Hutton (E. F.) & Company (London) Ltd v Mofarrij

JurisdictionEngland & Wales
JudgeLORD JUSTICE KERR,MR. JUSTICE EWBANK
Judgment Date21 February 1989
Judgment citation (vLex)[1989] EWCA Civ J0221-5
Docket Number89/0162
CourtCourt of Appeal (Civil Division)
Date21 February 1989

[1989] EWCA Civ J0221-5

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 HIRST)

Royal Courts of Justice

Before:

Lord Justice Kerr

and

Mr. Justice Ewbank

89/0162

1986 E No.2380

Between:
E.F. Hutton & Co. (London) Limited
Plaintiff (Respondent)
and
Abdul Ghani Mofarrij
Defendant (Appellant)

MR. TIMOTHY YOUNG (instructed by Messrs. Middleton Potts & Co., Solicitors, London, EC1 7LD) appeared on behalf of the Defendant /(Appellant).

MR. JONATHAN GAISMAN (instructed by Messrs. Simmons & Simmons, Solicitors, London, EC2M 2RJ) appeared on behalf of the Plaintiff (Respondent).

LORD JUSTICE KERR
1

Having just reminded ourselves that this is an application for leave to appeal by the defendant, we think that in the light of the submissions we should give him leave to appeal, and we now give judgment on the appeal.

2

This arises from a decision of Mr. Justice Hirst under RSC Order 11 in the Commercial Court on 20th May 1988. He had before him a claim on an English commodity contract against the defendant, who is resident in Greece or Saudi Arabia or both. Leave to serve him abroad on account of a breach of that English contract had previously been granted ex parte by Mr. Justice Staughton and the writ had been served.

3

The plaintiffs were minded to proceed under 0.14 for summary judgment. However, in circumstances which I shall mention in a moment in the context of that contract, the defendant had also given them a Greek cheque by way of security which had been presented and dishonoured by him. Mr. Justice Hirst was faced with an application by the plaintiffs to amend their statement of claim by relying on the dishonour of the cheque as well as on the breach of the English contract. They asked for leave to re-serve the amended statement of claim on the defendant by relying on the cheque as well. Mr. Justice Hirst granted leave almost as a matter of course, without giving elaborate reasons. He said:

"I consider this to be a perfectly proper case for leave to serve out of the jurisdiction. I therefore give leave to serve out pursuant to RSC Order 11.

"I also think that this is a perfectly proper case for leave to amend the writ."

4

However, it is common ground that Mr. Justice Hirst was not referred to the cheque which he permitted the plaintiffs to introduce into these proceedings in this manner. As I have already indicated, the cheque was Greek. If he had known that, I think that he would have appreciated that the position is considerably more complex than he thought. I say all that by way of background to this appeal, which now raises a novel point on 0.11.

5

The plaintiffs are a well known firm of commodity brokers in London. They are or were owned by an associated company with the same or a similar name in New York. We are concerned with E.F. Hutton & Co. (London)Limited.

6

The defendant was, and may still be, a commodity trader trading in Saudi Arabia and Athens. Through a Mr. Badran, a representative of the plaintiffs, he entered into agreements for the opening of commodity accounts, which have been called brokerage contracts, for sugar in London and New York and grain in Chicago, the latter two being concluded with the American company. We are concerned with a sugar contract in London. This was opened by these plaintiffs in favour of the defendant through Mr. Badran.

7

The contract was dated 14th April 1986. It contained in clause 6, among other terms, the following provision:

"All monies which the undersigned owes to you at any time shall be repayable to you at your principal office in London."

8

Quite apart from that provision, it has never been contested that the brokerage contract was governed by English law. For present purposes I shall therefore refer to it as "the English brokerage contract".

9

Under the umbrella and as part and parcel of the English brokerage contract, it was also agreed that there should be security for any indebtedness by the defendant under the contract. Such indebtedness could of course take the form of a deficit on the account, or of a liability for margin interest.

10

Pending the issue of a bank guarantee which never materialised, the agreement was that the defendant would deliver a cheque to the plaintiffs for US $300,000. This was obviously subject to the implied condition that the plaintiffs would have no right to present the cheque unless and until such indebtedness under the English brokerage contract should arise. The reasons for handing over the cheque, which happened in Greece, are set out in the affidavits without any substantial difference between the parties. The defendant deposed as follows:

"I said, however" (this was to Mr. Badran, who had come to see the defendant in Athens) "that the cheque should not be presented without proper notice because I did not keep sums of that order in that account which was a current account. He [Mr. Badran] reassured me that there was no question of presenting it and that it was only security to file with E.F. Hutton until I provided my guarantee, which would in due course be finalised for US $300,000 but about which there was no particular urgency."

11

On behalf of the plaintiffs Mr. Bacon, the solicitor dealing with this matter, said the following:

"In my first affidavit I state the fact, as is the case, that the cheque the subject matter of the amended writ was delivered to the plaintiffs for any deficit in the defendant's account with the plaintiffs. It has been confirmed to me by Mr. Badran that the obtaining of the cheque from the defendant was and was understood by the defendant to be a condition of the operation of the defendant's account with the plaintiffs."

12

One then comes to the cheque itself. It was dated 30th April 1986 for US $300,000 and stated to have been issued at Athens. It was made payable to the order of E.F. Hutton (London) and drawn on the branch of Citibank in Athens. It provided on the front:

"This cheque is payable in Greece by sight draft in New York funds."

13

The plaintiffs claim that the defendant's account went into deficit in excess of $300,000. It remains to be seen whether, and if so on what grounds, it is disputed that they became entitled to present the cheque. But it is not disputed that the plaintiffs have at least a good arguable case on that. The cheque was duly presented in Athens for payment, but was dishonoured. On 8th October 1986 notice of dishonour was duly given to the defendant both in Saudi Arabia and Athens.

14

As I mentioned at the beginning, the plaintiffs' original claim against the defendant was based solely upon the English brokerage contract. They closed out the defendant's open position after the cheque had been dishonoured and are now claiming over US $420,000 by way of debt or damages. That was the claim in the original writ for which they had obtained leave to serve out under 0.11. When Mr. Justice Hirst granted leave to add a claim on the cheque he was almost certainly unaware that it was a Greek cheque in all respects. We now know that it was drawn in Greece on a Greek bank, payable in Greece and had been delivered to a representative of the plaintiffs in Athens. What is now said is that leave should not have been given to amend the writ and to re-serve it on the defendant. There is no challenge to the exercise by Mr. Justice Hirst of his discretion in this matter. Or, perhaps more accurately, it is not contested that if a claim on the cheque could properly be brought within the ambit of Order 11, then it is not denied that it would be proper for this court, now that it knows the full facts, to exercise the discretion to permit re-service under 0.11. Indeed, it would be surprising if this were not so. Given that the underlying, or umbrella, contract is clearly the English brokerage contract, which clearly falls within 0.11 on the ground that it is governed by English law and that it has been broken here, the transaction as a whole is manifestly within the spirit of 0.11. No doubt that is what led Mr. Justice Hirst to say what he did.

15

However, it is of course also trite law that there can be no leave to amend a writ which has been served out of the jurisdiction by the addition of a cause of action which does not qualify under 0.11. Accordingly, the writ and statement of claim could only be permitted to be amended in this case if the claim on the cheque can also be brought within 0.11. Everything depends on that.

16

When the matter came before Mr. Justice Hirst, there was a defect in the supporting affidavit on behalf of the plaintiff because the deponent did not identify the provision of 0.11 on which he relied, as he should have done. That has now been rectified and nothing turns on it. What we are concerned with is the question whether or not there is any provision of 0.11, or any other principle, which covers the inclusion of the claim on the cheque.

17

We were referred to the well known rules applicable to 0.11, which are collected in Note 11/1/6 in the Annual Practice under the heading "Principles upon which leave to serve outside the jurisdiction is granted". Paragraph 1 of the Note contains the following statements:

"The applicant for leave must show that his case falls clearly within one or other of the subparagraphs of r. 1( 1) or (2). In the application of this principle….

  • (c) any ambiguity in the construction of the rules will be resolved in favour of the foreigner"

18

and there is a reference to The Hagen (1908) Probate 189. There is also a sweeping up note at the end:

"The degree of proof of compliance with these requirements is, generally speaking,...

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