Dinesh Kotak v Jagdish Kotak Royal Bank of Scotland Plc (Third Party) Bowbridge Ltd (Fourth Party)
| Jurisdiction | England & Wales |
| Judge | Master Bowles |
| Judgment Date | 18 July 2017 |
| Neutral Citation | [2017] EWHC 1821 (Ch) |
| Docket Number | Case No: HC-2014-002093 |
| Court | Chancery Division |
| Date | 18 July 2017 |
[2017] EWHC 1821 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, London EC4A 1NL
Master Bowles
Case No: HC-2014-002093
and
and
Christopher Lundie (instructed under public access) for the Claimant
David Lord QC and Daisy Boulter (instructed by Candey Solicitors) for the Defendant
Richard Hanke (instructed by Addleshaw Goddard) for the Third Party
The Fourth Party was neither present nor represented
Hearing dates: 10 th, 11 th and 12 th May 2017
Judgment Approved
By my order dated 9th November 2016, as amended by my further order dated 21 st April 2017, I directed the determination of two preliminary issues, arising in third party proceedings between the Defendant, Jagdish Kotak (to whom, as did the parties, I shall refer as Jak), and the Royal Bank of Scotland (RBS). Those issues were as follows.
(1) Was there a 'one signature' bank mandate in place with the Third Party in relation to the partnership between the Claimant and the Defendant (the "partnership") and, if so, what was the scope of any such mandate? In respect of those loan agreements in Annex 1 to the Defendant's Defence and Amended Counterclaim, are the Partnership and/or the Defendant bound by any of those loan agreements by reason of any 'one signature' mandate held to have been in place?
(2) In respect of those loan agreements in Annex 1 to the Defendant's Defence and Amended Counterclaim, was it a precondition for those loans to bind the partnership that they be signed by both partners? Is the Third Party estopped from now alleging that a signature by one partner was sufficient?
Further, by an application notice dated 12 th April 2017, the Defendant sought permission to make amendments to his third party claim against RBS. That application came before me on 21 st April 2017 and I directed that it be heard with the preliminary issues. The trial of the preliminary issues and the hearing of the application to amend took place over the 10 th, 11 th and 12 th May 2017 and this is my judgment in respect of those matters.
The third party proceedings arise out of partnership proceedings between two brothers, Dinesh Kotak, the Claimant (to whom I shall refer, as did the parties, as Don), and Jak. Those proceedings are listed for trial in November 2017. The third party proceedings, brought by Jak, seek declarations that a large number of loan agreements purportedly entered into between the partnership and NatWest bank, were and are not binding on the partnership.
The partnership in question dates back many years and was, for much of the time, a partnership, between Don and Jak, pursuant to which they carried on business together in the textile industry.
In, or about, 2000, however, at a time when, as I am told, there was a downturn in the textile industry, the focus of the partnership shifted toward property and, from about that time onward, the focus of the partnership business turned to and became that of property development and of the purchase and letting of commercial property.
Somewhat earlier than that date, in, or about, 1996, the partnership moved its banking arrangements from Midland Bank to NatWest and, on 15 th October 1997, the partnership provided the banking mandate upon which RBS places reliance and which is the subject of the first preliminary issue for my determination. RBS is the statutory assignee of the rights of NatWest and, for convenience, I will refer to RBS, rather than NatWest, throughout this judgment.
As to that mandate, there was, prior to trial, some concern raised by Jak as to whether the copy of the October 1997 mandate, which is before the court, was complete and/or whether that mandate had remained in force throughout the period during which, as RBS contends, the mandate provided a sufficient authority for loan agreements entered into by the partnership. At trial, however, it was not seriously contended by Mr David Lord QC and Ms Boulter, on behalf of Jak, that the mandate had not remained in force throughout the relevant period, nor that, subject to a point about guidance notes, to which I will later refer, the mandate, as before the court, had formed a part only of a larger document, the missing parts of which might have affected, or impinged upon, the true construction of the mandate. The mandate, itself, as before the court, provides that the signature of one of the two partners constitutes sufficient authority to RBS in respect of any matter falling within its ambit.
Between the inception of the banking relationship between the partnership and RBS, and a date in 2002, when Jak, while remaining a partner, ceased to live in the United Kingdom and moved to Spain, the partnership entered into a number of loan transactions with RBS, which are not, in themselves, in issue in the third party proceedings. The first of those borrowings, so far as they are before thecourt, was a borrowing of £1.45M in June 1997, for the purchase of commercial premises at the Chartwell Drive Industrial Estate, at Wigston, in Leicestershire (Chartwell Drive) and for the construction of new properties on that site. Thereafter and until Jak moved to Spain, there were significant further borrowings and extensions of borrowings, the last of which, prior to Jak's departure, was in December 2002.
That last loan agreement, dated 9 th December 2002, as with an earlier loan agreement, dated 13 th July 1999, and, since not all parts of all other loan agreements, in this period, are available, perhaps other such agreements, contained, upon the signature page, a printed statement to the effect that the loan agreement, (more precisely the Advice of Borrowing Terms) 'MUSTBE SIGNED BY ALL THE PARTNERS'. The effect of that agreement was to extend the borrowing facilities available to the partnership to some £4.3M, of which £1.657M reflected existing indebtedness, at the time of the agreement, and the balance reflected a continuation of existing facilities, coupled with new facilities, to be used in respect of the continued development of Chartwell Drive and the purchase of land and buildings at St John's Street, in Leicester. As appears later in this judgment, the printed requirement, in respect of the 1999 and 2002 agreements, that they be signed by all the partners, is a matter heavily prayed in aid by Jak, as part of his case that RBS is estopped, in respect of the loan agreements, to which I shall now turn, from denying that the signatures of both himself and Don were required to be on those loan agreements before the partnership was bound.
The loan agreements in question are those purportedly entered into by the partnership with RBS during the period in which Jak was in Spain and before his return from Spain in 2010. The agreements are set out in Annex 1 to the particulars of the Defendant's additional claim against the Third Party. They commence in 2004 and continue until March 2010. They chart the gradual increase of the partnership's borrowings during that time. The last substantive agreement, other than an agreement extending the partnership's overdraft facility, is a loan agreement dated 26 th November 2009, under which RBS agreed to advance £11M to the partnership in order to refinance existing indebtedness.
The core point taken by Jak, in respect of these agreements (and each of them), other than a number dealing with the extension of the partnership's overdraft facility and which contemplated, in the signature section, a single signature, is that, as he contends, the agreements are, or were, only binding upon the partnership if signed by both partners, as principals. His case, in that regard, is that, although these agreements are all purportedly signed by him, in fact none of them are; his signature having been forged.
As to that, Don does not deny that Jak's signature was not always applied by Jak. His contention, which was, to a limited extent, explored in cross examination, by Mr Lord, was that, on occasions, Jak's signature had been applied to loan documents by members of the Kotak family, including Don, himself, but that, when so applied, it had always been at the request of and hence with the authority of Jak. Don's contention was that, from his, Don's perspective, the reason why Jak's signature was purportedly applied to documents, including loan documents was to record and signify that the documentation had been discussed and approved by Jak, even although Jak had not, himself, applied his signature. Don was not able, he said, to identify which loan documents had, actually, been signed by Jak and upon which loan documents a family member, whether Don, or another, had applied Jak's signature.
It has been agreed between the parties that, at this trial, I should not resolve the question of forgery, or the question of any actual authority granted by Jak for Don, or others, tosign loan agreements on his behalf and using his purported signature, or the further and related question as to Jak's knowledge of the relevant loan agreements and the loans advanced pursuant to those agreements.
Rather, I should decide whether, on the agreed assumption for purposes of this trial, that Jak did not, in fact, sign the relevant loan agreements and that it was only Don, who, in fact, signed those agreements, the partnership is not bound by the loan agreements, because the loan agreements only bound the partnership if actually signed by both partners, as principals, or because RBS is estopped from denying that that was the case, orwhether, as contended by RBS, the loan agreements bound the partnership if signed in any way binding upon the partnership.
If the answer to that question (the second preliminary...
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Table of Cases
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