1. The True Nature of the Deal
Jack’s advice was sound. Although I had formed a reasonably clear picture of the background facts, I had come to a dead end. I had virtually decided to give the case a miss, when I had a stroke of good luck.
Cases to be litigated before a court in London were usually discussed with a member of a law firm, a solicitor. His task was to obtain the required evidence, to assess the basic nature of the case and to form an initial impression. When his work was done, the law firm referred the file to a barrister. If the latter thought the ‘cause’ was sound, he would prepare the case for trial.
Usually, a solicitor refuses to provide any information respecting a case to outsiders. It is part of his legal training. Indeed, Seddon’s law firm retained its reticence. However, Mike Smith, the solicitor who had been in charge of Seddon’s file, had quit practice and became a business entrepreneur. From time to time, he came up to Oxford – his alma mater – in respect of a donation made by his new business to my college.
When we met during a formal dinner in the Senior Common Room, Mike told me that Seddon had been a ‘full partner’ in Ng’s Hong Kong firm. Further, Seddon knew the supplier in China who had shipped the dust. Ng and his supplier took Seddon for a ride following a commercial dispute that had arisen between them. It related to the price of earlier shipments and to delays by Ng in making the payment due to his supplier as well as in the remittance of part of the ‘price’ to a Swiss bank account in Seddon’s name.
“We thought it inadvisable not to refer to this matter when the case was heard by the High Court. You see, Peter, the transactions involved breaches of the Exchange Control Act. Seddon arranged to have the invoices made out for about twice the price of the goods. Ng and the supplier were to get what was due to them. The balance was to be remitted from Hong Kong to Zurich.”
“Do you think Masterman Bank knew?”
“They were not born yesterday,” grinned Mike
“Why did they proceed with the transactions?”
“Well, they wanted to ‘please’ a good customer. Further, Peter, they wanted to earn the fee payable when a letter of credit is opened by them! They are not philanthropists!”
2. Further Investigations
The fresh background facts intrigued me. Was it possible that many letters of credit were issued to disguise the illegal movement of funds out of the country? Here was I, a young lawyer from Tel Aviv, hoping to build a castle consecrating the law of letters of credit. But wasn’t I yet another starry-eyed researcher, who failed to see that his holy cow was nothing but a technique used to camouflage shady dealings?
Hoping to find out whatever remained unclear, I went down to London and managed to buttonhole Jacob Brown – the barrister engaged by Seddon. Sensing that he could trust me, he opened up.
It turned out that he, too, was aware of Seddon’s illegal design. Further, he was not surprised when the Judge rejected Seddon’s arguments.
“So, it was a bad case. Wasn’t it?”
“Touch and go,” replied Jacob. “And you know, Seddon’s usual legal advisers, Messrs L & K – a conservative firm specialising in international trade and property transactions – did not handle the matter themselves. They told Seddon ‘it was not their line of country’. They referred him to H & C – a well-known law firm specialising in commercial litigation.”
“Didn’t the partners of H & C see the writing on the wall?”
“Who can tell? Still, their object is to take cases on and – whenever possible – to make a profit. I was known as one of their ‘hawks’. The file was referred to me.”
“So, the case was not altogether hopeless?”
“As I already said, it was a ‘touch and go case’. It all depended on Seddon’s evidence. Did he rely on the Bank’s advice or did he simply give his instructions. That’s why I decided to proceed. In the event, the Bank refused to settle. And Seddon was destroyed in the cross-examination. He had to admit that he had not asked the Bank to advise him on details of the transaction.”
“Who appeared against him?”
“My good friend, Bernard. Another Oxbridge man.”
“Why didn’t the Masterman Bank raise the issue of the exchange control contravention?”
“To what end? They did not want to invoke the wrath of the Bank of England. They relied on the skill of their barrister. Bernard tore Seddon to shreds in the box: got him to admit he had had regular dealings with Ng for years. Bernard thought it best not to refer to the ‘partnership’ and illegality points.”
“So, all in all, Seddon got what he deserved?”
“He did, rather. And you know, the case ruined him. The shipment was worthless. The ensuing loss and the legal costs drove him into bankruptcy.”
3. Jack Sums Up
Jack, the publican, did not appear surprised by the facts I conveyed to him. To my surprise, he grinned when I mentioned the court proceedings. When I finished, he observed: “Look, Peter, that fellow knew his counterparty in Hong Kong. Still, before you make up your mind you ought to hear his version of the encounters with the Z Bank and the lawyers.”
“I know. Still, on the face of it our Mr. X appears to be a naughty fellow.”
“But why? Haven’t you yourself taken things through customs without declaring them? Have you never smuggled US dollars on your travels out if Israel?”
“Of course I did. And I have hidden some income from our tax authorities. Most middle-class persons are guilty of such petty dishonesties. What I find ugly is our Mr. X’s attempt to recover his losses from the Bank.”
“It is not nice. But you should find out what made him act in such a manner!”
“Only one person can tell us,” I muttered.
“Quite so,” replied Jack averting his eyes.