Bank of India v Trans Continental Commodity Merchants Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WALLER,SIR DAVID CAIRNS,LORD JUSTICE KERR |
| Judgment Date | 16 October 1981 |
| Judgment citation (vLex) | [1981] EWCA Civ J1016-1 |
| Date | 16 October 1981 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 81/0411 |
[1981] EWCA Civ J1016-1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL FROM
THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Lord Justice Waller
Lord Justice Kerr
Sir David Cairns
81/0411
1976 B 698
MR J. RAE (for MR N. MURRAY) (instructed by Messrs Philip Conway Thomas) appeared on behalf of the Appellants (the second Defendant
MR R.O. HAVERY, Q.C., and MR D. TURRIFF (instructed by Messrs Loxley Sanderson & Morgan) appeared on behalf of the Respondents.
I will ask Sir David Cairns to give the first Judgment.
This is an appeal by the second Defendant from a refusal by Mr Justice Bingham to give him leave to amend his Defence. The appeal was brought by leave of the learned Judge. The decision refusing the amendment was given on Wednesday of this week, during the hearing of the action. In order that the further hearing of the action should be delayed as little as possible, the appeal was put in the list yesterday. At the end of the submissions of Counsel in support of the appeal, the Court did not find it necessary to call upon the Plaintiffs' Counsel, but intimated that the appeal would be dismissed and that the reasons would be given today.
The action is one in which the Plaintiffs, the Bank of India, an Indian company with an office in London, claimed damages from the first Defendants, Trans Continental Merchants Ltd., an English company, for breach of 12 forward exchange contracts for the purchase of dollars by the Plaintiffs from the first Defendants. The second Defendant, Mr Patel, was sued as guarantor of the liabilities of the first Defendants under each of the contracts. It is he, Mr Patel, who is the Appellant.
The particular amendment to which the appeal relates was to raise a plea of illegality under the Exchange Control Act, 1947. The learned Judge refused the application for leave to amend on the grounds that the Plaintiffs' case involved no necessary illegality; that there was no ground on the materials before the Court for inferring illegality; that to allow the amendment at this stage would involve serious prejudice to the Plaintiff Bank, and that it would also involve a breach of certain undertakings given on behalf of Mr Patel.
Mr Murray, on behalf of the Appellant, submits first that the Courts must take cognisance of alleged illegality, however late the allegation is made, and if there is a tenable argument the Court must allow it to proceed, even if it is prejudicial to the other side. Secondly, that leave to amend the alleged illegality should be given almost as a matter of course on the usual terms; and thirdly, that the legality of these contracts was dubious ex facie.
The transactions to which the action relates all took place in 1975. The Writ was issued on the 30th January 1976; the joint Defence, with a counterclaim by the first Defendant, was served on the 14th April 1976. On the 7th March 1978, after further pleadings and applications for delivery of Particulars and so forth, the second Defendant, Mr Patel, decided that he would sever his Defence, and so an amended Defence was served on his behalf.
On the 17th July 1980, the action was set down for hearing. Then the first Defendant, Trans Continental Merchants Ltd., disappeared. Apparently it was not wound up, but so far as is known from that time it had no premises and no directors in the United Kingdom.
The Plaintiff Bank issued a Summons for Judgment against the first Defendant; Mr Patel resisted the application for such Judgment in a hearing before the Master. The hearing was adjourned, and when it was resumed, a Consent Order was made in these terms: "Upon the Plaintiff, by its Solicitors undertaking to the Court and to the second Defendant that it will not rely upon this Order or any Judgment which it might obtain in consequence thereof as being binding upon or as evidence against the second Defendant for the purposes of the guarantee which is the subject of the Plaintiff's claim against the second Defendant in this action. And upon the Second Defendant by his Solicitors undertaking: (1) That he will not oppose any application by the Plaintiff to enter an enforced Judgment herein against the first Defendant. That, in the event of his intending to apply for leave to amend or further amend any pleading of his in this action or to serve any further pleading herein, he will serve on the Plaintiff s Solicitors before the 1st August 1981 a copy of the proposed amendments and any such further pleading. (3) That not later than one month before the trial of this action or the 12th September 1981 (which ever is the later) he will notify the Plaintiff's Solicitors in writing of any of the matters raised in the pleadings of the first Defendant on which he does not intend to rely at the trial. And upon the Plaintiff and the second Defendant consenting to the Order made hereinafter and the first Defendants not appearing: It is hereby ordered (1) That the Defence and Counterclaim of the first Defendant be struck out and that Judgment be entered for the Plaintiff against the first Defendant for damages to be assessed and that the Plaintiff's costs of this application be paid by the first Defendant; (2) That, subject to paragraph 3 of his undertaking recited above, the second Defendant be at liberty without further amending his Defence to contend at the trial of this action that the first Defendant is not indebted to the plaintiff so as to give rise to liability under the said guarantee upon the basis of the matters pleaded in the first Defendant's Defence".
The most important part of that Consent Order is the paragraph in which it was undertaken by the second Defendant's Solicitors on his behalf that any further amendment in his pleading would be made before the 1st August 1981.
I can deal shortly with the pleadings in the action. The Statement of Claim set out 12 contracts alleged to have been made orally between certain agents of the Plaintiff and the first Defendants, in some cases confirmed in writing. It went on to allege the guarantee, by the second Defendant, to the extent of £600,000. Except to a small extent dollars were not delivered, and when the contracts were closed out or the time for delivery of the dollars expired, the Plaintiffs, it was alleged, suffered damage because of the increased cost of dollars at that time.
In the joint Defence, the authority of the agents to contract is denied—but that contention has now been abandoned by the second Defendant. Other Defences were raised including a custom of the City of London for prompt confirmation in writing of forward exchange contracts, but of course there is nothing about illegality. Indeed on the contrary, there were certain allegations in the Defence, and in the Further and Better Particulars thereunder, rather to the contrary effect.
Paragraph 7 of the Defence is in these terms: "As the Plaintiffs at all material times well knew the business of the first Defendants involved the purchase and sale by the first Defendants of commodities in overseas trade frequently involving the payment or receipt by the first Defendants of foreign currencies including U.S. dollars at future dates. The Plaintiffs from time to time entered into agreements with the first Defendants acting as aforesaid whereby the Plaintiffs agreed to exchange foreign currencies into sterling and vice versa at such future times and fixed exchange rates as might be agreed in order to protect the first Defendants against losses caused by fluctuations in the relevant rates of exchange."
Then in the Further Particulars there are these words: "As appears from paragraph 7 of the Defence the first Defendants only dealt with the Plaintiffs in foreign exchange transactions where the same were an incident of a commodity transaction involving foreign currency and by reason of the Exchange Control Regulations no other form...
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