Gur Corporation v Trust Bank of Africa Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE NOURSE,LORD JUSTICE GLIDEWELL |
| Judgment Date | 22 July 1986 |
| Judgment citation (vLex) | [1986] EWCA Civ J0722-2 |
| Docket Number | 86/0685 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 July 1986 |
and
[1986] EWCA Civ J0722-2
The Master of the Rolls (Sir John Donaldson)
Lord Justice Nourse
and
Lord Justice Glidewell
86/0685
1985 G. No. 3036
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
(MR. JUSTICE STEYN)
Royal Courts of Justice.
MR. A. BUENO (instructed by Messrs. Jeffrey Green & Russell) appeared on behalf of the (Plaintiff).
MR. P. CRESSWELL, Q.C., MR. E. LAUTERPACHT, Q.C. and MR. J. JARVIS (instructed by Messrs. Durrant Piesse) appeared on behalf of the (Defendant) Appellant.
MR. S. TUCKEY, Q.C. and MR. A. TEMPLE, Q.C.(instructed by Messrs. Barlow Lyde & Gilbert) appeared on behalf of the (Third Party) Appellant.
MR. JOHN LAWS (instructed by the Treasury Solicitor) appeared as amicus curiae.
At first blush this might appear to have been a very ordinary commercial dispute. GUR Corporation, a Panamanian company, had contracted to build a hospital and two schools in Ciskei, Southern Africa. In connection with this construction contract, GUR had asked the Trust Bank of Africa to issue a bank guarantee, limited to US $375,000 and having an expiry date and time, in favour of the building owners, the Department of Public Works of the Republic of Ciskei. The London branch of the bank had issued such a guarantee, but had required GUR to give a counter-guarantee and to deposit US $300,000 with it as security for that obligation. In due course the building owners demanded payment under the guarantee. The bank declined to pay on the grounds that no demand complying with the conditions of the guarantee had been made before its expiry. GUR not unnaturally supported the bank.
In the ensuing litigation all three parties were before the court and, in a splendidly complex set of pleadings involving claims, defences, counterclaims and third party proceedings, every contingency was catered for. However, the basic issue was very simple, namely whether (a) the building owners had made a valid claim under the guarantee for US $375,000 and, if so, whether they could keep any money which they recovered in the proceedings or had to pay it over to GUR as being retention moneys no longer required for the purposes of the building contract, or (b) the bank was under no liability under the guarantee and was therefore obliged to repay to GUR the US $300,000 deposited as security for their obligations under the counter-guarantee. It was estimated that the whole matter could be heard and judgment given within at most half a day.
The matter came before Mr. Justice Steyn who, to the discomfiture of all three parties, raised the question of whether it was permissible for the building owners to sue or be sued in the English courts. Let me say at once that the learned judge was quite right to do so. Although the courts in general, and the Commercial Court in particular, will always do their best to meet the needs and wishes of the litigants, there are certain public policy constraints. So far as is relevant, they are based upon the undesirability, to put it no higher, of the national courts appearing to speak in terms which are not consistent with the nation's foreign policy and diplomatic stance. And so it came about that Mr. Justice Steyn tried, as a preliminary point, the issue of whether the building owner, which called itself "The Government of the Republic of Ciskei" had any locus standi in the courts of this country, either as a claimant or as a respondent. He decided that it had none.
This decision was greeted with some dismay by all three parties. The most dismayed was the bank and for two somewhat different reasons. The first was that the decision opened up the possibility of judgment being given against the bank in favour of GUR in this country, without the bank being able to obtain a judgment in its own favour against the Republic of Ciskei, which it could use as a defence if sued by Ciskei in the local courts or those of the Republic of South Africa. The second was of more general import. It was that the financial institutions of the City of London which lend money or provide financial services to bodies in a similar position to that of the building owners, and the "Republic of Ciskei" is by no means unique, would have no means of having their rights and obligations determined by the courts of this country. It was therefore the bank which appealed, but it has done so with the full support of the other two parties. In these circumstances we, like the learned judge below, sought the assistance of an amicus in order that the arguments might be fully deployed and we, like the learned judge, have been extremely fortunate in that Mr. John Laws was able to undertake this duty.
It is now necessary to explain the problem in more detail. Ciskei is a geographical area situated in what was once the self-governing colony of the Cape of Good Hope in Southern Africa, that colony later becoming part of the Union of South Africa in accordance with the South Africa Act 1909. By section 152 of that Act, the Parliament of the Union was empowered to alter or amend it and by section 22 of the Statute of Westminster 1932, which applied to the Union, it was provided that no law made after 1932 by the Parliament of a dominion should be void or inoperative on the ground that it was repugnant to the law of England. In 1961 the Union Parliament enacted the Republic of South Africa Constitution Act, which repealed most of the 1909 Act and resulted in the Union becoming an independent Republic outside the Commonwealth, whose territory included the territory of the Ciskei. Thereafter a form of local government was established in Ciskei, but in 1981 the Parliament of what was now the Republic of South Africa passed the Status of Ciskei Act, which purported to declare that the territory of the Ciskei constituted a sovereign and independent state and was no longer a part of the Republic. The Act also purported to empower the Legislative Assembly of Ciskei to legislate in the manner provided by the Act and to make laws (including a constitution) for Ciskei. In reliance upon this power, the Assembly passed the Republic of Ciskei Constitution Act 1981 which, by section 34(1), authorised the President of Ciskei to establish such departments of state as he might deem necessary for the Government and to appoint persons to administer such departments, such persons being "Ministers holding office during the pleasure of the President". "The Minister of Health" in fact signed the construction contract.
It appears that the Department of Public Works, which was the beneficiary named in the bank's guarantee, owes its existence to this provision and there are no materials upon the basis of which it might have been argued that it and the Government of Ciskei were, or might be viewed as, the same entity as the local government which existed immediately prior to the passing of the Status of Ciskei Act 1981.
This is also important from another point of view. The mere fact that a party to litigation chooses to describe itself as "The Government of the Republic of…" does not of itself create any problem of locus standi. This may be a trade name, a firm name, the title of an incorporated or unincorporated association, a description of what is known in the travel industry as an "affinity group" or simply an example of what I venture to call the "Pimlico Syndrome", after the classic film "Passport to Pimlico". However, this is not such a case and what might otherwise be treated as mere pretentiousness cannot here be so lightly dismissed, since the Republic of Ciskei is without doubt recognised by the Republic of South Africa.
In these circumstances steps were rightly taken to inform the learned judge of the attitude of Her Majesty's Government towards the "Republic of Ciskei" and, to this end, Messrs. Durrant Piesse, the solicitors for the bank, wrote to the Foreign and Commonwealth Office on the 10th April, 1986 on behalf of all parties, asking:
"1. What recognition, if any, does Her Majesty's Government accord to (1) the 'Government of the Republic of Ciskei' and/or (2) 'the Department of Public Works, Republic of Ciskei'?
2. Would it be contrary to the policy or attitudes of Her Majesty's Government for the English Courts to recognise either or both of such bodies as
(i) contracting parties and
(ii) capable of suing or being sued in an English Court under such names or either of them in respect of a commercial obligation assumed in its favour by the London branch of a bank licensed to accept deposits under the Banking Act 1979, a copy of which is annexed hereto."
The answer dated the 1st May, 1986 was as follows: "In answer to the first of your questions, I am instructed to inform you that, consistently with the statements made in Parliament in April 1980 about the outcome of a re-examination of British policy and practice in this field, it is not the current practice of Her Majesty's Government to accord recognition to Governments. The British Government recognises states in accordance with common international practice, but so far as governments are concerned, the attitude of Her Majesty's Government is to be inferred from the nature of its dealings with the regime concerned and in particular whether Her Majesty's Government deals with it on a normal government to government basis. Her Majesty's Government does not recognise the 'Republic of Ciskei' as an independent sovereign state, either de jure or de facto, and...
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