ENE Kos 1 Ltd v Petroleo Brasileiro SA (No 1)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Dyson,Lady Justice Arden,Lord Justice Waller |
| Judgment Date | 30 October 2009 |
| Neutral Citation | [2009] EWCA Civ 1127 |
| Docket Number | Case No: A32009/0989 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 October 2009 |
[2009] EWCA Civ 1127
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
Mr Justice Field
Lord Justice Waller
Lady Justice Arden and
Lord Justice Dyson
Case No: A32009/0989
Christopher Hancock QC (instructed by Messrs Thomas Cooper) for the Appellant
Bernard Eder QC (instructed by Ince & Co) for the Respondent
Hearing date: Monday 27 July 2009
Introduction
One of the questions raised by this appeal is: what is the effective date of a payment into court where payment is made by cheque? Is it when the cheque is received in the court office, or is it when the funds have been cleared? Does it make any difference if the cheque is in a foreign currency? Perhaps surprisingly, it seems that there is no previous authority on this point.
This case arises out of a long term charter dated 2 June 2006 under which the claimant (as owner) chartered the MT KOS to the defendant (as charterer). The charter was in standard form requiring payment of hire to be made monthly in advance, failing which the claimant was given the express right to withdraw the vessel. The vessel was delivered into the chartered service in July 2006 and thereafter performed various voyages pursuant to the instructions of the charterer for nearly 2 years. The advance hire payment for June 2008 was due by the latest on Saturday 31 May 2008. It was not paid by that date. After checking that no hire had in fact been paid on the next banking day (2 June 2008), the claimant withdrew the vessel at 14.41 GMT on that day.
The claimant started these proceedings and claimed inter alia a declaration that the withdrawal was valid and lawful. The defendant put the claimant to proof that it was entitled to withdraw the vessel. It also advanced a counterclaim on the basis that, if the claimant failed to prove that the withdrawal was valid and lawful, then it was liable in damages for breach of the charter.
The claimant applied to the court for summary judgment for a declaration that the withdrawal was valid and lawful and for an order that the counterclaim be dismissed.
On that application, the defendant adduced evidence from Juan Alegre, a partner in Messrs Thomas Cooper, the defendant's solicitors, that the defendant might be able to assert that the claimant had lost the right to withdraw the vessel by operation of waiver. Mr Alegre accepted that, in order to do so, the defendant would have to show that the claimant knew that it had failed to pay the hire by 31 May. Mr Alegre said that the defendant could reasonably expect further evidence to be available by the time of the trial to support such a case.
Field J conditionally refused the application for summary judgment on 13 February 2009. He said:
“18. With a very considerable degree of reluctance I have come to the conclusion that the right way of dealing with this application is to refuse summary judgment but on strict terms that the charterers pay into court, or make arrangement of equivalent security, the sum of $500,000. Somewhat over $400,000 is claimed by way of damages and it is within the power of the court under the Practice Direction to order security as to costs. The issue is a very narrow one and it seems to be capable of being resolved very quickly. Bearing that in mind, the pain inflicted on the charterers to avoid summary judgment is somewhat less than if this were a case that would have to go off for many months and involve a lengthy trial.
19. Accordingly I decline to enter summary judgment as sought by Mr Eder but I impose the condition I have identified. If that condition is not satisfied within a period of time to be debated by counsel then the claimants will have a judgment for the declaration that they seek.”
Para 1 of the court order dated 13 February was in these terms:
“The application for summary judgment is refused provided that by 5pm on 27 th February 2009 the Defendant shall pay into Court, or provide, in a form and on terms reasonably satisfactory to the Claimant, security for, the sum of US$500,000.”
At 11.18 hrs on 27 February, Thomas Cooper sent an email to the claimant's solicitors, Ince & Co in these terms:
“We have received the funds from Petrobras in respect of security as ordered by the Court.
Are you happy for the funds to be held by Thomas Cooper on our undertaking not to dispose or deal with the funds otherwise than as agreed by Ince & Co or your clients, or as may be ordered or authorized by the Court?”
At 13.56 hrs on the same day, Ince & Co replied saying that the claimant was not willing to agree that the funds be held against a solicitor's undertaking and that the defendant should comply with the terms of the order of 13 February. The defendant therefore chose to pay into court. Thomas Cooper completed Court Funds Office Form 100 (Request for Lodgment) and before 16.30 hrs on 27 February lodged in the Court Funds Office a cheque in the sum of US$ 500,000 payable to the Accountant General of the Supreme Court. The cheque was drawn on Thomas Cooper's US$ client account. On the same day, the Court Funds Office sent Thomas Cooper a temporary acknowledgement of receipt of the cheque, stating “once our bank confirms the payments, we will write to notify you of the exact amount that has been received”. The letter also stated that the standard procedure for cheque clearance by the Royal Bank of Scotland usually takes between 6 and 8 weeks.
Thomas Cooper's US$ client account statement shows that the cheque cleared on 6 March and the Court Funds Office confirmed to the defendant that it had received the cleared funds by a letter dated 10 March.
In the meantime, Ince & Co wrote to the court asking the judge to restore the claimant's application and to enter summary judgment against the defendant on the ground that it had not complied with paragraph 1 of the order of 13 February. The claimant's contention was that delivery of the cheque before 17.00 hrs on 27 February was not sufficient to comply with the order.
After receiving written submissions from both parties, on 8 April 2009 the judge granted the order sought by the claimant. The heart of his reasoning is at para 5 of his ruling:
“In my opinion, the purpose of paragraph 1 of the Order is to require the Defendant by the stipulated time to provide security in the sum of US$500,000 to protect the Claimant against the possibility that the defence advanced in resistance to the application for summary judgment should fail. With this in mind, the true meaning and effect of the condition contained in paragraph 1 is that cleared funds must be held by the Court Funds Office by the time stipulated in the paragraph. The tendering of a cheque and completion of Form 1 are steps on the way to providing security but until funds have been received into Court, the Claimant are not secured. ”
The defendant appeals with the permission of the judge.
The grounds of appeal
The defendant says that the judge erred in that (i) by lodging the cheque in the Court Funds Office before 17.00 hrs on 27 February, it complied with paragraph 1 of the order of 13 February; alternatively (ii) if the defendant did not comply with paragraph 1 of the order, then the judge should have exercised his discretion under CPR 24.2 not to grant summary judgment; alternatively (iii) the judge should have relieved the defendant from the sanction set out in paragraph 1 of the order by making an order under CPR 3.9 by granting a short extension of time for compliance with the order.
The relevant rules
The general provisions regarding payments into court are in CPR 37 and the Practice Direction supplementing that rule. CPR PD37 provides:
“1.1 Except where paragraph 1.2 applies, a party paying money into court under an order or in support of a defence of tender before claim must –
(1) send to the Court Funds Office –
(a) the payment, usually a cheque made payable to the Accountant General of the Supreme Court;
(b) a sealed copy of the order or a copy of the defence; and
(c) a completed Court Funds Office form 100;
(2) serve a copy of the form 100 on each other party; and
(3) file at the court –
(a) a copy of the form 100; and
(b) a certificate of service confirming service of a copy of that form on each party served.”
Funds in court are regulated under section 38 of the Administration of Justice Act 1982 and by the Court Fund Rules 1987 (“the CFR”) made thereunder. Rule 16 of the CFR provides:
“16(1) Money to be lodged in accordance with Rules 14 or 15, except money representing the proceeds of sale or redemption of National Savings stock or money to be paid into court under rule 19, shall be paid directly into the Court Funds Office.
(2) [….]
(3) Where money is paid under paragraph (1), cheques or other instruments shall be made payable to the Accountant General of the Supreme Court.
(4) Money received in the Court Funds Office shall be paid into the Bank for the credit of the Accountant General's account as soon as practicable.
(5) Lodgments of money which are not required to be paid into the Court Funds Office under this rule to which rule 19 applies shall be made directly to the bank to the credit of the Accountant General's account.
(6) The effective date of lodgment of money lodged under paragraph (1) shall be:—
(i) in the case of cash or a banker's draft, the date of its receipt in the Court Funds Office;
(ii) in the case of a cheque or instrument other than a...
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