abu Dhabi Container Lines Ltd – ADCL, by Kreditanstalt Fuer Wiederaufbau – KfW, Frankfurt, as a long term loan.
Second:
In the light of and within the Company’s participation percentage as described above, it was resolved to approve the investment of an amount of US$6 million in Al-Sufun Holding Company to be established for this purpose in order to own the participation percentage of Abu Dhabi Investment Company (51%) in ADCL being the portion allocated for marketing and promotion to UAE major investors, against a commission, who will enhance the strategic value of the project and for preparing a comprehensive strategic plan for the marketing and promotion scheme for this purpose.
Third:
In the light of and within the Company’s participation, it was resolved to approve the arrangements for obtaining bridge financing in the sum of US$77.5 million provided by M/s PARIBAS without any guarantees by Abu Dhabi Investment Company (this amount includes US$1.7 million allocated as contingencies to cover bank charges and the cost of finalizing procedures relating to this investment).”
The Memorandum of Agreement of 22 November 1999
218.	A few days later on 22 November 1999 ADIC and NSL executed a Memorandum of Agreement.  It was plain and obvious from its terms that this document did not commit ADIC to invest and Mr. Steiger and Mr. Menzel clearly understood that ADIC was not yet bound.  In this Memorandum of Agreement ADIC was described as the “U.A.E. Investor” and Norasia Shipping Ltd was described as the “Co-Investor.”   The memorandum provided, so far as material: 
“WHEREAS
A.		The U.A.E. Investor has the skills, local knowledge and experience, legal charter and resources to engage in investment activities in Abu Dhabi and elsewhere and intends to create the SPV (as hereinafter set out) to hold its shareholding in the Project (as hereinafter defined);
…
C.		The Co-Investor has, either built and in operation or in the course of new building ten (10) specialised container vessels which the Parties have agreed will become assets of the venture herein referred to:
D.	This MOA follows discussions which have been held between the Parties regarding the Project and their intention to incorporate a private joint stock company as part of the Project.  The Parties have entered into this MOA to summarize the key elements of the discussions and to set forth a manner in which they are to proceed in the earliest practicable course.  The Parties agree to deal exclusively on the Project until 31 January, 2000 in order to allow the Parties the necessary time and opportunity to put in place the necessary documents and financing.  In the event of successful negotiations, all items in this MOA are subject to being incorporated in the necessary documentation the same to be in a form satisfactory to both Parties.
1.	The Project
To establish a Joint Venture Company (the ‘JVC’) in Abu Dhabi, U.A.E. with branches elsewhere as may be appropriate from time to time, for the purposes of developing a business in the area of the ownership, chartering and operation of vessels and related activities the same to be based in Abu Dhabi, U.A.E.  U.A.E. and elsewhere as the Parties shall consider appropriate and mutually agree (as set out in this Clause, the ‘Project’).
Details of the JVC to be formed to execute the Project are as stated in Clause 2 hereof.  For the purpose of its investment and to facilitate the same in the U.A.E. Investor will form a special purpose vehicle (the ‘SPV’) to hold its shareholdings in the JVC as set out in Attachment 1 thereto.
As and when the JVC is incorporated and registered in the Commercial Register the JVC will, and for value acquire from the Co-Investor or its subsidiaries or affiliates a fleet of ten (10) specialised container vessels (the ‘Vessels’), as set out in Attachment 2 hereto, the JVC obtaining funding in respect of the same by virtue of financing for the same as set out in Attachment 3 hereto (the ‘KfW Loan Financing’).  Furthermore the U.A.E. Investors’ participation in the Project is subject to the formation and legal creation of the SPV and the finalisation of Bridging Loan Facilities (as more fully set out in Attachment 4 hereto (the ‘Paribas Bridge Financing’)).
In furtherance of the foregoing aspects of the Project the Parties have negotiated and continue to negotiate as between them the substantive agreements referenced in Part 1 of Attachment 5 hereto (the ‘Party Agreements’) and each of the Parties has negotiated and continues to negotiated with certain third Parties the substantive agreements referenced in Part II of Attachment 5 hereto (the ‘Third Party Agreements’).”
219.	After setting out certain target dates the Memorandum continued: 
“Subject to the agreement of KfW and Paribas under, respectively, the KfW Loan Financing and the Paribas Bridge Financing the Parties record their intention that, at financial close under the Loan Agreement relative to the KfW Loan financing the JVC should pay for such of the Vessels as have then been delivered and that the JVC’s then capitalisation will reflect the same.  The subsequent Vessels (that is, those delivered thereafter) will be paid for initially by shareholder loans from the Parties, such shareholder loans to be deferred to amounts due under the KfW Loan Financing and such shareholder loans thereafter to be capitalised in the JVC and new shares in the JVC issued (subject, of course to any relevant share pledge in respect of such newly issued shares in the JVC).
2. 	The Joint Venture Company
The JVC will be established as a new and separate company by the Parties (that is, by SPV and the Co-Investor) to undertake the Project on the basis of the following parameters: 
2.1	Type of Company of the JVC:  Private Joint Stock Company					    under U.A.E. Companies 						    Law (as amended); 
2.2	Equity-Capital Contributions	    The JVC’s Capital will be   & the Sharing of Profit:	    Dirhams in a overall amount 					    of up to Dhs. 587,6000,000 					    (that is US $ 160 m 							    converted from US Dollars					    at the rate of 3.6725)) and						    will be contributed in 						    tranches as provided for in						    the last main paragraph of						    Clause 1.  In the initial 						    stages of the Project the 						    contributions will be in cash,					    that is, before any debt is						    incurred and:
the SPV will share in the JVC’s equity and hence profit for not less than 51%: and
the Co-Investor will share in the JVC’s equity and hence profit for not more than 49%.
2.3  Location of the Main Office:   Abu Dhabi City.
2.4	 Name of Company:		    Abu Dhabi Container Lines 					    Private Joint Stock 							    Company.
…
2.7	 Management:		The day to day management 		of the JVC shall be effected 		by the JVC’s duly 				appointed staff who shall,			in all cases, be suitably			experienced in the 				appropriate fields.  The 			Managing Director of the			JVC shall be a person			nominated or agreed by 			the Co-Investor.
…
4.	Obligations of the U.A.E Investor/the SPV and the Co-Investor
4.1	The Parties shall co-operate to develop and finalise the Feasibility Study and other supporting  information necessary or appropriate for the JVC’s formation as a private joint stock company under the U.A.E Companies Law (as amended). 
4.2	ADIC undertakes to fund the SPV’s capital in an amount of US $ 6m.
4.3	The SPV (when created) will fund its capital investment in the JVC by way of the Paribas Bridge Financing and the paid up/issued share capital available to it.
4.4	The Co-Investor undertakes to fund its capital investment in the JVC through the transfer of title/sale of such of the Vessels as shall then have been delivered to the JVC with appropriate accounting arrangements (in book entry form) relative to the same.
…
5	Good Faith Negotiations
	The UAE Investor/SPV and the Co-Investor agree to negotiate in good faith with a view to the execution of legally binding contractual documentation which consummates the matters contained in this MOA through the Party Agreements and the Third Party Agreements.  The Parties agree that they shall proceed on the basis stated in this MOA until such time as the aforesaid contractual documentation is put in place or until 31 January, 2000, whichever occurs first.”
Developments until completion 
220.	The MOA therefore envisaged completion by 31 January 2000 but this did not occur, largely as I have already described because of the unforeseen requirement to set up a second SPV and the unforeseen delay in obtaining the requisite consents and completing the requisite legal formalities attending company formation.  Indeed the first of the SPV’s, which was identified in Attachment 1 as ASH, was not incorporated until 15 February 2000.  It was only on 6 June 2000 that the Executive Council of the Emirate formally approved the establishment of ADCL.  It was only on 3 July 2000 that ADIC finally became committed by execution of the Shareholders Agreement between NSL and ASH.  On the same day KfW and ADCL entered into the new loan agreement.  On 24 July 2000 the second SPV ASMIC was incorporated.  On 29 July 2000 ADIC gave a letter of comfort to Paribas in respect of the latter’s proposed loan of US$77.5M to ASMIC to enable the latter to subscribe for shares in ADCL.  The letter of comfort provided that ASMIC was set up in order to acquire 51% of ADCL less the shareholding of ASH and Mr. Al Kindi, a nominee shareholder nominated by ASH for that purpose.  The letter states that it is to be governed by and construed in accordance with Abu Dhabi law and the federal laws of the United Arab Emirates as applied by the Civil Courts of Abu Dhabi.  It also states expressly that it is given “to comfort BNP Paribas and such other banks as may become involved in funding amounts under the Bridging Agreement… and does not constitute a guarantee obligation upon ADIC.”  The letter also however states, at clause 4, that in the event that ASMIC shall not, within the period of two years from the date of the signing of the Bridging Agreement, have repaid all of the amounts due thereunder (inclusive of principal and interest), then ADIC shall use its reasonable endeavours at such time to provide appropriate funding to ASMIC from other sources (whether in the form of additional new equity or in the form of deferred/subordinated debt granted to ASMIC) in order to ensure the reasonably timely repayment of amounts due by ASMIC under the Bridging Agreements.  I shall have to refer again to this letter of comfort in due course.  Reverting to the MOA this provided that the equity capital of ADCL would be US$160M, to be held as to 51% by the SPV and 49% by Norasia.  It was made clear that ADIC would fund the SPV’s capital only to the extent of US$6M with the balance of the SPV’s capital investment coming from the Paribas Bridge Financing.  ADIC in fact advanced US$6M for account of ASH, then “under establishment,” on 28 December 1999.  ASH used US$277,739.96 to purchase shares in ADCL on its incorporation.  The remainder, US$5,722,260.04 was in due course advanced to ASMIC which funds ASMIC used to purchase shares in ADCL and to pay the fees under the Paribas loan facility.  To complete the financial arrangements on 31 July 2000 the Paribas loan facility agreement for US$77.5M was executed by Paribas and ASMIC.  On 1 August 2000 Norasia, ASH and ASMIC executed an Accession and Amendment Agreement pursuant to which ASMIC became a party to the Shareholders’ Agreement.  There was then drawn up on 24 September 2000 formal documentation pursuant to which the vessels would be transferred into the ownership of ADCL.  This included, for each vessel, a Memorandum of Agreement on the Norwegian Saleform whereby the Norasia individual ship owning companies sold the vessels to ADCL, Management Agreements with Ganymed and Boxtime Charters of the vessels by ADCL to N-Xpress Abu Dhabi for 12 years at US$15,000 per day.  The charters described the vessels as having a service speed of 25 knots.  All of these agreements however took effect only on the actual delivery of the ships by the Norasia companies to ADCL which was effected as follows: 
Sheba 25 September 2000
Scarlet 26 September 2000
Sultana 2 October 2000
Shereen 3 October 2000
Savannah 9 October 2000
Samantha and Selena 16 October 2000
Salwa 17 October 2000
Salome-Shamsaa 13 November 2000
Sabrina delivered direct from yard to ADCL on 14 November 2000.
221.	I shall have to revert in due course to the role of N-Xpress Abu Dhabi, which was in fact a Norasia company and also to the performance of the vessels as this developed between 3 July 2000 and the ultimate breakdown of the relationship in 2001.  However the condition of the vessels had continued to give serious cause for concern throughout the period from signature of the Memorandum of Agreement between ADIC and NSL on 22 November 1999 until 3 July 2000.  Further problems with slamming and rolling were reported and the vibration problem came more acute.  Attempts to resolve it with modifications did not succeed, and although the Chinese vessels did not suffer to the same extent, apparently because they were constructed of less high tensile steel than the German vessels, they suffered nonetheless.  Other problems, such as a failure of a rotor bearing shaft and problems with the davits of the free-fall lifeboats were attributed to the vibration.  A service speed of even 23.5 knots was found to be unachievable.  Adjustment of the propeller pitch, whilst it allowed more power to be generated at the shaft, appears not to have been efficacious in enabling the vessels to maintain a service speed of 23.5 knots.  
222.	On 15 December 1999 Mr. Steiger took the opportunity of a letter to the new Chairman of HDW to make clear his views as to the shortcomings of the HDW vessels.  He wrote as follows: 
“First I would like to congratulate you to your appointment as Chairman of HDW.  We wish you good luck and success in your new assignment.
Since the delivery of Norasia SAMANTHA we made HDW aware of heavy vibrations on the deckhouse.  After a few months of operation we further detected structural deficiencies in the bow and stem section of the ships.  Meantime a lot has been discussed an a few modifications have been made.  However, the key problem of unbearable vibration and structural deficiencies are still unresolved 1 ½ years after delivery of the first ship.
With the recent  entry into the service of two of the new constructions from China, having identical shape and propeller design, it is a foregone conclusion that the problems with the five HDW-built ships are due to structural design deficiencies a task undertaken by HDW at its insistence.
The structural integrity of the ships, the unacceptable high vibration levels in the hull in general and the upper bridge in particular and the lack of solution for the repeatedly damaged free fall boats continue to interrupt the commercial operation of the five vessels.  Such interruptions manifest itself among others in unscheduled excessive operating costs, class notation, resignation of senior crew staff and the reputation of the Norasia fleet in general.
New cracks and structural deformations were again identified late this fall in the vicinity of previously strengthened areas by HDW last summer.  The bridge area continues to be uninhabitable and lifeboats are again damaged with a GL notation good until December 31, 1999 about to take effect.
In view of the above we put HDW on notice that Norasia plans to take whatever steps necessary to rectify these problems immediately at out own initiatives.  This will entail the engagement of consultants to determine the cause of the problems and hopefully results in an appropriate solution, be it the addition of reinforcement of steel or any other substance at the bow and stern areas and the reconstruction of the free fall boat arrangement to satisfy permanent class requirement.
Without prejudice, Norasia will hold HDW fully responsible for all time and material costs as well as off-hire losses until all the above deficiencies are resolved professionally.
Since February/March is the least damaging off-hire period for our ships in the Pacific to carry out the repairs, we ask you to meet us in Fribourg in early January to coordinate critical steps to mitigate further losses to Norasia and to avoid unnecessary costs to HDW.”
I make due allowance for the fact that Mr. Steiger wanted to ensure that the incoming Chairman regarded these problems as more serious and pressing than Mr. Steiger thought the HDW management had to date regarded them.  No doubt there was an understandable element of exaggeration.  Mr. Steiger is not to be criticised for that.  Even making these allowances, this letter speaks for itself as to the reliability of the vessels and the manner in which they were by now regarded by Norasia management, a picture amply borne out by the documentary evidence and by the oral evidence of the former Norasia employees who gave evidence for the Claimants.  
223.	By far the most serious problem to manifest itself during this time was however that with the controllable pitch propellers.  By 3 July 2000 all five HDW vessels had suffered a total failure of their CPP, Shamsaa on 19 February, Samantha on 9 May, Scarlet on 2 June, Savannah on 5 June and Sheba on 18 June.  All thereafter needed to be dry docked for repairs.  In consequence Samantha spent 96 days off hire undergoing repairs in Shanghai between 9 May and 14 August 2000, Scarlet spent 64 days off hire undergoing repairs in Hong Kong between May and 3 August 2000, Savannah spent 42 days off hire undergoing repairs in Hong Kong between 5 June and 17 July 2000, Sheba spent 39 days off hire undergoing repairs in Singapore between 18 June and 28 July 2000 and Shamsaa spent 18 days off hire undergoing repairs in Hong Kong between 15 August and 2 September 2000.
224.	This was not a sudden problem.  Although the first failure occurred on the Shamsaa on 19 February 2000 Norasia had already had ample warning of a significant and common problem well before that first complete failure.  Norasia was aware by June 1999 of a significant wear problem within the CPP system of at least two ships.  The problem appears to have been one of excessive and premature wear in the bearing surfaces of the propeller blade carriers and over-stressing of the blade carrier pins causing premature and repeated failures of the CPP system.  The problem initially manifested itself in the form of increased copper and iron in the lubricating oil for the CPP system, and, as a result, this was monitored over time as from about January 1999.  A survey report on the Sheba (in fact dated 10 October 2000) records analysis of the propeller oil undertaken in the period January 1999 to April 2000.  This shows the copper content increasing while water content remained at a trace level.  Increase in copper content is a matter of concern, and these results demonstrated that the problem of excessive wear in the CPP hub evidenced by the increased copper content in the lubricating oil was not attributable to ingress of water caused by a defective seal.  The increase in copper content was monitored from January 1999 and was a cause for concern because its rate of increase suggested excessive wear in the propeller hub.  The fact that water content remained at a trace level indicates that the CPP problem was not attributable to a defective seal but was a much more serious and inherent defect.
225.	After the first total failure on the Shamsaa in February 2000 a meeting took place at the propeller manufacturer Lips in March 2000.  Mr. Hollenbach of Ganymed attended on behalf of Norasia.  At this meeting it was decided that the seizing of the propeller mechanism was caused by water ingress due to “severe wear of the blade foot O-rings”.  This meeting appears to have concluded that “in this stage no final conclusion could be made” as to the cause, but that pressure pulses “might be a possible cause” which needed to be investigated further.
226.	It was against the background of three further failures that in June 2000 a Technical Committee was formed comprising representatives from Ganymed, hull and machinery insurers, Class and Lips.  The Technical Committee met for the first time on 16 June 2000.  The conclusions of the meeting were threefold: 
a)	The parties agreed to take a variety of measurements on the Savannah with a view to establishing the cause of the problems;
b)	For those vessels in service a variety of modifications were to be made including a reduction in power;
c)	Lips were to investigate the design of the blade carriers and present their findings to Class.

It is important to note that at this stage, prior to closing of the transaction as between Norasia and ADIC on 3 July 2000, the cause of the problem was unknown, hence obviously no solutions had been found and hence also the call for further testing, investigation and an immediate reduction in power on all vessels still in operation.  The problem was not resolved by the time the vessels were delivered to ADCL – indeed Mr. Zitz said that it never was.
227.	KfW were kept informed of all these problems.  Further letters were sent to HDW by Norasia in similar vein to that which I have already set out.  Thus on 4 April 2000 Mr. Steiger wrote to HDW, with copy to KfW: 
“In the course of the past two weeks, the following damage has appeared on HDW vessels: 
1.	MV Norasia Savannah.
Various rips in the forward vessel between Frame 246 and 250, partially on the same spot as had already been repaired.
2.	MV Norasia Scarlet.
Since last summer, we have several times drawn your attention to the fact that the transmission mechanism is subject to disproportionately intense vibrations.  To date the problem has been ignored by HDW.  At our behest GL took relevant readings from the transmission mechanism in February and confirmed the extremely intense level of vibrations.  On the advice of GL, the PTO was immediately shut off, to prevent damage.  Because of this, we are incurring additional costs daily because we have to switch to back-up diesel to generate power.  Now today, we have received confirmation that the Vulkan coupling in main engine No. 2 became defective shortly after putting to sea from Keelung and the main engine had to be shut down.  This will entail a delay of at least 2 days in the sailing schedule in Los Angeles.
Damage never comes singly.  For the second time now, the Exhaust Gas Compensator on the engine side of the No. 1 main engine has become defective which means that the crew has had to switch to No. 2 (main engine shut down).
Apart from the direct costs involved, the commercial damage we suffer due to these substandard vessels grows all the time, since, as a result of the on-going problems, we are not able to offer a regular service.  As the fastest vessels of this class, these ships enjoy special regard in the eyes of both customers and competitors.  Thanks to HDW, these vessels already have a bad press as the problems have not remained a secret to outsiders.
Although HDW does not like listening to the reproach, these vessels have already suffered a great drop in value insofar as very few people indeed would be interested in purchasing “new” ships with such an accumulation of defects.  We shall substantiate this situation at our meeting on 13th of this month with detailed figures.”
228.	On 2 May 2000 Mr. Steiger and Mr. Menzel wrote jointly to HDW, again copied to KfW as follows: 
“We refer to our meeting on April 13, 2000 in Munich between yourself, Mr. Dorsch and the undersigned.
We further refer to the phone call of Mr. Wilker to Mr. Menzel on April 27, 2000 and your draft settlement agreement, dated April 27, 2000.
In the Munich meeting we stated that our estimate for costs of repairing each vessel to bring it to the normal standard to be at least US $ 2.5 Mio.  Further we claimed an amount of US 2 Mio. Per ship for compensation of loss of asset value due to the clear visible substandard of these ships.
Our position in the meantime has been additionally confirmed by
A.	Investigation into Norasia Shamsha propeller damage and its consequences for the other vessels (see our letter April 20, 2000).
B.	All the vessels have to be drydocked instantly, to check the condition of the LIPS propeller and to replace the seals.
C.	Detection of numerous cracks on board Norasia Savannah, inspected by your representative Mr. Woller and Ganymed Mr. Tantzen (see fax of April 28, 2000 to Mr. Bottcher).
The above proves that our estimate of the repair costs is more accurate, eventually even underestimating the true repair costs of the deficiencies.  Therefore your counteroffer is totally unacceptable to us.
In our meeting of January 13, 2000 in Hamburg we drew your attention to the fact that the ships are literally falling apart and requested urgent attention to these vital problems.  With every day passing we see our warning come true.
We therefore must insist on a compensation of:
-	US$2.5Mio. per vessel for repair of the known problems (vibrations, strengthening of bow and stern section, new lifeboats and davits, LIPS propeller etc.).
-	US$0.5Mio. per vessel reserve and compensation of claims already presented.
In view of the urgency of this matter we request your reply within two days and reserve our full rights to pursue all legal options.”
229.	I have already referred to management accounts prepared on 9 March and 26 April 2000, the first dealing with the period May 1999 to October 1999 and the latter document dealing with the period May 1999 to March 2000.  I have summarised at paragraphs 171-173 above the picture which emerges from these accounts.  The vessels were heavily loss making, and were nowhere near making the US$15,000 per day TCE which was so critical to ADIC’s evaluation of the project and the achievement of which underpinned the independent advice which ADIC had by now received from Clarkson, Lucas and Brockman.  
Completion on 3 July 2000
230.	It is against this background that completion took place on 3 July 2000.  Completion was preceded by a meeting or meetings at which were present Mr. Al Fahim and Ms. Hammoudi for ADIC, Mr. Steiger, Mr. Cox and Mr. Nagji for Norasia and Dr. Wiebers and Mr. Proeve for KfW.  Lawyers were also present as were Paribas.  Nothing now turns on what was said at this meeting or these meetings.  It is sufficient to record that nothing was said to disabuse ADIC of its belief that the vessels were and had been performing well and in particular that they had reliably been earning US$15,000 per day in the APX service, just as earlier they had done in the CEX service.
Continuing representations – the duty to correct
231.	It was submitted on behalf of Mr. Steiger and Mr. Menzel that they did not appreciate that they needed to continue to supply information to ADIC once the due diligence exercise was over, ADIC had stopped asking questions and the recommendation to invest was made to and approved by the Board of Directors.  So therefore it was said that the necessary intent to defraud was absent.  I was referred to a number of authorities on this point.  I have already set out the concise statement of principle in Clerk and Lindsell at paragraph 18-22.  At paragraph 18-16 of the same work there appears the following: 
“Continuing representations
The tort of deceit is complete only when the representation is acted upon.  Where there is an interval between the time when the representation is made and the time when it is acted on, and the representation relates to an existing state of things, the representation is deemed to be repeated throughout the interval.  Hence if it is false to the maker’s knowledge at the time when it is relied on there will be a deceit at that time.”
Thus “a representation will normally be regarded as continuing, being repeated until acted on” – see paragraph 75 of Justice K. R. Handley’s edition of Spencer Bower on Actionable Misrepresentation.  In the same paragraph there is cited a passage from the judgment of Smith J in Jones v Dumbrell 1981 VR 199 at 203: 
“When a man makes a representation with the object of inducing another to enter into a contract with him, that other will ordinarily understand the representor, by his conduct in continuing the negotiations and concluding the contract, to be asserting, throughout, that the facts remain as they were initially represented to be.  And the representor will ordinarily be well aware that his representation is still operating in this way, or at least will continue to desire that it shall do so.  Commonly, therefore, an inducing representation is a continuing representation in reality and not merely by construction of law.”
See also Halsbury’s Laws of England, 2nd edition, volume XX111 paragraph 44: 
“Where there is an appreciable interval between the two dates above mentioned [i.e., date when made and date when acted upon], and the representation relates to an existing state of things, the representor is deemed to be repeating his representation at every successive moment during the interval, unless he withdraws or modifies it by timely notice to the representee in the meantime.”
The law is stated in these terms in Spencer Bower and Turner, The Law Relating to Actionable Non-Disclosure at paragraph 12.08: 
“Where the statement requiring correction was false in fact when made (though at the time when it was made it was believed to be true) the duty of its maker, when he later discovers its falsity, is obvious.  What was originally false remains false; but the importance of any failure to observe the plain duty of correcting an innocent misrepresentation immediately on discovery that it was false when made is that from that point what has hitherto been innocent becomes fraudulent;”
In the following paragraph the point is made that where a statement was true when made but becomes false before the contract is concluded, the representor comes under a duty to disclose this to the representee as soon as he becomes aware that the statement is no longer true.  
232.	I particularly emphasise the proposition that the duty of the maker of the statement is “obvious” because it was pointed out on behalf of Mr. Steiger and Mr. Menzel that “they are now pursued in a country other than that of their residence, which had no real connection to the deal and where the laws are entirely alien to them.”  It seems to me that the “obvious” duty to correct is simply an aspect of elementary honesty.  I do however accept that the relevant intention to defraud must at this stage of the inquiry be established.  The law is, as it seems to me, succinctly summarised in Cartwright on Misrepresentation, 2002, at paragraph 4.17: 
“In such cases the question is whether the representor can be shown to have become fraudulent by the time of the contract.  For this to be established, the representee will have to show not only that the representor knew of the relevant change (he has discovered the change in the facts, or he has discovered that he has already made a false statement), but also that his knowledge is sufficient to make him fraudulent: he must realise the significance of the change for the statement he has already made.”  
I would accept therefore that, as submitted by Mr. Hoyle in closing, the intention to defraud could only exist if:
•	Either Mr. Steiger and/or Mr. Menzel realised both that the information had changed and that it ought to be disclosed to ADIC; and
•	Either Mr. Steiger and/or Mr. Menzel took a conscious decision not to inform ADIC of the change in order to defraud them.
I would also draw attention to the proposition that the duty to correct arises as soon as the representor becomes aware that the statement is no longer true.  This is not an enquiry which presupposes that at the closing meeting Mr. Steiger should have corrected the earlier misrepresentations.  This is an ongoing duty, and the duty to correct had crystallized much earlier.
233.	There is absolutely no doubt that both Mr. Steiger and Mr. Menzel knew that the information had changed.  They accepted as much in their evidence and of course the 3 December 1999 management accounts were sent to KfW on 11 December 1999 by Mr. Menzel with the commentary that “the results in the Pacific have considerably worsened than at first report.”  It was stated that this had occurred “for the following reasons”: 
“(a)	higher bunker prices and expenditure than originally calculated
(b)	higher container costs than budgeted 
(c)	significantly higher rail costs than originally surmised.”
The pattern was repeated with the subsequent management accounts which became available before closing.  Mr. Steiger and Mr. Menzel took their stand on the proposition that they did not realise that the new or changed information needed to be disclosed to ADIC and that they lacked any dishonest intent in failing to correct their earlier representations which they now knew had been shown to be wrong.  They put forward various different reasons in an attempt to justify their stated belief that there had been no requirement to disclose to ADIC the changed situation.  I found none of them convincing.  Indeed I found their evidence on this topic wholly incredible.  
234.	In fact to be fair to Mr. Steiger he did at the outset of cross-examination on this point appear to accept the proposition that it would be dishonest to fail to disclose a substantial change in the situation.  He accepted that had he discovered that something he had told ADIC was incorrect he would have thought it right to tell them the true position provided it was “something of vital interest…which would have been vital for the future of this, of the venture.”  Mr. Steiger was however unable to accept that anything fell into this category.  He came up with a bewildering variety of reasons to justify his conduct.  He suggested that the management figures were wrong, notwithstanding they had been passed to KfW.  He tried to evade responsibility by pointing out that it was Mr. Menzel who had supplied the 9 October figures.  He said that ADIC never asked for updated information and were in any event not interested in what the vessels’ results were in the APX service.  He said that if it had been important to them they would have asked.  He acknowledged that what was important to ADIC was to get the US$15,000 charterhire but said that it was irrelevant to them to know whether the vessels had been achieving that because it would be the responsibility of the charterers to pay it.
235.	I have already recorded that I found Mr. Steiger’s evidence on this topic incredible.  In my judgment Mr. Steiger did not honestly believe that with signature of the Memorandum of Agreement Norasia’s obligation to provide information to ADIC ceased, absent an inquiry.  He knew, in any event, that ADIC would have no way of knowing, unless told, that the later management accounts revealed that what earlier they had been told was now known to be incorrect.  ADIC did not appreciate that a question needed to be asked, and Mr. Steiger realised that.  In my judgment he appreciated very well that had he told ADIC that the vessels had not in fact been making sufficient to pay the daily US$15,000 charterhire there was a real risk of their pulling out of the deal.  He appreciated very well that ADIC was not yet committed.  He undoubtedly found the delay frustrating, not least because Norasia’s own financial position was desperate and he was right to observe that the delay in ADIC committing itself had nothing to do with the figures.  He appreciated full well however that ADIC had no reason to doubt the figures about which they had been assured.  I am left in no doubt whatsoever that Mr. Steiger deliberately and dishonestly failed to inform ADIC, as he did KfW, that the figures upon which they had based their decision to invest had worsened to the extent that they now showed an entirely different picture.  He did so because he knew that if told of the true position there was a real risk that ADIC would pull out of the deal.  At the very least they would have reconsidered their position and there might have been further delay in finalising the joint venture.  That was not a risk which Mr. Steiger was prepared to take.  
236.	I have reached precisely the same conclusion with regard to Mr. Menzel.  Mr. Menzel’s evidence on this point was equally lamentable and equally incredible.  It appeared to be his position not just that it never crossed his mind that he should correct what he had told ADIC as he now knew it to be wrong but also that it did not cross his mind that ADIC was proceeding on the basis that what he had said about the vessels’ earnings was true.  He resorted to the assertion that “if ADIC would have laboured under this problem, they would have asked a question.”  It was the impossibility of his position which drove Mr. Menzel to such an absurd observation.  
The undisclosed problems with the ships
237.	My conclusions in this regard are reinforced by the failure of Mr. Steiger and Mr. Menzel to tell ADIC anything at all about the increasingly serious problems which beset the vessels, much of which I have already summarised.  A failure to correct earlier information does not here arise in the same way because Mr. Steiger and Mr. Menzel on any showing knew when they were representing that the vessels were “performing well” and achieving a service speed of 25 knots that neither was true.  However the position worsened markedly between the Memorandum of Agreement in November 1999 and completion in July 2000, as evidenced not least by the terms and tone of the letters written by Norasia to HDW during this period to which I have already referred.  It was also during this period, on 19 January 2000, that Mr. Menzel remarked to Mr. Scholtz that it “ha[d] not yet penetrated [with ADIC] just what problems we previously had with HDW.”  Mr. Steiger and Mr. Menzel fully appreciated of course the relevance of the defects and operational problems to the earning ability of the vessels and thus also to their value.  This very point was emphasised in their correspondence with HDW.  
238.	On 17 May 2000 Norasia and HDW concluded a settlement agreement concerning the five S-Class ships.  US$10M of the purchase price was at this time outstanding to the yard.  The yard agreed to forego its right to receive any further payment save for an amount of DM 5M which was to stand as an interest free loan to Norasia for two years in respect of which Norasia would have the ability to set off the cost of repairs of any new defects manifesting themselves during this period.  So far as concerned the already identified defects the yard was released from any further liability or obligation.  The yard assigned to Norasia such guarantee rights as it enjoyed against sub-suppliers who had been engaged during the construction of the vessels.  I find it simply astonishing that ADIC was told nothing about this settlement.  As it was put to Mr. Steiger, ADIC was going to pay the full price for the ships (or its proportionate share), buying them with unrectified defects for which HDW was responsible while compensation went to Norasia.  Mr. Steiger agreed that this was so, adding “but when we agreed on the price I did not know about this settlement.”
From completion to breakdown of the joint venture
239.	I can deal quite briefly with the remainder of the history until the eventual breakdown of the joint venture in April 2001.  
240.	As I have already indicated the vessels were as from their delivery into the ownership of ADCL time chartered to N-Xpress LLC a company registered in Abu Dhabi and established in April 2000.  There is no doubt that the idea of a new N-Xpress entity based in Dubai was raised at an early stage in the negotiations with ADIC.  Mr. Steiger’s memorandum of 23 April 1999 referred to Norasia forming “N-Xpress Ltd Abu Dhabi” immediately.  Whilst the company would be based in Abu Dhabi the intention was that its role should mirror that of N-Xpress Gibraltar.  The Letter of Intent of 31 May 1999 refers only to “N-Xpress Ltd” and describes it as Norasia’s subsidiary but ADIC’s understanding of this proposal is reflected in the Project Team’s investment memorandum of 19 June 1999 which states that what was contemplated was ADCL chartering the vessels to N-Xpress “a company to be set up in the UAE and owned by Norasia.”  Thus in the Business Plan attached to the Shareholders’ Agreement as Attachment 1 there appears the following: 
“ADCL’s Revenue Generation
Norasia proposes to provide a time charter employment of each of ten vessels owned by ADCL through N-Xpress Ltd, an Abu Dhabi based company.  This entity will charter the vessels at US$15,000 per day, increasing each year by US$500 per day.  This entity will manage the vessels for ADCL commercially and operationally.  It will guarantee a minimum income to ADCL to cover the operation costs (crew, maintenance, insurance, dry-docking etc.), the finance costs (interest and amortization), the corporate administration expenses (staff, rent etc.) and to pay a yearly dividend of 10% to the shareholders.  Any profits earned by N-Xpress will be split 50/50 between ADCL and N-Xpress.  This mechanism secures a guaranteed dividend to the shareholders of ADCL in addition to sharing of profits.”
I might mention in passing that this paragraph, an integral part of the Shareholders’ Agreement, execution of which marked ADIC finally becoming bound to its investment, yet again underscores the central importance to ADIC of the ability of the ships to generate a daily income of US$15,000.  The reference to that income (and indeed the dividend) being “guaranteed” may be thought naive but it is perhaps illustrative of the manner in which the project had been sold to ADIC.  Furthermore this document was handed in draft to Mr. Steiger for his comments and he indicated that he thought it was accurate.  I do not suggest that anyone on either side was under any illusion that if the vessels did not generate that income the charterhire either could or would be paid, at any rate other than in the short term.  In fact during late 2000 and early 2001 Norasia Holdings did provide financial support to N-Xpress LLC when it was unable to pay hire or suppliers’ invoices.  Mr. Menzel was at pains to point out at paragraph 158 of his first witness statement that Norasia was not in any way obliged to support N-Xpress LLC in this way and did so “because of our commitment to the joint venture.”  The iron fist in the velvet glove however became apparent when on 22 January 2001 Mr. Steiger informed ADIC that “we” shall hold i.e. withhold any charter payments until a certain matter was resolved, that matter being a dispute concerning an alleged shortfall in payment by ADCL to Norasia for the vessels to which I must in due course refer.  
241.	Reverting to N-Xpress LLC the ownership structure appears not to have been entirely straightforward although it was in fact controlled by Mr. Steiger and Mr. Menzel and indeed Mr. Menzel was appointed General Manager.  Apparently because of some local legal requirement N-Xpress LLC was in fact owned as to 51 per cent by Associated Construction and General Trading, ACGT, an Abu Dhabi company with which Sheikh Saeed, Chairman of the Abu Dhabi Port Authority, had some connection.  However the contract of establishment provided for profits and losses in the company to be split in the ratio 90:10 in favour of NSL, which was the other founding partner.  There may be some doubt as to whether all of the intended arrangements were formally put in place.  What is not in doubt is that N-Xpress LLC was a company run by Mr. Steiger and Mr. Menzel as a part of the Norasia Group.  The vessels of course continued to be managed by Ganymed.  It is this structure which perhaps explains how it was that Mr. Steiger and Mr. Menzel were able successfully to conceal for so long the increasingly dire technical problems with which the vessels were beset.
242.	Before turning again to those problems I must mention briefly the question of the US$26M shortfall to which I have already referred.  This was in part a product of the long gestation period of the project between the Memorandum of Agreement on 22 November 1999 and closure in July 2000.  This brought about a situation for which no provision had been made.  The price of the vessels had been agreed at US$42.6M for the HDW vessels, US$36M for the Chinese vessels, a total of US$393M.  The equity contribution had been agreed as US$160M, subscribed as to US$81.6M in cash by the UAE interests and US$78.4M representing the agreed value of Norasia’s transferred equitable interest in the vessels.  As at the time of the Memorandum of Agreement it was thought that the loan entered into between KfW and ADCL might be up to US$240M, that amount reflecting that which it was expected would be outstanding pursuant to the loan agreement as between KfW and Norasia, assuming of course that all repayments due to date had been made.  ADIC had no idea that Norasia was in fact in arrears to KfW.  The original loan from KfW to Norasia was US$251M but repayments of principal (and of course interest) had fallen due, although not all had in fact been paid.  By the time the vessels were indeed transferred to ADCL in September, October and November 2000 yet further instalments of both principal and interest had fallen due from Norasia to KfW.  In fact by the time the KfW/ADCL loan facility agreement was signed on 3 July 2000 it was in a maximum amount of about US$220M, that reflecting the amount which ought at that stage to have been outstanding as between KfW and Norasia.  In the event by the time the transactions were completed the total amount advanced by KfW to ADCL was US$209,556,303.  As at 3 July 2000 Norasia was in fact in arrears to KfW to the extent of US$23.7M on the S-Class vessel loan, and indeed in arrears totalling a further US$6.4M in respect of a liquidity loan and other facilities.  
243.	The upshot of all this was that there was a shortfall between the total price payable for the ships by ADCL to the individual shipowning companies, US$393M, and the amount received by ADCL, which was US$209,556,303 from KfW, US$80,172,000 from ASMIC (being US$77.5M borrowed from Paribas and US$2.672M from ASH) and the agreed notional contribution of US$77,028,000 from Norasia.  The shortfall was thus US$26,243,698.  Although ADCL had accepted an obligation to pay the total price of US$393M, neither ADIC nor Norasia had accepted an obligation to inject any further amount into ADCL.  This was simply a situation for which no provision had been made.  
244.	This shortfall generated acrimony between Norasia and ADIC with Norasia asserting that ADIC should contribute further funds in order to meet its proportionate share thereof.  Indeed such was the acrimony that Mr. Steiger went so far as to say in evidence before me that Norasia had been cheated by ADIC, an analysis which I can perhaps best describe as flawed.  Discussion of this issue was made the context for the telling of yet further untruths by Norasia to ADIC, Norasia being anxious to ensure that ADIC did not discover that it had been in arrears with its repayments due to KfW.  Thus on 7 January 2001 Mr. Menzel, in a letter the draft of which had been shown to Mr. Steiger, wrote to Mr. Al Kindi, Chairman of ADCL and of ADIC: 
“It was recorded in the initial Memorandum of Agreement that it would cost up to US$240M to clear the then existing financing of the vessels that Norasia had effected with KfW.  This was also the costs projection made in the Business Plan.  This was based on the arrangement made with KfW that new financing of the vessels by KfW would be made so that ADCL should assume responsibility for a KfW loan in an amount equal to the sum needed to clear the KfW loan to Norasia.  
In the event it took about ten months from initial Memorandum of Agreement until transfers of the vessels to ADCL, while the underlying arrangements were negotiated and documented.  During that ten month period Norasia continued to meet their responsibility for payments of interest and instalment repayments of principal to KfW under their earlier financing of the vessels.  These obligations were funded substantially from generated revenues of Norasia, net of expenses.  
…
The KfW Loan Facility Agreement was for a loan of up to US$220,288,460, the amount mentioned above, which as already indicated was the cost, put at 3 July 2000, of clearing the Norasia loan from KfW.  The actual loan was required to be adjusted down according to repayments made by Norasia, interest on these and others, and it is the calculation of these that resulted in the lower amount of US$209,556,303 actually borrowed.”
It was not true that Norasia had met their responsibility for payments of interest and principal, let alone out of revenues generated by Norasia.  
245.	ADIC’s perspective on this is reflected in an Internal Memorandum of 10 January 2001 produced by the Projects and Direct Investment Division.  In material part this read:-
“The original Business Plan contemplated a US$400M project cost funded through US$240M debt and US$160M equity under 60/40 debt/equity ratio.  ADCL’s incorporation and transfer of vessels were delayed by about 9 and 12 months respectively.  During that period, the original Business Plan did not come to a halt.  Instead it was carried forward by Norasia.  Accordingly, existing and newly delivered vessels were funded by debt and equity and continued being operated to generate the charter income through which loans are to be paid as per the plan.  Consequently, the level of debt was reduced to about US$210M in round figures.  Today Norasia is requesting from ADCL to pay back the portion of the loan that was repaid during the delay period while they were operating the vessels without passing on the revenues that were generated in the same period i.e. passing on the costs but not the earnings.  This does not reflect good faith dealings on Norasia’s part and our auditors endorsed our view as a matter of principal (sic).  Originally Norasia wanted the repayment to come through increase of equity but as this was not possible, they are now proposing repayment through new KfW loan against second mortgage over the vessels.  Norasia claimed that during that period they have actually incurred cost which exceeded the returns.  Accordingly, we requested from them to provide audited financial statements to support their claim.  So far, we have not received any such material.  Once this claim is proven, we will be pleased to settle the issue and take the necessary loan amount to repay them back the expenses that they have incurred alone.”
It is important to note that this memorandum does not imply any knowledge on the part of ADIC that the vessels had been loss making during the periods in respect of which Norasia had made relevant representations as to their earnings.  It refers rather to an apparently unsubstantiated claim made by Norasia in the context of the US$26M shortfall dispute (and therefore by definition post November 2000) that costs had exceeded returns in the period of delay between the once anticipated closure by the end of January 2000 and transfer of the vessels in September/October/November 2000.  I mention this obvious point because to my surprise the contents of this memorandum were relied upon, in the context of an argument that the Claimants’ claim is time-barred, as demonstrating that by this date the Claimants knew that they had been misled as to the earnings of the vessels.  The memorandum does not even demonstrate that ADIC knew that the vessels had been loss making in 2000 – only that Norasia had made an unsubstantiated claim to that effect in response to which ADIC had asked to see the supporting documentary material in the shape of audited financial statements.  In any event the specific representations as to the vessels’ actual earnings achieved in service upon which ADIC placed reliance had of course related to 1998 and 1999.  Norasia had not alleged that losses had been made during this period.  
246.	So far as the vessels were concerned the problem with the controllable pitch propellers continued unabated.  On 22 August 2000 a further meeting of the Technical Committee was held.  The importance of the problem is underlined by the fact that on this occasion Mr. Steiger himself attended.  It was decided to extend the measurement programme.  Furthermore a report was given on the latest inspection of the Selina, all four of whose blade carriers were cracked.  This was said to confirm that the Chinese vessels also had propeller problems and the assumed “incubation” period of 20-22 months within which these problems might manifest themselves was now seen to be dramatically reduced.  
247.	On 2 September 2000 Messrs Nolte and Szczesnowski reported on measurements which they had taken on the Sheba.  They concluded that excessive pressure surges were being experienced which acted on the holding pins at the foot of the blades causing cracking.  The reason for the pressure surges was thought to be an electronic malfunction.  Yet a further meeting of the Technical Committee was held on 21 September 2000.  This was held to analyse the report to which I have just referred and to receive further reports from Lips and Sam Electronics.  Whilst it is reported that it was generally agreed by all participants that the pressure pulses in the hydraulic system caused critical forces on the crankpin and are therefore the main cause for the damages of the blade carries, it is apparent that Lips still maintained their position that they were not responsible for the problems and that the main cause of the damage was abnormal behaviour of the control system.  It is plain therefore that even at this late stage, 21 September 2000, there was still no agreement across the board as to the cause of the problem.  
248.	As of 7 July 2000 Mr. Steiger had planned to transfer all ten ships into the ownership of ADCL before 18 September 2000.  He did not then know what was the cause of the CPP problem, he had no intention of telling ADIC anything about that problem and he did not do so.  On 11 July 2000 Mr. Steiger and Mr. Menzel were sent by Mr. Zitz a status report on the vessels which stated that Samantha, Savannah, Scarlet and Sheba were all in lay-by berth or, in the case of Sheba, already in dry dock awaiting repairs to their CPPs whilst Selina, Shamsaa, Sultana, and Shereen were at sea but all anticipating repairs to or replacement of their blade carriers/O-rings.  Replacement was to be carried out on Salwa and Sabrina prior to their delivery from the Chinese yard.  The delivery dates for the vessels were accordingly altered though in no case was it explained to ADIC that the reason for the delay was that the vessels were undergoing repairs.  Mr. Steiger said in evidence that he did not consider that ADIC would be interested in this information but the reality is that he was determined to conceal it from them.  In most, although not all cases, adjustments to the dead band setting were also made before transfer of ownership to ADCL.  This was not true of the Sheba or the Scarlet.  Mr. Steiger and Mr. Menzel suggest that as from 21 September 2000 they were confident that the modification to the dead band setting would solve the problem.  The conclusions of the Technical Committee would not have justified such a belief.  The Technical Committee agreed that the electronic governor software should be changed in an effort to eliminate the pressure pulses in the CPP hydraulic system but considered that having carried out the modification they should thereafter monitor subsequent performance to see whether it had been successful.  I doubt if Mr. Steiger and Mr. Menzel were as confident as they maintain but all this is perhaps somewhat beside the point.  It is to my mind a serious reflection on their probity, and supportive of my earlier conclusions, that they simply failed to tell ADIC anything at all about these problems.  In the event the modification to the dead band setting did not prove to be the answer to the problem, which simply recurred.  Thus on 4 January 2001 it was reported to Mr. Menzel that four ships were out of service, with the Sheba apparently suffering a recurrence of the earlier CPP problem notwithstanding both repair and modification of the dead band setting.  On 12 January 2001 Mr. Steiger prepared a report for presentation to the Board of ADCL.  In his report he summarised the present position as follows: 
“The four vessels not needed at the moment for the second service are offered short term in the charter market.  All German vessels have been docked during the summer prior to delivery to ADCL.  The Chinese ships will be docked prior to the end of the warranty period for each vessel in order to claim all warranty items properly.  The Sultana is presently undergoing warranty dry docking and the Selina has already completed this task.  One vessel suffered a propeller pin damage which is under warranty and another one had a turbocharger damage.  Otherwise the vessels are operating reliably and efficient.”
249.	I found wholly unconvincing Mr. Steiger’s attempt to defend this as a fair presentation.  Manifestly, it was not.  
250.	By 30 March 2001 six of the ten vessels were out of service, three because of further CPP failures.  Of the six vessels out of service, one had been out of service for now five months, one for two months and one for one month.  Of the other four vessels, three reported high actuating pressures at the hydraulic system of the CPP and expected to have to cease trading in order to carry out repairs.  
251.	It was in this context that on 30 March 2001 the vessels’ hull and machinery insurers Messrs Allianz notified Ganymed, Norasia’s insurance brokers and KfW as mortgagees that they had concluded that the defects in the CPP had not been eradicated and that the problem was present before the inception of the insurance.  In effect, insurers gave notice that they would not regard themselves as liable to indemnify the owners/mortgagees in the event of any loss of or casualty to any one of the ten vessels caused by the defective CPP.  The effect of course was, as Mr. Menzel as General Manager of ADCL immediately recognised, that the vessels could no longer be traded and they were all immediately taken out of service.  Mr. Menzel informed ADIC of this by fax dated 4 April 2001.  It was only at the subsequent meeting on 11 April 2001 that Mr. Menzel revealed to ADIC for the first time the true scale of the problems and their duration.  Not surprisingly ADIC immediately responded by complaining of the non-disclosure of the CPP problem about which Norasia had known in May/June 2000 prior to completion of the transaction.  Mr. Menzel’s response was that all relevant information had been given to Mr. Steiger and that “disclosure beyond that had been his decision.”  Perhaps unsurprisingly shortly thereafter on 25 April 2001 Mr. Menzel announced his resignation as General Manager of ADCL with effect from 30 April.
252.	The joint venture was by now effectively over since in the atmosphere of mutual distrust no solution could be found.  In any event on 1 June 2001 KfW declared ADCL to be in default of the loan agreement, there being about US$5.5M interest and about US$4.8M principal then overdue and unpaid and they demanded immediate payment of all outstanding indebtedness, a sum in the region of US$213M.  In due course ADCL, in the light of material uncertainty concerning its ability to continue as a going concern, resolved that it should be put into liquidation and dissolved.  By 22 May 2001 all ten vessels were out of service.  All of the vessels were subsequently arrested and acquired by KfW through court sales following public auction.  They were acquired at about US$16.5M for each vessel.
253.	I mention this last point because it demonstrates that Norasia suffered no real capital loss as a result of this failed transaction.  On the contrary, Norasia did well out of it.  NSL’s capital contribution took the form of its equity in the vessels which was for the purposes of the transaction valued at US$77M.  But NSL’s equity in the vessels was only worth that amount if the vessels were worth what they had paid for them, about US$40M each.  If the vessels were worth only what they were sold for at auction in 2001 then Norasia’s equity was of course illusory.  In cash terms, prior to the transaction Norasia owned ten defective vessels in respect of which they had outstanding debts to KfW of US$251M which were not being serviced by the vessels’ earnings or at all.  After the transaction, NSL’s indebtedness to KfW of US$251M (including arrears) was repaid and it now owned a 49% share in the new owner of the vessels whose indebtedness to KfW was about US$209M.  Although this was not I think a point noticed at trial, so far as I can trace in the documentation there was the added advantage for Norasia that there was no longer a Norasia Holdings guarantee either of the indebtedness of the borrower ADCL or of the obligations of the time charterer, N-Xpress LLC.
Limitation 
254.	In their respective Defences each of the Third Defendant, Norasia Shipping Ltd, the Fifth Defendant Mr. Steiger and the Sixth Defendant Mr. Menzel allege that the law applicable to the torts allegedly committed by them is, by reason of section 11 of the Private International Law (Miscellaneous Provisions) Act 1995, the law of Abu Dhabi – see Paragraph 76 of the Defence of the Third Defendant and paragraph 76 of the re-Amended Defence of the Fifth and Sixth Defendants both served on 30 June 2006.  The Claimants in their respective Reply and Re-Amended Reply deny that the law applicable to the torts allegedly committed by Norasia, Mr. Steiger and Mr. Menzel is the law of Abu Dhabi but in their Opening they accepted that the question whether such claims are time-barred is governed by the law of Abu Dhabi.  No party asserted at trial that the law of Abu Dhabi is relevant to any issue which I have to decide save the question of limitation.  The third Defendant was not of course present at trial.  However, there was before the court no evidence as to the content of the law of Abu Dhabi save in respect of limitation of actions.  Each of NSL, Mr. Steiger and Mr. Menzel alleges in their Defence that pursuant to such law the applicable limitation period is three years from the accrual of the cause of action and each alleges that all such claims are therefore time-barred since any such causes of action accrued more than three years before the commencement of these proceedings – the date on which the proceedings were commenced being 6 April 2004.  
255.	However at a time when Messrs LeBoeuf Lamb Greene & MacRae still acted for NSL as well as for Mr. Steiger and Mr. Menzel they instructed Mr. Ahmed Galadari, a lawyer practising in Dubai and Abu Dhabi, to prepare a report for the assistance of the court considering only the question whether the claims against Mr. Steiger and Mr. Menzel would be regarded by an Abu Dhabi court as time-barred.  Having regard to the provisions of Abu Dhabi law to which I have been referred it seems likely that it is the circumstance that NSL was vis a vis ADIC a contracting party that persuaded its solicitors to take the view that the three year limitation period was unavailable to NSL.  However I need say no more about that.  The short point is that the court has before it no material as to the relevant law of Abu Dhabi on the basis of which it could conclude that any of the Claimants’ claims against NSL whether in contract or in tort are time-barred since that issue has not been addressed in the evidence.  For the avoidance of doubt however I should state that were pursuant to the same provisions of Abu Dhabi law as those which I am about to consider a three year limitation period potentially available to NSL in respect of any of the Claimants’ tortious claims, then by parity of reasoning I would conclude that as against NSL ADIC on 5 or 6 April 2001 lacked sufficient awareness of matters which would render proceedings brought on 6 April 2004 time-barred.  
256.	I heard evidence from Mr. Galadari for Mr. Steiger and Mr. Menzel.  He graduated in law at the UAE University in 1990 and has ever since practised as an advocate in the UAE in the firm founded by his brother, Messrs Galadari and Associates.  He has been head of the litigation department for four or five years.  For the Claimants I heard evidence from Mr. Badawi Mohammed Noor.  He is now a licensed advocate and legal consultant practising at Al Suwaidi and Co., an Abu Dhabi based law firm.  He is of Sudanese nationality and graduated from the University of Khartoum in 1969.  After various legal posts in Khartoum he became a judge in the United Arab Emirate of Sharjah in 1976.   He explained that foreign nationals like himself are appointed as judges in the UAE owing to the fact that there are insufficient properly qualified UAE nationals to fill all the judicial posts available.  He presided over criminal, civil and commercial courts and reached the position of a judge of the Court of Appeal.  In 1993 he resigned his office in order to practise as an advocate in Abu Dhabi and I note that he had in fact spent seven years between 1995 and 2002 as an advocate and legal consultant at Galadari and Associates.  Mr. Noor had evidently been involved, possibly at one remove, in assisting ADIC with regard to the litigation in Abu Dhabi brought against it by Paribas, the outcome of which I shall have to mention in due course.  Mr. Noor did not strike me as the kind of person who would allow this previous involvement to compromise his integrity in giving assistance to the court.  Mr. Noor gave his evidence with great care.  Mr. Galadari gave his evidence with great charm and enthusiasm.  
257.	The law of the UAE recognises a claim for fraudulent misrepresentation.  The relevant law is to be found in Federal Law No. 5/1985 concerning the promulgation of the Civil Transactions Law of the United Arab Emirates.  For convenience both witnesses referred to this as the Civil Code.  Article 285 of the Civil Code provides: 
“If someone deceives another, he shall be liable for the damage arising from deception.”
258.	The relevant limitation period is provided by Article 298(1) of the Civil Code.  There were various translations of this before the court although the differences were not material.  Mr. Galadari recited this Article in English as follows: 
“No claim for compensation arising out of a harmful act shall be heard after the expiration of three years from the day on which the victim became aware of the occurrence of the harm and of the identity of the person responsible for it.”
259.	Awareness for these purposes means actual not presumptive or constructive knowledge.  The relevant Arabic word is “hakiky.”  In Appeal no.352/2001 it was explained by the Court of Cassation that the lapse of three years from the date on which the victim becomes aware of the harm implies proof that the victim has relinquished his right to compensation.  There is no basis for such an assumption of a relinquishment unless the victim is “decisive” as to the occurrence of the harm and the person responsible for it.  The task of determining whether the requisite level of awareness was present falls to the court of merits, directing itself by reference to the applicable legal principles.  
260.	To my mind the critical point on the facts of this case concerns what is meant by knowledge of the identity of the person responsible for the harm.  There is here at least a twofold requirement, knowledge of the identity of a person, whether natural or unnatural, but also knowledge that that is a person or the person responsible for the harm.  Responsible does not mean proved responsible – c.f. the decision of the Court of Cassation in Al Mohamadi v Sheraton Dubai Hotel, Case No. 279/2005 where it was material that in earlier proceedings claiming a different head of relief the claimants had sued two parties arising out of a fatal accident associated with a lift, both the hotel in which the lift was situated and the elevator maintenance company.  It was held that in relation to a new head of relief which the claimants wished to pursue time ran not from the decision of the Court of Appeal in June 1992 that the hotel alone was responsible for the accident but from the earlier date on which the claimants had commenced proceedings against both parties, which was in 1989, not, be it noted, October 1988 when the accident took place.  The judgment in this case seems to me amply to bear out Mr. Galadari’s view expressed in paragraph 10 of his Second Supplementary Report that “hakiky” as used in this Article of the civil Code means “sure knowledge” which he paraphrased as meaning “enough information upon which one can act.  In other words, it means information upon which a decision could be made to make a claim.”  In the Sheraton Dubai Hotel case it may have been unnecessary to decide whether the claimants in fact had the requisite knowledge in October 1988, but plainly the court was comfortable with the notion, in a fairly straightforward personal injury case, that time would not necessarily begin to run against the claimants in favour of the hotel immediately upon acquisition of knowledge of the harm which had occurred on the hotel premises.  It seems to me necessarily to follow from Mr. Galadari’s formulation that what is required is at any rate some knowledge from which one can formulate not just a claim but a claim at any rate in respect of the relevant cause of action in respect of which in turn time is alleged to be running.  I think that this is precisely what Mr. Noor meant in his answer to the following question: 
“Q. Is it necessary under Abu Dhabi law, for time to start running, that you know the grounds for the claim or is it sufficient that you simply know of the loss?
A. Article 298 itself answers this question by saying that the limitation period starts from the day of knowledge of both the loss and the person responsible for it.  In essence, it is speaking about the existence or the creation of the cause of action.”
Mr. Galadari was I think a little reluctant to accept the logical consequence of the approach which he had himself espoused.  You cannot know the identity of the person responsible for harm unless you know that that person is responsible.  In order to know that he is responsible you must know the grounds giving rise, or arguably giving rise, to that responsibility.  But Mr. Galadari did accept that this needs to be examined on a case by case basis.  I would just reiterate that if it is said that a cause of action in fraudulent misrepresentation is time-barred, then before time begins to run the victim must at the least have some information upon the basis of which he can assert that the relevant representations were false and fraudulent.  
261.	Here I am concerned with the question whether the Claimants’ cause of action in fraudulent misrepresentation is time-barred.  The relevant misrepresentations are those spelled out in Paragraph 29 of the Re-Re-Amended Particulars of Claims.  The essential representations were to the effect that the vessels had in service in 1998 and 1999 performed well at a service speed of 25 knots which had enabled them to command a premium in the market, which had been achieved, the vessels having consistently earned a time charter equivalent of at least US$15,000 per day.  In order to have information upon which a decision could be made to make a claim against Mr. Steiger and Mr. Menzel arising out of these representations, ADIC would in my view have at the least needed information upon the basis of which they could plausibly assert that the representations had been false.  They would also, I should have thought, have at the least needed information upon the basis of which they could plausibly assert that the representations had been made dishonestly with a view to inducing them to enter into the transaction.  However I do not think that I need to enquire that far.  In my judgment the suggestion that before 6 April 2001 ADIC had information upon the basis of which they could plausibly have asserted that the relevant representations had been false is wholly unarguable.  The approach adopted on behalf of Mr. Steiger and Mr. Menzel is to the effect that ADIC was aware no later than February 2001 that the value of the vessels had been compromised.  That may be so.  It is certainly true that ADIC was aware in February 2001 that charterhire payments of US$15,000 per day were not being paid – Mr. Steiger had told them earlier that they would be withheld.  Even if ADIC was aware that charterhire equivalent earnings of US$15,000 per day were not then being achieved – Mr. Dallal’s formulation in his first witness statement which he corrected in his second, unchallenged, witness statement, still that would not begin to amount to material upon the basis of which ADIC could be forming a view as to whether the representations made to them in 1999 had been false.  
262.	The high watermark of the case of Mr. Steiger and Mr. Menzel on this point was the 4 April 2001 fax sent to ADIC by Mr. Menzel as General Manager of ADCL.  That fax was received on the ADIC fax machine at 18:02 hours local time on Wednesday 4 April 2001, i.e. within the normal business hours of ADIC.  I leave out of account for the moment that the evidence strongly suggests that no responsible person saw this fax until the morning of Saturday 7 April.  Mr. Hoyle submitted that “ADIC’s claims to ignorance cannot survive receipt of the 4 April 2001 fax.”  In view of the importance attached to it I will set it out in full: 
“Re:	ADCL Fleet
Gentlemen,
We have been informed by Allanz Globus MAT, the leading Hull and Machinery Insurers, that they shall withdraw insurance protection in case of any damages, collision etc. due to malfunctioning of the pitch propellers.  In our opinion this reaction is without any foundation and we strongly objected to it.  We are consulting with lawyers to protect the interest of ADCL.  This step is also causing tremendous damage to N-Xpress LLC, with stranded cargo, delays, cargo damages etc. unfortunately, we have no alternative but to stop any operation in order to save the company, its directors and the management company from any direct or indirect liabilities.  Together with our lawyers we are trying to reach a solution to these surprising and totally unjustified measures.  Please note that all vessels are properly equipped with all necessary class certificates.  Damages have been reported without any delay and all repairs have been carried out in accordance to class requirements and recommendations.  
We suffered last year damages to the controllable pitch-propeller the cause of which has been established by experts as a faulty deadband setting, causing high frequent hydraulic pulses to the pitch-setting system.  After defeating the source of the problems all vessels involved have been docked and the damaged parts replaced.  As a result of these damages the hydraulic pressure of the propeller pitch system was systematically monitored.  This regular survey recently showed on some vessels high oil pressure in the pitch control system.  This pressure was higher then normal operating pressure but within the operating limits.  These “observations” have been reported to the shipyard, manufacturer, class and insurance companies, leading to the above mentioned action by the insurers.  So far we have not received any response from the classification societies.  The manufacturer states as a possible cause a dynamic overload but does not give any advice how to correct this problem.  For your information the Chinese vessels are still under warranty while the German vessels are beyond the warranty period.  Together with a law firm in Hamburg we are investigating potential claims against the propeller manufacturer and / or the software manufacturer of the propeller adjustment system.  
In our opinion the underwriters overreacted dramatically and we reserve all our rights to hold them responsible for any commercial and other damages.
I shall keep you informed about any further developments.”
In my judgment it is obvious that this fax gave ADIC no information on the basis of which they could have begun even to consider let alone reach a decision as to whether the representations made to them in 1999 had been either false or fraudulent.  The defence of time bar accordingly fails.  
Conclusion 
263.	The Claimants’ approach to the liability of, respectively, Mr. Steiger and Mr. Menzel in fraud was that it was made out in respect of both men by reason of the totality of their dishonest misrepresentations having been the product of a joint enterprise.  They were “in it together” in the hallowed phrase used when directing juries about criminal joint enterprise.  Even so Mr. Salter, in his closing address, was careful also to attempt to identify the contribution of each man to each of the misrepresentations upon which the Claimants claim to have relied.  For example, Mr. Menzel was not present at the 12 April 1999 meeting with ADIC but he knew what was contained within the Business Plan and how and for what purpose it was intended to deploy that material.  Mr. Menzel was not present at the 27 April 1999 meeting but said that he thought that he had helped Mr. Steiger with the figures contained in the critical Week 15 comparison.  Again, the material was deployed in precisely the manner and for the purpose which Mr. Menzel knew and intended it would be deployed.  Mr. Menzel saw Mr. Steiger’s fax of 9 August 1999 when it was sent.  Mr. Steiger may not have known in advance what Mr. Menzel would say to Mr. McLellan on 27 September 1999, but he knew by 15 October what figures Mr. Menzel had supplied to Mr. Saudi in his fax of 9 October.  There is no evidence that Mr. Menzel knew about Mr. Steiger’s conversation with Mr. Lucas on 15 October 1999.  At paragraph 199 and following, above, I have tried to draw together the threads in the context of my discussion of the duty to correct representations subsequently discovered to be false.  In my judgment Mr. Salter was correct to assert that, subject to establishment of the other elements of the tort, the liability of both Mr. Steiger and Mr. Menzel in deceit is made out on the basis of their participation in a joint enterprise which had as its aim the misleading of ADIC.  In reaching that conclusion I have at all times had regard to the high standard of proof appropriate to the establishment of so grave an allegation – cf per Lord Steyn in Smith New Court Securities Limited v Citibank NA [1997] AC 254 at 274.  One aspect of that exercise is to weigh in the balance the unlikelihood of apparently reputable businessmen acting in that way.  It is implicit in my findings that the decision to mislead was necessarily taken at an early stage.  I agree with Mr. Salter that the actions of Mr. Steiger and Mr. Menzel are inexplicable on any basis other than that they thought that market conditions would improve and that a niche would be found in which the S-Class vessels could operate profitably.  It is also obviously right to say that they were not attempting to walk away from the ships and their problems.  Rather, they were involved in crisis management, at which they were adept, by attempting to bring on board a solvent partner whose participation would buy them time.  Their difficulty was that they could not wait for the anticipated improvement in the vessels’ fortunes.  It was in these circumstances that, in my judgment, they decided at an early stage to pretend that the vessels were already performing in the manner in which they hoped and believed that ultimately they would.  Most of the figures presented in support of this strategy were opaque, particularly having regard to the corporate structure, and, if challenged, could for the most part be explained or clothed with some apparent authenticity, or passed off as an error by junior management.  Particularly inconvenient results could be buried for long enough in the books of subsidiaries whose accounts would remain unexamined.  It may be thought that this was a high risk strategy, but as events have shown the misrepresentations were not in fact uncovered, despite the asking of pertinent questions and the involvement of outside consultants.  Had it not been for the problems with the controllable pitch propellers, the misrepresentations might never have come to light.  Accordingly therefore in my judgment the joint enterprise approach is made out.  In any event, as I have demonstrated, significant aspects of the misrepresentations as to the performance of the vessels can be shown to have been the product of a joint exercise.  Furthermore, in my judgment the misrepresentions which each of Mr. Steiger and Mr. Menzel themselves made personally to ADIC are a sufficient basis to establish their individual liability in deceit, subject of course to proof of the other elements of the tort.  
264.	I have, I hope, already made sufficiently clear my findings as to ADIC’s reliance upon the representations made to them by Mr. Steiger and Mr. Menzel.  I refer in particular to what I have said in paragraphs 64, 101, 117, 210, 215 and 229 above, although paragraphs 85, 109, 122, 197, 199, 230 and 235 are also of relevance.  Since the representations were made in order to persuade ADIC to invest in the project it is an unsurprising conclusion that ADIC did so rely.  It is nothing to the point that ADIC called no member of the Board to give evidence.  It is in my judgment clear that the proposal would never have reached the Board, still less received its approval, without the support of the Project Team.  Likewise it is ultimately of no assistance to the Defendants to point out that ADIC relied also upon the advice of independent experts Messrs Clarkson, Lucas & Brockmann.  So they did, but not to the exclusion of reliance upon what they were told by Mr. Steiger and Mr. Menzel.  The Claimants have demonstrated that the representations made by Mr. Steiger and Mr. Menzel played a substantial or significant part in their decision to invest in ADCL.  In fact this point is apparent from the content of documents generated by the Project Team, in particular the Investment Memorandum of 21 June 1999 and the Internal Memorandum to the EGM of 13 November 1999 reporting on the outcome of the due diligence exercise.  A striking example of the importance to ADIC of their understanding that the vessels had reliably proved themselves in service able to earn a time charter equivalent of US$15,000 per day is that what was said in that regard in the February 1999 Business Plan is carried through to the ADCL Business Plan annexed to the shareholders’ agreement in July 2000.  Furthermore, it is in my judgment self-defeating for the Norasia Defendants to attempt to suggest that ADIC should be taken to have relied upon the advice of its independent consultants to the exclusion of reliance upon them, the Norasia Defendants.  The advice of both Mr. McLellan and Mr. Lucas was critically underpinned by what they in turn had been told by, respectively, Mr. Menzel and Mr. Steiger.  In this respect Mr. McLellan and Mr. Lucas were little more than conduits through which the relevant representations were communicated and, as it happens, repeated, to ADIC.  I should make clear that it is not essential to my conclusions of intended reliance on the part of Mr. Steiger and Mr. Menzel and reliance by ADIC that the representations of Mr. Steiger and Mr. Menzel were through the medium of Mr. Lucas and Mr. McLellan conveyed yet again to ADIC.  I believe however that it would be legitimate to found such findings on the communication of the representations indirectly through Mr. Lucas and Mr. McLellan.  The relevant representations were made to Mr. Lucas and Mr. McLellan with a view to their placing reliance thereupon in advising ADIC.  The representations were of such a nature that they could not be cross-checked by reference to material in the market.  They were intended to be accepted at face value.  To all intents and purposes the representations were on these occasions made by Mr. Steiger and Mr. Menzel to ADIC, although communicated in the first instance to Mr. Lucas and Mr. McLellan for intended onward transmission to ADIC.  However that may be, the involvement of Messrs Lucas and McLellan acts as a useful cross-check in two respects.  Firstly, since Mr. Lucas and Mr. McLellan both relied upon what they were told by Mr. Steiger and Mr. Menzel, that tends to confirm the reasonableness if not the correctness of the conclusion that ADIC likewise so relied.  Secondly, since the advice of both Mr. Lucas and Mr. McLellan made clear that it relied critically upon what both had been told by Mr. Steiger and Mr. Menzel about the vessels’ earnings, their advice serves at least as confirmation that ADIC was itself acting reasonably in placing reliance upon what they had been told directly in that regard.  The evidence of the ADIC witnesses was to the effect that had they been made aware, prior to closing, that the representations as to the vessels’ earnings had been inaccurate to the extent which Norasia’s own internal documents demonstrated then the transaction would not have been closed.  I accept this evidence, since it is entirely consistent with the critical role in ADIC’s thinking which was at all times played by the talismanic US$15,000 per day figure.  
265.	I was much pressed by Mr. Hoyle with the danger of equating the present case with the nineteenth century prospectus cases such as Arnison v Smith (1888) 41 ChD 348.  He cited in particular observations of Park J in Infiniteland Limited v Artisan Contracting [2004] EWHC 955 (Ch).  In that case, as in this, a long time elapsed between an alleged misrepresentation and the conclusion of a contract, in the course of which the purchasers conducted a full financial due diligence investigation.  In fact, in the course of that exercise the investigating accountant discovered a payment which was an exceptional item which had the effect of overstating the profits from ordinary activities of the company to be acquired.  It seems that this information was not passed on.  Park J observed, at paragraph 91 of his judgment: 
“In those circumstances it is simply not credible that Mea and, later, Infiniteland exchanged contracts in reliance on the impression which Mr. Berry had obtained several weeks earlier, from a fairly short conversation over coffee in an hotel, of how Bickerton’s and Driver’s trading results were working out.  After all, a major reason why purchasers of companies carry out due diligence investigations is in order that they do not have to rely on what they have been told by the vendors, but can find things out for themselves before committing themselves to a contract.”
In that case the documents disclosed by the company revealed that what had earlier been said on a somewhat informal basis was incorrect.  In that respect it was a similar case to Holmes v Jones (1907) 4 CLR 1692 in the High Court of Australia.  Each case turns on its facts.  In the present case documents disclosed by Norasia in the course of the due diligence exercise did not reveal the falsity of the earlier representations.  When the Infiniteland case reached the Court of Appeal it was held that the test of adequacy of disclosure in circumstances such as these is whether it was fairly to be expected that the accountants would become aware, from an examination of the documents supplied to them, that the accounts contained an exceptional item or items.  In the present case it may be that a more aggressive or enquiring mind than that of Mr. Agarwal might have asked questions which would have compelled either disclosure of documents which would demonstrate the falsity of earlier representations or some rapid reappraisal of the basis upon which the proposal was being sold to ADIC.  However, it could most certainly not be fairly expected that Mr. Agarwal would become aware, from the documents actually supplied to him, of the falsity of the earlier representations.  On the facts of this case the intervention of a due diligence exercise does nothing to derogate from or render incredible any conclusion that ADIC relied upon what they had been told by Mr. Steiger and by Mr. Menzel not, be it noted, in short and casual conversations over coffee, but in the course of formal meetings and by means of communications intended to address their queries.  
266.	The representations upon which the Claimants relied and which I have identified were plainly material to their decision since as I have already explained they underpinned the financial viability of the investment.  The Claimants were induced by these representations to enter into the contract.  
267.	The only remaining element of the tort of deceit is loss.  I did not understand Mr. Hoyle to dispute that ADIC had, if the other elements of the tort were made out, in consequence lost US$6,000,000, as in my judgment they had.  Mr. Hoyle did however contend that ADIC can recover no more and that neither ASH nor ASMIC has any cause of action.  In my judgment these submissions are correct.  
268.	The position as it obtained at the end of the hearing was that ADIC and ASMIC had been sued in Abu Dhabi by some, perhaps all, of the banks participating in the Paribas loan facility for recovery of the amounts advanced to ASMIC.  In five cases the Abu Dhabi Federal Court of First Instance had found ASMIC liable but had dismissed the claim against ADIC.  Implicit if not explicit in ADIC’s approach was that this represented the correct outcome.
269.	On 22 March 2007, whilst I was in the course of preparing my judgment, I was sent by the Claimants’ solicitors copies of three judgments of the Abu Dhabi Federal Court of Appeal, First Commercial Civil Department, in which that court allowed appeals by the Bank of Bahrain and Kuwait, The Abu Dhabi Commercial Bank and the Arab Banking Corporation against dismissal of their claims against ADIC.  In each case judgment has now been given against ADIC.  I was told that ADIC are preparing to appeal to the Abu Dhabi Supreme Court against these decisions.  In each case the basis of the decision appears to have been, at any rate in part, that whilst the ADIC letter of comfort dated 29 July 2000 furnished to Paribas, to which I referred at paragraph 220 above, did not amount to a guarantee it nonetheless contained an enforceable obligation on the part of ADIC to use its reasonable endeavours to provide appropriate funding to ASMIC in order to ensure the reasonably timely repayment of amounts due by it under the Paribas facilities.  In each case the Court of Appeal found, apparently on the basis of fresh evidence which had not been before the Court of First Instance, that ADIC was in breach of this obligation which sounded in damages the equivalent of the outstanding indebtedness of ASMIC to the syndicate banks.  
270.	In my judgment it is plain that the decision which ADIC took in reliance on the representations of Mr. Steiger and Mr. Menzel was to invest US$6million and no more.  As early as 22 June 1999 the General Manager had indicated that ADIC should incur no risk beyond its US$6million investment – see paragraph 118 above.  His approach was endorsed by the Board.  On 14 November 1999 the General Manager reported to the Board that “financing ADIC’s participation in ADCL, we have succeeded in securing bridge financing for US$77.5million in addition to our US$6million participation from Paribas on very competitive terms with none recourse to ADIC…” see paragraph 216 above.  I have already set out at paragraph 217 above the Board Resolution of 18 November 1999 which approved the arrangements for obtaining bridge financing from Paribas “without any guarantees by ADIC.”  It is clear therefore that in so far as ADIC have by their arrangements with Paribas incurred a liability to the syndicate banks they have done so inadvertently and contrary to their professed intention.  Their intention was to rely upon the representations of Mr. Steiger and Mr. Menzel only to the extent of a US$6million investment and not to hazard any further of their own funds.  Any further loss has in my view been caused by reason of their giving to Paribas a letter of comfort which on its true construction, as determined by a court of competent jurisdiction applying its own local law, contained an enforceable obligation of a nature which they had expressly resolved not to undertake in reliance on the representations of Mr. Steiger and Mr. Menzel.  As such, it is irrecoverable from Mr. Steiger and Mr. Menzel.
271.	It follows that, subject to the effect of the settlements with Clarkson and KfW, ADIC may recover US$6million from Mr. Steiger and Mr. Menzel, the latter being jointly and severally liable in the tort of deceit.  
272.	It also follows, for the reasons set out in paragraph 6 above, that ADIC may likewise recover US$6million from ADX Shipping Limited, formerly Norasia Shipping Limited, again subject to the same reservation concerning the effect of the settlements.  
273.	These findings make it unnecessary to deal with ADIC’s alternative claims in negligence.  I have already adumbrated my findings in this regard at paragraph 206 above.  Had it been relevant I would have dismissed any claim in negligence against Mr. Menzel.  It was in my judgment always clearly understood by the ADIC personnel that Mr. Menzel, whilst the most senior person in the Norasia organisation after Mr. Steiger, whose personal business acumen and attributes were important factors to be taken into account when evaluating the prospects for the joint venture, was nonetheless a trusted lieutenant rather than a principal in the transaction.  In my judgment the circumstances fall far short of what is required to infer a personal assumption of responsibility by Mr. Menzel when making his representations to ADIC so as to create a special relationship between them giving rise to a duty of care in tort.  Mr. Menzel never held himself out as doing anything other than represent Norasia.  Mr. Steiger by contrast held himself out as the sole shareholder in Norasia which, in its then current form, was described by him in terms which made it effectively his creation.  Mr. Steiger’s conduct was in my judgment just such as can properly form the foundation for an inference of a personal assumption of responsibility.  It follows that, had it been relevant, I would have found ADX Shipping Limited and Mr. Steiger liable in negligence to ADIC in the sum of US$6million, again subject to the same reservation as to the effect of the settlements.  
274.	Had the liability of ADX Shipping Limited and Mr. Steiger been founded in negligence alone I should have had to deal with the defence of contributory negligence.  For the reasons set out in paragraph 211 above I think it unwise as well as unnecessary to express any further views on this topic, particularly in the absence of further argument.  
275.	ADIC allege that ADX Shipping Limited, formerly Norasia Shipping Limited, is liable to them in breach of contract for having failed to disclose to them financial and/or other information concerning the ships’ business and operations, more particularly information concerning their defects and their earnings.  The obligation of disclosure is said to arise out of paragraph 7 of the Letter of Intent, the terms of which I set out at paragraph 114 above.  Since this claim is in the light of my findings unnecessary and since I have heard no argument about it from ADX Shipping Limited it is again, I think, unwise to express any concluded view about it.  Particularly is this so since I have not heard argument from ADIC on the question whether Norasia Shipping Limited, as opposed to Norasia Services S.A. should be regarded as party to whatever relationship the Letter of Intent brought into existence.  I will only say that I would require some persuading that this document was intended to generate a duty of disclosure as opposed to an obligation to make available such financial and other information as was specifically requested as part of the due diligence exercise to which reference was made in the preamble.  It seems to me that an obligation to disclose, i.e. to volunteer, “all” information concerning the ships’ business and operations and the proposed financing is unbounded, uncommercial and unlikely.  I also think that it would be unwise to consider the effect of the Letter of Intent in isolation from the contract or contracts which in due course ensued.  
276.	In the alternative to their claims in deceit and negligence ADIC advance a claim against ADX Shipping Limited under section 2 of the Misrepresentation Act 1967.  In the light of my findings thus far this claim falls away.  
The independent claims of ASH and ASMIC
277.	I accept that the law is correctly stated in the following passage at paragraph 697 of the Claimants’ written closing submissions: 
“It is clear that a cause of action in deceit may lie even where the misrepresentation in question was not made to the claimant directly.  Representation made to a third party with the intention that it will be passed on to the claimant to be acted on by him will suffice.  What must be shown is an actual intention to deceive the claimant in question.  The precise identity of the claimant need not be known by the defendant provided he belongs to a class of person within the contemplation of the defendant as likely to be deceived by his misrepresentation.”
278.	The Letter of Intent spoke of Norasia granting ADIC an exclusive private placement mandate to raise the 51% of the equity from UAE nationals.  Norasia would have had no control over this operation.  As I have set out at paragraph 120 above, by 28 June 1999 it was clear to Mr. Steiger that ADIC would invest only US$6million and that they would place the rest of the investment with other investors.  The proposed bridge financing of which Mr. Steiger was also by then aware did not alter the essential structure of what was proposed.  
279.	Putting on one side the duty to correct earlier representations which had been shown to have become false, the last positive misrepresentations upon which the Claimants rely are those made by Mr. Menzel in his 9 October 1999 fax and by Mr. Steiger to Mr. Lucas on 15 October 1999.  I think it very unlikely that either Mr. Steiger or Mr. Menzel had any very clear idea by this stage of what, if any, precise role would be played by an ADIC special purpose vehicle.  If they had any understanding it would have been that a special purpose vehicle was necessary in order to insulate ADIC from any exposure over and above the US$6million which they were prepared to invest.  In the event ASH was not incorporated until 15 February 2000 and ASMIC not until 24 July 2000, i.e. three weeks after closing of the transaction.  
280.	In these circumstances it is in my judgment difficult to conclude that Mr. Steiger and Mr. Menzel intended that their representations should reach ASH and ASMIC in order to induce them to act upon them.  In Standard Chartered Bank v Pakistan National Shipping Corporation (No. 2) (1988) 1 Lloyds Rep 684 it was held by Cresswell J to be enough that the claimant bank was within the class of persons within the defendants’ contemplation as likely to be deceived.  That case, however, concerned the issue of a falsely dated bill of lading, a document of title, the whole purpose of which is that it is to be put into circulation as a negotiable instrument on the face of which banks and others will advance money.  It is intended to pass from hand to hand and it is known that reliance will be placed upon the representations contained therein.  That, as it seems to me, is the paradigm case where liability is likely to attach in respect of a deceit communicated indirectly.  In my judgment it is not demonstrated that Mr. Steiger and Mr. Menzel made their representations to ADIC intending that they would pass them on to others – cf the formulation of Quain J in Swift v Winterbotham [1873] LR 8 QB 244 at 253 cited in Clerk & Lindsell at paragraph 18-29.  In my judgment the case of ASH and ASMIC in this regard is not advanced by their reliance upon their status as wholly-owned subsidiaries of ADIC.  The whole purpose of their introduction into the transaction was to insulate ADIC from exposure.  It would to my mind be an odd conclusion that their wholly-owned status lent them greater proximity to Mr. Steiger and Mr. Menzel than, for example, an independent UAE investor subscribing to an IPO.  In my view in order for ASH and ASMIC to succeed it would be necessary to conclude that Mr. Steiger and Mr. Menzel intended their representations to be passed on to any person who ADIC might wish to interest in investment in the joint venture.  Even then I would be left in doubt as to whether either ASH or ASMIC could truly be regarded as within that class.  The position of ASH is in any event academic since its claim duplicates that of ADIC – it has lost the money advanced to it by ADIC.  ASMIC was not in any real sense an investor in the joint venture.  A good test of whether ASMIC should be able to claim from Mr. Steiger and Mr. Menzel is in my judgment to enquire whether Paribas (or the banks within their syndicate) should be regarded as having a cause of action in deceit against them.  In my judgment that would clearly be a step too far and so therefore in my judgment is the claim by ASMIC.  In my judgment ASH and ASMIC have no claim in deceit against Mr. Steiger, Mr. Menzel and ADX Shipping Limited.  
281.	By parity of reasoning I conclude that Mr. Steiger and ADX Shipping Limited owed no duty of care to ASH and ASMIC.  I would in any event find it impossible to conclude that Mr. Steiger assumed a personal responsibility towards strangers, as ASH and ASMIC should, I believe, for this purpose be characterised.  The position of Mr. Menzel is a fortiori.  At paragraph 701 of their written Closing Submissions the Claimants say this: 
“The Claimants’ case is that the Norasia Defendants owed Al Suffun and Al Shira’a a duty of care in tort as it was plainly within the reasonable contemplation of the Norasia Defendants that ADIC would use SPVs to make its investment in ADCL.”
In my view, for the reasons which I have already set out, this is an incorrect characterisation of the situation.  
282.	For completeness I should add that I do not understand on what basis ADIC can recover damages “calculated by reference to the total amount invested in ADCL by all three Claimants,” the claim which is asserted in paragraph 707 of the Claimants’ written Closing Submissions.  Again, in support of that submission I am invited to look at the reality of the situation which is said to be that whilst the investment was structured through SPVs the true position is that ADIC made a total investment in ADCL of US$80million.  This is, of course, the same mischaracterisation as that upon which I have already commented.  The Claimants submitted that the present case is analogous to Esso Petroleum Co. v Mardon 1974 QB 801.  I do not agree.  Mr. Mardon’s was “a business run partly on a one-man company’s account and partly on a personal account by the only person who was active in the company” – per Ormrod LJ at p.830.  Mr. Mardon’s and the company’s finances were “so inextricably intermingled that it was impossible to differentiate between them” – ibid at pp.829-830.  The money put into Mr Mardon’s business “might be obtained by overdraft at the bank or by loan from his own private company – but wherever it came from, it was a loss to him; and he can recover that loss” – see per Lord Denning MR at p.821.  In these circumstances it was held that to treat the company as a separate legal entity whose loss was not the personal loss of Mr. Mardon would be a denial of justice.  None of these considerations are of any application here.  To fail to recognise that ASH and ASMIC are indeed separate legal entities whose losses are not those of ADIC would be to frustrate the intention of the Board of Directors of ADIC to ensure that the investment and exposure of ADIC was restricted to US$ 6 million and that the bridge financing should be obtained “without any guarantees by ADIC” and with “none (sic) recourse.”
283.	Since, however, I have held that ADIC are entitled to recover damages for deceit, it follows that a recoverable element of those damages includes, in principle, the profit or return which they would have made on their investment in ADCL had they invested the money in another, hypothetical, profitable project – see East v Maurer [1991] 1 WLR 461 at 468 per Mustill LJ, cited with approval by Lord Steyn in Smith New Court Securities Limited v Citibank NA, above, at page 282.  By agreement the question whether ADIC are able to prove an appropriate internal rate of return on investment has been left to be determined, if necessary, at a later date.  
284.	I was told that by virtue of its settlements with Messrs Clarkson and KfW, ADIC has recovered US$4.75million in respect of the damages which it claims in this action, together with US$2.375million by way of interest thereon.  I leave over for agreement or further argument if necessary how receipt of those sums should be reflected in the order which I should now make.  Comprised within the issues for further agreement or determination is of course the question on what principal sum an internal rate of return is recoverable, if established, bearing in mind ADIC’s recovery against Clarkson and KfW.
285.	Accordingly, there will be judgment in terms to be agreed or determined for ADIC against Mr. Steiger, Mr. Menzel and ADX Shipping Limited.  The claims of ASH and ASMIC will be dismissed.  
286.	I am grateful to all Counsel and their instructing solicitors for the very considerable assistance of all types which I received in the course of this long and heavily documented trial.