Neutral Citation Number: [2022] EWHC 1625 (Comm)  
Case No: CL-2019-000380  
Royal Courts of Justice  
Strand, London, WC2A 2LL  
Date: 01/07/2022  
Before :  
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Between :  
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Philippa Hopkins QC, Adam Turner and Henry Ashwell (instructed by Watson Farley &  
Williams LLP) for the Claimants  
Charles Kimmins QC and Luke Pearce (instructed by Schjødt LLP) for the First, Third and  
Fourth Defendants  
Timothy Hill QC and Alex Carless (instructed by Clyde & Co LLP) for the Second  
Hearing dates: 7, 8, 9, 10, 14, 15, 16, 17, 18, 23, 24 March 2022  
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Approved Judgment  
This is a reserved judgment to which CPR PD 40E has applied.  
Copies of this version as handed down may be treated as authentic.  
Approved Judgment  
Kyla Shipping v FTL  
Mr Justice Andrew Baker :  
Nikolaos (‘Nick’) Livanos (‘NEL’) is a cousin of Peter G. Livanos (‘PGL’), the son of  
the late George P. Livanos (‘GPL’). GPL was the principal of the Ceres Hellenic  
shipowning businesses, running Ceres Hellenic Shipping Enterprises Ltd, which was  
established in 1949 and was for many years the Livanos family’s principal trading  
NEL’s father spent his career at sea, as a ship’s captain employed in the Ceres  
Hellenic fleet. He died when NEL was only 18, and GPL became a father figure and  
business mentor to NEL. In the summer of 1980, NEL was 22 and had spent the  
previous 4 years or so gaining experience at sea working on board ships owned by the  
Stravelakis and Xylas families. On a visit to NEL’s family home in Chios that  
summer, GPL invited NEL to come to work for the Livanos family businesses.  
With financial assistance by way of an informal, interest-free loan from GPL, NEL  
studied business and management at Pace University in New York. He gained further  
seafaring experience by working on board Livanos ships during the summer holidays,  
and upon graduating from Pace, NEL joined Sea Group, the Livanos tanker  
management company.  
I shall come back to this below, but in short NEL’s career was then with Livanos  
companies until 2007, when he branched out fully on his own, although he continued  
to operate from the Ceres Hellenic building in Piraeus until June 2007, when he set up  
his own office in Athens.  
Therefore, NEL was a long-standing and close member of the Livanos family, in  
business and by blood; and he continued to be treated as such in ways that matter to  
the present proceedings even after he had set up on his own and no longer held any  
position with the Ceres Shipping Group.  
These proceedings concern 41 FFA trades (‘the Kyla FFAs’) documented by the third  
defendant (‘CTM’) as having been entered into between the first claimant (‘Kyla’)  
and the first defendant (‘FTL’).  
It was common ground that the Kyla FFAs were null and void if, as Kyla claims for  
31 of them (‘the Disputed FFAs’), they were concluded by CTM purportedly for and  
on behalf of Kyla but acting in breach of fiduciary duty in one or more of the ways  
alleged by the claimants when doing so. For the sake of brevity, in this judgment I use  
language as I would of binding contracts to describe and analyse the Kyla FFAs and  
their purported effects without meaning by that to pre-judge whether they were any  
such thing. Thus, for example, where I refer to obligations under, or profits and losses  
made on, the Kyla FFAs, as if they were FFA trades binding upon Kyla, it should be  
borne in mind throughout that, save for the first 10 Kyla FFAs, the claim is that Kyla  
came under no such obligations and its losses are recoverable as having been paid by  
or on behalf of Kyla under an operative mistake as to whether there was any  
obligation to pay (with counter-restitution required for apparent profits received by or  
credited to Kyla).  
Approved Judgment  
Kyla Shipping v FTL  
All of the Kyla FFAs took positions on the Baltic Forward Assessment (‘BFA’) Index  
price for time charter routes for either Capesize, Supramax or Panamax bulk carriers.  
Those main time charter price Indices, familiar to anyone who knows the FFA  
market, are often referred to as ‘Cape 4TC’, ‘Smx 6TC’ and ‘Pmx 4TC’ to reflect the  
fact that the Index for Capesize bulkers, likewise the Index for Panamax bulkers, is  
intended to represent an average of daily charter hire rates for four standard time  
charters, whereas for Supramax bulkers the Index is built from six standard time  
charter rates. I shall refer simply to ‘Cape’, ‘Smx’ or ‘Pmx’ respectively, so that (for  
example) a Kyla ‘Q1 08 Pmx’ FFA is a forward purchase or sale by Kyla of the Pmx  
4TC Index for the first quarter of 2008, at a strike price fixed when the trade was  
Market standard terms for FFAs, those of the Forward Freight Agreement Brokers’  
Association (‘FFABA’), provided for monthly settlement. So a ‘full’ Q1 08 FFA  
would settle with monthly differences payable in early February 2008 (January 2008  
Index against strike, multiplied by 31 days), early March 2008 (February 2008 Index  
against strike, multiplied by 29 days) and early April 2008 (March 2008 Index against  
strike, multiplied by 31 days). Thus, a ‘full’ contract on Q1 08 represented a 91-day  
exposure (contract volume). (I pass over what may be a complication that does not  
affect any of the issues I have to decide, namely a possible standardisation for cleared  
trades via the London Clearing House (‘LCH’) to notional 30-day months that some  
of the evidence suggests but which was not explored at trial.)  
It was not uncommon to trade ‘half’ contracts, i.e. half a ‘full’ calendar period. Such a  
contract would still settle monthly, but at half the value of a full contract. So, for  
example, in early February 2008, there would be a first monthly settlement of January  
2008 Index against strike, multiplied by 15.5, under a ‘half’ contract for Q1 08; and a  
‘half’ contract on Q1 08 would be a 45.5-day exposure in all.  
Most of the Kyla FFAs may be identified uniquely by the date on which they were  
placed, their direction (Kyla buying or Kyla selling), and the Index bought or sold (if  
that be necessary to distinguish the trade from another Kyla FFA placed on the same  
date). I shall take advantage of that when dealing with individual Kyla FFAs, using a  
format of Buyer/Seller DDMMYY’. Thus, the first Kyla FFA, placed on 7 February  
2007, Kyla buying from FTL, is ‘Kyla/FTL 070207’. It was a full Q2 07 Cape, but  
that does not need to be said to identify the trade as it was the only Kyla FFA placed  
on that date. On the other hand, two Kyla FFAs were placed on 11 July 2007, both  
purchases, so they need to be distinguished by Index, becoming Kyla/FTL 110707 Q3  
07 Cape and Kyla/FTL 110707 Q4 07 Cape.  
That labelling convention does not allow unique identification of four Kyla FFAs  
placed at the end of April 2008. Four sales by Kyla were placed on 29 April 2008  
(although one was only documented the next day, 30 April 2008). Each was a half  
May/June 08 Cape position, the first three at US$147,500 per day, the fourth at  
US$148,000 per day. I shall refer to them as FTL/Kyla 290408(1) to FTL/Kyla  
290408(4). Using that labelling convention, FTL/Kyla 290408(3) is a Kyla FFA  
confirmed at the time as a sale to the second defendant (‘CTP’) rather than a sale to  
FTL. In referring to that Kyla FFA as FTL/Kyla 290408(3), I do not mean to beg the  
question whether it was (purportedly) a trade with FTL rather than with CTP as  
confirmed to Kyla.  
Approved Judgment  
Kyla Shipping v FTL  
I shall also use from time to time an equivalent labelling convention in respect of  
‘second leg’ trades (as to which, see below). So, for example, the ‘second leg’ trade  
for the first Kyla FFA was a full Q2 07 Cape purchase by FTL from Pioneer, on the  
same date, 7 February 2007. That FTL purchase could be referred to as FTL/Pioneer  
Kyla’s net loss on the Kyla FFAs was a little over US$31.1 million and its net loss on  
the Disputed FFAs was just shy of US$32 million. FTL made profit of US$8.4 million  
from the Kyla FFAs, of which a fraction over US$8 million came from the Disputed  
FFAs, treating as profit for FTL the margin between the Kyla FFA prices and the  
prices of the trades in the opposite direction with FFA market counterparties that FTL  
treated in its books as matched to the Kyla FFAs.  
In a description that was used at trial, the Kyla FFAs were ‘first leg’ trades, and the  
trades with market counterparties to which they were matched in FTL’s books were  
‘second leg’ trades. On reflection, it would have been better, for discussing the claims  
I have to judge, to number the legs the other way round, so that a ‘first leg’ trade was  
a trade done by FTL in the market, and a ‘second leg’ trade was a trade with Kyla  
matched to a ‘first leg’ trade. However, I retain the parties’ usage (‘first leg’ = Kyla;  
‘second leg’ = market) to avoid confusion for them, given their familiarity with that  
The claimants’ case is that CTM was Kyla’s agent to trade FFAs, so that every ‘first  
leg’ trade, when placed, should have been matched to a ‘second leg’ trade. In practice,  
the individual at CTM said to have undertaken that agency role was the fourth  
defendant, Luigi Cafiero. The arrangement, according to the claimants, was that CTM  
(acting by Mr Cafiero) was to trade in the FFA market, at its discretion, for Kyla,  
using FTL to ‘front’ to the market for Kyla, for a fee of US$500 per day built in to the  
trades as a margin in favour of FTL. On the claimants’ case, therefore, the ‘second  
leg’ trade was always the primary trade, or should have been anyway, generating  
when placed with the market, by reason that it was intended by Mr Cafiero to be for  
Kyla’s account, a simultaneous ‘first leg’ trade on back-to-back terms save for that  
US$500 per day margin. That is to say, each Kyla FFA should have involved a single  
trading decision on Mr Cafiero’s part, namely that a trade should be done for Kyla, to  
be implemented by: (i) trading with the market (the ‘second leg’), trading in FTL’s  
name but intending the trade to be for Kyla; (ii) documenting a matching trade (the  
‘first leg’) between FTL and Kyla at a price US$500 per day higher (purchases) or  
lower (sales) than the price secured for Kyla from the market.  
In 2007-2008, various practices were known in the FFA market by which an  
established participant (B) might ‘front’ an FFA trade with another (A) where the  
trade was intended by B to be for the ultimate account of a third party (C), facilitating  
an effective trade (assuming all remained solvent) between C and A, through B,  
where for one reason or another C was unable to trade directly with A. The claimants  
said that the Kyla-CTM relationship, of agency and FFA management on the part of  
CTM for and on behalf of Kyla, involved a standing arrangement for FTL to front in  
that way for Kyla on (what would then be documented as) the ‘second leg’ trades.  
If the claimants are correct about the nature of the relationship between Kyla and  
CTM, and how it was supposed to work, the aggregate amount generated for FTL in  
Approved Judgment  
Kyla Shipping v FTL  
that way from the Disputed FFAs, at US$500 per day, should have been c.US$1.2  
million rather than US$8 million odd.  
The defendants say that CTM was not trading for Kyla but trading (as agent for FTL)  
with Kyla. They say that each of the Kyla FFAs was traded between NEL for Kyla  
and Mr Cafiero for CTM (as agent for FTL); and that for every Kyla FFA, the  
material terms of the trade, including the strike price, were agreed over the telephone  
between NEL and Mr Cafiero acting in those capacities.  
Whether the relevant relationship, between Kyla and CTM, was as described by the  
claimants or as described by the defendants, was the principal issue at trial, aside from  
time bar. I find in favour of the claimants on it.  
The Disputed FFAs were placed between early May 2007 and mid-November 2008.  
They followed the first 10 Kyla FFAs, which conformed closely enough to how, as I  
find, the FFA trading was supposed to work that no claim was maintained in respect  
of them by the claimants. Considered as a trading book of 41 trades, the Kyla FFAs  
5 FFA positions put on during February-April 2007, each later closed out,  
which account between them for the first 10 Kyla FFAs in respect of which no  
claim was pursued;  
5 further FFA positions put on during May-August 2007, each again later  
closed out;  
5 positions put on during September-October 2007, one of which ran to  
settlement (a Q1 08 Pmx traded on 6 September 2007), one of which did so in  
part (the Q1 08 part of a full Q4 07 + Q1 08 Pmx traded on 12 September  
2007), the other three of which were closed out;  
1 position taken on 17 January 2008 and closed on 18 January 2008 (44.5 days  
short Q1 08 Cape, part of 90 days traded, the balance of which closed out the  
last October 2007 trade);  
1 position taken on 18 January 2008 and closed on 6 March 2008 (45.5 days  
long Q2 08 Cape plus 1 day long Q1 08 Cape, part of 45.5 days long Q1 08  
Cape the balance of which (44.5 days) was the close-out of the short taken the  
day before ((4) above));  
2 positions going long Q2 08 Cape, traded on 13 February and 11 March 2008,  
the April months of which ran to settlement and the May/June months of  
which were closed out on 29 April 2008;  
1 position taken on 5 June 2008 (Kyla/FTL 050608), going long Q3 + Q4 08  
Cape, with Q3 and October running to settlement while the  
November/December balance was closed out by (part of) the final Kyla FFA,  
traded on 17 November 2008 (FTL/Kyla 171108). Kyla/FTL 050608 was a  
ruinously bad trade, Kyla losing c.US$21.6 million on it;  
Approved Judgment  
Kyla Shipping v FTL  
1 position taken on 18 September 2008 (Kyla/FTL 180908), going long Q4 08  
Cape, with October running to settlement and the November/December  
balance being closed out by (the balance of) FTL/Kyla 171108.  
70% of Kyla’s aggregate net loss on the Kyla FFAs, c.US$21.6 million out of  
c.US$31.1 million, was suffered on Kyla/FTL 050608. That trade amounted to a  
disastrous bet on the market rising, placed at the very peak of the overheated market  
of early summer 2008 and held until well after the global crash was precipitated by  
the collapse of Lehman Bros in mid-September 2008. I find that it was not traded by  
NEL on behalf of Kyla in a negotiation with Mr Cafiero on behalf of FTL. It was put  
on by Mr Cafiero purportedly for Kyla, but acting against its interests and by way of  
dishonest opportunism acting in the contrary interests of FTL so as to cause a  
significant loss he had incurred for FTL’s own account the previous day to be shifted  
to Kyla.  
Given the basic chronology, it was common ground that all of the claimants’ various  
claims, as alleged, in respect of the Disputed FFAs are prima facie time barred,  
proceedings having been commenced in June 2019. The claimants say that they are  
not time barred, however, attempting to bring themselves within s.32 of the  
Limitation Act 1980. I find that the attempt fails.  
My conclusions as to the facts follow from a consideration of all the evidence in the  
round, and all the parties’ submissions on the evidence, even if I do not mention or  
summarise all of that evidence or all of those submissions. It is rarely possible to do  
full justice to the holistic, iterative, self-critical and cross-checking nature of the  
process of assessing a case on the evidence, in an essentially ‘linear’ written  
judgment. Thus, for example, my assessment of the factual witnesses was informed  
by the plausibility of their evidence, and its consistency or inconsistency with the  
documentary record, as well as by the ability which cross-examination afford[ed] to  
subject the documentary record to critical scrutiny and to gauge [the witnesses’]  
personality, motivations and working practices(per Leggatt J, as he was then, in  
Gestmin SGPS S.A. v (1) Credit Suisse (UK) Ltd & (2) Credit Suisse Securities  
(Europe) Ltd [2013] EWHC 3560 (Comm) at [22]); but at the same time, my final  
sense of the plausibility of rival accounts on disputed matters, bearing in mind what is  
or is not in the documentary record, was informed by the personalities involved (and  
their motivations and working practices), the most important of which I had an  
opportunity to gauge through the trial process.  
The Parties  
Kyla was formed in 2003 to own the m.v. Kyla, a 1982 Capesize bulk carrier. Kyla  
was co-owned between N&P Shipping Co (‘N&P’), a company owned between NEL  
and his brother, which had 70% of Kyla, and YPA Associates Inc (‘YPA’), which had  
the other 30%. YPA was owned by Yannis Haramis (the ‘Y’ in YPA), a senior  
executive in PGL’s businesses, PGL himself (the ‘P’), and Adamantios Lemos (the  
‘A’), another cousin of PGL, a shipowner and principal of Unisea Shipping SA.  
The second claimant (‘Vega’) was also formed in 2003. NEL is Vega’s sole beneficial  
owner. In June 2005, through Vega, NEL took a 25% stake in a joint venture  
company that owned a bulk carrier called the m.v. Bulk Hong Kong. PGL’s side of the  
Livanos family was also involved through a corporate vehicle. In 2011, Vega’s  
Approved Judgment  
Kyla Shipping v FTL  
indirect stake in the Bulk Hong Kong was translated into a stake in a broader joint  
venture by way of a shareholding in CBC Holding (‘CBCH’), a company controlling  
a fleet of 10 ships (including the Bulk Hong Kong). That stake in CBCH was  
surrendered in May 2012 under a Termination Agreement that was part of the way in  
which Kyla’s FFA liabilities were ultimately discharged.  
The Kyla was purchased from a company associated with Paolo Clerici under whose  
ownership she was operating in the Coeclerici/Ceres Capesize Pool, under the  
technical management of Ceres Hellenic and the commercial management of CTM  
(then called CC Maritime SAM). Under NEL’s (majority) ownership, the Kyla  
continued to operate in the Capesize Pool, with the same technical and commercial  
In February 2004, NEL and his brother, indirectly through N&P, purchased another  
Clerici ship, a 1992 Capesize, which they renamed the m.v. Captain Vangelis L.  
Under NEL’s ownership, the Captain Vangelis L rejoined the Coeclerici/Ceres  
Capesize Pool for two years following the purchase, so like Kyla she had Ceres  
Hellenic as technical managers and CTM as commercial managers.  
In February 2005, NEL and his brother purchased, through an SPV called Northern  
Chios Holdings Inc (‘Northern Chios’), a 2001 Panamax, which they named the m.v.  
Kalliopi L. Northern Chios was owned, like Kyla, 70% by N&P and 30% by YPA.  
The following year, again using an SPV owned by Northern Chios, another Panamax  
was acquired, a 2003 build which became the m.v. Pantazis L.  
At the time of the events giving rise to the claims considered in this judgment, FTL,  
CTP and CTM were all companies within PGL’s Ceres Shipping Group.  
CTP was established in 1999 and operated until the end of 2007 as the corporate  
vehicle for the CTP Panamax Pool (‘the CTP Pool’). On 1 January 2008, the CTP  
Pool ceased to exist, but CTP continued to provide services to shipowners, including  
members of the CTP Pool as it had been. There was a similar Capesize Pool operated  
by C Transport Cape Size Ltd (‘CTC’, operating the ‘CTC Pool’), which was the  
successor in business to the Coeclerici/Ceres Capesize Pool to which I referred above.  
C Transport Holding Ltd (‘CTH’) was the commercial manager for CTC and CTP, as  
pool companies until the end of 2007, and thereafter. CTH delegated the performance  
of its functions as commercial manager for CTC and CTP to CTM, established in  
Monaco in 2004.  
Mr Gary Weston joined CTM as CEO in 2004, when it was still CC Maritime SAM  
and based in Genoa, before the move to Monaco later that year, after a 25 year career  
with H Clarkson & Co Ltd. He joined Clarkson as a trainee shipbroker in 1979, rising  
to become Executive Chairman in 1998. He worked as CEO of CTM until 2011, and  
was then Executive Chairman until he retired in 2015.  
Mr Cafiero joined CTM on 1 November 2004 and worked for CTM until December  
2010. For just over a year, from January 2007 to January 2008, Mr Cafiero’s contract  
of employment was in fact with C Transport Maritime UK (‘CTM UK’), but that was  
an internal matter as part of his relocation during that period to head up a London  
office for CTM, and in his dealings with others, including NEL/Kyla, he continued to  
Approved Judgment  
Kyla Shipping v FTL  
act for and represent CTM. He returned to Monaco in early 2008 when, without  
relinquishing his role running FTL, he took over from Mr Giacomo de Ferrari as the  
head of the CTM Panamax desk, so he was then effectively running CTP as well as  
FTL until he left CTM at the end of 2010.  
One of CTM’s functions, as delegated commercial manager for CTC and CTP, was  
the trading of FFAs for those companies and the management of FFA positions held  
by them, as hedging instruments in respect of their exposures as ship operators to  
movements in dry bulk freight markets. Mr Cafiero first became involved with FFAs  
in and after January 2005, as part of his work for CTM, under the supervision of Mr  
Henry Collot d’Escury, head of CTM’s Capesize desk, for CTC, and Mr de Ferrari,  
head of CTM’s Panamax desk, for CTP.  
FTL was established in 2005 as a speculative FFA trading fund. It began trading in  
April 2005. FTL was run as a zero cash business whose financial results (positive or  
negative) were allocated entirely to the fund investors, who were well-known friends  
and contacts of CTM. The two initial investors (via corporate vehicles) were PGL and  
Petros Pappas of Oceanbulk. As FTL’s activities became established, others joined as  
investors, including Mr Weston.  
Mr Weston put Mr Cafiero in charge of FTL from the outset. As CEO of CTM and a  
Director of FTL, Mr Weston had an ultimate responsibility to FTL’s investors for its  
performance, but apart from the Japanese business of the Ceres Group, with which Mr  
Weston had a close personal involvement, he was not involved in day-to-day  
operations which had to be delegated to others. He was heavily involved in setting up  
FTL, but not in its operations once it was up and running, although he did receive  
weekly reports on FTL’s trading enabling him to write monthly reports on the  
performance of the fund for the investors. He asked Mr Cafiero to run FTL because he  
(Cafiero) had a bit of experience of FFA trading and had shown some aptitude for it.  
The Factual Witnesses  
38. On the pleadings and at trial, the rival cases as to the facts were completely at odds.  
Although the primary events occurred many years ago, it is difficult to envisage how  
there could be an honest misunderstanding or difference of recollection between NEL  
and Mr Cafiero as to how the Kyla FFA trades were placed and as to what CTM  
(acting by Mr Cafiero) was doing, or at least was supposed to be doing, in relation to  
them. Either Mr Cafiero was deciding what positions to buy and sell, when, at what  
price and on what other terms, all for Kyla, which can only sensibly be because the  
claimants are correct about the type of arrangement that had been set up and agreed,  
i.e. a generally unfettered discretionary trading mandate under which CTM (Mr  
Cafiero) was to look after Kyla’s interests, using FTL to front for it to the market; or  
NEL was engaged in independent trading, for his own account, with Mr Cafiero of  
CTM (acting for FTL) his only counterparty, negotiating every trade and making his  
own decision every time on product, period, volume, price and direction.  
The well-known remarks of Robert Goff J, as he then was, in The Ocean Frost [1985]  
1 Lloyd’s Rep 1 at 57, are apposite (but also bearing in mind what I said in paragraph  
24 above):  
Approved Judgment  
Kyla Shipping v FTL  
“Speaking from my own experience I have found it essential in cases of fraud, when  
considering the credibility of witnesses, always to test their veracity by reference to  
the objective facts proved independently of their testimony, in particular by reference  
to the documents in the case, and also to pay particular regard to their motives and to  
the overall probabilities. It is frequently very difficult to tell whether a witness is  
telling the truth or not; and where there is a conflict of evidence such as there was in  
the present case, reference to the objective facts and documents, to the witnesses’  
motives and to the overall probabilities can be of very great assistance to a judge in  
ascertaining the truth.”  
In this case, the documents almost all point in favour of the claimants’ case. There are  
hardly any documents that support the defendants’ case and instead, the defendants  
had to try to explain away damaging document after damaging document. The  
explanations, mostly proffered by Mr Cafiero in a bravura performance of brazen  
inventiveness in the witness box, were not at all convincing, either individually or  
(particularly) taken as a whole.  
I considered NEL as a witness to be engaging, careful, compelling and honest. His  
account of the FFA trading was consistent, and he was content to admit matters which  
might be thought uncomfortable or damaging, for example that the 2008 Kyla  
financial statements included statements he knew at the time to be untrue.  
The defendants contended that NEL would not have been so naïve or trusting as to  
leave the conduct of his FFA portfolio to a young, inexperienced trader like Mr  
Cafiero, employed by CTM. As to that:  
firstly, whilst I agree that Mr Cafiero was unsuited to the role, he was asked by  
Mr Weston to run FTL and presented to the world, including to NEL, as  
suited. The underlying error of judgment, a serious one in my view, was not in  
NEL trusting to CTM (which in practice mostly meant trusting to Mr Cafiero,  
but was ultimately about trusting a family business led by Mr Weston), but in  
Mr Weston leaving Mr Cafiero essentially unsupervised to run FTL’s book  
and to do as he saw fit with Kyla’s FFA trading as one element of his activity;  
secondly, the defendants’ case depended upon a portrait they sought to paint of  
NEL as a financially sophisticated shipping investor with expert knowledge  
and understanding of FFAs and the trading thereof which in my view badly  
missed the mark. NEL was a very experienced shipping industry man, with a  
technical management and operations background in the tanker market, and  
expertise of that kind. He was not at the material time an expert shipping  
investor, even as regards the commercial management of the ships in which by  
2007 he had built up a substantial indirect interest as owner, let alone as  
regards trading in FFAs as a speculative investment activity.  
Fitting that true description of the man, NEL was something of a control freak in  
relation to matters of technical management and vessel operations, but not at all in  
relation to his business affairs more generally, whether as regards the FFAs or  
anything else. He was a touch chaotic and disorganised, reliant on others (especially  
Mr Thanopoulos (paragraph 69 below) generally (but not for FFAs), and CTM for the  
Vega and Kyla FFAs). From September 2007, that was exacerbated by his need to  
focus on difficult personal matters arising out of the breakdown of his marriage. The  
Approved Judgment  
Kyla Shipping v FTL  
idea that NEL considered, negotiated and agreed each FFA trade, and was all over  
Kyla’s FFA book running it for himself as an independent investor trading with Mr  
Cafiero, as contended by the defendants, is unreal.  
Mr Cafiero, I find with regret, was dishonest in his dealings and as a witness. In the  
latter regard, he was prepared to say whatever suited his case, even if it was  
contradicted by or very difficult to fit with the documents or the evidence of others.  
He was argumentative, inventive, and thoroughly unconvincing.  
Mr Weston was also an unsatisfactory witness, keen to argue the case. His only  
relevant focus at the time was on FTL’s bottom line, and in his evidence he seemed to  
me motivated primarily by a desire to persuade the court that whatever had occurred  
was not his fault rather than just to assist with the facts where he could, or admit,  
where this was the position, that he could not assist because he either did not  
remember or would not have known at the time, or both. I found Mr Pulcini  
(paragraph 68(1) below) aggressively argumentative, keen to speculate, and happy to  
give evasive answers rather than to assist the Court. Mr Weston and Mr Pulcini  
claimed in their trial witness statements to be in a position to testify to the untruth of  
the claimants’ claim (and NEL’s evidence) that Mr Cafiero was making the trading  
decisions (purportedly) on behalf of Kyla in respect of the FFAs, and that NEL was  
leaving that to him and trusting him with that. In my judgment, neither in fact had  
then or has now any knowledge of how Mr Cafiero operated the Kyla-CTM  
relationship, and neither provided at the time any meaningful supervision or audit of  
what Mr Cafiero was doing or had done in that regard.  
Mr Haramis’s evidence contributed very little to the matters in issue. It was concerned  
mostly with meetings and discussions relating to the rescheduling of Kyla’s FFA  
debts, the facts relating to which were largely common ground. He had given in his  
written evidence a glowing description of NEL’s expertise and experience in the  
shipping industry, but in fact had no basis for asserting (if this was his intention) that  
NEL was an FFA expert or was not (or would not have been) relying on CTM (Mr  
Cafiero) to build and run Kyla’s FFA book for him. A telling piece of correspondence  
from him during the debt rescheduling period showed that at the time he appreciated,  
as I judge to have been the truth, that NEL would have been out of his depth trying to  
build and run an FFA book for Kyla.  
Mr Mantero (paragraph 68(3) below) was very nervous and defensive in the witness  
box, but in my judgment he was essentially an honest witness. The claimants invited  
me to find that he was complicit in, and knowingly assisted with, dishonest trading for  
Kyla against its interests. I am not persuaded that the evidence justifies such a finding.  
Mr Mantero was reliant on the information given to him by Mr Cafiero concerning  
what trades to document as Kyla FFAs and did not attempt to interrogate or second-  
guess what he was told, or to subject it to any critical scrutiny of his own at the time.  
His task (as he saw it) was to document accurately the business Mr Cafiero told him  
had been done, and to report weekly to his superiors in Monaco on the effects as  
shown in FTL’s books. Any decisions required or actions to be taken would have  
been decisions made by or actions directed by others.  
Mr Chillo (paragraph 68(4) below) was an honest witness, as the claimants accepted  
after he had given his evidence. But he was not in a position at the time to have  
knowledge that might have assisted on any of the important issues in the case, even  
Approved Judgment  
Kyla Shipping v FTL  
leaving aside the passage of time and its impact on his ability to recall any of the  
material events.  
Mr Thanopoulos’ written evidence substantially supported the claimants’ case, albeit  
he was not in a position to know, and did not know, whether NEL had been taking his  
own trading decisions in relation to FFAs or relying on CTM (Mr Cafiero). Under  
cross-examination, he became somewhat trenchant and argumentative, and I was left  
with the conclusion that he had worked himself up for the trial to try to support the  
defence position from the witness box rather than just tell it as it was in point of fact,  
to the extent that the facts had been within his knowledge and to the extent that he had  
any real recollection.  
Mr Iliopoulos (paragraph 70 below) was a straightforward witness, but his evidence  
did not assist much on any of the issues that mattered.  
The Expert Witnesses  
I heard expert evidence from Philippe van den Abeele (called by the claimants), Ian  
Staples (called by FTL, CTM and Mr Cafiero) and Benjamin Goggin (called by CTP).  
All have expertise concerning the trading and/or the broking of trades in the FFA  
market, and all were in the market during the period of interest in this case.  
Mr van den Abeele was knowledgeable and authoritative. He was independent and  
obviously had no axe to grind, with a wealth of FFA experience as trader and broker  
and a deep understanding of the dry bulk FFA market from all angles. His opinions  
withstood scrutiny, and I have no hesitation in accepting his evidence where it was  
properly expert evidence at all.  
One of the major exercises undertaken through Mr van den Abeele’s written reports,  
however, was little more than a collation and summary of the factual information  
available in the documentary materials obtained for the case as to the state of the  
market, trades done, prices reported and so on. It fed into an analysis, for example, of  
whether the Disputed Kyla FFAs had been placed at or about a prevailing market  
price that depended mostly upon the taking of a view that required no expertise, and is  
a matter for the court and not for the experts, on when a particular trade was done.  
Mr van den Abeele’s reports explained that the collation and summary of the factual  
material was not his, but was prepared for his use by the claimants’ solicitors, Watson  
Farley & Williams LLP (‘WFW’). It was clear throughout where that ended and Mr  
van den Abeele’s commentary, analysis or opinion began. Even so, it would have  
been better (more balanced) for Mr van den Abeele to have expressed his views  
somewhat differently. Thus, for example, dealing with Kyla/FTL 050608 and the  
question “How did the Contract Rate compare to the prevailing market rates  
at the relevant time?”, he said this: The prevailing price at the relevant time, i.e. the  
time of execution at 6.23pm should be close to the BFA closing price on that day. The  
BFA closing price was $172,649/day and the executed Kyla price was $182,000/day. I  
cannot see any kind of plausible explanation for this kind of discrepancy between the  
Kyla price and the prevailing market price at the time of the trade.”  
In that example, the pertinent expert evidence Mr van den Abeele was in a position to  
give was limited to this, namely that the Kyla/FTL 050608 price of US$182,000 per  
Approved Judgment  
Kyla Shipping v FTL  
day was close to the very top of the market at the close of the day on 4 June 2008 and  
overnight into 5 June 2008, although on the high side even for that, but well off the  
market if the trade was done at anything other than the very start of the day on 5 June  
2008. Even that would barely have been expert evidence, being apparent from the  
available records as to market activity that day as collated and summarised by WFW.  
The real value of the expert evidence was in explaining the different sources of  
information thus collated and summarised, and matters of good or normal broking  
practice affecting the timeliness of record production. What then to make of the  
material available was a matter for argument and determination by the court, informed  
by those explanations, not a matter for the experts.  
With the benefit of hindsight, I consider the fault there lay in the way in which the  
issues on which the experts were asked to give an opinion were drafted. I did not  
consider that Mr van den Abeele was giving me other than his independent  
assessment and view upon the questions he was asked to address; and I had no  
difficulty identifying what was properly expert evidence within what he said and what  
was only an assessment of the facts that it was for the court to make on the evidence.  
Mr Staples was not an FFA trader at the material time, and has had more limited  
experience than Mr van den Abeele in that regard generally. He was sullen, truculent,  
and combative in the witness box. I was unsure whether he was applying his mind  
independently to the questions he had been asked, and was being asked under cross-  
examination, or was seeking to argue a case for the defence. I did not find his  
evidence helpful.  
Mr Goggin, like Mr van den Abeele, evidently provided an experienced and  
independent assessment. His main experience however has been in the tanker FFA  
market, and some of his conclusions were undermined by reliance on some irrelevant  
material. Where his ultimate views differed from those of Mr van den Abeele, I would  
prefer the latter.  
The Facts  
NEL and PGL  
As already noted, NEL is the principal of the claimants, and they were, amongst other  
things, the vehicles he used for his involvement in the trading of FFAs from 2005. He  
has worked in the shipping industry since about 1976 and is the founder and CEO of  
Kyla Shipping & Trading Corp.  
PGL is NEL’s second cousin once removed, and a prominent figure in the shipping  
industry. At the time of NEL’s FFA trading, PGL was President and Chairman of  
CTM, and beneficial owner of the Ceres Shipping Group, the Drylog group, CTM,  
CTP, CTC and FTL, and a shareholder in YPA. I was told that CTP is not now  
beneficially owned by PGL. That was said to be the reason why CTP was separately  
represented, although why the changed ownership of CTP meant that separate  
representation was necessary (if it was) was neither explained further nor evident,  
given the common cause made by all of the defendants on the disputed issues.  
GPL supported NEL during the early stages of NEL’s career, and after PGL took over  
the Ceres Shipping Group in 1997, PGL took on that role as well. As a result, for  
Approved Judgment  
Kyla Shipping v FTL  
many years, and throughout the period relevant to these proceedings, NEL had a very  
close relationship with the Group, including with CTM. In paragraph 3 above, I broke  
off my summary of NEL’s career as he graduated from Pace and went to work for Sea  
Group. He worked there for 6 years in junior roles and during that period repaid the  
family loan he had been given to fund his business studies.  
In 1990, NEL moved to Houston, Texas, to work for the chemical tanker division of  
the Group, Seachem Tankers Ltd. He was there for 7 years as general manager,  
reporting to PGL. In 1997, PGL asked NEL to return to Greece as operations manager  
for the Group. As I mentioned in the previous paragraph, that was also the year in  
which GPL died and PGL became the overall head of the Group.  
In 2003, when NEL was 45 years old, he became the CEO of Ceres LNG Services  
Ltd, which was the predecessor to GasLog Ltd, a well-known listed ship management  
company within the Group. That made him the most senior individual at the Group  
other than PGL himself. In early 2005 NEL also acquired from PGL a company called  
Ceres Hellas Maritime Co, which was a technical ship-management company set up  
to be technical manager for a fleet of seven tankers.  
Thus, while NEL had worked in the shipping industry for 30 years at the time of the  
FFA trades with which I am concerned, his experience and responsibilities had been  
in operations and technical management, and all with tankers. By contrast, his  
growing investments as a shipowner were all in dry bulkers. Though the defendants  
sought to challenge this, in my judgment NEL was accurate in his evidence about  
himself as of 2005: I was very green back then as a shipowner. I have to state I  
have to state back on now it is a different story, but then I was very green. I was …  
[an] operations manager, looking after the technical aspects of the family, running  
the fleet of the family. I … never had a commercial role, so all my activities, the  
commercial, were done by CTM. Being a shipowner was the fulfilment of a dream,  
and NEL was immensely grateful to PGL for the assistance that being part of the  
Ceres Shipping business family gave him in realising that dream, but he remained  
relatively naïve as a shipowner-investor, relying on others for commercial  
management, and that was still the position at the time of the Kyla FFAs in 2007-  
NEL received numerous market reports, all the time, including FFA market reports.  
But he did not pay them any close attention. That was not unusual for a senior  
shipping executive who did not personally get involved in tracking the FFA markets  
or making FFA trading decisions. For example, Mr Iliopoulos said he received reports  
on the FFA market every day; and even Mr Weston spent much of his time trying to  
avoid market reports (I was copied in on so many emails that we used to have a  
policy of going through the system and cancelling them or trying to get people not to  
copy me, but including all the market reports, for instance, because otherwise it  
would just be a waste of time. There was nothing of any value to be identified). NEL  
did not have personal FFA expertise, or access to FFA expertise at Kyla, but relied on  
what he understood to be CTM’s expertise, and Mr Cafiero as a trusted individual,  
and did not question or second-guess the prices in the Kyla FFA recaps or the trading  
decisions Mr Cafiero was making for Kyla (as NEL understood it). In my judgment,  
that will have been apparent to Mr Cafiero and came to be taken advantage of by him,  
instinctively (and correctly) assessing that that would not be detected.  
Approved Judgment  
Kyla Shipping v FTL  
In 2005, NEL had an indirect beneficial interest in the Kyla, the Captain Vangelis L,  
the Kalliopi L, and the Bulk Hong Kong. The first two were traded in the CTC Pool,  
which meant they were chartered to CTC with commercial operations managed by  
CTM. A commercial management agreement was in place in respect of at least the  
Captain Vangelis L, and possibly also in respect of the Kyla. NEL attended the CTC  
Pool meetings and received reports from CTM on the commercial management of the  
CTC Pool, but lent PGL his voting rights in respect of those ships. After acquisition,  
the Kalliopi L was placed on long-term charter to the CTP Pool and so was also  
managed by CTM.  
In 2006, NEL acquired a fifth vessel, the Pantazis L, and there were other ship  
ownership investments too, including a newbuilding programme, such that, if I  
understood the relevant chronology correctly, NEL had had an involvement in the  
purchase or ordering of ships with a gross value of over US$400 million as of 2007-  
Other Individuals  
68. I introduced Mr Weston and Mr Cafiero when identifying the parties, above. Many of  
the other individuals relevant to the proceedings worked at CTM in the relevant  
Mr Luigi Pulcini: CFO of CTM and head of CTM’s Risk Management team,  
as well as a Director / Secretary of FTL.  
Mr Haramis: shareholder in, and a director of, YPA. Former CEO of DryLog  
Ltd from 2001 to 2005, before moving to set up and run PGL’s private family  
office in 2005. President / Director of FTL from 2005, and CFO of the Ceres  
Shipping Group.  
Mr Enrico Mantero: at the material time, a member of CTM’s Risk  
Management team reporting to Mr Pulcini, with responsibility for FTL’s  
portfolio of FFAs (from January 2007). He was said by the claimants to have  
been a party to the alleged dishonest disloyalty of CTM, having issued almost  
all the trade recaps for the Kyla FFAs and kept records by way of spreadsheets  
of the various trades.  
Mr Pierantonio Chillo: another member of the CTM risk management team,  
reporting to Mr Pulcini, with responsibility for the CTC portfolio; he  
sometimes covered for Mr Mantero on the FTL portfolio. In the course of the  
trial, the claimants accepted that Mr Chillo was not privy to any dishonesty.  
Mr de Ferrari: Head of CTM’s Panamax commercial team, managing CTP’s  
business, until early 2008, and subsequently CTM’s Head of Panamax  
Morocco Project & Special Cargo Projects.  
Mr d’Escury: Head of CTM’s Capesize commercial team, managing CTC’s  
Mr Athanasios Thanopoulos was, in general, NEL’s right hand man in business at the  
time of the FFA trading. He held various positions as Finance Manager / CFO within  
Approved Judgment  
Kyla Shipping v FTL  
the Kyla Group from 2005 to February 2014, when he moved to Ceres Shipping as  
CFO. He is now a Director and CEO of DryLog Ltd. He did not have a close  
involvement in the Kyla FFAs, which were dealt with personally by NEL, interacting  
directly with Mr Cafiero.  
Mr Ilias Iliopoulos took over from Mr Haramis as CEO of DryLog Ltd in 2006, a  
position he held until 2015. He was also Managing Director of Ceres Monaco SAM  
and a director of CTP.  
Setting up of FTL  
As noted above, FTL was set up in 2005 as a vehicle for trading in the international  
freight derivative markets.  
An offering memorandum in respect of investment in the FTL fund was produced on  
17 March 2005. This recorded, inter alia, the following:  
The investment objective of the fund was “... to achieve capital appreciation  
by using freight and freight-related derivatives whether cleared or over the  
counter (“OTC”). The fund will trade in forward, futures and option contracts  
(including options on futures contract) in shipping freight and freight indices".  
The “Investment Policy” was that trading would take place “principally in off-  
exchange transactions such as freight OTC swaps contracts (“FFAs”)”.  
CTH, one of the higher companies in the group, was to act as Commercial  
Manager and be responsible for day to day decisions in respect of the fund,  
albeit this was in fact delegated to CTM (CTH’s subsidiary), as permitted in  
the terms of the offering memorandum.  
There would be Trading policies and restrictionsas set out in Clause 4,  
which included very limited restrictions, namely that the Fund only invest in  
trades with sufficient liquidity to enable positions to be opened and closed  
without causing excessive price movements; that the fund would not borrow;  
that exposure to any one counterparty would be limited to 50% of the fund’s  
value; and that the fund would adhere to a principle of risk spreading. No  
other restrictions were stated.  
The Commercial Manager would charge a monthly management fee of 0.15%  
calculated by reference to the net increase in the net value of the fund, together  
with an annual incentive fee subject to a hurdle, plus a cash management fee  
based on assets under management.  
The establishment of FTL was noted in the minutes of the CTC Pool meeting in  
Monaco on 25 April 2005, which recorded that FTL had been incorporated in  
Bermuda, with CTH and their service providers CTM as the Commercial Managers  
for a monthly fee of 0.15% on the value of monies in the fund and an incentive fee of  
20% of profits paid annually (with no reference to a hurdle as set out in the offering  
The Pool minutes noted that the two initial investors were DryLog (PGL’s company)  
and Oceanbulk (Mr Pappas), that trading had started on 13 April 2005, and that  
Approved Judgment  
Kyla Shipping v FTL  
additional investors with a knowledge of the shipping markets would be invited in due  
course to join at the discretion of the Directors but the Commercial Managers had  
recommended that, for the time being, entry be restricted to the initial investors.  
The Vega FFAs (2005 2006)  
NEL became interested in gaining exposure to FFAs, with the assistance of CTM,  
around the same time as FTL was set up, in mid-2005. The way in which this came  
about, to whom at CTM NEL spoke about getting involved in FFAs, and the nature of  
those conversations, was in dispute.  
NEL’s written evidence was that, after speaking to another shipowner in the CTC  
Pool, he spoke to Mr Cafiero at one of the Pool meetings, who confirmed that CTM  
could trade FFAs for him through the Pool. The pleaded case was that Mr Cafiero  
encouraged NEL to trade FFAs, and NEL was receptive to that encouragement, which  
suggested that the initiative came from Mr Cafiero. NEL’s oral evidence was that this  
was an error. He clarified that: Mr Cafiero had been encouraging of the idea; but he  
(NEL) was the one who brought it up. By contrast, Mr Cafiero’s evidence was that  
NEL must have spoken to someone more senior at CTM, such as Mr d’Escury or Mr  
de Ferrari (who were not witnesses at trial), because at the time Mr Cafiero was a very  
junior (26 year old) trader on the CTM Panamax desk, who had only begun trading  
FFAs that year, and was only authorised to place trades once he had spoken to his  
seniors. As such, he would not have been speaking to someone as senior as in the  
Ceres group as NEL at all, he said.  
In any event, between September 2005 and March 2006 CTP/CTC fronted for Vega  
on three long FFA positions, two of which were subsequently closed out, one of  
which ran to settlement. There were therefore five Vega FFAs in all. The CTP/CTC  
fronting was gratuitous and fully back-to-back. That is to say, positions were bought  
in the market for Vega’s account, but not so that Vega was the counterparty with the  
(external) market counterparties (who were BHP Billiton, Seaarland and SK  
Shipping). Rather, CTP or CTC was counterparty to those market participants, and a  
simultaneous, back-to-back, trade between CTP or CTC and Vega was documented.  
The trades were placed via well-known FFA brokers, who charged standard  
commissions to CTP/CTC which were re-charged to and paid by Vega. Only CTM  
dealt with, and gave instructions to, the brokers, on behalf of both CTP/CTC and  
Vega. The ‘external’ trades by CTP/CTC were described by a range of CTM  
personnel and on internal CTM descriptions as trades which were “fronted” or  
related” or done “on behalf of” Vega/NEL. The brokers issued recaps for both the  
external (‘second leg’) trade and for the internal (‘first leg’) trade with Vega.  
Vega lost c.US$750,000 on the Vega FFAs, including a loss of c.US$500,000 on  
closing out the second of the three positions taken. That position involved CTP  
buying a full Q1 06 Pmx from Seearland on 3 October 2005 at US$22,100 per day  
and closing the position on 9 January 2006 by selling to Glencore at US$16,500 per  
day, fronting for Vega, as described above, on both trades. The first position ran to  
maturity (long Q4 05 Pmx, CTP buying from BHP as front for Vega at US$21,500 on  
28 September 2005) at a loss of c.US$200,000. The third position was a CTC front,  
not a CTP front. Vega went long a half quantity March 06 Cape Route 4 (‘C4’ for  
short), an FFA route traded on a freight in US$/m.t. with a full nominal contract  
Approved Judgment  
Kyla Shipping v FTL  
quantity of 150,000 m.t. so that Vega’s half quantity was 75,000 m.t.; CTC bought  
from SK Shipping at US$13.50 per m.t. on 21 March 2006 and sold to BHP a week  
later, at US$12.85 per m.t., in each case fronting for Vega as described above, so  
Vega’s loss was US$48,750 (US$0.65 per m.t. on 75,000 m.t.).  
NEL appears not to have taken on board at the time that he had lost money on the  
Vega FFAs. Mr Thanopolous’ evidence was that NEL had told him at the time, in  
relation to the Vega FFAs, that he (NEL) had done “a couple of derivative trades with  
CTM and had managed to make some money”.  
CTM (and, via CTM, CTP/CTC) did all this for NEL (through Vega) because NEL  
was not in a position to access the FFA market directly, since (so they all believed at  
the time) he/Vega did not have a sufficient asset base or market reputation to do so  
and would have been regarded by potential counterparties as presenting too great a  
credit risk. On Mr van den Abeele’s evidence, that perception might not have been  
correct, i.e. it may be that NEL, through Vega, could have got FFA trades placed  
directly with the market via brokers, but I need make no firm finding on that. What  
matters for a consideration of the Vega (later Kyla) relationship with CTM is the joint  
understanding at the time of NEL and CTM.  
That mutual belief as to how NEL/Vega would be viewed by the FFA market  
notwithstanding, given the family relationship between NEL and PGL, and NEL’s  
connection to the Ceres Shipping Group, CTM was happy to assist by using  
CTP/CTC, and later FTL, to front FFA trades for NEL. One of the key features of the  
case, explaining NEL’s FFA trading, was that CTM rightly trusted NEL to honour  
‘his’ FFA obligations, and to ensure that CTP/CTC, and later FTL, would not suffer  
loss through fronting for him. Because of who NEL was, CTM (and CTP/CTC, later  
FTL) did not regard Vega/Kyla as any real credit risk, whether or not that is how FFA  
market participants like (say) Cargill or Glencore would have regarded them.  
There was no written agreement setting out the basis for or terms of this fronting to  
the market for Vega. Nor was there any written agreement later setting out the basis  
for or terms of the arrangement with CTM/FTL generating the Kyla FFAs. There is a  
dispute between the parties as to the nature of the legal relationship behind the Vega  
FFAs, and in particular the extent to which NEL was involved in making decisions  
about the trades. The central factual issue in relation to the Vega FFAs is whether (as  
the defendants contended) the trades were entered into on behalf of Vega by NEL,  
who agreed the price (and other terms) each time, or whether (as the claimants  
contended) the trades were entered into on behalf of Vega by Mr Cafiero, who had a  
discretion to trade on Vega’s behalf. No claim was made in relation to the Vega  
FFAs, but they are the material FFA trading history prior to the Kyla FFAs, so the  
basis on which the Vega FFAs were transacted is relevant.  
NEL’s evidence was that he needed CTM’s assistance because he did not know  
anything about FFA trading himself, not only because (as he accepted was his  
perception at the time) he/his companies could not have traded in the market except  
by a fronting arrangement with established participants. He understood some of the  
functions of FFAs, for example for hedging exposure on the physical market as well  
as for speculative trading, but he did not understand how they worked. He thus relied  
on CTM, he said, for advice, and to use its discretion to decide for him which trades  
should be conducted. He also knew that Mr Weston was the top person at CTM, was  
Approved Judgment  
Kyla Shipping v FTL  
aware of his experience and reputation, and so he trusted in CTM’s expertise, albeit  
his contact person was Mr Cafiero. For him, the relationship with CTM and Mr  
Cafiero was based on “blind trust”. NEL and Mr Cafiero spoke on the phone about  
FFAs, and those conversations would include Mr Cafiero’s ideas, suggestions and  
advice about what trades should be done, but NEL did not direct specific trades and  
never negotiated or fixed a price, because he did not have the relevant knowledge and  
CTM (Mr Cafiero) was supposed to be simply passing on whatever price it got from  
the market for the trades that Mr Cafiero placed for NEL/Vega. Thus, NEL left it to  
Mr Cafiero to make the trading decisions on his behalf.  
By contrast, the defendants’ position was that, although CTP or CTC was fronting for  
Vega, the trading decisions for Vega were taken by NEL alone; that each of the Vega  
FFAs was concluded orally between NEL and a representative of CTP/CTC, on the  
phone, with NEL making the final decisions; and that the representative in question  
would not have been Mr Cafiero. Mr Cafiero indeed denied in his evidence that he  
would have had any regular conversations with NEL at the time of the Vega trading,  
his role at the time, he said, being only to book trades under instruction from his  
seniors at CTM.  
Documents referred to by the parties in this period included the following:  
On 24 November 2005, Mr Cafiero emailed NEL two FFA contracts: “Please  
find attached the FFA contract we have done so far. Kindly sign them and  
send them back to me via fax…”  
On 2 January 2006, Mr Cafiero emailed NEL wishing him a happy New Year  
and saying: Today markets are closed but i will revert tomorrow with an up  
On 9 January 2006, Mr Cafiero emailed NEL to confirm: “Following our  
teleconv today we managed to sell the Q1 for to to [sic] Glencore, with the  
usual fronting of CTP”. In my view, as Mr Cafiero accepted was likely, this  
was meant to be, “… we managed to sell the Q1 for [you] to Glencore …”.  
On 14 March 2006, Mr Cafiero emailed Mr Weston saying: “Nick Livanos  
called to do something on paper (c4 march) have told him he needs to speak  
with you.”  
In an internal CTM document, the resulting FFA dated 21 March 2006  
between CTC and SK Shipping, by which the third of Vega’s long positions  
was put on, was described as having been “done of [sic] behalf of Vega  
On 7 November 2006 Mr Cafiero emailed NEL, not in relation to FFAs but in  
relation to the acquisition of the Pantazis L (previously named Red Tulip). In  
signing off his email, he stated "We at CTM did our best to assist you in every  
possible way as usual”.  
Approved Judgment  
Kyla Shipping v FTL  
The Kyla FFAs  
In early February 2007, just over 10 months after the last Vega FFA, NEL’s FFA  
trading started up again. NEL’s oral evidence was that everyone in the market was  
very optimistic that the 2007 market was promising, and so he wanted to get involved.  
There were some differences in the way NEL’s trading operated from 2007 that were  
common ground: the FFAs were traded through Kyla, rather than through Vega; and it  
was agreed that Kyla’s counterparty was to be FTL, rather than CTP or CTC. The  
latter (FTL, not CTP or CTC) was implemented in practice for all 41 of the Kyla  
FFAs, subject only to the issue whether FTL/Kyla 290408(3) was a trade with CTP,  
not FTL.  
The way in which the trading recommenced is disputed to a degree. The defendants’  
witness evidence was that, in early 2007, NEL indicated to CTM that he wished to  
conduct some further FFA trading and this time to build and run his own portfolio  
rather than conduct one-off trades. It was suggested to NEL that he should join the  
FTL fund, but NEL instead wanted to trade on his own behalf.  
NEL disagreed with that account. His evidence was that he was never asked to join  
the FTL fund, and indeed was a little disappointed at the time not to have been asked.  
In any event, NEL did not invest directly in the FTL fund, and the Kyla FFAs were  
entered into through a separate arrangement. Mr Weston’s evidence was that this  
arrangement was made as a result of an informal discussion at a meeting or social  
event, at which PGL asked that CTM help NEL trade more FFAs; NEL did not recall  
As to the use of Kyla, rather than Vega, NEL recalled being asked by Mr Pulcini if  
Kyla could be used as the vehicle for the FFA trading, but did not recall what reason  
was given, if any was given. The defendants’ position was that this occurred because,  
whilst CTM was in principle content to assist NEL, it took the view that any further  
trading should be conducted through Kyla rather than Vega, since Kyla owned a  
vessel that would provide more security for the trades. Mr Haramis’ evidence was that  
NEL spoke to him to obtain YPA’s approval to use Kyla as the FFA vehicle, given  
YPA’s minority stake in Kyla, and that YPA was indeed content with the proposal, so  
long as NEL promised to keep Kyla harmless. There was, accordingly, a change in the  
identity of the contracting entities involved, from 2007 onwards. NEL remembered  
speaking only to Mr Pulcini, and having the understanding that Mr Pulcini cleared the  
use of Kyla with Mr Haramis (for YPA). I prefer NEL’s evidence as to that.  
CTM also decided that any further trades should be placed with FTL, rather than CTP  
or CTC, since FTL had been set up specifically for speculative FFA trading, which  
the Kyla FFAs would be (as the Vega FFAs had been).  
A further change in the trading relationship was that the trading was not done  
gratuitously by CTM in the way that the Vega FFAs had been handled:  
The defendants’ position was that it was agreed with NEL that FTL would  
seek to profit from the trading, by way of a margin between the price under the  
Kyla FFAs and the price of the back-to-back trades. Although they could not  
Approved Judgment  
Kyla Shipping v FTL  
remember details of conversations with NEL in this regard, both Mr Pulcini  
and Mr Weston claimed in evidence that these matters were discussed with  
NEL at one of the Pool meetings or other occasions when they were present,  
and that it was clear that Kyla would be treated like any other FTL  
counterparty. In short, CTM (acting on behalf of FTL) would be trading with  
NEL (acting on behalf of Kyla), not trading with the market for Kyla.  
The claimants’ position was that it was agreed that there would be a fixed  
US$500 per day management or service fee, built into the trades. That is to  
say, CTM would trade with the market in the name of FTL, but intending the  
trade to be for Kyla’s account; two trades would be documented, otherwise on  
back-to-back terms, with a price differential of US$500 per day in favour of  
FTL representing the CTM/FTL fee for acting on Kyla’s behalf and managing  
the resulting portfolio. Thus, NEL’s evidence, and the claimants’ case, was  
that the nature of the relationship remained the same in 2007-2008 for the Kyla  
FFAs as it had been in 2005-2006 for the Vega FFAs: (i) CTM was to arrange  
FFAs as agent for NEL’s company (Kyla); but (ii) CTM’s associated company  
(CTP/CTC for Vega, FTL for Kyla) was to front those FFAs to the market, so  
the trading would generate first leg’ and ‘second leg’ trades, not just a single  
trade between NEL’s company and the external market counterparty. NEL’s  
understanding was that CTM was Kyla’s manager, in the person of Mr  
Cafiero. His mandate was to keep track of the FFA market for NEL/Kyla, to  
identify profitable trades, and then to conclude them on Kyla’s behalf -  
opening and closing positions for Kyla in the market, using FTL as front for  
Kyla, on best available terms, passed on to Kyla plus (when buying) or minus  
(when selling) the management fee. FTL was to be market neutral, not trading  
against Kyla. This happened because NEL trusted both CTM and Mr Cafiero  
The Kyla FFAs then came to be placed between 7 February 2007 and 17 November  
2008. The first 11 Kyla FFAs were placed at fairly regular intervals between 7  
February and 4 May 2007. They were matched to FTL ‘second leg’ trades that gave  
FTL margins per day on the contract volume of US$500 (7 of the 11 trades), US$250  
(the 3rd and 7th of the trades), US$750 (the 2nd trade), and US$600 (the 11th trade), for  
a weighted average margin of US$478.26 per day. NEL did not know at the time  
about the variation in the FTL margin.  
On 5 of those first 11 FFAs, CTM re-charged to Kyla the broker’s commission FTL  
was charged for the ‘second leg’ trade. Those instances aside, no brokers’  
commissions were re-charged to Kyla, and CTM did not itself charge commission (as  
distinct from building in a margin in favour of FTL). There was no witness evidence  
or documentary record speaking to any decision not to pass on brokerage the way it  
had been passed on for the Vega FFAs. In particular, there was no evidence of any  
discussion with Kyla/NEL about that.  
The only explanation suggested (by the claimants) and I consider it a highly  
plausible explanation is that Mr Cafiero appreciated that if the brokerage being  
charged to FTL were re-charged to Kyla, given the customary rate in the market of  
0.1%, someone at Kyla could work out the ‘second leg’ prices being obtained by  
CTM for FTL, which would reveal that more than a US$500 per day margin was  
being taken, as consistently it was from May 2007.  
Approved Judgment  
Kyla Shipping v FTL  
The 12th Kyla FFA was placed on 20 June 2007, by which Kyla bought from FTL a  
half Q4 07 Cape at US$91,000 per day, matched to a purchase by FTL from CTC at  
US$90,000 per day, an FTL margin of US$1,000 per day. The 13th Kyla FFA, placed  
on 29 June 2007, was a sale by Kyla to FTL of a half Q3 07 Cape 4TC at US$92,000,  
matched by FTL to a sale to Cargill placed the previous day at US$94,500, giving  
FTL a margin of US$2,500 per day. Thereafter, apart from one trade in September  
2007 and one in September 2008 each giving FTL a margin of US$750 per day, the  
margin for FTL on the trades it treated as ‘second leg’ trades matched with Kyla  
FFAs was always at least US$1,000, often substantially more, with several in the  
region of US$4,000-US$5,000 per day, one (in March 2008) of US$7,750 per day and  
one (in June 2008) at a spectacular US$18,375 per day. NEL did not know at the time  
anything of these higher FTL margins, save that Mr Cafiero told him there would be a  
margin of US$1,000 per day on the final trade in November 2008, by which NEL  
closed out what was left of the disastrously loss-making June and September 2008  
FFAs, giving NEL a special reason why, in the particular circumstances of that trade,  
a larger margin was sought.  
The defendants’ position was that NEL must have realised the margins that FTL was  
likely to be making because (they said) he was actively engaging with the market and  
actively trading with Mr Cafiero as counterparty, and was receiving a wealth of  
pricing / Index information from market reports from brokers, which must have made  
him aware of relevant market levels.  
100. Over the course of the 41 Kyla FFAs, the total profits made by FTL (comprising the  
difference between the price of the Kyla trades and the trades that FTL treated as  
matched to them) was US$8,430,238, of which US$8,058,488 was generated  
(measured in that way) from the Disputed FFAs. If FTL’s margin had been US$500  
per day throughout, the profit for the 3,126 days bought and sold (in aggregate) by  
Kyla would have been US$1,563,000. The Disputed FFAs involved buying and  
selling (in aggregate) 2,337 days, the profit on which at a constant margin of US$500  
per day would have been US$1,168,500. Allowing that NEL may properly be taken to  
have authorised the higher margin of US$1,000 per day on the final close-out trade,  
FTL/Kyla 171108, would add US$40,500 to bring that to US$1,209,000.  
101. On the claimants’ case, FTL thus made profit on the Disputed FFAs of c.US$6.85  
million from Kyla in excess of anything that NEL authorised. The claim was not  
limited to that sum, however, since the claimants contended (and the defendants  
conceded at trial) that if CTM was supposed to have been trading for Kyla under a  
mandate entitling it (FTL/Kyla 171108 aside) to a margin of US$500 per day and no  
more, then the Kyla trades placed otherwise than in accordance with that mandate  
were unauthorised so as to be null and void. The claim therefore ran, in unjust  
enrichment or damages, to the full extent of the losses incurred on the Disputed FFAs.  
102. The individual at CTM principally involved with NEL was Mr Cafiero. The two men  
would speak regularly on the telephone. All the Kyla FFAs and all ‘second leg’ trades  
were placed by Mr Cafiero. Mr Mantero was involved in almost all of them, recording  
the trades in the defendants’ systems and drawing up recaps for the Kyla FFAs and  
sending them to NEL. Occasionally Mr Chillo drew up the recaps. The claimants’  
position for trial was that Mr Chillo was privy to the alleged wrongdoing against  
Kyla, but after he had given evidence they accepted they could not maintain that case  
and it was not pursued in closing.  
Approved Judgment  
Kyla Shipping v FTL  
103. The recommencement of the trading for NEL via Kyla approximately coincided, in  
early 2007, with Mr Cafiero and Mr Mantero being sent to London to open the new  
CTM office.  
104. In a document circulated by email on 5 February 2007, CTM announced the opening  
of its “London office”, listing Mr Cafiero and Mr Mantero as the contacts. CTM was  
described in the announcement as service agents for CTH as managers of CTC, CTP,  
DBCN Corporation, and FTL. There was no indication on the face of the document  
that the London office would or might be that of the separate corporate entity (CTM  
UK), with whom Mr Cafiero’s employment contract was placed for his time in  
105. From London, Mr Cafiero continued to run FTL’s FFA business, with Mr Mantero  
assisting in a risk management capacity but also to some extent with the trading,  
including taking responsibility for issuing FFA confirmations to Kyla. Messrs Cafiero  
and Mantero were from that time geographically separated from the rest of the group,  
albeit occasionally visiting and working from Monaco, with their line management  
seniors, Mr Weston for Mr Cafiero and Mr Pulcini for Mr Mantero, remaining in  
106. Around the same time, on 20 February 2007, draft Risk Management Procedures for  
FTL were circulated internally within CTM by Mr Chillo. The document was headed  
Paper Trading”. It set out that trading authorities were given for CTP and FTL to Mr  
Cafiero, and for CTC to Mr d'Escury, with Mr Weston also being authorised in  
respect of all three entities. It provided that authorised traders were not permitted to  
trade from outside the Monaco and London offices without management approval;  
and that the trader had to approve all derivative trades, with a physical or digital  
signature required for the London office, a practice that appears on the evidence not to  
have been adhered to much if at all.  
107. A process was specified for engaging with a new counterparty for the first time,  
requiring the completion of a detailed questionnaire and occasionally further proof as  
to creditworthiness, as well as for monitoring trades with existing counterparties  
(trades were to be within a 365-day time horizon, and when needed stress tests were  
to be circulated internally, and Risk were to be informed about the trades). There was  
reference to concluding an ISDA master agreement or a master netting agreement (i.e.  
an individually negotiated agreement rather than the deemed ISDA master agreement  
created by the FFABA Terms). The lengthiest section of the document dealt with the  
practicalities of the largely unused procedure for digital signatures (two of the three  
pages of the document).  
108. These FTL Risk Management Procedures contained no limits of any kind upon Mr  
Cafiero’s trading authority apart from the rule against purchasing more than a year  
forward. There was no trading policy concerning volume, no policy or strategy  
regarding risk or exposure, by market or by counterparty or at all, no stop loss or stop  
gain triggers, no limits on the types of FFAs that might be traded, and so on. It was  
the evidence of Mr Cafiero and Mr Weston that there was strategic oversight by Mr  
Weston, but I am clear that this was only in the loose sense that he maintained a  
general awareness of the broad shape of the FTL trading book that Mr Cafiero was  
running, he would discuss matters from time to time with him and occasionally he  
Approved Judgment  
Kyla Shipping v FTL  
would involve himself, or Mr Cafiero would ask him to be involved, in an individual  
trading play or other decision affecting the book.  
109. There was, in short, no serious effort to supervise or control Mr Cafiero’s FFA trading  
activity. He was essentially left to get on with it, trading FFAs as he saw fit, in the  
hope that he would do so successfully, i.e. so as to make money for FTL’s investors.  
Mr Weston’s background, experience and reputation in the industry will have lent  
FTL an air of professionalism and expertise, and I accept NEL’s evidence that it  
influenced him into believing he was indeed being looked after by a professional and  
expert FFA trading outfit. But in reality FTL was being run on little more than Mr  
Cafiero’s inexperienced, untrained, and untested enthusiasm for FFAs.  
110. Kyla was not asked to fill in a new counterparty questionnaire or provide equivalent  
information in any other form, nor was it asked to enter into an ISDA master  
agreement or master netting agreement.  
111. I should mention, before moving on, the record-keeping system at CTM.  
112. As I have said, Mr Mantero was largely responsible for the record-keeping of FTL’s  
trades. His evidence, and that of Mr Pulcini, was that CTM used an internal  
accounting system called Argo to record trades. The defendants’ disclosure included  
spreadsheets generated from Argo, which showed details of the FFA trades  
conducted, with columns for various data points such as the contracting entity, a  
contract description, a general description” (amounting to buy or sell), a “notes”  
column (which might include, for instance, an explanation that FTL was “sleeving”  
(but did not always do so)), contract dates and days, settlement price, and maturity  
113. Mr Mantero also kept his own internal spreadsheets, which he stated were used for  
weekly reports that he produced in relation to FTL’s book. These included an  
“exposure” sheet showing open contracts, with columns including the trade date,  
name, counterparty, broker (if relevant), route, maturity date, quantity, and price; with  
the contracts paired with their matching trade, where relevant. A separate sheet,  
entitled “Open & Close Dec OUT”, showed the same open contracts side by side with  
trades against which they were matched, or a “MKT” (i.e. market) value against  
which they were being marked, giving individual and aggregate estimated outturn  
results based on the paired price differences. There were also various other tabs. The  
entries in the different sheets were occasionally inconsistent, and it may have been  
that Mr Mantero kept one part of the spreadsheet better updated than the other.  
114. It is possible to see from the spreadsheets when they were last modified, which was  
referred to in considering when within a day some of the trades may have been  
placed. Mr Mantero’s written evidence was that the last modified time gave no  
indication about when a trade was conducted, because he was only interested in  
record-keeping for the purpose of updating the weekly report (rather than keeping it  
up to date more regularly). However, he accepted in cross-examination that it was his  
general practice to include a trade in the spreadsheet as soon as FTL was bound to it,  
and if there was not then a matching trade, to include it as an open position.  
115. These spreadsheets created trading records by contract month, so an individual FFA  
would typically generate more than one spreadsheet entry, as it would typically not be  
Approved Judgment  
Kyla Shipping v FTL  
for a single contract month. For example, if Kyla bought Q3 07 Cape, that would  
generate separate entries for July, August and September 2007.  
116. When a trade was concluded, recaps of the Kyla trades were drawn up by CTM  
(usually by Mr Mantero) and sent to NEL (usually by Mr Cafiero, copying the Risk  
team). These showed, among other things, the date, the buyer and seller, quantity and  
route traded, the strike rate and term. The recaps did not show the difference between  
the contract rate and the rate from any matching trade (i.e. they did not reveal the  
margin being made by FTL on the trade), or indeed say anything at all about that  
‘second leg’ trade.  
117. There would also be a recap for the ‘second leg’ trade, sent to CTM by the relevant  
118. There was a dispute between the parties about whether the time that broker recaps  
were received or CTM recaps (for the Kyla FFAs) were created is indicative of the  
time that the trades were concluded. The defendants’ position was that there was no  
real connection, as a recap might be sent many hours, or even a day, after a trade was  
in fact concluded. The claimants’ position was that this was intrinsically improbable  
and would be very bad practice, since it was in all parties’ interests swiftly to receive  
a recap after the trade was concluded to ensure that all details were correct. The  
position, I find, was that (a) of course there might on occasion be a delay, for any or  
no particular reason, such that a recap was not sent until substantially later than when  
a trade was placed, but nonetheless (b) the practice both of independent brokers  
recapping trades broked by them, and that of CTM (Mr Mantero or occasionally Mr  
Chillo) in relation to recapping the Kyla FFAs, was to issue and send out recaps  
promptly following the decision to trade, and so (c) in particular, therefore, the time at  
which any given Kyla FFA recap was created will generally be a reasonably reliable  
guide to the time of day at which the decision to conclude that trade was made.  
119. During the early months of the Kyla trading, positions were opened and closed for  
Kyla with some regularity. The first 11 Kyla FFAs referred to above, placed between  
early February and early May 2007, represented 5 long positions each closed by the  
next trade (or in one case by the next trade after an intervening pair), and then a  
further long position (Kyla/FTL 040507) closed by the next trade but one (FTL/Kyla  
290607). All 6 long positions were thus closed out before the first monthly settlement  
date, indeed in all but one case before the beginning of the first settlement month (the  
exception being Kyla/FTL 300307, a Q2 07 Pmx position closed by FTL/Kyla  
120. The claimants’ position was that, and I find that, the strategy adopted for Kyla in this  
period, of regularly opening and closing long positions on Q2 07, was consistent with  
the trading strategy CTM was executing for FTL’s own account at that time, as  
recorded in CTM’s monthly reports to the FTL investors.  
121. Only the last of these first 11 Kyla FFAs is a Disputed FFA, and the claim on that 11th  
Kyla FFA is only that it was unauthorised because the FTL margin was US$600 per  
day rather than US$500 per day. The 11th Kyla FFA, Kyla/FTL 040507, was for half a  
Q3 07 Cape at US$97,000 per day, matched to FTL/SK Shipping 040507 at  
US$96,400 per day; and I agree with the suggestion put by Ms Hopkins QC to Mr  
Cafiero in cross-examination, namely that Mr Cafiero ‘rounded up’, when instructing  
Approved Judgment  
Kyla Shipping v FTL  
Mr Mantero as to the terms for the ‘first leg’ trade, so as to take US$600 per day  
rather than US$500 per day for FTL, a little casual disloyalty he would not expect to  
be discovered.  
122. Although no claim was pursued in respect of the first 10 Kyla trades, certain  
documentary evidence arising at the time of them was referred to as evidencing the  
nature of the relationship between the parties and the approach to the Kyla trading,  
including the following:  
On 7 February 2007 Mr Cafiero emailed NEL saying “Please give me a call  
when u can.” Shortly afterwards, Mr Cafiero emailed NEL stating: “With your  
Authority I’ve bought 63250 on the q2 capes. Your counterparty is Freight  
Trading Limited and the cost (already built in the rate) is Usd 500. A full  
recap will follow but kindly reply to this mail confirming your agreement.” A  
recap was then drawn up and sent to NEL, who was asked to “Kindly confirm  
all in order.” Kyla therefore bought from FTL a 91-day Cape FFA for  
US$63,250, which FTL matched against a trade with Pioneer with a margin of  
On the same day, FTL bought an identical product for its own book from  
Navios. In the same email, Mr Cafiero said: “I will follow the market for you  
and keep in touch in case there is anything to be done.  
The following day, Mr Mantero emailed CTM’s “FFA Settlements” email  
address attaching the recap and saying “Broker’s Commission to be re-  
invoiced to Kyla”.  
The Navios trade was then closed out by Mr Cafiero on 8 February 2007,  
when FTL sold an equivalent contract to TMT at a price of US$63,750,  
making a profit of US$1,000 per day.  
On that same day, Mr Cafiero sought to get in touch with NEL, sending  
emails: Pls call me when u can.; Pls call me.” The defendants’ position was  
that it can be inferred that the reason why Mr Cafiero was calling NEL was to  
see whether he wanted to close out the 7 February 2007 trade, as Mr Cafiero  
had chosen to do for FTL. In the event, the 7 February 2007 Kyla FFA was not  
closed out on this day. The defendants say that the reason for this was likely to  
be either (a) that Mr Cafiero could not get through to NEL, and so did not have  
authority to close the trade, or (b) that Mr Cafiero did get through to NEL and  
was told not to close the trade. The trade was subsequently closed out on 21  
February 2007 at a profit of US$182,000.  
On 21 February 2007, Mr Cafiero mentioned in an email to NEL about the  
Kalliopi L: Will keep you posted on the paper position;  
On 22 February 2007, Mr Cafiero emailed NEL: “Please find attached  
confirmation of trade. As said you will NOT pay any commission on this  
trade…. NEL responded: “Many thanks. But I want to pay commissions. I do  
not feel comfortable. Please understand.” Mr Cafiero responded: “Sorry but  
no commission on this trades. We have made you some money and that is what  
it counts, as it is our main aim to service in the best possible way our clients  
Approved Judgment  
Kyla Shipping v FTL  
and friends. You know that we are not commission orientated and if we can  
trade something exclusively we treat it as if it was ours hence we try to save as  
much money as possible and get the best result...Hope you will keep using  
CTM in the future as your management company.”  
On 8 March 2007, Mr Mantero said in an email to Risk and Planning at CTM:  
FTL is sleeving between SK Shipping Europe… and Kyla Shipping …;  
On 21 March 2007, Mr Cafiero said to NEL: “Whilst we thank you for  
entrusting us with your authority on the FFA trades, I would like to confirm  
that on the last trade [20 Mar 07] you will be paying Usd 500 pd to cover the  
management fees. All other commissions will be paid by FTL”;  
(10) On the same day, NEL emailed Mr Cafiero: “luigi many thanks as per  
discussion settlement of last trade is / net ie 77,000 - 500 US$;  
(11) On 23 March, Mr Cafiero confirmed to NEL: “…Kyla has no more open  
positions. We will send you the recap of all trades concluded as soon as  
(12) Mr Cafiero then sent NEL a tabulated list of 6 FFAs and their results: “Please  
find below a recap of details for all the trades we have done for you and final  
net result. Whilst we have charged our management fee on ALL the trades you  
will pay brokerage commission only one trade as agreed… We would like to  
thank you once more for your very kind support.” Mr Cafiero also emailed Mr  
Pulcini: “Please find below list of closed trades we have done for Kyla and the  
final result…;  
(13) On 30 March 2007, Mr Cafiero said to the Risk department: this trade will be  
passed on to Kyla at 41250…[i.e. less the US$500 margin];  
(14) On 5 and 6 April 2007, Mr Cafiero reported: “Market quiet today due to easter  
holidays but all index up…”; and NEL responded: “Luigi thank you very much  
For all you. Have done for Me…;  
(15) On 18 April, Mr Cafiero emailed NEL: “Have tried to call you but I’m unable  
to reach you. As predicted last week the panaamax market has risen over the  
last few days and I have today closed your Panamax q2 position at Usd  
42900… pls find details of all the trades I have concluded for you… Hope you  
are happy about the result”;  
(16) On the same day, Mr Mantero emailed Risk attaching the relevant recaps and  
setting out the different legs of the transaction, in which PCL Ltd bought from  
CTP, CTP bought from FTL, and FTL bought from Kyla, and noting that “The  
broker commission that FIS will invoice to FTL, it has to be reinvoiced to  
(17) On 25 April 2007, Mr Cafiero emailed Mr Weston: “Market moving again. I  
have just closed the half cape I bought this morning for Nick at 110000  
(110500 to Nick) at 115000 (114500 to Nick) with TMT. I will hold on another  
Approved Judgment  
Kyla Shipping v FTL  
bit before closing our positions.” Mr Weston replied: “… well done for  
(18) Mr Cafiero also emailed NEL referring to a telephone conversation on that  
date: “Following our teleconv pls find attached trade recap.”.  
123. On 4 May 2007, Kyla/FTL 040507 matched to FTL/SK Shipping 040507 having been  
placed, Mr Cafiero wrote to NEL: “Please find attached FFA recap as per our  
teleconv few mins ago…Mr Thanopoulos also wrote that day, to Ms Drago of CTM,  
in relation to an FFA invoice. He said: “please note that the trading was between Nick  
Livanos and Luigi Cafiero. I do not know the exact amount due to us…” Ms Drago  
replied: “We know the amount due to you: we just needed to have the banking  
124. On 10 May 2007, Mr Cafiero forwarded NEL the Baltic Indices for that day, saying  
Hope u have seen this… I think we are going up up up up….”; NEL replied:  
Bravisimo let it go up up up Luigi many. Thanks”; Mr Cafiero replied “Leave it with  
me!!!; NEL responded: …I suggest to keep it run I believe we will see real high  
Numbers However you know best Luigi.  
125. In June 2007, NEL moved Kyla’s offices out of the Ceres building to his own  
126. On 18 June 2007, Mr Mantero emailed Mr Cafiero with a calculation of the break-  
even point on various FTL trades and a summary of the break-even points on Kyla  
127. On 19 June 2007, Mr Cafiero emailed NEL, saying: “Market really pushing again ...  
on q3 we are now around 83,000 ...”; NEL responded “very good news many  
128. The next trade took place the following day, Kyla/FTL 200607 at US$91,000 per day,  
with an FTL mark-up of US$1,000 per day from a ‘second leg’ purchase from CTC,  
CTC/FTL 200607 at US$90,000 per day. In the absence of evidence that CTC was  
fronting into the market for FTL on the ‘second leg’ trade, the natural inference is that  
CTC was hedging a Pool position. Thus, Mr Cafiero was putting Kyla on the opposite  
side of that Pool position, via FTL as front, for CTC’s convenience. That is consistent  
with a contemporaneous CTC Pool report recording CTC’s FFA as a purchase from  
FTL, without any suggestion that CTC was fronting for FTL for a purchase from an  
external market counterparty, and without mentioning the on-sale to Kyla.  
129. Kyla then had two open half positions: it was 45 days long on Q3 07 Cape (Kyla/FTL  
040507) and 45 days long on Q4 07 Cape (Kyla/FTL 200607). On 22 June 2007, Mr  
Cafiero emailed Mr Weston in relation to the physical market, but also telling him:  
.... paper not reacting for now… only thing that I will try and do is to close out the  
half position I have bought for Nick on the q4 (91000) at 100000 with nobu” (a  
reference to the possibility of trading with TMT (Nobu Su)).  
130. On 29 June 2007, Kyla sold to FTL a half Q3 07 Cape at US$92,000 per day. This  
was matched in FTL’s books to a trade with Cargill at US$94,500 per day, concluded  
Approved Judgment  
Kyla Shipping v FTL  
the previous day. Cargill/FTL 280607 was not done with Kyla in mind. From the  
documentary record, I find that:  
Cargill/FTL 280607 was concluded before 3.37 pm on 28 June 2007;  
no recap was drawn up for FTL/Kyla 290607 until 2.14 pm on 29 June 2007,  
when it was drafted by Mr Chillo at a price of US$92,500, a mark-up for FTL  
against the Cargill trade of US$2,000 per day;  
within two minutes, that recap was re-drawn by Mr Chillo at US$92,000, a  
mark-up for FTL of US$2,500 per day, and that is what was confirmed to  
131. This trade closed out the long position on Cape Q3 07 created by Kyla/FTL 040507 at  
a loss to Kyla of US$230,000 whereas every previous Kyla close-out trade had locked  
in a profit for Kyla.  
132. The claimants’ interpretation of this trade was that, whilst it was not an offload by  
FTL of an out-of-the-money position on its own account, Mr Cafiero had traded  
Cargill/FTL 280607 for FTL’s own account and, for whatever reason, decided the  
following day that he did not want to keep it as an FTL position and so re-allocated it  
to Kyla at a mark-up. That, I agree, is what the documentary record indicates.  
133. In cross-examination, Mr Cafiero’s evidence was that at the time he believed the  
market was falling, he would have advised NEL that that was his view, he also  
probably would have told NEL that FTL had sold the day before – he was “absolutely  
transparent” – but NEL must have taken a different view, in order then to place the  
opposite trade, so Mr Cafiero would have gone out and “produced a price” by seeing  
what was being offered in the market, because what FTL had on its own book was  
completely irrelevant”. Mr Cafiero also suggested that NEL would have had no  
interest in FTL’s pre-existing position. I consider that evidence to have been invention  
in the guise of reconstruction, in an attempt to explain away the documentary record.  
In my view, in giving that evidence, Mr Cafiero appreciated that, back in 2007, NEL  
believed CTM was trading for Kyla, using FTL to front for Kyla, and so NEL would  
have assumed, when he saw it recapped to him, that FTL/Kyla 290607 at US$92,000  
was generated from a ‘second leg’ fronting trade that day (29 June), FTL selling to a  
counterparty at US$92,500.  
134. After 29 June 2007, Kyla was still 46 days long on Q4 07 Cape under Kyla/FTL  
135. By the next trade, FTL/Kyla 030707, Kyla went short a half Q3 07 Cape at  
US$90,000 per day. This trade was matched with a Cargill/FTL trade of the same  
date, with an FTL margin of US$2,000 per day.  
136. On 11 July 2007, two Kyla FFAs were placed:  
Kyla/FTL 110707 Q3 07 Cape closed Kyla’s open Q3 07 position at a loss to  
Kyla of US$460,000. This trade was matched with FTL/Oceanbulk 110707,  
giving FTL a margin of US$1,000 per day. Mr Cafiero emailed the recap to  
NEL at 9.30 am on 11 July 2007. Mr Cafiero did not mention the loss, but  
Approved Judgment  
Kyla Shipping v FTL  
stated “we are long q4 and feel we should wait and sell it at around 105  
making Usd 4000 profit on the spread”. There was a dispute between the  
parties about whether this trade was in fact intended as a spread play, the  
claimants’ position being that Mr Cafiero’s email was an exercise in jargon-  
laden spin to distract from the loss.  
Kyla/FTL 110707 Q4 07 Cape doubled the size of the long position on Q4 07  
Cape. A recap was sent to CTM risk management but no document has been  
identified sending the recap to NEL. The trade was matched with FTL/CTC  
110707 for an FTL margin of US$1,000 per day.  
137. Despite the US$230,000 loss crystallised on 29 June 2007 and the further loss of  
US$460,000 on 11 July 2007, Kyla’s result on closed positions by the end of July  
2007 was positive overall: US$182,000 + US$273,000 + US$91,000 + US$150,150 +  
US$124,000 - US$230,000 - US$460,000 = US$130,150.  
138. Kyla was holding a 92-day long position on Cape Q4 07, bought at (an average of)  
US$97,500 per day, and markets surged through July 2007 and into August 2007, so  
that Kyla’s position was in the money to a significant extent. In the first week of  
August 2007, the BFA closing price for Q4 07 Cape oscillated around a figure of  
US$106,000 per day. Marking Kyla’s 92-day long to market at that level would have  
put it in the money to the tune of US$782,000.  
139. In emails sent to NEL and to Mr Weston on 7 August 2007, Mr Cafiero and Mr  
Mantero highlighted Kyla’s mark-to-market position at market levels ranging from  
US$104,000 per day (at worst) to US$110,000 per day (at best). Mr Cafiero emailed  
NEL a summary of the current trading position with anticipated returns: We have  
prepared following for you to highlight your present FFA situation and the various  
results basis different market levels. Hope you like it……. On 9 August 2007, Mr  
Cafiero emailed Mr Weston: ....... we managed to break the 1 mio net profit for Nick  
too ...... aren't we goooooooooooood!!!.  
140. In the days that followed, the market for Q4 07 Cape rose even further than Mr  
Cafiero had modelled to NEL as a best case. By 13 August 2007, the BFA closing  
price on Q4 07 Cape was US$115,000 per day. On that date, two Kyla FFAs were  
Mr Cafiero sold Q4 07 Cape to Drybulk at US$115,500 per day (Drybulk/FTL  
130807), but passed that through to Kyla at only US$110,500 per day  
(FTL/Kyla 130807), thus capturing a mighty margin of US$5,000 per day for  
FTL. The US$110,500 Kyla selling price was slightly higher than the best case  
indicated by Mr Cafiero to NEL at the end of the previous week (7 August  
2007 was a Saturday), but is not credibly a price at which NEL would have  
agreed to sell if he was making his own trading decisions for Kyla based on his  
own view or information as to the market. By closing out the long position on  
Q4 07 Cape at US$110,500, Kyla locked in a large profit of US$1,196,000  
million. If the FTL margin had been US$500 per day rather than US$5,000 per  
day, the profit to Kyla would have been US$1,610,000. In oral evidence, Mr  
Cafiero suggested that the size of the FTL margin might have been for a  
variety of reasons: because the counterparty Drybulk was not a particularly  
good one; because of the level of volatility at the time; because of the size of  
Approved Judgment  
Kyla Shipping v FTL  
the trade. I consider the truth to be as the claimants submitted, namely that it  
was as large as Mr Cafiero believed he could get away with, having given  
NEL a ‘best case’ scenario of US$110,000 that he would still be beating, and  
knowing that NEL was trusting him (Mr Cafiero), not judging FFA transaction  
pricing for himself.  
A further position was opened for Kyla, Kyla/FTL 130807, buying Q1 + Q2  
08 Cape, matched with FTL/Cargill 130807, giving FTL a margin of  
US$1,000 per day. That margin itself tells the lie to Mr Cafiero’s suggestion  
that the US$5,000 margin from the Drybulk trade was a function of market  
volatility at the time or the size of the trade. It may be that Drybulk would  
have been considered less ‘blue chip’ than Cargill as a counterparty, but I do  
not accept that Mr Cafiero would have charged Kyla, or at the time thought he  
was charging, a counterparty premium of US$4,000 per day for dealing with  
Drybulk as opposed to (the likes of) Cargill on that other trade. In my  
judgment, there has to be another explanation for this huge margin differential,  
and it is there in the correspondence, namely (as I have said already) that NEL  
had been given US$110,000 as a ‘best case’ close-out rate for his long Q4 07  
Cape position, he was not second-guessing Mr Cafiero on the pricing of Kyla’s  
FFAs, and Mr Cafiero took advantage of that for the benefit of FTL at the  
expense of Kyla.  
141. That second 13 August 2007 trade was closed by a trade placed on 28 August 2007  
locking in a profit for Kyla of US$728,000. The FTL margin on the close-out trade,  
matched by FTL as it was to a ‘second leg’ trade on that date with CTC, was  
US$3,000 per day. On the large volume of that position (a full Q1 + Q2 08 Cape, i.e.  
182 days) FTL’s profit from closing out Kyla’s position was US$546,000 (rather than  
the US$91,000 that would have been earned if the FTL margin had been US$500 per  
day, in which case the profit for Kyla would have been US$1,183,000).  
142. On that date, 28 August 2007, Mr Cafiero emailed Mr Weston: “Spot market going  
insane. Have closed one more position for ares on the q1 and we are now left with 1  
q1 only ... This afternoon I will sell also the last q1 for ftl. I have also locked in a  
massive profit for nick livanos (this afternoon will send you his exact profit since we  
started trading for him)”. He also emailed NEL: “Pls find attached the recap of our  
today trade. Please note that you do not have anymore open positions. Below also  
find a recap of your profits. Hope “this makes your day”. NEL forwarded that email  
to Mr Thanopolous later that evening, adding simply “2,030,964 total”, which I take  
to be NEL’s calculation of the total net profit then booked by Kyla from the Kyla  
FFAs to date. The total net close-out profit to the end of August 2007 was marginally  
greater, some US$2,054,150, but I envisage that NEL’s calculation also took account  
of the broker’s commissions re-charged by FTL to Kyla during the first few months of  
143. Following FTL/Kyla 280807, Kyla had no open positions.  
144. On 3 September 2007, two identical half volume purchases, Kyla/FTL 030907,  
opened a new 92-day long position on Q4 07 Cape, matched with FTL/D’Amico  
Finance 030907 and FTL/CTC 030907, for an FTL margin of US$1,500 per day  
(US$1,000 from the D’Amico Finance trade and US$2,000 from the CTC trade). On 5  
Approved Judgment  
Kyla Shipping v FTL  
September, Mr Cafiero emailed Mr Weston, saying … This market is helping my  
mood a lot!!!! I am tr[y]ing to close out our and Nick cape at 135.000”. Then:  
On 6 September 2007, Kyla’s position was closed out at a profit for Kyla of  
US$184,000. The matching trade was with Oldendorff, but fronted for FTL by  
CTC (so there were in fact two ‘second leg’ trades, Oldendorff/CTC 060907  
and CTC/FTL 060907, on identical terms).  
Having profited by a margin of US$1,500 per day on the opening of the  
position, FTL took another US$2,000 per day on the close-out leg, for a total  
profit of US$322,000.  
When Mr Mantero sent Mr Chillo the draft recap for FTL/Kyla 060907, the  
only text in the covering email was this (in translation): Father I have sinned  
Can you convert me???. The claimants’ position for trial was that Mr  
Mantero was there joking about having skimmed excess profits from Kyla,  
acknowledging wrongdoing. No specific, innocent explanation of the joke was  
suggested prior to trial, but in his oral evidence Mr Mantero said that on re-  
reading the correspondence he had remembered that it was about his inability  
to convert documents into .pdf format. Despite emerging so late in the day, the  
explanation had the ring of truth, and Ms Hopkins QC fairly accepted as much  
in closing, having also accepted after Mr Chillo’s evidence at trial that he was  
an honest witness who had never understood that CTM/FTL had done  
anything wrong.  
145. Kyla/FTL 060907, a full Q1 08 Pmx purchase, was also placed on 6 September 2007.  
It ran to settlement, earning FTL a margin of US$1,000 per day (so a profit of  
US$91,000) and incurring for Kyla a loss on settlement of just over US$982,084. The  
opening of this long Q1 08 Pmx position for Kyla coincided with a point in time when  
CTM also opened and held – a number of long positions on Q1 08 Pmx for FTL’s  
own account.  
146. On that same date, 6 September 2007, there were email exchanges between Mr  
Thanopoulos and individuals at CTM:  
Mr Thanopoulos emailed Mr Cafiero (copying the FFA Settlementsemail  
address) raising a query about an invoice sent by FTL for the settlement month  
of August 2007, requesting “some kind of statement” in relation to the FFAs  
so that we can avoid similar issues”.  
Mr Pulcini emailed Mr Cafiero, saying “since I don’t know the portfolio you  
built for Nick in detail, can you answer….  
Mr Cafiero responded to Mr Thanopoulos: “No not correct. There is still a loss  
to be paid this month. Fyg you will start getting money from october (we did a  
spread lost money on q3 and made more on q4)(referring to the 11 July  
trades I described above).  
Mr Pulcini emailed Mr Thanopoulos: “I know Luigi Cafiero already answered  
you on this; you can relax, still on negative settlement and then positive  
Approved Judgment  
Kyla Shipping v FTL  
Mr Thanpoulos responded: “No problem. Just double checking because Nick  
trades over the phone and then I am struggling to keep track.”  
147. On 10 September 2007, FTL bought from Drybulk a large long position (183 days) on  
Q4 07 + Q1 08 Pmx at US$69,250 per day, for its own book. Two days later, on 12  
September 2007, Kyla/FTL 120907 effectively passed that position on to Kyla, but at  
a price of US$70,000 per day, i.e. with a margin for FTL of US$750 per day. The Q4  
07 Pmx portion was later closed out at a profit for Kyla, as I mention below; but the  
Q1 08 Pmx portion (which doubled Kyla’s long position on Q1 08 Pmx created by  
Kyla/FTL 060907) ran to settlement at a loss to Kyla of US$1,027,584.  
148. Between FTL/Drybulk 100907 and Kyla/FTL 120907, the market fell so that (a) FTL  
was out of the money on FTL/Drybulk 100907 and (b) US$70,000 per day for  
Kyla/FTL 120907 was a price well off the market on the trade date. The extent to  
which FTL was out of the money on the Drybulk trade when the Kyla FFA was  
placed depends on where exactly the market was at that time, which in turn depends  
on when in the day on 12 September 2007 the Kyla FFA was placed, but it was at  
least US$250,000 or so and in my judgment the probability is that the Kyla FFA was  
only placed later in the trading day when FTL was out of the money by over  
149. The defendants said that was not a significant mark-to-market exposure, given FTL’s  
then most recent trading figures estimating an overall net profit on its FFA book of  
c.US$10.5 million. I disagree. This was a large single-trade paper loss generated in  
very short order tempting Mr Cafiero to offload the position if he could, and that is  
what he did.  
150. Mr Cafiero’s written evidence was that FTL was not offloading unprofitable positions  
to Kyla. In cross-examination, he expanded on this, relying on his claim that FTL was  
trading independently with Kyla as an ordinary counterparty; therefore, he argued, it  
might well be that Kyla wanted to do a trade in which FTL wanted to take an opposite  
position (including selling an open position on its books); he did not consider this  
“offloading”, in the sense that, he asserted, FTL was not going out and arranging to  
“offload” a position on Kyla, because NEL was the one who would be making the  
trading decisions for Kyla, not FTL. In relation to the 12 September trade itself, Mr  
Cafiero suggested that this would have come about because there would have been a  
phone call on the morning of 12 September in which he disclosed FTL’s 10  
September position to NEL, and NEL must have liked the idea of doing a similar  
trade or the same trade that we had done. I do not accept any of that evidence,  
which I considered to be a forensic effort by Mr Cafiero to explain away his conduct.  
I am confident that there was no conversation in which NEL, conveniently and  
coincidentally, wanted to do an FFA trade that would take a large, recent, out-of-the-  
money trade off FTL’s books, and, what is more, decided to do that trade at an off-  
market price to favour FTL.  
151. NEL’s evidence, as already outlined, was that he did not understand that Kyla was  
being traded with by Mr Cafiero like a regular counterparty; he understood Mr  
Cafiero to be trading for Kyla, not with Kyla; and he would not have been  
comfortable with an arrangement where he was negotiating with or dealing against a  
PGL company, as opposed to negotiating with and dealing against the outside market,  
Mr Cafiero doing that on his behalf so that FTL was fronting for Kyla.  
Approved Judgment  
Kyla Shipping v FTL  
152. From around September 2007 onwards, difficulties arising from the breakdown of  
NEL’s marriage began to affect and substantially preoccupy him. I accept NEL’s  
evidence about that. It is not necessary to rehearse the unhappy detail in this public  
judgment. It suffices to say that those difficulties meant NEL paid less attention to his  
business. This was at its worst between July 2008 and March 2009, during which  
period NEL was hardly ever in the office and spent extended periods of time in the  
US dealing with these difficult personal matters.  
153. The claimants said, and I agree, that this meant there was no prospect of NEL giving  
careful consideration to each and every one of the FFAs, or taking trading decisions in  
relation to them, or negotiating prices with Mr Cafiero; CTM (Mr Cafiero) was  
trading for him, so far as he was concerned, and he trusted CTM to look after his  
154. On 19 September 2007, Mr Thanopoulos wrote to Mr Pulcini asking if CTM could  
provide some kind of statement regarding the FFA positions of Nick. It would be of  
great assistance to us and Nick since he is increasingly active in that area.”  
155. In response, CTM began providing monthly reports, the first of which was sent to  
Kyla on 21 September 2007. The cover sheet said the report was prepared by “CTM  
as manager for Kyla Shipping”, and described the report as a “Portfolio Analysis”.  
The report included mark-to-market valuations of Kyla’s open positions based on  
market data available to CTM. It was prepared each month with input from Mr  
Mantero, reviewed by Mr Cafiero, and was copied to Mr Weston and Mr Pulcini.  
156. At about the same time, CTM also began sending regular BCI physical market reports  
to Kyla.  
157. On 25 September 2007, the Q4 07 portion of Kyla/FTL 120907 was closed out by a  
sale of Q4 07 Pmx to FTL at US$77,000, locking in a profit to Kyla of US$644,000.  
The ‘second leg’ trade was a sale to Oldendorff, but fronted by CTP, so there were  
sales by FTL to CTP and by CTP to Oldendorff, on identical terms. FTL sold at  
US$78,000 per day, so its margin by reference to the price given to Kyla was  
US$1,000 per day.  
158. During the morning of 3 October 2007, FTL sold Q1 08 Cape to Citigroup at  
US$134,000 per day, for FTL’s own account. Two days later, FTL/Kyla 051007 was  
placed at US$133,000 per day and matched by FTL with Citigroup/FTL 031007,  
giving FTL a margin of US$1,000 per day and passing the open short position to  
Kyla. The market moved sharply against that position during that day, so that a  
rapidly developing paper loss on a sizeable trade was taken on by Kyla and avoided  
by FTL. The Kyla FFA appears to have been placed early on the morning of 5  
October 2007, but I accept Mr van den Abeele’s expert opinion, considering the  
available market data, that even for an early trade that day, a price below US$137,000  
was well off the market.  
159. In the event, the market for Q1 08 Cape rose by c.US$40,000 over the next two weeks  
and Kyla’s short position was closed on 19 October 2007 at a loss to Kyla of  
Approved Judgment  
Kyla Shipping v FTL  
160. Mr Cafiero’s oral evidence was that the opening and closing of Kyla’s 91-day short  
position on Q1 08 Cape could not be regarded in isolation, but had to be regarded as  
part of a spread against Kyla’s 182-day long position on Q1 08 PMX, opened by  
Kyla/FTL 060907 Q1 08 Pmx and extended by Kyla/FTL 120907.  
161. On 15 October 2007, Mr Cafiero emailed NEL to say “market moving our way as u  
might have seen from the index”. In another email he directed NEL’s attention to the  
spread” between the physical Capesize index and the physical Pmx index, and said,  
This should make you feel better.. As soon as the spread hits 1.85 pct i will close  
it...” (to which NEL replied, “Very good many many thanks”). Mr Cafiero promised  
“… I will keep you posted on the market”.  
162. When the short position on Q1 08 Cape was closed out on 19 October 2007, no ratio  
to which Mr Cafiero might have been referring was at 1.85, and the long position on  
Q1 08 Pmx was in the money by c.US$3.5 million. If this had been a planned ‘spread’  
play, understood as such by Mr Cafiero and/or NEL, I consider it would have been  
closed out for a net loss overall of US$250,000 or less. Instead, the long Pmx position  
ran to settlement, losing Kyla over US$2 million, so that the total loss on this  
supposed ‘spread’ play was c.US$5.75 million.  
163. FTL had traded very profitably in the period February 2007 to October 2007. The  
short narrative reports prepared for FTL’s investors gave the following headline  
overall net estimated profit figures for FTL’s Fund II, which began trading in April  
2007: US$2.8m as of 14 May 2007; something of a dip after a “difficult week” to  
US$448k as of 1 June 2007; a jump back up to US$2.6m as at 16 July 2007; an  
increase to US$4.6m as at 09 August 2007; and further increases thereafter, to  
US$6.7m as at 3 September 2007, US$8.7m as at 22 October 2007, and a high  
watermark as at 12 November 2007 of US$12.1m.  
164. Thereafter, the position turned. In late 2007 Mr Cafiero opened, and held, four long  
positions on Q1 08 which would go on to make substantial losses.  
165. The next Kyla trade, Kyla/FTL 291007, was also a new long position, Kyla buying a  
half Q1 08 Cape at US$174,500, which was held open until mid-January 2008. It was  
matched by FTL against a half Q1 08 Cape purchased by FTL from Castalia that day  
at US$173,500 for an FTL margin of US$1,000 per day.  
166. The physical and forward markets fell dramatically in late December 2007 / early  
January 2008. FTL’s paper losses, marking its four open long positions to market,  
ballooned, as did the (negative) mark-to-market value of Kyla’s position. The 17  
December 2007 report to FTL investors showed a US$3m drop in estimated profit,  
marking the book to market, to US$9.1m. That drop accelerated into January 2008.  
167. Mr Cafiero denied in cross-examination that these developing losses made him  
uncomfortable. He noted that, whilst it was not ideal, in trading, “you can’t be  
successful all the time”, and FTL had been in this situation in the past – it was “totally  
normal”. However, this was not just the ordinary ups and downs of trading life, but a  
major reversal of fortune for FTL caused by putting on and holding substantial long  
Approved Judgment  
Kyla Shipping v FTL  
168. Between 7 and 16 January 2008, Mr Cafiero closed all four FTL positions,  
crystallising substantial losses for FTL totalling US$9,361,625:  
On 7 January, FTL closed its net long position against Castalia (the half not  
matched with Kyla/FTL 2910107) by a sale to CTC at US$148,250 per day,  
booking a loss of US$1,148,875 for FTL. The Kyla portion of this trade was  
not closed out at this time;  
On 14 January, FTL closed its long position against Oceanbulk at a loss of  
On 16 January, FTL closed its long position against CTP at a loss of  
Also on 16 January, FTL closed its long position against Agrenco at a loss of  
169. The overall value of FTL’s book, marked to market and reported internally at CTM  
on 14 January 2008, was (US$3,728,000), i.e. a net overall anticipated loss of that  
170. Between 11 am and noon on 17 January 2008, CTM opened a 90-day short position  
by two LCH trades on Q1 08 Cape, for FTL’s own account, at an average price of  
US$84,250 per day. Mr Cafiero emailed Mr Weston noting “market keeps falling…;  
Mr Weston responded at 12.07 pm: Can we do anything to take advantage of this for  
ctp or ftl [?]; and Mr Cafiero responded: I already sold another cape full at 84250.  
Index will be below that this am. FTL rules!!!!”  
171. However, following a huge fall in the physical index (published at 1 pm), the FFA  
market shot up, so that in the space of a few hours FTL was facing a new, and  
significant, paper loss on the positions Mr Cafiero had just congratulated himself for  
taking on. Mr Cafiero agreed in cross-examination that he had gone short in the  
expectation of a large index drop, and he would have known in the afternoon that his  
morning’s positions were, instead, under water.  
172. When recording the above trades, Mr Mantero inserted the two LCH/FTL 170108  
trades in his spreadsheet sometime after their conclusion between 11 am and 12 noon;  
and by 2.47 pm he was showing those as an open position for FTL’s account with a  
mark-to-market value of ($2,025,000), contributing to an overall net valuation of  
FTL’s book of ($6,439,000) before brokers’ commissions, (US$6,704,934) after  
173. Mr Cafiero accepted in evidence, and I find, that even though he would not have seen  
Mr Mantero’s spreadsheet at the time, he would have known from following the  
market closely as was his job that his trade was heavily out of the money in the  
afternoon. That was when FTL/Kyla 170108 was placed. It was almost a full Q1 08  
Cape trade, because it was stated to be a 90-day contract whereas Q1 08 had 91 days,  
at US$80,000 per day. That closed Kyla/FTL 291007, which had been a half Q1 08  
Cape purchase (45.5 days), locking in a loss to Kyla of US$4,299,750, and flipped  
Kyla to being short Q1 08 for the balance of the new trade (44.5 days).  
Approved Judgment  
Kyla Shipping v FTL  
174. For FTL, the effect of FTL/Kyla 170108 was to close out Mr Cafiero’s heavily out-of-  
the-money short put on that morning via LCH, at a profit (FTL’s margin by matching  
FTL/Kyla 170108, as it did, against the LCH trades) of US$4,250 per day. The  
FTL/Kyla price of US$80,000 was more than US$20,000 away from a market price  
that afternoon. Indeed, FTL placed four other trades on Q1 08 Cape that afternoon, for  
its own account, at prices in the range of US$100,000-US$105,000 per day.  
175. The Kyla trade was not in Mr Mantero’s spreadsheet when last modified at 2.47 pm  
and was only confirmed to Kyla at 4.03 pm.  
176. Mr Cafiero claimed in oral evidence, conveniently, that a phone call with NEL must  
have occurred in the morning which would explain the position and the price, and  
indeed that they probably also spoke before then, including the day before, in relation  
to the trades being done by FTL, and that Mr Cafiero would have told NEL he was  
planning to sell given that the market was falling. The defendants contended that if  
the trade had been concluded at around 12 noon, the price would have been around  
US$84,500, and there would have been no mark-to-market loss it might be tempting  
to try to offload. Mr Mantero did not accept that the absence of the Kyla FFA from his  
spreadsheet at 2.47 pm meant that the trade had not been done by that point. He  
claimed, likewise conveniently, that although he had no specific recall, he thought he  
would have been prioritising the recording of LCH trades, to ensure those were  
cleared correctly, such that he might not have been recording other trades in the  
spreadsheet as they occurred.  
177. I do not accept that claim, or Mr Cafiero’s creative reconstruction. I do not regard it as  
credible that Mr Mantero would have entered up the LCH trades, marked them to  
market, and shown them as an open position, with a net negative exposure of over  
US$2 million for FTL, if in fact they had been covered by a trade with Kyla and, far  
from requiring to be marked to market, and shown as loss-making on paper, could be  
booked as profitable (to the tune of nearly US$400,000). I regret to say, but have no  
hesitation in concluding, that Mr Cafiero off-loaded FTL’s exposure onto Kyla, taking  
advantage of the trust he knew NEL placed in him to trade for Kyla and look after its  
interests. The rapidity of the market movement in the afternoon is liable to have given  
him a sense that he would have a cover story if challenged by NEL (albeit he would  
not have expected any such challenge, as he knew NEL did not question his activities  
for Kyla), namely to pretend that it was a trading decision made in the morning before  
the market went the other way.  
178. Kyla’s new net 44.5-day short position on Q1 08 Cape was then held open for just one  
day, before being closed out and flipped to a long position on Q2 08 Cape by  
Kyla/FTL 180108, which was a half quantity Q1 + Q2 08 Cape at US$120,000 per  
day, that is to say it had a contract volume of 91 days, 45.5 days on each of Q1 08 and  
Q2 08. US$120,000 was well out of line with the market, possibly by as much as  
US$10,000 depending on when exactly the Kyla FFA was placed. The close-out in  
fact created a discrepancy of 1 day on Q1 08 Cape, i.e. Kyla became 1 day long on Q1  
08. That 1-day discrepancy was resolved by FTL/Kyla 060308 1 Mar 08 Cape, i.e. a  
1-day ‘short’ purportedly traded 5 days after the Index date traded, at US$120,000 so  
as to balance exactly the 1-day discrepancy created on 18 January. The closing out of  
the 44.5-day short at US$120,000 locked in a loss to Kyla of US$1,780,000.  
Approved Judgment  
Kyla Shipping v FTL  
179. Meanwhile, for FTL’s book, CTM matched Kyla/FTL 180108 against FTL/Citigroup  
100108 at US$116,325 (i.e. a trade from over a week earlier not intended when placed  
to have any connection to Kyla), giving FTL a margin of US$3,675 per day on the Q2  
08 Cape portion, and FTL/D’Amico 180108 at US$115,000, giving FTL a margin of  
US$5,000 per day on the Q1 08 Cape portion. Further:  
The Citigroup trade had been part of an FTL spread play (Cape vs. Pmx). It  
was being marked to market by Mr Mantero late on 17 January 2008 as out of  
the money to the tune of US$1.1 million. The Pmx leg of the spread was  
shown as in the money by US$530,000, and the Cape leg would not have been  
so far out of the money if marked to market on 18 January 2008; but though  
those factors may have reduced any sense of urgency about offloading the  
Cape leg, the fact remains that there was a temptation to do so to which in my  
judgment Mr Cafiero succumbed, benefiting FTL at Kyla’s expense.  
The D’Amico trade was concluded prior to a sharp fall in the Q1 08 Cape price  
in the mid-afternoon on 18 January 2008, to US$100,000 per day shortly  
before 4 pm, before it recovered to somewhere close to the FTL/D’Amico  
price by the close that day. The off-market price of Kyla/FTL 180108  
insulated FTL against all of that.  
180. In the event, Kyla’s new 45.5-day long position on Q2 08 Cape was profitable. It was  
closed out by FTL/Kyla 060308 Q2 08 Cape at US$150,000 per day, a profit for Kyla  
of US$1,365,000. FTL matched that close-out with Augustea/FTL 060308 at  
US$152,000 per day, for an FTL margin of US$2,000 per day.  
181. On 21 January 2008, Mr Cafiero provided NEL with a …report on your present open  
positions…. The report did not show the 24-hour period for which Kyla was short Q1  
08 Cape or the losses crystallised on 17 January 2008. NEL replied asking for “the  
transactions of last week if possible”, and was sent just a list of trades.  
182. Mr Weston’s next monthly update to FTL investors reported on the FTL book as at 21  
January 2008 and explained that: “Regretfully the Market correction as reported in  
last months [sic] report was longer and deeper than we expected and we gave back  
some of the gains we made earlier in the year. We held our longs into January in  
anticipation of a strong Q1 we [sic] so far has not happened. We adjusted our  
position before the worst of the drop and although at one point we were Usd 4.10  
million negative for 2008 we have regained some of this back and now stand at Usd  
3.1 negative for 2008.” The trading against Kyla’s interests on 17/18 January 2008  
will have been the major cause of that relative improvement, as Mr Cafiero will have  
known at the time. Mr Weston’s evidence was that he was unaware that Kyla trades  
had helped out, which only serves to confirm my conclusion as to the absence of any  
real supervision of Mr Cafiero’s activity.  
183. Kyla/FTL 130208 (matched to FTL/Bunge 130208) extended Kyla’s long position on  
Q2 08 Cape from 45.5 days to 136.5 days, with a margin taken by FTL of $1,500 per  
day. Mr Cafiero sent a trade recap to NEL saying “following our teleconv”.  
184. The next Kyla FFAs, placed on 6 March 2008, I have already described, above, in  
tracing through the aftermath of the 17/18 January trades.  
Approved Judgment  
Kyla Shipping v FTL  
185. Following those trades, still on 6 March 2008, Mr Pulcini emailed NEL a request for  
settlement, and included an update: “As per attached, situation is improved after  
February, but this month is still heavy.”  
186. After 6 March 2008, Kyla’s long position on Q2 08 Cape was 91 days. That was  
doubled by Kyla/FTL 110308, booked at US$145,000 per day against a trade with  
Deiulemar that day at US$137,250 per day for a whopping FTL margin of US$7,750  
per day. The market fell heavily during 11 March 2008, and the documentary record  
indicates that both trades were done towards the end of the day, such that FTL got the  
late-day market price from Deiulemar but matched it against a price given to Kyla that  
would have been about right for a trade at the start of the day. Mr Cafiero’s oral  
evidence was that the Kyla FFA must have been done in the morning, and he would  
have agreed the price with NEL. I do not accept that evidence. The price of the Kyla  
FFA was, as always, set by Mr Cafiero; and he had by now become accustomed to  
setting the price to suit FTL and not by reference to a price obtained in the market  
adjusted by the FTL margin authorised by NEL of US$500 per day.  
187. Around this time, NEL began receiving market updates from additional sources. From  
February 2008 Mr Yannis Niotis began working as a commercial manager at Kyla,  
and sent NEL regular market updates. In addition, on 22 February 2008, Mr Duncan  
Dunn of the brokers SSY emailed NEL referring to a meeting and indicated “…  
additionally I would like to introduce you to our Cape team wit[h] a view to one of  
them keeping you in touch with the market and perhaps helping to formulate a  
hedging strategy for your new Capes.” After this, NEL began to receive FFA market  
updates from SSY. This was in addition to reports sent through by other brokers such  
as Clarksons on a regular basis that he had received throughout.  
188. As regards FTL’s fund performance, Mr Weston’s monthly reports to FTL’s investors  
reported net overall estimated profit as at 4 February 2008 of US$540,000 and as at 3  
March 2008 of US$3.3m although, in February 2008, substantial losses for CTP had  
also been reported to PGL.  
189. In the March 2008 report, Mr Weston mentioned that there would be an investors’  
meeting and lunch on 16 April 2008. Either at that meeting or earlier but confirmed at  
the meeting (as Mr Weston said in his oral evidence that he recalled it), a decision to  
run off FTL Fund II was made, following which FTL eliminated its net long and short  
positions on Q2 08.  
190. On 24 April 2008 at 2.37 pm, Mr de Benedictis emailed Mr Cafiero, with the subject  
Nick positions”, telling him the current bid prices on May/June 08 and Q2 08 and  
ending with: “Send something to Nick. He is waiting for a msg.” At 2.51 pm, Mr  
Cafiero copied and pasted the substance of that email to NEL but reduced the prices  
in each case by US$2,000 per day, saying those were the prices “u mite get”. I agree  
with the claimants that, as a result, those prices were dishonestly represented by Mr  
Cafiero to be his view of what was available from the market. Mr Cafiero’s oral  
evidence was that this was an example of him offering special Kyla prices to NEL,  
which in a sense is true, i.e. that is what Mr Cafiero was doing (as he knew at the  
time). But it was not what NEL thought Mr Cafiero was doing, and in my judgment  
Mr Cafiero knew that too.  
Approved Judgment  
Kyla Shipping v FTL  
191. The (internal) FTL weekly report dated 28 April 2008 showed FTL having long  
positions on Q2 08 Pmx (91 days) and Cape (2 x 45 days). By the end of April 2008,  
these positions were eliminated, and in all remaining FTL Fund II reports the  
long/short position was reported to be neutral.  
192. On 29 April 2008, the following Q2 08 Cape trades for Kyla remained open: (i) 91  
days bought on 13 February 2008 at US$139,000 per day; and (ii) 91 days bought on  
11 March 2008 at US$145,000 per day. Kyla was therefore long 182 days on Q2 08  
Cape at US$142,000 per day. That position was closed out by FTL/Kyla 290408(1) to  
(4), sales on 29 April 2008 of 4 x 30.5 days on May/June 08 Cape, and by the April  
month running to settlement (for a small loss to Kyla of US$36,300, the April 08  
Cape 4TC settlement having been at US$141,395 per day). Each of the closing trades  
for the May/June 08 Cape portion was matched with a ‘second leg’ trade:  
FTL/Kyla 290408(1) at US$147,500 per day was matched to CTC/FTL  
290408 at US$150,000 per day (giving FTL a margin of US$2,500 per day),  
and a recap for the Kyla FFA was sent to NEL at 11.36 am;  
FTL/Kyla 290408(2) at US$147,500 per day was matched with Cargill/FTL  
290408 at US$150,000 per day (an FTL margin of US$2,500 per day again),  
and a recap for the Kyla FFA was sent to NEL at 3.17 pm;  
FTL/Kyla 290408(3) at US$147,500 per day was matched with Morgan  
Stanley/CTP 290408 at US$151,000 per day (an FTL margin of US$3,500 per  
day). It will be recalled that this is the Kyla FFA confirmed as CTP/Kyla  
rather than FTL/Kyla. My reference to FTL having a margin, like my use of  
the FTL/Kyla 290408(3) label, is not intended to beg the issue arising of  
Kyla’s true (purported) counterparty. CTP appears to have been involved on  
this trade because it had signed an ISDA master agreement with Morgan  
Stanley and FTL had not at this time. Mr de Benedictis was recorded by the  
broker (Clarkson) as having traded for CTP. The recap for the Morgan Stanley  
trade was sent to CTM by Clarkson at 3.06 pm, and at 3.13 pm Mr Mantero  
sent an email to NEL attaching a recap for the Kyla FFA, showing it as a trade  
between Kyla and CTP;  
Mr Cafiero emailed NEL at 4.25 pm on 29 April 2008, saying: “Have tried  
calling you but cannot get through. Have done one more (half) at 147500.  
Kyla has now got only half position long.”  
The final trade, FTL/Kyla 290408(4) at US$148,000 per day was matched  
with Louis Dreyfus/FTL 290408 at US$153,500 per day for an FTL margin of  
US$5,500 per day. The Louis Dreyfus trade was placed through brokers (GFI),  
who recapped it to CTM for FTL at 6.49 pm on 29 April 2008. At 9.15 pm, Mr  
Cafiero emailed Mr Weston: Got it done in the end….. nick is completely out  
of all positions.”, confirming that although not yet recapped to Kyla, this  
fourth external trade was indeed intended, when placed, as a ‘second leg’ trade  
to be passed through to Kyla (less FTL’s margin). The corresponding Kyla  
FFA was in fact, however, only recapped to Kyla the following morning, 30  
April 2008, by email sent at 10.32 am.  
Approved Judgment  
Kyla Shipping v FTL  
193. The four close-out trades for the May/June 08 part of the original Q2 08 long  
positions locked in profit for Kyla of (in aggregate) US$686,250, so that the overall  
outturn result on those original positions was a profit for Kyla of US$649,950 after  
deducting the small April settlement loss.  
194. The parties differed as to the reason the Kyla positions were closed out. The claimants  
contended that this took place at CTM’s instigation, in anticipation of the switchover  
from Fund II to Fund III by the end of April, in line with the rest of FTL’s book. Both  
Mr Weston and Mr Cafiero denied in cross-examination that Mr Weston had  
instructed that the positions be closed to tidy up FTL’s book. The defendants’ position  
was that whether a position had been closed or not had no effect on FTL’s books or  
the run-off of Fund II, and that it was NEL who would have decided to close the  
trades. The documentary record supported the claimants’ case, and I have no real  
doubt that it is correct. NEL did not take any relevant trading decision; but rather  
CTM (Mr Cafiero, probably under instruction from Mr Weston) chose to close out  
Kyla’s long position, did so, and reported having done so.  
195. As regards the counterparty to FTL/Kyla 290408(3):  
As I have already noted, it was recapped to Kyla as a sale to CTP. There was  
no evidence of any agreement made on 29 April 2008 that CTP, in trading  
with Morgan Stanley, was merely fronting for FTL. There was no evidence at  
all from Mr de Benedictis explaining the trade, although his name appeared  
initially on the recaps. Mr Cafiero had authority to trade FFAs for CTP and by  
this time (April 2008) was running CTM’s Panamax trading desk, i.e. for day-  
to-day purposes he was the personification of CTM as agent for CTP and not  
only as agent for FTL.  
On 30 April 2008 (last modified at 11.46 am), Mr Mantero updated his  
spreadsheet of FTL’s portfolio to record 2 x Kyla FFAs on 29 April 2008 and  
1 x Kyla FFA on 30 April 2008, i.e. (as I have labelled them, FTL/Kyla  
290408(1), (2) and (4)). He did not include the trade I have labelled FTL/Kyla  
290408(3) as an FTL trade in the “Exposure” tab. However, in the “Open &  
Close Dec OUT” tab, Mr Mantero made a narrative comment: “CTP is paying  
to FTL US$106,750 [minus] US$9,150 [commission] [equals] US$97,600”).  
On 2 May 2008, Mr Mantero created a new spreadsheet, updated to take  
account of the April 2008 settlement. This version included the same treatment  
of the 29 April trades.  
On 7 May 2008, CTM Risk Management in Monaco circulated their weekly  
Counterparties’ Exposure report, said to be “as of May 5th 2008. CTP was  
shown as having a 31-day long position against Kyla (rounded up from 30.5  
days), and a short position against Morgan Stanley (215 days in total) of which  
Morgan Stanley/CTP 290408 would have formed part; and FTL was shown  
still 31 days short against Kyla (rounded up from 30.5 days).  
At 9.51 am that day, Mr Mantero sent two new recaps, one for FTL/Kyla  
290408(3) but now showing FTL, not CTP, as the buyer, and one for a newly  
documented CTP/FTL 290408 on back-to-back terms with Morgan  
Stanley/CTP 290408, to Mr Spallone in “Planning”, and described the new  
Approved Judgment  
Kyla Shipping v FTL  
FTL/Kyla recap as “nothing more than the copy of the CTP/KYLA 290408  
contract, with the contract name and the counterparty modified (FTL instead  
of CTP). No party now has any record of the new FTL/Kyla recap ever being  
sent to Kyla, although the defendants said it should be inferred that it probably  
was. I note that Mr Mantero’s word was “modified” not “corrected”.  
Mr Spallone drafted a monthly report for Kyla as of 7 May 2008 on the basis  
inter alia of that new recap (and thus on the basis that Kyla’s counterparty on  
all four 29 April FFAs was FTL), which he sent to Mr Cafiero for approval at  
11.37 am, saying, “‘I’m sending you the report at 30/04/2008 to send to Kyla.  
I’ll be waiting for your confirmation”. No party now has any record of this  
being sent to Kyla. Again, the defendants suggest it would have been.  
At some point also on 7 May 2008, the Argo entries for 29 April 2008 were  
KylaFTLCTPMorgan Stanley.  
The next internal spreadsheet produced by Mr Mantero, on 15 May 2008,  
shows FTL/Kyla 290408(3) in the “Exposure” tab and the “Open & Close Dec  
Out” tab, and the note about a payment of US$106,750 less commission  
between FTL and CTP has been deleted.  
196. The deemed ISDA master agreement created by trading on the FFABA 2007 Terms  
includes netting. On 4 June 2008, FTL issued to Kyla a Credit Note in respect of  
various trades including FTL/Kyla 290408(3), treating that as a trade with FTL, not a  
trade with CTP, and taking Kyla’s loss on that trade into account in the calculation of  
the overall balance between Kyla and FTL. On 1 July 2008, FTL issued a further such  
Credit Note.  
197. I agree, as to the facts, with the claimants’ interpretation of all of the above. That is to  
say, Mr Cafiero and Mr Mantero procured CTP to sell a half order on May/June 2008  
Cape to Morgan Stanley as part of a concerted effort directed by Mr Weston to close  
Kyla’s long position by the end of April. They intended that to be, as documented, an  
FFA chain KylaCTPMorgan Stanley, but because it was seen as really FTL’s  
business, involving no risk for CTP, there would be a side-payment by CTP to FTL to  
transfer the profit on the trades, less broker’s commission so it cost CTP nothing, to  
FTL. The Risk Management report a week later prompted them to restructure the  
transaction, now documenting it so that Morgan Stanley/CTP 290408 was a trade  
fronted for FTL, backing a sale by Kyla to FTL representing one quarter of the  
closing out of Kyla’s long position, because the use of CTP and a side-payment meant  
that Kyla’s liabilities to FTL could not be shown as fully netted off prior to the run-off  
of Fund II.  
198. I do not accept the defendants’ alternative version of events, under which FTL/Kyla  
290408(3) was intended when placed to be a trade between Kyla and FTL, not CTP,  
but Mr Mantero made an error when drawing up the recap that made it look as if CTP  
was Kyla’s counterparty. If the intention had been for FTL to be the counterparty,  
CTP fronting for FTL with Morgan Stanley, that is what Mr Mantero would have  
been told on the day, and that is what would have been documented (a) by Mr  
Mantero, as regards FTL/Kyla 290408(3), and (b) by the broker, as regards Morgan  
Approved Judgment  
Kyla Shipping v FTL  
Stanley/CTP 290408, i.e. there would have been a corresponding broker’s recap for  
CTP/FTL 290408 to reflect the fronting by CTP for FTL.  
199. I therefore resolve the factual dispute as to what was done, and why, in favour of the  
claimants. That does not mean that FTL/Kyla 290408(3) did not become a trade  
between Kyla and FTL, if it was a valid trade at all. The claimants’ claims begin with,  
and require them to establish, a general FFA trading mandate on the part of CTM (Mr  
Cafiero) for Kyla. If CTM was given that mandate, as alleged by the claimants, then  
Mr Cafiero had ample authority from Kyla to adjust the FFA chain for FTL/Kyla  
290408(3) as he did (subject, which is a different point and gives rise to the claimants’  
claims, to the complaint that the trade skimmed more than US$500 per day for FTL  
(originally CTP) so as to have been unauthorised). It matters not for that conclusion  
whether, as the defendants contended, Mr Cafiero had no authority to create  
FTL/Kyla 290408(3) as a trade with CTP, although in fact he did have full authority  
to trade for CTP at this time. That does not matter because on the claimants’ case as to  
the facts, which I have accepted, Mr Cafiero was authorised to put the final version of  
the FFA chain together when the CTP vs FTL issue was identified (subject again to  
the different point about whether the resulting FTL/Kyla trade was null and void for  
skimming). The upshot is that whether or not there was originally a purported trade  
between CTP and Kyla on 29 April 2008, there was a trade between FTL and Kyla  
either on or (as I have found) as of 29 April 2008, which was either valid and binding  
or not, as the case may be, by reference to the charges of breach of fiduciary duty  
levelled at CTM by the claimants. The financial impact of FTL/Kyla 290408(3),  
treated at the time as having been valid, was all felt and given effect between FTL and  
Kyla / Vega, and did not involve CTP at all.  
200. From 30 April 2008, Kyla had no open positions. No Kyla FFA was placed in May  
2008. In the meantime, there were two main developments for FTL:  
First, the Cape 4TC dry bulk index, i.e. the underlying “physical” index  
against which Cape 4TC FFAs settle, climbed steadily towards its all-time  
peak of US$233,988 per day on 5 June 2008.  
Second, Mr Cafiero opened a number of short positions for FTL on Capes for  
Q3 and Q4 08: (i) BNP Paribas/FTL 090508 via LCH, a half Q4 08 at  
US$142,000 per day; (ii) Noble/FTL 160508, a half Q4 08 at US$164,000 per  
day; (iii) BNP Paribas/FTL 190508, via LCH, a half Q4 08 at US$167,800 per  
day; and (iv) Classic Maritime/FTL 200508, a full Q3 + Q4 08 at US$163,000  
per day.  
201. As the market rose dramatically towards and into early June 2008, FTL became more  
and more heavily out of the money. On 4 June 2008, Mr Cafiero decided to cut FTL’s  
losses on all four shorts, closing them out at an aggregate loss to FTL of  
202. Mr Cafiero’s timing was unfortunate. The next day, 5 June 2008, the forward market  
fell back sharply, a fall that continued into the following day, 6 June 2008. If Mr  
Cafiero had held on for just two more days, FTL’s paper (mark-to-market) losses on  
the shorts Mr Cafiero had opened in May would have been all but eliminated. Instead,  
he had bought the positions back at or near the very top of the market, locking in a  
Approved Judgment  
Kyla Shipping v FTL  
US$5.5 million loss for FTL, counteracting the steady improvements in the earlier  
part of the year.  
203. At 2.36 pm on 5 June 2008, Mr Cafiero emailed NEL:  
hi nick  
can u give me a ring when u can please”  
204. There is no evidence to suggest that NEL solicited this message; or that he phoned Mr  
Cafiero in response to this email. Nor is there any evidence of any conversation  
between them at any time on 5 June 2008. Neither of them says he remembers any  
call, and I do not believe Mr Cafiero would have emailed in those terms if he had  
already spoken to NEL earlier that day. I find that he had not done so.  
205. At some point during that day, Kyla/FTL 050608 was placed for Kyla, a full Q3 + Q4  
08 Cape purchase. FTL thus reinstated the short position against Classic Maritime it  
had put on its own book on 20 May 2008 (paragraph 200(2)(iv) above) but had closed  
on 4 June 2008 at US$179,999 per day, for a loss of US$3,128,000, now charged to  
Kyla at US$182,000 per day.  
206. US$182,000 per day was at the top of the top of the overheated Cape forward market  
and not a price at which anyone following the market might have bought on 5 June  
2008 unless perhaps they had traded at the very start of the day, gambling that the  
price would rise even further. In fact, over the course of 5 June 2008, both the freight  
and FFA markets plummeted.  
207. At 7.32 pm London time (8.32 pm in Monaco, 9.32 pm in Greece), well after ordinary  
trading hours, an FFA recap was emailed by Mr Mantero to NEL for Kyla/FTL  
208. Mr Cafiero said in cross-examination that very conveniently for him (as with other  
elaborations) he must have had a phone call with NEL on the morning of 5 June  
2008, before his email of 2.36 pm suggesting the opposite, and that this would  
account for the high price of Kyla/FTL 050608, close to the previous day’s prices. He  
developed this to suggest that he thought at the time that the market was going to  
come off (so it would be wrong to be buying), but NEL was bullish and must have  
insisted on taking an opposite position. I consider none of that to be true and none of  
that evidence to have been honest.  
209. I agree with the claimants, and find, that Kyla/FTL 050608 was placed late in the day  
on 5 June 2008, well off the market price at that time and after the market had begun  
its nosedive. Mr Cafiero had seen how badly his decision to close out FTL’s May  
shorts the previous day had turned out, and documented a new short, selling to Kyla,  
at the very top of the market, as he could say it had been at the start of 5 June 2008, to  
repair a substantial part of the damage to FTL’s book.  
210. It was evident that Mr Cafiero had prepared well to address, when (inevitably) he  
would be challenged about it at trial, the extreme pricing anomaly on Kyla/FTL  
050608, and had concluded that the only way for him to claim that the Kyla FFA was  
somewhere near a prevailing market price was to invent a telephone order placed with  
Approved Judgment  
Kyla Shipping v FTL  
him by NEL on the morning of 5 June 2008. There are at least six major problems  
with this:  
first, there was otherwise no evidence suggesting that NEL and Mr Cafiero  
spoke on the morning of 5 June 2008;  
second, it demands far too great a coincidence to suppose that NEL, who was  
at Posidonia, called Mr Cafiero on the morning of 5 June 2008, there having  
been no Kyla FFA since the end of April, wanting to take the opposite side of  
the precise position Mr Cafiero had closed for FTL the previous day (at a very  
large loss) and which Mr Cafiero was looking to re-instate for FTL at a higher  
third, it is impossible to imagine what would have been said on this phone call,  
given Mr Cafiero’s insistence in cross-examination that he thought the market  
was going to come off. It would have required that NEL, who believed that  
Mr Cafiero knew best, decided to put on his biggest ever bet, in the face of Mr  
Cafiero’s warning that the market was going or about to go in the other  
direction. Mr Cafiero indeed did extend his invention to that highly  
implausible suggestion;  
fourth, the recap for Kyla/FTL 050608 was not sent to NEL until 7.32 pm, and  
there was no sensible explanation for why such a large delay would occur, on a  
trade of such consequence, when the market was falling heavily;  
fifth, the email Mr Cafiero sent NEL at 2.36 pm was a casual message looking  
to have a call, without any hint of concern or warning that, supposedly just as  
Mr Cafiero had advised NEL that morning was likely to happen, prices had  
tumbled from a price of US$182,000 traded between them in the morning such  
that Kyla was already facing a very large paper loss;  
sixth, the morning telephone order hypothesis was advanced for the first time  
at trial (it emerged as a previously unheralded suggestion put to NEL in cross-  
examination, enthusiastically adopted by Mr Cafiero when it was his turn in  
the witness box). It had not been mentioned in any of Mr Cafiero’s three  
witness statements, and his evidence on it was transparently self-serving. It  
was, in my judgment, not an honest account at all.  
211. There was no contemporaneous ‘second leg’ for Kyla/FTL 050608, although it was  
partially matched in FTL’s books to a half purchase of Q4 08 Cape from Classic  
Maritime traded earlier on 5 June 2008 at US$170,000 (for a margin in FTL’s favour  
of US$12,000 per day). The rest of the new short against Kyla (from FTL’s  
perspective) was matched later by FTL/Global Maritime 090608, a half Q3 + Q4 08  
Cape at US$164,570 per day (FTL margin US$17,250 per day) and FTL/Songa Bulk  
110608, a half Q3 08 Cape at US$155,000 (FTL margin US$27,000 per day), locking  
in profit for FTL of US$3,381,000 in aggregate.  
212. The identity of the trades matched by FTL in June 2008 to Kyla/FTL 050608 only  
emerged late in the litigation following a specific disclosure application. The  
defendants said this was the result of an accident in the original recap matching  
exercise to identify and produce the relevant trades conducted for the litigation by an  
Approved Judgment  
Kyla Shipping v FTL  
individual who was not a trial witness. I do not accept that explanation. An honest  
disclosure exercise focused upon providing to the solicitors the records of the  
transactions matched by FTL in its books at the time would have resulted in the true  
position being plain from the outset.  
213. On 9 June 2008, Mr Weston reported to the FTL investors that, despite the heavily  
loss-making position of FTL Fund III at this point, the position had improved by  
about US$3 million over the past week. This had been achieved at Kyla’s expense via  
Kyla/FTL 050608.  
214. NEL received price data on 5 and 6 June 2008 which showed that the price had  
dropped dramatically (to around US$170,000, against the FTL/Kyla price of  
US$182,000), at which point he had lost US$3 million in one day on the trade. As  
with all of the Kyla FFAs, and the losses made by Kyla on them, NEL did not query  
the trade with Mr Cafiero, or anyone, at the time, or at all until many years later.  
215. Through Q3 08 and into Q4 08, Kyla incurred huge losses under Kyla/FTL 050608 as  
it proceeded to settlement for July (at a loss of $869,834), August ($1,613,971),  
September ($3,358,096) and October ($5,036,981), an aggregate loss on settlement of  
US$10,878,882. The open balance of the position (Nov + Dec 08) was closed out by  
FTL/Kyla 171108, after the spectacular market crash of the early autumn of 2008, at  
US$6,000 per day, crystallising further loss of US$10,736,000.  
216. Kyla/FTL 050608 was thus a US$3 million piece of dishonest opportunism by Mr  
Cafiero that cost Kyla just over US$21.6 million.  
217. On 24 June 2008, Mr Thanopoulos sent NEL an e-mail effectively marking Kyla/FTL  
050608 to market and noting that Kyla was out of the money by more than US$4  
million. The BFA c.o.b. price that day for Q4 08 Cape was US$160,000 (on which  
measure Kyla was out of the money by US$22,000 per day on 184 days, which is  
218. By<