Three companies controlled by Peter Livanos are facing litigation by family member Nikolaos E Livanos over forward freight agreements (FFA) dating back to 2007 that were allegedly structured unfairly.
Nikolaos' companies Kyla Shipping and Vega Carriers are pursuing a claim in the London High Court against Freight Trading, C Transport Panamax and C Transport Maritime (CTM), which are ultimately controlled by Peter Livanos.
Nikolaos, who is Peter's second cousin once removed, is claiming $31.4m, equivalent to the net loss he incurred between February 2007 and November 2008 on FFA trades that he says were weighted in his cousin's favour.
The case comes more than a decade after the late 2008 shipping market crash that left many FFA players exposed, sparking a wave of litigation.
Entering the market
Nikolaos began trading in the FFA market via Vega Carriers around September 2005, after being encouraged by then CTM employee Luigi Cafiero, his lawyers alleged in the claim document.
Not having any detailed knowledge of the market, Nikolaos claims he gave continuing authority to Cafiero to trade FFAs on his behalf.
“Do for me what you do for Peter Livanos,” he told him, according to court papers.
From early 2007, the trades were done under the name of Kyla Shipping rather than Vega Carriers.
Kyla Shipping is a single-purpose company that previously owned a capesize of the same name and is not to be confused with the Athens-based shipmanagement entities Kyla Shipping & Trading and Kyla Enterprises.
At that time, Cafiero was an FFA trader employed by CTM and was general manager of Freight Trading, the documents state.
Kyla Shipping’s counterparty for almost all of the FFA trades was Freight Trading, except for one deal that had C Transport Panamax on the other side.
Nikolaos’ lawyers alleged in the claim that he and Kyla Shipping believed “at all material times” that the two counterparties were “playing a fronting role” and that the cousins’ economic interests would not ultimately be opposed.
However, the claim alleges, the companies were not fronting trades for others but were “exploiting” a difference in contract rates between their FFAs with Kyla Shipping and other trades for their own benefit.
Breach of authority
Kyla Shipping and Vega Carriers claim that CTM, through the actions of Cafiero, made a fraudulent breach of its fiduciary duties.
"The FFAs were deliberately not concluded on terms, particularly as to contract rate, that CTM believed to be the best available," the claim alleges.
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The trades were concluded on terms that were favourable to Freight Trading and C Transport Panamax, without authorisation from Kyla, according to the claim.
Freight Trading and C Transport Panamax "dishonestly assisted" CTM in the breaches, lawyers alleged in the document.
However, Nikolaos' lawyers also claim that the relationship between Vega, Kyla and CTM was "characterised by extreme informality".
"No one acting for CTM asked [Nikolaos]/Vega to sign any written authority or contract; to place any money on account; to establish any position limits; or to establish any stop-loss principles," they allege in court documents.
Today, Cafiero works in London for bulker manager Crystal Maritime (UK), which is affiliated with the Crystal Pool.
When contacted by TradeWinds, Cafiero said he denies all allegations made against him in the claim.
In addition to Cafiero, Nikolaos named three other executives at CTM, who he claims were responsible for the conclusion of FFA trades on Freight Trading's behalf and managed its portfolio.
The executives named in the claim are Luigi Pulcini, CTM’s chief financial officer; Gary Weston, the company’s chief executive until his retirement in 2015; and Yiannis Haramis, the chief financial officer of the Ceres Group.
Peter Livanos and CTM declined to comment when contacted by TradeWinds and no formal response has yet been filed with the court.
Debt and settlement
After racking up losses, Kyla Shipping and Vega Carriers signed a settlement agreement with Freight Trading in May 2009 to settle the outstanding debt owed. Nikolaos alleges in the claim that there was no question of the FFAs’ validity at this time.
However, Kyla Shipping and Vega Carriers did not meet the payment schedule stipulated in the settlement agreement over the two years that followed.
The two companies ended up signing a termination agreement with Freight Trading in May 2012, which ended the settlement agreement and paid off $5.6m of the debt with cash and shares, the documents alleged.
This amount is included in the total sum for which Kyla Shipping and Vega Carriers seek restitution because they claim the settlement was skewed in Freight Trading’s favour.
Bank claim
Separately, Nikolaos appears to be facing a claim from DVB Bank and Nord/LB for “general commercial contracts and arrangements”.
The two banks filed the case against Nikolaos and his companies Vega Marine and Fortuneship with the London Commercial Court on 31 July.
However, no particulars of claim or defence have been filed at the time of writing.
DVB Bank and Nord/LB are both known to be winding up their portfolio of shipping loans and ceasing lending to the sector.
