Banco Atlantico S.A. v British Bank of the Middle East
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BINGHAM,LORD JUSTICE STOCKER,LORD JUSTICE NOURSE |
| Judgment Date | 23 May 1990 |
| Judgment citation (vLex) | [1990] EWCA Civ J0523-6 |
| Docket Number | 90/0501 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 May 1990 |
[1990] EWCA Civ J0523-6
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR JUSTICE LEGGATT)
Royal Courts of Justice
Lord Justice Nourse
Lord Justice Stocker
and
Lord Justice Bingham
90/0501
MR STEVEN GEE, instructed by Messrs Herbert Smith, appeared for the Appellants (Plaintiffs).
MR RICHARD HACKER, instructed by Messrs Stephenson Harwood, appeared for the Respondents (Defendants).
In September 1988 the plaintiffs issued proceedings in the Commercial Court claiming US$170,000 or damages against the defendants as indorsers or guarantors of 17 bills of exchange. The defendants, having been duly served with those proceedings within the jurisdiction, applied to stay them "on the ground that the appropriate forum for these proceedings is the Courts of the United Arab Emirates, being the forum conveniens in this action". This application for a stay came before Leggatt J. (as he then was) who on 30th June 1989 granted it.
The plaintiffs now appeal against that decision with the leave of Staughton L.J. On the same occasion Leggatt J. refused the plaintiffs summary judgment and an order for interim payment. Leave to appeal against those decisions was not granted and so they are no longer in issue.
The plaintiffs ("Banco") are a bank incorporated in Spain. The defendants ("BBME") are a bank incorporated in England by a royal charter granted in 1889. They have their main office in the City of London.
The relevant history begins with a written agreement made in Spain on 2nd June 1985 under which Mr Santiago Vila Marques, a Spanish citizen resident in Spain, agreed to sell to Mr Moosa Abdullah-Al-Amri, a citizen of the United Arab Emirates resident in Sharjah, half the shares in a Spanish corporation, Riobal S.A. Riobal was said to own land in Spain and Mr Marques was said to own the majority of the shares in the company. The agreement provided for payment of the price partly by a down-payment and partly by a series of promissory notes with maturity dates at monthly intervals. The agreement provided that the promissory notes "will be guaranteed" by BBME to Banco. The agreement contained an arbitration clause of uncertain effect. it did not contain a choice of law clause.
Also on 2nd June, the same date as the agreement, Mr Marques signed as drawer a series of bills of exchange drawn on Mr Al-Amri as drawee which Mr Al-Amri there (in Spain) and then signed as acceptor. These bills included those sued upon in this action. The bills were on a form in which the printed words were in Spanish. They bore a Spanish stamp. They recorded a Spanish town as the place of issue. They showed the maturity date of each bill. The bills were for payment to the order of Banco, the sum in each case being $10,000. In a box for the name and address of the drawee there were shown the name and the Sharjah address of Mr Al-Amri. There then followed the words "Payable at: The British Bank of the Middle East, PO Box 25, Sharjah."
At this stage there existed bills which, although duly executed and valid, lacked the guarantee which the agreement had provided for BBME to give. BBME accordingly asked Banco to send the bills direct to them in Sharjah for countersigning, and Banco duly did so. BBME then countersigned the reverse side of the bills, a sample of those bills (as executed) reading thus:
"Guarantee No OTH/SHJ/854044 aval de Moosa Abdullah Al-Amri de 30 January de 1987 Nombre y domicilio del avalista The British Bank of the Middle East PO Box 25 Sharjah."
There then followed the signatures of two BBME officers. "Aval" is an expression with a well-understood meaning in international commerce, the nearest (although inaccurate) synonym or translation perhaps being "guarantee". The date specified is the date of maturity of that bill. Having countersigned the bills, BBME sent them by their own courier back to Banco in Spain where they were delivered.
There was evidently some hiccup in loan arrangements between Banco and Mr Marques. Banco accordingly endorsed the bills over to Mr Marques, who in turn endorsed them to his brother Mr Pedro Vila Marques and he endorsed them to Banco as security for a loan then made to him by Banco. Thus Banco ended up as holder of the bills.
The first bills presented to BBME for payment by Mr Al-Amri were paid, but a time quickly came when the monthly bills were not paid on presentment. It appears that Mr Al-Amri believed himself to have been defrauded by Mr Santiago Vila Marques, the basis of his complaint apparently being that Mr Marques had not owned the shares he had purported to sell. It appears that this complaint may not be without substance. Accordingly, Mr Al-Amri as plaintiff began proceedings in Sharjah against Mr Marques as defendant some time before the end of 1985. The progress of this action is not entirely clear, but it seems to be as yet unresolved whether the local court will accept jurisdiction or decline it because of the arbitration clause in the original agreement. However that may be, the Head of the Justice Department of the Ministry of Justice Sharjah Civil Court wrote letters on 30th December 1985 and 25th January 1986 to BBME in Sharjah informing BBME of interlocutory orders made by the court in the action and instructing BBME not to pay the bills until further order. Thus, when Banco, on the default of Mr Al-Amri, sought payment from BBME, BBME replied that they could not make payment to Banco without breaching the order of the Sharjah court and exposing themselves to the risk of serious criminal penalties for contempt. Banco then began this action. On 13th April 1989 BBME wrote to the Ministry of Justice in Sharjah, recounting the recent history (including the commencement of this action) and describing the quandary in which they found themselves. They posed this question:
"…should payment be made through—our London branch under the court order that Banco Atlantico may obtain [in London], would such a payment be considered in breach of your own court orders?
More generally, we are seeking guidance as to the way in which [BBME] may proceed, and in particular, would you consider varying your aforementioned orders so as to permit us to make payment in respect of the 17 bills of exchange referred to above should Banco Atlantico be successful in obtaining a court order ordering us to pay."
No reply has been received. On 12th March 1990, at the instigation of Staughton L.J., a further letter was written by BBME. It asked the Sharjah court if it could vary and/or discharge the Sharjah orders so as to permit BBME to pay Banco. A supporting letter from Banco was enclosed. An urgent response was requested. No reply has yet been received.
In considering BBME's application for a stay, the learned judge was in my judgment required to consider four questions, which were these:
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(1) Is there a contract between Banco and BBME?
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(2) If so, what appears to be its proper law?
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(3) What issues between these parties have to be decided under the presumptive proper law of the contract?
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(4) Do BBME show that Sharjah is clearly a more appropriate forum than this for the determination of those issues having regard to the interests of all parties and the achievement of justice?
In this court another question arises. It is whether, the learned judge having granted BBME a stay, Banco can discharge the heavy burden of showing that his decision should be disturbed. The answering of questions (1), (2) and (3) involves no element of discretion properly so-called. Even the answer to question (A) is not wholly discretionary, since the question itself is defined by authority and there is clear authoritative guidance on the matters which may and may not be considered in answering it. But the final answer is discretionary, and the answers of an experienced commercial judge to all these questions have a strong inherent quality of strength which an appellate court must respect. I consider these questions in turn.
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(1) Is there a contract between Banco and BBME?
I need not linger on this question since it has inevitably been accepted by both parties from the outset that they are bound by contract.
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(2) What is the proper law of the contract?
It is, I think, clear (and the contrary was not argued) that to decide what is the proper law of the parties' contract the English court must apply English conflict of law rules. However those rules are applied in this case it seems to me that they show Spanish law to be the proper law.
The documents on which Banco sue are bills of exchange within the definition in section 3 of the Bills of Exchange Act 1882. Section 72 of that Act lays down a specific conflicts rule. It provides:
"Where a bill drawn in one country is negotiated, accepted, or payable in another, the rights, duties, and liabilities of the parties thereto are determined as follows:
(2) Subject to the provisions of this Act, the interpretation of the drawing, indorsement, acceptance, or acceptance supra protest of a bill, is determined by the law of the place where such contract is made."
These bills were drawn in Spain and payable in Sharjah, so the section applies. The word "interpretation" has been given a wide meaning to embrace the respective obligations created by the acts of drawing, indorsing and accepting the bill: G & H Montage Gmbh v. Irvani [1990] 1 Ll. Rep. 14 at 20.
Where, then, was this contract made? Section 56 of the Act provides that "where a person signs a bill otherwise than as drawer or acceptor, he thereby incurs the...
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