G. & H. Montage G.m.b.H. v Irvani

JurisdictionEngland & Wales
JudgeLORD JUSTICE MUSTILL,LORD JUSTICE WOOLF,LORD JUSTICE PURCHAS
Judgment Date28 July 1989
Judgment citation (vLex)[1989] EWCA Civ J0728-11
Docket Number89/0816
CourtCourt of Appeal (Civil Division)
Date28 July 1989
G & H. Montage GmBh (formerly Grunzweig Und Hartmann Montage (GmbH)
Respondents (Plaintiffs)
and
Rahim Mottaghi Irvani
Appellant (Defendant)

[1989] EWCA Civ J0728-11

Before:-

Lord Justice Purchas

Lord Justice Mustill

and

Lord Justice Woolf

89/0816

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

SAVILLE J.

Royal Courts of Justice

MR. DAVID DONALDSON Q.C. and MR. MICHAEL BRINDLE (instructed by Messrs Wilde Sapte) appeared on behalf of the Appellant (Defendant).

MR. IAN HUNTER Q.C. and MR. GRAHAM DUNNING (instructed by Messrs Rowe & Maw) appeared on behalf of the Respondents (Plaintiffs).

LORD JUSTICE MUSTILL
1

This appeal concerns 15 bills of exchange drawn by Grunzweig und Hartmann Montage GmBH. and accepted by Industrial Development and Service Company Limited ("I.D.S."). These companies were incorporated respectively in the Federal Republic of Germany and the Islamic Republic of Iran. (For brevity I will use the expressions "Germany" and "Iran" and "German" and "Iranian" throughout). Each bill bore on its reverse the signature of Mr. R.M. Irvani, a principal shareholder in I.D.S. The bills, which were payable in London to the order of the drawers, were presented to I.D.S. on maturity by the London correspondents of the drawers' bankers and dishonoured. The drawers, to whose order the bills were payable, now sue Mr. Irvani by virtue of his signature.

2

The trial before Saville J. occupied 22 days. Most of it was devoted to argument as to the choice between the laws of Germany and Iran as the law governing the rights and liabilities of the three participants in the transactions; argument as to the relationship between English law as the lex fori and whichever of those two laws was the governing law in relation to the rights sued upon; and the expert evidence and submissions upon the content of the two laws. The result was to present the learned judge with numerous and complex issues. Many of these were contingent on the answers to others. In the event, the learned judge chose not to explore Iranian law in depth, having decided that it was German law which should be applied; and in relation to certain questions, which were academic in the light of his principal conclusion, he either expressed no view at all, or stated his conclusions only in the briefest of terms.

3

In taking this course, I believe that the judge was entirely right. The result is, however, that on certain questions we do not have the benefit of the judge's opinions. What we do have is an economical and lucid summary of the important facts, and of the issues arising on them upon which it would be hard to improve. I shall not try to do so, and since the judgment has been reported, I will adopt all the exposition which it contains, simply re-stating those facts which are directly relevant to the questions remaining in dispute.

  • 1. During August 1976 the plaintiffs drew up thirty forms of bill, stating "Ludwigshaven/Rh. 20th August 1976" as the place and date of drawing.

  • 2. In the space reserved for the signature and address of the drawers there was placed the stamp of the plaintiffs, but the bills were not then signed. I.D.S. were named as drawees.

  • 3. The bills were expressed to be payable on various dates, terminating on 18th November 1981.

  • 4. Each bill stated the amount payable in figures as DM464.000, and twenty-nine of them expressed the amount in words as "Deutsche Mark Vierhundertvierundesechsigtausend". Through a typing error, the word "tausend" was omitted from the remaining bill.

  • 5. The bills were expressed to be payable to the plaintiffs' order in London at National Westminster Bank.

  • 6. All the documents were posted by the plaintiffs from West Germany to I.D.S. in Iran on 20th August 1976.

  • 7. On a date or dates unknown, and in an order unknown, the signature and stamp of I.D.S. was placed on the front of each bill as acceptor, and the signature of the defendant was placed on the reverse. The case has been argued on the assumption, which seems plainly correct, that these signatures were made in Iran.

  • 8. At about the end of September 1976 I.D.S. posted the documents thus signed from Iran to the plaintiffs in West Germany.

  • 9. On a date or dates unknown the plaintiffs placed their signatures in the space reserved for the drawers on each bill, and remitted them to Bayerische Vereinbank.

  • 10. On 29th October 1976 Bayerische Bankverein wrote to the plaintiffs, saying in effect that for the purposes of both Iranian and German law there should be expressed words showing that the defendant was signing as guarantor, so as to make him liable to the plaintiffs. The bank returned the bills with a request for the authorization of the defendant to be obtained for the adding of the words "bon pour aval pour les tirés" above his signature on the bills.

  • 11. On 8th November 1976 the plaintiffs wrote to the defendant saying that the bank had informed us that "to prevent misunderstandings" the drafts should be "formally supplemented" by the words just quoted.

  • 12. On 17th November 1976 the defendant wrote to the plaintiffs from Iran saying:—"I would have no objection to your adding the words 'bon pour aval pour les tirés' above my signature on the reverse of the drafts sent to you in settlement of our contract 18.2.76".

  • 13. On receipt of this letter the plaintiffs in West Germany added "bon pour aval pour les tirés" in typescript above the signature of the defendant on each bill, and returned them to the bank, having first endorsed them in blank on the reverse.

  • 14. At some time thereafter, Bayerische Vereinbank specially indorsed the bills to Citibank N.A. for collection, and the latter specially endorsed them to National Westminster Bank for collection.

  • 15. At maturity each bill was presented for payment at National Westminster Bank in London and was dishonoured. At some time afterwards the bills were returned by Bayerische Vereinbank to the plaintiffs.

  • 16. No notice of dishonour was given in respect of any bill. Each of the bills was protested for non-payment, but in respect of six the protest was not carried out within the time required by section 51 of the Bills of Exchange Act, 1882 ("the Act").

4

On these facts three issues remain for the decision on the appeal.

  • 1. Whether the absence of any notice of dishonour, and (in relation to six bills) the giving of notice of protest outside the statutory limit, has the effect of discharging the liability of the defendant to the plaintiffs under the bills.

  • 2. Whether the plaintiffs were disentitled from enforcing their claim before the English courts, on the ground that there is no memorandum or note in writing sufficient to satisfy the requirements of section 4 of the Statute of Frauds, 1677.

  • 3. Whether in respect of the single bill where the words and figures denoting the amount were different, the plaintiffs are entitled to recover only to the extent of the written (lower) sum.

5

If the defendant were to succeed on the first issue, there would arise the question whether he had waived the requirements for notice of dishonour and protest. Furthermore, if he were to succeed on either of the first two issues, it would be necessary to consider whether the plaintiffs have a right of action under German law on a contract of Garantie, independently of any claim founded directly on the bills. By the end of the argument on the appeal it had become accepted that this court could not on the material before it reach a conclusion on these issues, and that if a conclusion were required the case would have to be remitted to the learned judge. In addition I consider (although this is not a matter of agreement between the parties) that if we were to conclude that the law governing the extent of the defendant's obligations on the bills is the law of Iran, the issue on the discrepancy between words and figures would have to be remitted for a finding on the effect of that law.

6

In order to make these issues intelligible, it is necessary to look into the effect in the three relevant laws—English, German and Iranian—of a signature placed on a bill by a party who is a stranger to it.

7

Signature by way of "Aval".

8

The placing of a signature on a bill of exchange, by someone who is neither drawer nor acceptor, coupled with delivery of the bill thus signed, is a potential source of liability in two directions. First, towards those who subsequently become holders of the bill. Secondly, towards prior parties, including in particular the drawer.

9

English law distinguishes between the liabilities of a signatory who is a holder of the bill, and of one who is not. Where the person signing is a holder, then his signature will be that of an indorser, and his liability is defined by section 55(2)(b) as follows:

  • "(2) The endorser of a bill by endorsing it—

    • (a) engages that on due presentment it shall be accepted and paid according to its tenor, and that if it is endorsed he will compensate the holder or subsequent indorser who is compelled to pay it, provided that the requisite proceedings on dishonour be duly taken…"

10

As stated in Byles on Bills of Exchange, 26th Edition, p.198, every indorser of a bill is in the nature of a new drawer. Evidently, the indorser will not be liable to the drawer as such, whatever his liability to that person as named payee and holder may be: ibid p.200.

11

Where the party is not the holder of the bill, but a stranger to it, he may incur liabilities in more than one way. (I omit from consideration the liabilities of persons who sign as agents, or as accommodation parties, or for honour only, since these are not material...

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