Coca-Cola Financial Corporation v Finsat International Ltd and Others

JurisdictionEngland & Wales
Judgment Date25 April 1996
Judgment citation (vLex)[1996] EWCA Civ J0425-9
Docket NumberQBCM1 95/0413/B
CourtCourt of Appeal (Civil Division)
Date25 April 1996

[1996] EWCA Civ J0425-9





Royal Courts of Justice


London WC2


Lord Justice Neill

Lord Justice Morritt

Lord Justice Hutchison

QBCM1 95/0413/B

Coca Cola Financial Corporation
Finsat International Limited and Others

MR M POOLES (Instructed by McKenna & Co., EC1A 4DD) appeared on behalf of the Appellant

MR M BELLOFF QC and MR D DALE (Instructed by Bower, Cotton & Bower, EC4Y 8BH) appeared on behalf of the Respondent


( )


Thursday, 25th April 1996


The appeal will be dismissed for the reasons set out in the judgments that have been handed down.


The plaintiff in these proceedings is Coca Cola Financial Corporation (CCFC). By an agreement in writing dated 19th October 1987 (the loan agreement) CCFC agreed to lend to Finsat International Limited (Finsat) (then known as Satra International Limited) a sum not exceeding US$ 5,000,000. The loan agreement made provision for the payment of interest and also provided that the determination date for the loan was to be 15th August 1992. It was a condition precedent to the effectiveness of the loan agreement that a guarantee had been executed by the date of the loan agreement by guarantors.


On 15th October 1987, in accordance with the condition precedent in the loan agreement, a guarantee was executed by the second to eighth defendants in these proceedings and by Finsat. By the guarantee Finsat and the guarantors agreed to make payment forthwith of all sums due under the loan agreement on written demand being made by CCFC. It was further provided that the guarantors would be liable as primary obligors and not merely as sureties.


We were referred to the following specific provisions in the loan agreement:

"Article 1.4: This agreement is, and the notes when delivered hereunder will be, legal, valid and binding obligations of the debtor enforceable against the debtor in accordance with their respective terms, subject to laws affecting creditors rights generally and the availability of equitable remedies.

Article 5.1: The lender shall have the right to require, as a condition precedent to any advance, that the debtor shall deliver to the lender, one or more promissory notes for the amount of each advance and for interest.

Article 5.7: All payments under this agreement, including all payments of the notes and all prepayments, shall be made in United States dollars, in immediately available funds, free and clear of any right of set off or counterclaim or any withholding or deduction whatsoever, provided that if the debtor is required by law to make any withholding or deduction, it shall pay such additional sum to the lender as will ensure that after such deduction or withholding the lender receives the full amount due to it under this agreement. If the lender shall be or become entitled to any tax credit or relief in respect of any tax which the debtor is required to withhold or deduct, the lender shall promptly account to the debtor therefor."


It is to be noted that, by paragraph 14 of the guarantee, it was provided that Article 5.7 of the loan agreement should apply to the guarantee. Both the loan agreement and the guarantee were expressed to be governed by and construed in accordance with English law.


On or about 21st October 1987, CCFC advanced the sum of US$ 5,000,000 to Finsat pursuant to the loan agreement.


On 28th January 1994 written demand was made for the repayment of the loan of US$ 5,000,000 and interest thereon. On the same day written demands were sent to the other defendants for payment of the same sums due under the guarantee. However, none of the defendants made any payment of the sums demanded or any part thereof and on 26th April 1994 CCFC issued the writ.


On 29th June 1994 CCFC issued a summons under Order 14. The summons was heard by Waller J. on 21st October 1994 when he gave judgment for CCFC against each of the defendants in the sum of US$ 5,000,000 together with the sum of US$ 996,234.49 by way of interest thereon. The judge refused leave to appeal but leave was subsequently given in March 1995 by a single Lord Justice.


CCFC contends that its claim is a simple claim under the loan agreement and the guarantee and that there is no defence. The defendants, however, argue that they should have unconditional leave to defend or at least that there should be a stay of execution of any judgment. They put forward the following contentions:

(1) That the loan agreement and the guarantee cannot be seen in isolation. They formed part of a number of complex transactions between the Coca Cola Company, the parent company of CCFC, and Finsat and other Satra companies whereby Finsat and the Satra companies provided assistance to the Coca Cola Company in its efforts to obtain access to markets in the former Soviet Union.

(2) That the case raises issues of fact and some questions of law which are unsuitable for determination on a summons under Order 14.

(3) That Finsat has counterclaims against the Coca Cola Company which can be used by way of set off against CCFC's claim under the loan agreement and the guarantee. These counterclaims substantially exceed the claim by CCFC.

(4) That Article 5.7 in the loan agreement cannot be relied upon by CCFC because

(a) on its true construction Article 5.7 does not apply to the counterclaims made by Finsat.

(b) that even if as a matter of construction Article 5.7 could apply to these counterclaims it is unenforceable as being contrary to public policy.

(5) That in any event any judgment in favour of CCFC should be stayed pending the determination of Finsat's counterclaims which form the subject matter of proceedings in the Supreme Court of the State of New York.


I propose to consider these arguments in turn.


Whether proceedings under Order 14 are justified Mr Beloff QC reminded us of the guidance given by Parker LJ in Home and Overseas Insurance Co. v. Mentor Insurance Limited [1990] 1 WLR 153 as to the circumstances in which the summary judgment procedure could be used. At 158 Parker LJ said:

"The purpose of Order 14 is to enable a plaintiff to obtain a quick judgment where there is plainly no defence to the claim. If the defendant's only suggested defence is a point of law and the court can see at once that the point is misconceived the plaintiff is entitled to judgment. If at first sight the point appears to be arguable but with a relatively short argument can be shown to be plainly unsustainable the plaintiff is also entitled to judgment. But Order 14 proceedings should not in my view be allowed to become a means for obtaining, in effect, an immediate trial of an action, which will be the case if the court lends itself to determining on Order 14 applications points of law which may take hours or even days and the citation of many authorities before the court is in a position to arrive at a final decision."


It is important to keep this guidance well in mind. At the same time one must take account of the fact that in some cases it may take a little while before the court can make an accurate assessment of the difficulty of any points of law which require to be resolved and whether further argument on another occasion is necessary. Moreover, sometimes, as in the present case, the quality of the advocacy is such that the court can be confident at the end of the hearing that all relevant arguments have been fully deployed and that any postponement of a decision would be unjustified. Issues of fact of course give rise to a different problem because it is seldom possible to decide disputed questions of fact on affidavits alone unless there are contemporary documents which provide sufficient answers. But here again there will be cases where the court can proceed to a decision on the hypothesis that the defendant will be able to establish the matters asserted in his affidavits or defence.


I turn therefore to the issues raised by the defendants other than the specific matters raised by way of counterclaim and the issues arising from article 5.7.


It was argued on behalf of the defendants that, even apart from the matters relied on by way of counterclaim which could be used by way of set off, leave to defend should be given for the following reasons:

(1) That in the course of the discussions which had led to the written agreement in December 1986 between Coca Cola and the second, seventh and eighth defendants Mr Winer on behalf of Coca Cola had represented that the loan of US$ 5,000,000 and interest thereon would be repayable by Finsat only out of its profits made from the commercial arrangements between Coca Cola and the Satra companies. This representation is referred to in paragraph 9(i) of the revised draft Points of Defence.

(2) That having regard to the overall character of the Agreement between Coca Cola and the Satra companies it was to be implied that the loan was to be repaid out of such profits. The Agreement was the oral agreement made in October 1985 referred to in paragraph 7(1) of the revised draft Points of Defence.

(3) That it was a condition precedent to any obligation on Finsat to repay the loan and interest that Coca Cola would perform its obligations under the Agreement.

(4) That Coca Cola had repudiated the Agreement and had been guilty of such wholesale non-performance of it and such breaches that the defendants were discharged from any obligation to perform the loan agreement. It was said that the defendants accepted the repudiation by refusing to make any payment under the loan agreement. This alleged repudiation and breach were referred...

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