An International Bank Plc v Zambia
| Jurisdiction | England & Wales |
| Judgment Date | 23 May 1997 |
| Date | 23 May 1997 |
| Court | Queen's Bench Division (Commercial Court) |
(Moore-Bick J)
State immunity Enforcement Procedure State Immunity Act 1978, Section 12 Service of process on foreign State The law of England
Summary: The facts:In 1984 a Refinancing Agreement (the Agreement) was made between Zambia and a number of commercial banks (the defendants). The second and third defendants were original creditor banks under the Agreement who had assigned part of the debts owed to them to another bank, which in turn had assigned them to AN International Bank Plc (the plaintiff) in May 1996. The Agreement stated that it was governed by English law and that the parties accepted the jurisdiction of the English courts. Clause 46 provided that Law Debenture Trust Corporation Plc (Law Debenture) was appointed as Zambia's process agent and that notice of process in proceedings against Zambia could be served upon Law Debenture or in any other manner permitted in English law.
In July 1996 the plaintiff initiated legal proceedings which were served upon Law Debenture. Law Debenture's appointment had expired in 1991, but it nevertheless forwarded the relevant process documents to Zambia. The plaintiff was subsequently told of the expiry of Law Debenture's appointment through a conversation with an employee of Law Debenture and through receipt of a copy of the covering letter accompanying the writ sent by Law Debenture to Zambia in August 1996 which included statements to that effect. Zambia failed to respond to the process documents.
The plaintiff applied ex parte for leave to enter judgment in default of appearance. The plaintiff obtained judgment in default and was granted garnishee and charging orders nisi. Zambia applied to have the default judgment and the orders set aside.
Held:The application to set aside the default judgment was dismissed but the remaining garnishee and charging orders nisi were set aside.
(1) The provisions of Clause 46 meant that Zambia had undertaken to treat notice of proceedings upon Law Debenture as good service upon itself. Zambia had the responsibility to maintain sufficient links with Law Debenture, and could not unilaterally vary the Agreement in respect of Law Debenture being its process agents. In this case, service had been proper. The judgment automatically carried with it leave to serve out of the jurisdiction, and was therefore not irregular (pp. 60910).
(2) In determining whether there had been an effective judgment, the Court considered the meaning of Section 12 of the State Immunity Act 1978. The prescribed procedure for service of a default judgment on a State was through diplomatic channels. As the default judgment had not been served upon Zambia in the manner prescribed, the judgment had not taken effect. Consequently the garnishee and charging orders nisi could not be invoked to enforce the judgment, and were set aside for being irregular (pp. 61519).
The following is the text of the judgment of the Court:
I have before me applications on the part of the Republic of Zambia to set aside a default judgment entered pursuant to the order of Mance J and certain garnishee and charging orders nisi which the plaintiffs have obtained with a view to its enforcement. The plaintiffs in this action, an international bank, claim as assignees of certain debts due from Zambia under a Refinancing Agreement dated 31 December 1984 (the Agreement) made between Zambia and a number of commercial banks. The claim is for almost US $19 million together with compound interest in accordance with the terms of the Agreement from August 1996 until payment. The second and third defendants are original creditor banks under the Agreement who assigned part of the debts owed to them to another bank, Lazard Brothers and Co. Ltd, who in turn assigned them to the plaintiffs. The plaintiffs invited the second and third defendants as original assignors of the debts to join in the action as plaintiffs but they declined to do so and have therefore been joined as defendants. They have not appeared or been represented on these applications.
The Agreement is a lengthy and complex document to which I need not refer in any detail. Two clauses are important for the purposes of this application, however. They are Clause 45 which expressly provides that the Agreement is to be governed by and construed in accordance with English law and Clause 46 which deals with jurisdiction and the service of process. The material parts of Clause 46 provide as follows:
Lazards assigned the debts which it had obtained from the second and third defendants to the plaintiffs by an agreement dated 2 May 1996 and notice of assignment was given by the plaintiffs to Zambia on 3 May 1996. On 16 July 1996 the plaintiffs' solicitors began steps to recover those debts by sending a letter before action to Zambia c/o The Law Debenture Trust Corporation (Law Debenture) at its offices in London. Although, as subsequently became apparent, Law Debenture's appointment as Zambia's process agent had lapsed in 1991, it did forward the letter to the Ministry of Finance marked for the attention of the Permanent Secretary under cover of a letter in which it pointed out that the matter required urgent attention. It has subsequently come to light, however, that the clerk in the registry by whom that letter was opened, a Mr Francis Nguluwe, failed to appreciate its importance and simply placed it on the file. No steps were taken at that point, therefore, to bring the matter to the attention of a responsible official.
Having received no response to the letter before action, the plaintiffs decided to pursue their claim by way of proceedings in the High Court. With that in mind Mr Jonathan Speed of the plaintiffs' solicitors spoke to Mrs Anne Hills of Law Debenture on 23 August no doubt to discuss procedures for serving a writ. In the course of that conversation Mrs Hills told Mr Speed that Law Debenture's agency for Zambia had expired in 1991 but that it would still forward the writ to the Ministry of Finance as a matter of courtesy. On 30 August 1996 the plaintiffs issued a writ against Zambia and the two original assignor banks claiming the sums due together with interest in accordance with the Agreement. A sealed copy of the writ together with a form of Acknowledgment of Service was sent to Law Debenture for service on Zambia under cover of a letter dated 5 September in which the plaintiffs' solicitors sought confirmation that service had been effected. A copy of that letter was returned by Law Debenture indorsed with the words Received original of this letter and its enclosures signed by Mr Clements the manager responsible for service and process.
On the same day Law Debenture wrote to the Zambian Ministry of Finance enclosing a copy of the writ and form of Acknowledgment of Service. The letter included the following paragraphs:
A copy of that letter was sent to the plaintiffs' solicitors who thus had further confirmation, if they needed it, that Law Debenture's appointment had expired some years before.
Once again, the letter to the Ministry of Finance enclosing the copy writ was opened by Mr Nguluwe. This time he passed it to the Director of the Loans and Investment Department, Mr Waly Musonda, for his consideration. Unfortunately, Mr Musonda did not appreciate that there was any urgency attached to the matter. About two weeks after the documents had been received he instructed an employee in his department to find out whether the Ministry had a file relating to the plaintiffs and to investigate the claims and the background to them. By the middle of October 1996 attempts were still being made to trace the file and since he had heard nothing further Mr Musonda assumed that everything was being dealt with satisfactorily. That was not the case, however, as far as Zambia was concerned, because in the absence of any Acknowledgment of Service the plaintiffs were already taking steps to apply for leave to enter judgment in default.
By virtue of the provisions of Section 12(1), (2) and (4) of the State Immunity Act 1978 a writ or other document required to be served for instituting proceedings must in the case of a State normally be served through diplomatic channels on the Ministry of Foreign Affairs of the State concerned and time for acknowledging service begins to run two months after receipt of the writ by the Ministry. Judgment in default cannot be given except on proof that these requirements have been complied with and that the prescribed time has expired. An exception is made, however, in the case where the State has agreed to accept service in some other manner. Section 12(6) provides that in such cases service of the writ may be made in the agreed manner and that subsections (2) and (4) do not apply where service is effected in that way. In such cases, therefore, the time for acknowledging service is not deferred.
These provisions of the Act are reflected in the Rules of the Supreme Court 1965. In particular, Order 13, rule 7A provides that a plaintiff is not entitled to enter judgment against a foreign State in default of notice of intention to defend without the leave of the court. This is normally obtained on an ex parte application supported by an affidavit which must, inter alia, verify the facts relied on as exempting the State from the immunity conferred by Section 1 of the Act as well as the facts relied on as constituting service in accordance with the requirements of Section 12. Accordingly, in mid-October 1996 the plaintiffs' solicitors made an ex parte application on paper for leave to enter judgment. The matter came before Mance J supported by an affidavit sworn by Mr Speed. In his affidavit Mr Speed referred to the Agreement and described the circumstances under which the plaintiffs had become assignees of the debts originally owed to the second and third defendants. He...
To continue reading
Request your trial