Barclays Bank Plc v Alfons Kufner
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE FIELD,Mr Justice Field |
| Judgment Date | 10 October 2008 |
| Neutral Citation | [2008] EWHC 2319 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2007 Folio 1028 |
| Date | 10 October 2008 |
[2008] EWHC 2319 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Cardiff Crown Court
Cathays Park
Cardiff CF10 3ND
MR Justice Field
Case No: 2007 Folio 1028
John Passmore (instructed by Clifford Chance LLP) for the Claimant
Jonathan Nash QC (instructed by Withers LLP) for the Defendant
Hearing dates: 17 & 18 September 2008
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an application for summary judgment on a claim under a guarantee executed on 13 June 2006. The defendant/guarantor is Mr Alfons Kufner, a citizen of Germany. The guarantee (“the Kel guarantee”) was given by way of security for a loan (“the Kel loan”) made by the claimant (“the Bank”) to an Isle of Man company beneficially owned by Mr Kufner, Kel Maritime Limited (“Kel”). The purpose of the loan was to finance the purchase of the motor yacht “Lifestyle” (“the vessel”) which Mr Kufner intended should be bareboat chartered under the management of a Turkish business associate of Mr Kufner, Mr Mustafa Ontulmus. The loan was made under a loan agreement made between the Bank and Kel (“the Kel loan agreement”) on 26 June 2006. The total advanced under the Kel loan agreement was €3,494,322.00. It was a condition precedent to Kel's entitlement to drawdown under the Kel loan agreement that a mortgage over the vessel had been duly executed by the borrower notarially attested and legalised in such a form as shall be capable of registration against the vessel in accordance with laws and regulations of the Isle of Man. The sum guaranteed was € 3,540,000.00. The Bank also took a mortgage over the vessel executed by Kel (“the Kel mortgage”).
When the Kel loan agreement was executed the vessel was entered in the Isle of Man Ships Register but shortly thereafter steps were taken to have the vessel registered in Madeira and to have it sold to a Madeira company, Paelten Consultores e Servicos Lda (“Paelten”). On 8 August 2006 Paelten and the Bank executed a loan agreement (“the Paelten loan agreement”) whose purpose was to finance Paelten's purchase of the vessel from Kel. The Paelten loan agreement was on substantially similar terms to the Kel loan agreement. Thus it was a condition precedent to Paelten's right to drawdown under the agreement that the Bank have a mortgage of the vessel notarially attested and legalised and in such form as shall be registrable in accordance with the laws and regulations of Madeira. It was also intended that Paelten's liability should be secured by a guarantee executed by Mr Kufner. On 4 August 2006 Paelten executed a First Priority mortgage over the vessel in favour of the Bank and on 8 August 2006 Mr Kufner executed a guarantee (“the Paelten guarantee”) on the same terms as the Kel guarantee.
On 15 August 2006 the Kel mortgage was discharged and the following day the registration of the vessel with the Isle of Man Registry was closed. These steps were necessary before the vessel and the Paelten mortgage could be registered in Madeira. However, when the Bank attempted to register the Paelten mortgage in Madeira, the Madeira Shipping Registry declined to register it, apparently because the mortgage and/or the bill of sale of the vessel from Kel to Paelten had not been duly notarised. This led to discussions between Mr Kufner and the Bank about amending the documentation. Mr Kufner contends that he did not know that the Paelten mortgage had not been registered until the beginning of November 2006. He says that in mid November 2006 Mr Ontulmus took advantage of the Bank's failure to have the Paelten mortgage registered by giving instructions that Paelten should not execute an amended mortgage until Mr Kufner had paid him “security” of between €500,000 and €700,000. On 21 November 2006 the vessel was transferred from Paelten to another Madeira company, Mellabond Market Trading Lda (“Mellabond”), whose title was registered in the Madeira Shipping Registry. The stated consideration was €5.4 million payable by post-dated cheques but none of these cheques has been honoured. Mr Kufner maintains that he was not at the time aware of this transfer. He alleges that it was engineered by Mr Ontulmus, whose nominee, a Miss Julia Clas, had been appointed a director of Paelten to facilitate the chartering of the vessel through Mr Ontulmus's travel agency. On 19 February 2007 the Bank served on the Madeira Shipping Registry a stop order obtained from a Madeira court, but by now the vessel had been transferred off the Madeira Registry. In paragraph 30 of his witness statement, Mr Kufner states he has lost track of the vessel and does not know where it is presently registered.
Kel made only two payments under the Kel loan agreement in September and October 2006, totalling €71,040.01. On 13 April 2007 the Bank issued a notice of default under the Kel loan agreement which resulted in the whole of the outstanding balance becoming payable. On 30 April 2007 the Bank gave notice of demand to Mr Kufner under the Kel guarantee in the sum of €3,540,000, plus interest and costs. The Bank's position is that the debt owed by Kel under the Kel loan agreement was never discharged because there was no drawdown under the Paelten loan agreement, and it was only upon such a drawdown that the loan to Kel was to be transferred to Paelten, in which event there was to be a deemed repayment of the Kel loan and deemed payment by the Bank to Paelten. Accordingly, there was never any transfer from the Kel account to the Paelten account in the Bank's books and the Kel loan remains in arrears.
Clauses 5.1 and 5.3 of the Kel guarantee
These provide:
5.1 This Guarantee is independent of any other security or guarantee which we hold or may hold in the future for the Customer Liabilities. When we hold any other security or guarantee, we may choose which security or guarantee we will enforce and, if we enforce more than one, the order in which we do so. However, we will not have to enforce any other security or guarantee, or take any steps or proceedings against the Customer, before we enforce this Guarantee.
5.3 From time to time we may:
a provide the Customer with any credit or facilities;
b vary, cancel or refuse any credit or facilities;
c give the Customer time to pay any money owing to us;
d make any other arrangement, compromise or settlement with the Customer or any other person;
e take or deal with any security, guarantee or other legal commitment for the Customer Liabilities; or
f release, enforce or not enforce our rights under any such security, guarantee or commitment.
If we carry out any of the above acts, or do or fail to do anything else, this will not affect our rights under this Guarantee, even if it would have done so if this condition did not exist.
Mr Kufner's defences to the Bank's claim on the Kel guarantee
A. Discharge of the Kel loan
Mr Nash QC for Mr Kufner applied for permission to rely on this defence following a comment of mine during the hearing that the idea of a drawdown under the Paelten loan agreement was unreal, so that it seemed arguable that the Kel loan was discharged when the Paelten loan was executed. Mr Kufner needed permission because, until the hearing, he had accepted that in the absence of an estoppel arising from the discharge of the Kel mortgage 1, the Kel loan had not been discharged. However, having heard Mr Passmore for the Bank on the issue, I decided that the contention that the Kel loan had been discharged was unarguable and so ruled. The idea that there was going to be a drawdown under the Paelten loan agreement is unreal, but bearing in mind the conditions precedent to the right to drawdown, I am satisfied that all parties must have proceeded on the basis that the Kel loan would only be discharged if and when the Bank had a mortgage over the vessel executed by Paelten in a form capable of registration in Madeira, and no such mortgage was ever executed.
It follows that the Kel loan has not been discharged and that unless Mr Kufner has some other defence, he is liable under the Kel guarantee as claimed by the Bank.
B Release of the Kel mortgage by the Bank without procuring a replacement mortgage executed by Paelten registrable in Madeira
This defence is pleaded in paragraphs 32, 36 and 37 of Mr Kufner's Amended Defence and Counterclaim, which read:
32 At all material times the Bank owed duties in equity to Mr Kufner not to release any security held for the guaranteed indebtedness and/or not to lose any such security by its negligence.
36 By reason of the discharge of the Mortgage (viz the Kel mortgage) Mr Kufner is wholly discharged from any liability in respect of his Guarantee.
37 Further or alternatively, the Mortgage was discharged in breach of the Bank's duty in equity to take care not to lose securities for the guaranteed indebtedness by its negligence. If, which is denied, the Bank is entitled to assert that Kel remainsindebted to it, the Bank was negligent in discharging the
Mortgage before Kel's indebtedness had been discharged by an advance to Paelten secured by a registrable Mortgage over the Vessel supporting Paelten's borrowings.
It is to be noted that the pleaded duty is said to be a duty in equity; no implied contractual term or common law duty of care is relied on.
To the extent that the Bank seeks to rely on Clauses 5.1 and 5.3 of the Kel guarantee, Mr Kufner contends that on their true construction these provisions do not assist the Bank and, even if they do, they are not binding on him by reason of regulation 8 (1) of the Unfair Terms in Consumer Contracts Regulations 1999 which provides: “An unfair term in a...
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