Argo Caribbean Group Ltd v Lewis
|England & Wales
|LORD JUSTICE STEPHENSON,LORD JUSTICE ORR
|19 December 1975
|Judgment citation (vLex)
| EWCA Civ J1219-3
|19 December 1975
|Court of Appeal (Civil Division)
 EWCA Civ J1219-3
In The Supreme Court of Judicature
Court of Appeal
(Appeal of Defendant from judgment of Mr. Justice Mocatta, London, dated June 17, 1974.)
Lord Justice Stephenson,
Lord Justice Orr and
Lord Justice Bridge. (Not present)
MR C. ROSS-MUNRO. Q.C. and MR A. PUGH, (instructed by Messrs. David Lees & Co) appeared on behalf of the Appellant (Defendant).
MR S.A. STAMLER. Q.C., MR M. DEAN and MR S.M. TOMLINSON. (instructed by Messrs. Herbert Oppenheimer Nathan & Vandyke) appeared on behalf of the Respondents (Plaintiffs).
The judgment of the court, including Lord Justice Bridge, who is unable to be present, will be read by Lord Justice Orr.
This is an appeal by the defendant in a High Court action for the recovery of moneys alleged to be due under a written agreement against a judgment of Mr. Justice Mocatta delivered on the 17th June, 1974, whereby he hold the defendant liable to the plaintiffs in the sum of £68,390, together with interest amounting to £30,691.28
The agreement on which the action was brought was dated the 30th April, 1971, and was made between five parties, of whom the first and the third were Eric Lewis, the defendant in the action, and Argo Carribean Ltd. (Argo), the plaintiffs in the action, and the other three parties were Fieldham Holdings Ltd. ("Fieldham"), Laytons Finance Company Ltd. ("Laytons") and David Rowland. David Rowland is a young man of considerable wealth living in Paris, who at all material times controlled Argo, a private company registered in the Bahamas, and used it as a holding company through which he owns shares in a large number of other companies, one of these being Adepton Ltd., originally named Kings Motors (Oxford) Ltd., an English company in which Argo, in July, 1970, had acquired a 54.6 per cent, shareholding (later, in October, 1971, reduced as a result of a rights issue to 45 per cent.), and whose name they changed to Adepton. Fieldham is an English private company with an authorised capital of 10,000 shares which was incorporated by the defendant and in which at the time of the agreement he held the only two issued shares. He also held at the time of the agreement the following interests in the issued capital of fiveother companies (four English and one French), namely, 70 per cent. in Industrial Commercial Plastics (1968) Ltd. ("I.C.P."), a similar percentage in Deacon Records Ltd. ("Deacons"), 50 per cent. in Park Lane Tapes Ltd., and in Stereo Sound, incorporated in France as an S.A.R.L., and 100 per cent. in Audio Management (Sales) Ltd.
The provisions of the agreement of the 30th April, 1971, so far as material for the present purposes, may be summarised as follows. By Clause 2 Fieldham were on receipt of a loan, to which we shall refer later, to buy the outstanding share capital of I.C.P. and Deacon, other than that held by the defendant, for £70,000. By Clause 3 the defendant undertook forthwith after completion of such purchases to sell to Fieldham and to procure that Fieldham purchased the shares owned by him in the five companies, and in consideration of such sale there were to be issued to him as fully paid 9,998 ordinary £1 shares in Fieldham. By Clause 4, in consideration of a payment of £1, the defendant granted to the plaintiffs an option, exercisable at any time within three years, to buy from the defendant 35 per cent. of Fieldham's shares for £70,000.
The loan, which was to enable Fieldham to buy the shares in I.C.P. and Deacon, was provided for in Clause 1 of the agreement. It had been contemplated when the negotiations for the agreement began, in late January, 1971, that this loan should be made by the plaintiffs, and at a later stage that it should be made by Byfleet Ltd., a wholly owned Behamian subsidiary of the plaintiffs, but eventually, because of tax considerations affecting the plaintiffs, it was proposed and accepted that it should be made by Laytons, and the agreement soprovided. Laytons had been incorporated in February, 1970, as a wholly owned subsidiary of Kings Motors (Oxford) Ltd., in order to handle that company's hire-purchase business. In January, 1971, it was resolved at a board meeting of Laytons to apply for money lenders' licences both in Oxford and London, and these licences were obtained in early February, the business address for the purpose of the Oxford licence being 11/13 Old High Street, Headington, and for the purpose of the London licence 23 Buckingham Palace Road, at which address Mr. Rowland also had his London office.
By Clause 1 (A) or the agreement Laytons agreed to lend to Fieldham £7,000 on the signing of the agreement, such sum to be paid to Fieldham's solicitors as stakeholders pending completion, and on completion, and on the execution of a debenture by Fieldham in favour of Laytons, to lend to Fieldham a further sum of £63,000, and Fieldham agreed to repay the total loan of £70,000 on terms set out in the agreement and debenture.
Clause 1 (D) and 9 of the agreement, which are of crucial importance on the issue of liability, provided as follows: 1 (D) Argo and Mr. Rowland hereby agree at the joint request of Fieldham and Mr. Lewis to guarantee to Laytons the repayment of the said loan by Fieldham together with interest thereon and in consideration thereof Fieldham will pay to Argo a fee at the rate of 2 per cent. per annum on the principal amount of the said loan from time to time outstanding calculated on a day to day basis and payable quarterly in arrear and Mr. Lewis agrees that he will indemnify and keep indemnified Argo and Mr. Rowland and his personal representatives against any lossesdamages costs expenses or charges which Argo and/or Mr. Rowland and his personal representatives may incur by reason of having given the guarantee contained in this sub-clause.
"9. In consideration of Argo and Mr. Rowland entering into this Agreement Mr. Lewis hereby agrees with Argo and Mr. Rowland that if Fieldham shall in any respect fall to execute the terms of this Agreement or commit any breach of its obligations hereunder then Mr. Lewis will indemnify Argo and Mr. Rowland and his personal representatives against any losses damages costs expenses or otherwise which may be incurred by them by reason of any default on the part of Fieldham in performing and observing the agreements and provisions on its part contained in this Agreement Mr. Lewis shall not be discharged or released from this guarantee by the alteration in the obligations undertaken by this Agreement or by any forbearance both as to payment time performance or otherwise."
Clause 10, which is of importance on an issue of quantum, provided: "All costs and expenses arising out of this Agreement the Agreements annexed hereto and the Debenture and out of previous negotiations between the parties hereto shall be borne by Fieldham but not taken into account for the purpose of calculating the net profit referred to in Clause 7 hereof."
By the terms of the debenture executed by Fieldham in pursuance of Clause 1 (A) of the agreement it was provided that interest on the money lent to Laytons was to be paid at the rate of 20 per cent. by half-yearly instalments, the first payment to be made on 31st December, 1971, and it was further provided that if Fieldham should make default for more than 14 days in the payment of any instalment of interest Laytons should at any timethereafter be entitled to demand payment of the entire sum outstanding, and that upon such demand being made that sum should immediately become payable.
These being the relevant terms of the agreement, the subsequent course of events was as follows. On the date of the agreement £7,000, the first part of the loan to be made by Laytons to Fieldham, was duly paid by means of a cheque drawn by Argo in favour of Fieldham's solicitors, and on the 1st June, 1971, the postponed date of completion, there was paid to Fieldham by way of a banker's draft drawn by Argo a further sum of £61,890, being the stipulated payment of £63,000 less £1,110 in respect of the solicitors' and accountants' charges which Argo had discharged, and which they claim that Fieldham had by Clause 10 of the agreement agreed to bear. No interest having been paid by Fieldham on the 31st December, 1971, Laytons, by letter dated the 17th January, 1972, demanded payment by Fieldham of the entire sum due for principal and interest. On the 4th February, 1972, no payment having been received, they demanded payment of the same sum from Argo, and on the 9th March, 1972, Argo and Mr. Rowland's solicitors demanded in turn the same sum from Mr. Lewis.
At the end of March, 1972, it is common ground that there was a meeting between Mr. Rowland and Mr. Lewis in the course of which Mr. Lewis, whose evidence was that he had not at that time been advised as to the effect, if any, of the Moneylenders Act 1927 on the transaction, offered to pay £500 down (which he in fact did) and £500 per month over a period of six months, but there was on the evidence an issue between them as to whether these payments were to be, as Mr. Lewis claimed, in fulldischarge of his liability, or merely, as Mr. Rowland claimed, payments on account in consideration of Mr. Rowland and Argo holding their hand for that period.
On the 31st May, 1972, Argo issued a writ against Mr. Lewis claiming an indemnity, but they had not at that time made any payment under Clause 1 (D) or Clause 9 to Laytons and that action was later discontinued. On the 1st June Argo paid Laytons £84,000 in respect of the loan and interest, and on the same day, or soon after, Laytons repaid that sum to Argo on the basis that the loan moneys had been provided by Argo and that Laytons were indebted to Argo in respect of those moneys and interest...
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