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Metall Und Rushtoff V. Donaldson Lufkin Notes

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This is an extract of our Metall Und Rushtoff V. Donaldson Lufkin document, which we sell as part of our Conflict of Laws BCL Notes collection written by the top tier of Oxford students.

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ETAL UND RUSHTOFF V. DONALDSON LUFKIN M

FACTS M. & R. are a company incorporated under the laws of the Canton of Zug in
Switzerland where the company carries on business. At the material time M. & R.
were buyers and sellers of physical aluminium. As part of their ordinary business M.
& R. also traded in aluminium with dealers on the London Metal Exchange. M. & R.
are a subsidiary of Associated Metals & Minerals Corporation ("A.S.O.M.A."), a New
York corporation carrying on business there. For purposes of their dealings on the London Metal Exchange, M. & R. employed a
number of ring­dealing members of the Exchange dealers. One of these was an
English company which then had a different name but which the parties have for
convenience called "A.M.L." We shall continue to use that name. At all times material to these actions A.M.L. were a subsidiary of A.C.L.I. (the second
defendants) and A.C.L.I. were a subsidiary of D.L.J. (the first defendants). A.C.L.I.
and D.L.J. are both Delaware corporations and had their principal office at 140,
Broadway in the City of New York. In the first action M. & R. were the plaintiffs and A.M.L. (not a party to the present
action) were the defendants. A.M.L. met only a small fraction of the large judgment
given against them. On M. & R.'s petition an order was made that A.M.L. be wound
up. It is in those circumstances that M. & R. now seek to recover the balance
outstanding from D.L.J. (which has become the subsidiary of another large
American company) and A.C.L.I. They wish to prosecute this action, like the first, in
London. Circumstances giving rise to the present proceedings: M. & R.'s chief aluminium
trader at the relevant time was a Mr. Glaser, whose duty was to trade in the name and
for the benefit of M. & R. In fraud of M. & R., however, he embarked on a course of
trading on his own account through a number of what were called "miscellaneous
accounts," these being accounts in the names of companies or establishments in
Liechtenstein, Zurich, West Germany and Guernsey. From an early stage, as
Hobhouse J. found, senior officers of A.M.L. knew of and connived at Mr.
Glaser's fraud on M. & R., his employers, well­knowing that these accounts were
nothing to do with M. & R. Mr. Glaser's intention was that the trades conducted
through the miscellaneous accounts should be profitable and that he should keep the
profit for himself instead of passing it on to M. & R. Trades which proved
unprofitable would be allocated to M. & R. Unfortunately for him (and A.M.L. and M.
& R.), the price of aluminium, which had been fairly stable for the first 11 months of
1982, rose sharply at the beginning of 1983 with the result that Mr. Glaser's
transactions on the miscellaneous accounts led to large losses. Mr. Glaser
fraudulently transferred funds from M. & R. into the miscellaneous accounts. A.M.L.'s response was to treat the miscellaneous accounts as sub­accounts of M.
& R. for which M. & R. was responsible; to treat M. & R. as being in default. All
this was done, as Hobhouse J. held, in bad faith, because A.M.L. knew that the

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