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In this case the Supreme Court dealt with some very important issues in matters concerning diamonds, or more specifically, fraud in diamond transactions.
Maya was a stockholder and director in Maya Diamonds Ltd. Maya purchased a stock of valuable diamonds from various diamonteers in consideration for post-dated cheques. Soon after Maya left the country and appointed Mr. Shaul to approach each of the diamonteers and offer a settlement according to which they will receive some diamonds - with a value which was significantly lower than the actual value of the purchased diamonds - and agree to waive the full debt owed to them by Maya.
The diamonteers tried to negotiate with Mr. Shaul, but finally agreed to Maya's settlement offer. Accordingly, each of the diamonteers signed a waiver document according to which, upon receipt of the said consideration, they waive all rights against Maya. However, immediately after receipt of the said diamonds from Maya, all of the diamonteers sent a cancellation letter to Maya, notifying him that they had cancelled the original diamond purchase agreements as well as the waiver documents, alleging that both sets of agreements were signed under duress and extortion.
These facts were proven in court during the hearing of a motion to declare that Maya is bankrupt and that he should be personally obliged to pay the consideration for the non-returned diamonds (less the value of the diamonds he had given them in accordance with the second agreement).
The court ruled:
- Could the waiver agreements be legally annulled by the diamonteers?
- Should the original sale documents be considered as void in the circumstances?
- Was Maya personally liable for the company's obligations?
The court ruled (in the majority opinion) that the answers to all of these questions are in the affirmative, namely that the diamonteers were entitled to nullify the waiver they had signed under extortion and duress. Moreover, Maya had fraudulently purchased the diamonds and therefore, these transactions are void; the diamonteers are entitled to receive the full value of the diamonds or their return; and that Maya is personally liable to pay these amounts.
The insurance aspect
Although, in this specific case, no insurance aspect was involved, nevertheless, we believe that this case as well as in other similar cases, may have some important relevancy on insurance coverage for diamonds.
Let us say that the diamonteers - all or some of them - had Jewellers Block insurance. In such a case, no doubt that they would demand indemnification from their insurers rather than entering into negotiations with Maya. If, indeed, it can be proved that Maya had fraudulently received the diamonds, the loss may be covered under a standard J.B. policy.
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