Guaranty Trust Company of New York v Hannay & Company
| Jurisdiction | England & Wales |
| Date | 1915 |
| Court | Court of Appeal |
Practice - Action claiming a Declaration - Where no Cause of Action exists - “Whether any consequential relief is or could be claimed or not” - Jurisdiction -
By Order XXV., r. 5, “No action or proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether any consequential relief is or could be claimed or not”:—
Held by Pickford and Bankes L.JJ., Buckley L.J. dissenting, that the Court has power to make a declaration at the instance of a plaintiff though he has no cause of action against the defendant; and that the rule so construed is merely an extension of the practice and procedure of the Court, and is not ultra vires.
The defendants, who carried on business in Liverpool, purchased cotton from dealers in America, who drew a bill of exchange on the defendants for the price. The plaintiffs in New York (who had a branch office in London) in good faith purchased the bill of exchange with the bill of lading and insurance certificate attached thereto, and sent the documents to the defendants in Liverpool, who accepted the bill of exchange and returned it to the plaintiffs' London office. The defendants paid the bill at maturity. The bill of lading was a forgery, and no cotton had been shipped under it. The defendants brought an action against the plaintiffs in America to recover the amount of the bill so paid by them, and it was admitted that the law of England applied to the case. The plaintiffs thereupon brought an action in England claiming declarations to the effect that they did not by presenting the bill for acceptance with the bill of lading attached represent that the bill of lading was genuine, and that they were not bound to repay the amount of the bill. They also claimed an injunction to restrain the defendants from further proceeding with the action in the United States. The ground upon which the injunction was asked was that the proceedings in the United States were vexatious and likely to cause injustice and expense. Upon an application by the defendants under Order XXV., r. 4, to strike out the claim for the declarations upon the ground that they disclosed no cause of action:—
Held (Buckley L.J. dissenting), that the claim ought not to be struck out.
By Pickford L.J.: Order XXV., r. 5, is not confined to cases where the plaintiff has a cause of action apart from the rule; its effect is to give a general power to make a declaration, whether there is a cause of action or not, at the instance of a party interested in the subject-matter of the declaration. A declaration, however, that a person is not liable in an existing or possible action is one which will hardly ever be made, though it is not beyond the power of the Court in a very exceptional case to make such a declaration.
By Bankes L.J.: The rule applies where a person is seeking relief or in whom a right to relief is alleged to exist, and his application for a declaration is not to be refused merely because he cannot establish a legal cause of action. “Relief” is not confined to relief in respect of a cause of action, and the claim for the injunction was a claim for relief to which the claim for the declaration was merely ancillary.
By Buckley L.J.: A declaration can only be made under Order XXV., r. 5, where it is founded on facts which, if true, show a cause of action. The rule does not authorize a declaration as to the plaintiff's obligation, where the cause of action is in the defendant and not in the plaintiff. The declarations claimed did not lead to or bear upon the injunction, which was an entirely separate matter.
APPEAL from an order of Bailhache J. in chambers.F1
The plaintiffs were a banking corporation carrying on business in New York, and having a branch office in London, and they did a large business in buying, selling, and discounting foreign bills of exchange. The defendants carried on business in Liverpool as dealers in cotton.
At the end of 1909 and beginning of 1910 the defendants made through brokers on the Liverpool Cotton Exchange purchases of cotton from a firm carrying on business as dealers in cotton in Alabama, United States of America. In order to receive payment for the cotton so sold the usual course of business was for the American sellers upon shipment to draw a bill of exchange either upon the actual buyers or by the buyers' direction upon banks with whom the buyers arranged for their acceptance. In accordance with that course of business the sellers in America drew a number of bills of exchange for the purchases of cotton in question, either on the defendants or on their banks in Liverpool, and in each case the sellers attached to the bill of exchange relating to the particular shipment what purported to be the bill of lading and insurance certificate relating thereto. The bills of exchange so drawn and the attached documents were sold in New York through brokers there by the sellers of the cotton to the plaintiffs, who paid full current value for the same and received the bills of exchange and the attached documents. The plaintiffs throughout acted in good faith and without any knowledge or suspicion that the attached documents were other than what they purported to be. Upon receipt of the bills of exchange with the documents attached the plaintiffs sent them to the drawees in Liverpool, who accepted the bills of exchange and returned them to the plaintiffs at their office in London, and retained the attached documents. The plaintiffs, upon receipt of the accepted bills, negotiated them in England by way of discount, and the bills were duly paid at maturity by the defendants, or by their bankers on their behalf. It turned out that many of the bills of lading were forgeries, and that no cotton had in fact been shipped under them. In respect of one of these bills of exchange for 1464l. 9s., which had been accepted by the defendants' bankers in Liverpool on behalf of and paid by the defendants, the latter on January 23, 1911, brought an action against the plaintiffs in the United States Circuit Court for the southern district of New York to recover the 1464l. 9s. so paid by the defendants. It was admitted that the case was governed by the law of England. The Court gave judgment for the present defendants (the plaintiffs in that action), but the United States Court of Appeals ordered a new trial.
While the new trial was pending, the plaintiffs on October 12, 1914, commenced the present action in the King's Bench Division, the claim indorsed on the writ being as follows:—
“(1.) A declaration that the plaintiffs are not liable to repay to the defendants any sums paid by them in respect of any of a number of bills of exchange drawn by” the sellers of the cotton in America “on the defendants, the Bank of Liverpool, Limited, and the London City and Midland Bank, Limited, and accepted by the drawees, particulars whereof so far as known to the plaintiffs are as follows”: Then followed a list of six bills accepted by the Bank of Liverpool on February 10, 1910, four accepted by the London City and Midland Bank on February 21, 1910, and six accepted by the defendants on February 24, 1910, one of the bills accepted by the Bank of Liverpool being that on which the defendants sued in the United States.
(2.) A declaration that the plaintiffs did not by presenting the said bills for acceptance with bills of lading attached or by indorsing the said bills warrant or represent that the said bills of lading were genuine or that the cotton therein described and referred to in the said bills of exchange had been shipped.
(3.) A declaration that all the said bills accepted by, on behalf, or on account of the defendants were unconditionally accepted.
(4.) An injunction to restrain the defendants from further prosecuting or taking any further step in an action commenced by the defendants against the plaintiffs in the United States District Court for the southern district of New York on the 23rd January, 1911, to recover the aforesaid sum of 1464l. 9s. and interest.
(5.) An injunction to restrain the defendants from instituting or prosecuting any proceedings against the plaintiffs to recover any moneys paid by the defendants in respect of the aforesaid bills or any of them in any foreign Court.
(6.) Payment of the costs incurred by the plaintiffs in and in respect of the above-mentioned action in America or such part thereof as the Court may think fit.”
The action was transferred to the commercial list. The plaintiffs took out a summons before Bailhache J. for an interim injunction in the terms stated in paragraphs 4 and 5 in the indorsement on the writ, upon the ground that the action in America was vexatious and embarrassing and likely to cause injustice to the plaintiffs and expense and that the English Courts could better decide the English law. The learned judge intimated that he was not prepared to grant an interim injunction, and upon the defendants' counsel stating that they intended to raise the point that the Court had no jurisdiction to make the declarations claimed in paragraphs 1 to 3 in the indorsement on the writ, the claim for an injunction stood over, and it was agreed that the case should be argued upon the footing that the defendants had taken out a summons under Order XXV., r. 4, that the claim for the declarations in paragraphs 1 to 3 in the indorsement on the writ should be struck out. Bailhache J. held that he had jurisdiction to entertain the claim for the declarations, and dismissed the summons.F2
The defendants by leave appealed.
F. A. Greer, K.C., and A. R. Kennedy, for the defendants. The declaration which the plaintiffs ask...
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