Barclays Bank Plc v Landgraf
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 28 February 2014 |
| Neutral Citation | [2014] EWHC 503 (Comm) |
| Docket Number | 2013 Folio 87 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 28 February 2014 |
[2014] EWHC 503 (COMM)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
7 Rolls Building, Fetter Lane
London, EC4A 1NL
The Hon. Mr Justice Popplewell
2013 Folio 87
Guy Philipps QC and Adam Zellick (instructed by TLT LLP) for the Claimant
John Brisby QC and Alexander Cook (instructed by Candey LLP) for the Defendant
Hearing dates: 25 February 2014
Approved Judgment
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 the Claimant's application for summary judgment on issues of the construction of an agreement by which the Claimant ("the Bank") made a loan of US$ 486,000 by payment into an account in the name of Dewey & LeBoeuf LLP, a US law firm of which the Defendant, Mr Landgraf, was at the time a partner ("the Firm"). The Bank claims that the loan was to Mr Landgraf to enable him to make his capital contribution to the Firm, and that Mr Landgraf is the borrower liable for repayment of the loan and interest. Mr Landgraf contends that he undertook no obligation to repay the loan; or alternatively that his obligation was that of a guarantor of the liability to the Bank of the Firm as primary obligor, and that such liability as a guarantor has been discharged by forbearance or agreement between the Bank and the Firm and/or due to non disclosure.
The contractual documents which fall to be construed comprise:
(1) A letter dated 10 May 2010 addressed by the Bank to Mr Landgraf and signed by him on 13 May 2010 (the "Loan Agreement");
(2) A letter of instruction signed by Mr Landgraf on 13 May 2010 addressed to the Firm ("the Instruction"); and
(3) A letter of undertaking addressed to the Bank signed on behalf of the Firm ("the Undertaking")
The issues of construction upon which summary judgement is sought arise from paragraphs 9 and 10 of the defence which are in the following terms:
"9. The Defendant avers that the Loan Agreement was in reality and/or should be treated as an agreement for a loan between the Firm and the Bank, in respect of which the Defendant has no liability. This is supported by the application form, the terms of the Loan Agreement and the Undertaking, as well as the manner in which the Loan was administered in practice, as pleaded elsewhere herein. The Defendant accordingly seeks a declaration to this effect, as pleaded below.
10. Further, or alternatively if, contrary to paragraph 9 above the Defendant had an obligation under the Loan Agreement, on a true construction, the express terms of the Loan Agreement and the Undertaking, read in the context of the BCLP and the surrounding circumstances, constituted the Firm as primary debtor and the Defendant as guarantor. If, contrary to the contention at paragraph 9 above, the Defendant is not entitled to such a declaration, paragraphs 11–31 below proceed on the basis that the Defendant is guarantor and not primary debtor."
These are not the only issues in the case. There is a further defence advanced, namely that the terms of the Loan Agreement were unfair under paragraph 140A(1)(a) of the Consumer Credit Act 1974. There is also a counterclaim alleging breach of a duty of care owed by the Bank to advise Mr Landgraf of various specific matters which affected the financial health of the Firm, and alleging implied misrepresentations that the contemplated borrowing was prudent. Irrespective of the construction issues for which summary judgment is sought, those further issues will fall to be determined, after disclosure, at a trial which has been fixed for 5 days commencing on 1 December 2014.
This led Mr Brisby QC on behalf of Mr Landgraf to submit that the present application should not have been made, and should not be heard, because it would provide no saving in time or costs, and the argument could as well be advanced and addressed at the trial. He relied upon the well known passage in the speech of Lord Templeman in Williams and Humbert Limited v W and H Trademarks (Jersey) Limited [1986] AC 368 at 435H–436A that:
"…if an application to strike out involves a prolonged and serious argument the judge should, as a general rule, decline to proceed with the argument unless he not only harbours doubts about the soundness of the pleading but, in addition, is satisfied that striking out will obviate the necessity for a trial or will substantially reduce the burden of preparing for trial or the burden of the trial itself";
and on that of Lord Mackay of Clashfern to similar effect:
"…..if on an application to strike out it appears that a prolonged and serious argument will be necessary there must at the least, be a serious risk that the court time, effort and expense devoted to it will be lost since the pleading in question may not be struck out and the whole matter will require to be considered anew at the trial. This consideration, as well as the context in which Ord. 18, r. 19 occurs and the authorities upon it, justifies a general rule that the judge should decline to proceed with the argument unless he not only considers it likely that he may reach the conclusion that the pleading should be struck out, but also is satisfied that striking out will obviate the necessity for a trial or will so substantially cut down or simplify the trial as to make the risk of proceeding with the hearing sufficiently worth while."
He also relied on the remarks of Lord Hope in Three Rivers District Council v Bank of England (No3) [2001] 2 All ER 513 at [107] that "…..if one part of the claim is to go to trial it would be unreasonable to divide the history up and strike out other parts of it".
In my view these dicta are not apposite to the circumstances of the present case. The argument is not prolonged or complex; it took only about two hours. The overriding objective requires the court to deal with cases as expeditiously and efficiently as possible. The Bank's submission on the substance of the application is that the issue of construction is a short point which can be determined on the face of the contractual documents and the court has all the evidence necessary to do so. If the Bank be right in that submission, the court should grasp the nettle and decide those issues now, even if it were the case that that would not result in any overall saving in timing and cost because the argument would be dealt with now instead of at the trial. Unless there were any positive disadvantage or prejudice, as for example in the expenditure of increased time and costs, which is not suggested on behalf of the Defendant, the Bank is entitled to have its position vindicated at the earliest reasonable opportunity if it be the case that this aspect of the defence is hopeless. It appears that if the summary judgment issue were resolved in the Bank's favour there may be some overall saving of time and expense in the proceedings: the allegation in paragraph 10 of the defence that Mr Landgraf's obligations are those of a guarantor, gives rise to a number of factual issues as to whether such obligations have been discharged by reference to the conduct of the Bank vis a vis the Firm, not all of which arise in relation to the Consumer Credit Act defence or the counterclaim. It is also relevant to take into account that if it be the case that the defences advanced in paragraph 9 and 10 are hopeless and bound to fail, it may promote settlement for the parties to know now that that is the position. There is a further consideration. There are outstanding claims against some 50 former partners of the Firm, amounting in total to a little over US$15 million, which arise on the same contractual documentation. Whilst it is accepted that a decision in this case will not give rise to an issue estoppel, and that if there are relevant factual circumstances relating to Mr Landgraf which differ from those which apply to other former partners a decision on construction in this case will not necessarily give definitive guidance, nevertheless a decision of this court at an early stage may help to inform and resolve those other disputes.
For all these reasons it is in my view appropriate to determine the summary judgment application which has been made, and accordingly I heard argument on it.
Factual Background
From 1987 to 2007, Mr Landgraf was a partner in the U.S. law firm LeBoeuf, Lamb, Greene & MacRae ( "LeBoeuf"). He specialised in legislative and regulatory policy. He worked in the Washington DC office.
Mr Landgraf's evidence is that while he was a partner in LeBoeuf, he had made, and maintained, a capital contribution to the firm, in accordance with the firm's constitution, of around 33% of his annual target compensation. This capital contribution had been funded by withholding the relevant sums from the distributable income received by the partners of the firm.
Dewey Ballentine LLP ( "Dewey") was another well-known U.S. law firm. Although it was well-regarded, by around 2007 Dewey was in dire financial straights according to an article in the New Yorker dated 14 October 2013. The Bank was (at least one of) Dewey's bankers and Mr Landgraf submits that it is legitimately to be inferred that the Bank knew of the firm's financial troubles.
On 1 October 2007, following negotiations between the chairman of LeBoeuf, Mr Davis, and the head of Dewey, Mr Pierce, LeBoeuf and Dewey merged to form the Firm. Mr Landgraf's evidence is that at the time of the merger his capital account position was in line with the Firm's constitution, and he was not required to make any further contribution to the Firm.
During the years 2008–2011, the...
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