Amalgamated Investment & Property Company Ltd v Texas Commerce International Bank Ltd

JurisdictionEngland & Wales
Judgment Date31 July 1981
Judgment citation (vLex)[1981] EWCA Civ J0731-3
CourtCourt of Appeal (Civil Division)
Docket Number81/0337
Date31 July 1981
Amalgamated Investment & Property Company Limited (in liquidation)
Plaintiffs (Appellants)
Texas Commerce International Bank Limited
Defendants (Respondents)

[1981] EWCA Civ J0731-3


The Master of the Rolls

(Lord Denning)

Lord Justice Eveleigh


Lord Justice Brandon


1979 A. No. 65







Royal Courts of Justice.

MR. ANDREW MORRITT. Q.C. and MR. PAUL WALKER (instructed by Messrs. Allen & Overy) appeared on behalf of the Plaintiffs (Appellants).

MR. ANTHONY COIMAN. Q.C. and MR. M. HAPGOOD (instructed by Messrs. Nabarro Nathanson) appeared on behalf of the Defendants (Respondents).


This case is complicated beyond measure by the existence of wholly-owned subsidiaries. These are the dramatis personae: A property company registered in England called Amalgamated Investment & Property Co. Ltd. (now in liquidation). I will call it "Amalgamated". It had a wholly-owned subsidiary registered in the Bahamas called Amalgamated (New Providence) Property Ltd. I will call it "ANPP". A merchant bank registered in England called Texas Commerce International Bank Ltd. I will call it the "bank". It had a wholly-owned subsidiary registered in the Bahamas called Portsoken Properties Ltd. I will call it "Portsoken".


Treating the wholly-owned subsidiaries as one with their parent companies, the facts in broad outline are these: There was a building site in the centre of Nassau in the Bahamas. It was ripe for development. Amalgamated wanted to raise $3,250,000 in order to erect a building on the site. They borrowed it from the bank. Amalgamated mortgaged the property to the bank to secure the loan. As further security Amalgamated also gave a guarantee to the bank. It is on that guarantee that the whole case depends. I will call it the "guarantee". The loan was not repaid. The property was Bold. It realised $2,500,000, leaving a deficit of $750,000 unpaid for which the guarantee was the only security.


Amalgamated also owned properties in England which they had mortgaged to the bank. These were "all money" mortgages covering all moneys owing to the bank by Amalgamated on any account whatever. These mortgages covered, not only the moneys advanced by the bank on the English properties, but also the moneys owing by Amalgamated on the guarantee in the Bahamas.


Amalgamated defaulted on the English loan. The English properties were realised. These more than covered the English loan. There was a surplus of $750,000 in the hands of the bank. The bank claimed to apply that surplus to wipe out the $750,000 unpaid on the guarantee.


A year later Amalgamated went into liquidation. The liquidator looked into the papers. He contended that the guarantee did not cover the deficit of $750,000 on the Nassau loan. He said that Amalgamated were entitled to the surplus of $750,000 which was realised on the sale of the English properties. The liquidator claimed that it should be paid over to him.


The liquidator bases his case on the introduction into the story of wholly-owned subsidiaries. He Bays that the guarantee only covered the sums which Amalgamated owed to the banks: and that it did not cover the sums which were owed by their wholly-owned subsidiary, ANFP, to the bank. The bank say that it did cover them: or alternatively that Amalgamated were estopped from saying that it did not cover them.


The full facts are set out by Mr. Justice Robert Goff in the report in (1981) 2 Weekly Law Reports 554. I will only set out such details as are necessary for the points of law.


The execution of the guarantee


The guarantee was signed on the 28th September, 1970. It is to be construed together with these two letters:


On the 23rd September, 1970 the bank wrote to ANPP:


"We confirm that we will be pleased to make available to A.N.P.P. a facility of U.S. $3,250,000 for a period of five years from the date that the borrowing is taken…


"The borrowing will be secured by a legal mortgage in respect of the freehold property, The Harrison Building, Marlborough Street, Nassau, Bahamas, together with a guarantee for US $3,250,000 from Amalgamated Investment & Property Co. Ltd." (Amalgamated).


On the 28th September, 1970 Amalgamated replied:

"Proposed Eurodollar Loan—US $3,250,000—Harrison Building—Amalgamated (New Providence) Property Ltd.


"Thank you for your letter of the 23rd instant wherein you enclose a guarantee which has been completed and is returned herewith".


The guarantee was on a printed form. It was addressed to the bank with blanks filled in in type (here shown in capitals):



(hereinafter called 'the Guarantor'), in consideration of your from time to time making or contributing loans or advances to or otherwise giving credit or affording banking accommodation or facilities to



(hereinafter called 'the Principal'), hereby unconditionally guarantee to and agree with you as follows:


1. The Guarantor will pay to you on demand all moneys which now are or shall at any time or times hereafter be due or owing or payable to you on any account whatsoever by the Principal, either solely or jointly with any other person, firm or company, together with all…charges and expenses which you may in the course of your business as bankers charge against the Principal…provided nevertheless that the total amount recoverable from the Guarantor hereunder shall not exceed US $3,250,000…" (I ought to say that ANPP was hereinafter called "the Principal").


"10. For all purposes including any legal proceedings a copy of the account of the Principal in your books signed by any of your officers shall be accepted by the Guarantor as conclusive evidence of the state of such account…


17. This Guarantee is to be governed by and construed according to English Law and the Guarantor submits to the jurisdiction of the English Courts.

Dated this 28TH day of SEPTEMBER 1970".


At that date, the 28th September, 1970, as the covering letters show, the facilities were to be made available by the bank to ANPP.


The interposition of a subsidiary


At page 559 the judge describes the introduction of a wholly-owned subsidiary of the bank. It was a Bahamian company called Portsoken Properties Ltd. ("Portsoken"). This was done for exchange control purposes. It was a channel through which money passed. The position was well stated in a letter by the bank's solicitors to the Controller of Exchange in the Bahamas on the 15th December, 1970. The wholly-owned subsidiary (Portsoken) was to:


"1. Receive the U.S. dollar funds from its parent company and lend them to A.N.P.P. in U.S. dollars without conversion into Bahamian dollars or sterling.


2. Take a Mortgage from A.N.P.P. expressed in U.S. dollars.


3. Maintain a U.S. dollar bank account for the purpose of handling payments of principal and interest in connection with this back-to-back loan".


The transaction of the 31st December, 1970


On the 31st December, 1970 ANPP executed a mortgage on the Harrison Building in favour of Portsoken for securing U.S. $3,250,000. That sum was entered in the books as a loan by the bank to Portsoken and then as a loan by Portsoken to ANPP. And likewise with interest paid by ANPP to Portsoken: and by Portsoken to the bank. On many occasions, however, the interest was paid direct by ANPP to the bank.


Note the important point. The guarantee was not touched. It still remained dated the 28th September, 1970. It still remained a guarantee of moneys owing to the "Principal", that is, to the bank. The judge considered this to be "a crucial defect". He said (at page 560):


"There was a crucial defect in these arrangements; the guarantee furnished by the plaintiffs (Amalgamated) to the Bank was not amended. It remained a guarantee in respect of money due or owing or payable to the Bank, not to Portsoken".


Was it a crucial defect?


I take a different view from the judge. He has construed the guarantee in its strict literal sense—all by itself—without regard to the letters which accompanied it—and without regard to the surrounding circumstances—or the—factual matrix" to use the modern equivalent.


The guarantee of the 28th September, 1970 was of no effect by itself. It only took effect on the 31st December, 1970 when the sum of $3,250,000 was advanced. That sum of $3,250,000 is the connecting link which joins everything together. It was the "facility" which the bank promised on the 23rd September, 1970 to make available to ANPP and which was to be supported by a mortgage on the Harrison Building: and by a guarantee from Amalgamated to the bank. It was the "banking facilities" contained in the guarantee itself. It was the "facility" which was in fact granted on the 31st December, 1970 and supported by a mortgage. The words of the printed form must, in my opinion, be subordinated to the express provisions of the correspondence which brought it into being. That correspondence shows, beyond doubt, that the guarantee was intended to cover the $3,250,000 lent by the bank to ANPP, even though it was done through the channel of its wholly-owned subsidiary, Portsoken.


Apart from this, I think that this is one of those cases where a wholly-owned subsidiary is to be regarded as the alter ego of the parent company. We have often lifted the corporate veil so as to show forth the realities of company life. This wholly-owned subsidiary was the creature of...

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