Ionian Bank Ltd v Couvreur

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE DAVIES
Judgment Date23 January 1969
Judgment citation (vLex)[1969] EWCA Civ J0123-1

[1969] EWCA Civ J0123-1

In The Supreme Court of Judicature

Court of Appeal.

Appeal of defendant from order of Mr. Justice Roskill in chambers on 28th November, 1968.

Before:

The Master of The Rolls (Lord Denning).

Lord Justice Davies and

Lord Justice Widgery.

Between
Ionian Bank Limited
Plaintiffs, Respondents,
and
Michel Marie Couvreur
Defendant Appellant.

Mr. DAVID HIRST, Q.C. and Mr T. BINGHAM (instruoted by Messrs, Preshfield) appeared on behalf of the Appellant Defendant.

Mr. B. MacCRINDLE, Q.C. and Mr. H. HILL (instruoted by Messrs. Herbert Smith & Co.) appeared on behalf of the Respondent Defendant.

THE MASTER OF THE ROLLS
1

The Ionian Bank Limited sue upon a number of written guarantees which were given to them by M. Michel Marie Couvreur on various dates from February 1966 to February 1967, the total being the sum of £20,392 lls. 7d. They have taken out a summons under Order XIV for summary judgment. The Judge has given leave to defend to M. Couvreur on condition of the whole sum being brought into Courts; and now M. Couvreur appeals to this Court. The case raises two points: first, whether the action ought to go on in England at all, having regard to some proceedings which the bank have already taken in France; and, secondly, if the action is to go on, whether there is to be leave to defend or no.

2

The story is a little complicated and I must recite the facts. It appears that in the year 1965 M. Couvreur was interested in acquiring the products of a vineyard in France — the Thevenot vineyard; but he had not got the money with which to buy the products. So he approached the Ionian Bank in London to help in the venture. M. Couvreur had two companies which were wholly owned by him, or substantially wholly owned — an English company, Michel Couvreur Limited, and a French company of the same name, Michel Couvreur S.A., societe anonyme. As a result of their discussions, a letter passed in October 1965 which on the face of it constituted a partnership between the bank and M. Couvreur's English company. It was from the Ionian Bank:

3

"Dear Monsieur Couvreur, I confirm that on behaif of the Ionian Bank, I have entered into a partnership with your English Company to buy the wines on the attached sheet" that is the Thevenot wines. "for the sterling equivalent of 205,000 NF in London today Monday, October 16th, 1969. The net profit after all expenses, including interest at 2% over Bank Rate, will be divided between us 50% each".

4

After that letter the Bank paid £14,913 3s. 2d. (the sterling equivalent of the francs) to the English company Michel CouvreurLtd. The English company bought the Thevenot wines from Madame Fournier and paid her. But the transaction did not ultimately go through in the form of a partnership as originally contemplated. M. Couvreur himself explained the reason. He said that afterwards there was a discussion between him and Mr. Baird, the Managing Director of the Ionian Bank. He said:

5

"Baird spoke to me of his desire to formulate a plan which would enable all profits from the venture to be enjoyed free of tax. He suggested that only the interest on the money advanced was to be paid to the Plaintiffs and the profits paid to companies controlled by Mr. Behrene which were safe from the taxation angle either on account of their location or on account of their right to offset the profits against earlier losses.

6

This meeting followed receipt of a letter referring to a loan. I pointed out that the agreement had been one of partnership and Mr. Baird said that the Plaintiffs' position as bankers in respect of exchange control as well as income tax demanded such apparent alteration. He said no further funds would be forthcoming if the draft was not signed. The original agreement, he said, had merely to be split into a loan from the Bank and a profit sharing with some of Mr. Behrene's companies. Eventually, I signed an amended form of letter and a form of personal guarantee".

7

It is quite plain from that sworn statement by M. Couvreur that there was a new arrangement between them. The previous arrangement for a partnership on a 50% basis was replaced by a new arrangement designed to avoid tax. A letter was sent by the Ionian Bank for M. Couvreur's approval. He made in his own hand a number of significant alterations. It was then typed out in final form for the signature of the English company. Then on 20th February, 1966, the English company wrote to the Bank:

8

"We write to record the arrangements arrived at between us as follows;

9

"1. You have made a loan to this company of £14,913 3s 2d. which amount was credited by you to this company's account at Westminster Bank Limited on 19th October, 1965.

10

2. We understand that the rate of interest applicable to this loan will be 2% above Bank of England Discount Rate for the time being, with a minimum of 7% per annum.

11

3 The security for the loan is 139½ casks of wine (each cask containing 225 litres) constituting the entire produce for the year 1964 of the Domaine Hyppolyte Thevenot at Alexe Corton, Cote-D'or, France, particulars of which wine are set out in the schedule to this letter. Accordingly we hereby hypothecate to you the said stock of wine as security for your loan to this Company. In addition, the repayment of half of the loan will be guaranteed by M. Michel Couvreur and the other half by Mr. E.M Behrens or by a company nominated by him. The insurance company which is covering this wine against all usual risks will also be notified of your interest and we will send you the polioy in due course. We have already delivered to you a signed copy of the purchase contract covering this wine.

12

4. It is intended that the bulk of the wine will be bottled as and when each item is ready.

13

5. Enough of the wine will be sold by us to repay the said loan and interest thereon.

14

6. We will notify you of all sales of this wine which we may make and the amount and date of reoeipt of the net proceeds thereof.

15

7. For the purpose of repaying the said loan and interest thereon we will hold the net prooeeds of sale of all this wine hypothecated to you in trust for you, to remit the same to you forthwith in reduction or extinguishment of your advance to us and interest thereon.

16

8. We estimate that in the ordinary course of our business as wine merchants the loan and interest thereon should be completely repaid by the end of 1967".

17

That was clearly a contractual letter whereby the Ionian Banklent £14,913 3s. 2d. to the English company on those detailed terms. On the same day M. Couvreur personally signed (the letter said he would) a personal guarantee for half the amount, namely. £7,466 11s. 7d. Whatever the original arrangement was, it seems to me plain that it was replaced by a new arrangement altogether, under which the Bank lent the money to the English company, Michel Couvreur Limited. and M. Couvreur guaranteed half the sum to be repaid. At the same time, however, there was a collateral arrangement for a partnership. On 23rd February,1966, a company called the Crosshaven Management company Ltd. wrote a letter recording that they had entered into a partnerahip arrangement with the English company. Michel-M. Couvreur Ltd., to buy the stock of wine on the Thevenot estate, and saying that the net profit on the sale would be divided equally between them. The Crosshaven Management Company was as associated company of the Ionian Bank. So the net result was that the associated company entered into the partnership, and not the Bank.

18

That was the first transaction. It was followed by a number of other transactions. I need not go into them in detail. They all followed the same form. In each case there was a loan by the Ionian Bank to the English company and a guarantee of half by M. Couvreur personally which he himself signed. Yet at the same time there was, on each transaction, a collateral arrangement for a partnership. The partnership was between an associated company of the Bank and the Engliah company: and was for half the profits.

19

All the transactions were carried through accordingly. Wines were obtained and bottled and put in store in France. All were paid for by money provided by the Ionian Bank. Some time later some of the wines were sold; but, unfortunately, very little of the proceeds seem to have been paid to the Ionian Bank. Eventually at the end of 1967 the Ionian Bank became restless. They investigated the position, and sought to recover the moneys due to them.

20

In the first place they took proceedings in France. They issued proceedings in the Tribunal at Dijon on 5th March. 1968, for an order of asisis conservatoire (a stop order) against the wines held by M. Couvreur and his French company and the English company at Bouse-les-Beauns, Cote D'Or in France; but in accordance with French procedure, that stop order had to be followed up by proceedings in the Courts to determine the ownership of the wines and the validity of the claim. Proceedings were taken both in Dijon and in the Tribunal de Commerce at Beaune. Furthermore, in June 1966, in France there was a complaint of a criminal nature in regard to the supposed fraudulent conversion of a pledge.

21

Very soon after starting those French proceedings, the Ionian Bank issued a writ in England against M. Couvreur and his guarantee. On 19th March, 1968, the Bank issued the writ in this action claiming the sums (half the loans) due on the guarantees. There were six of them amounting to £20,392 11s 7d. M. Couvreur applied for a stay. He said that the Bank ought not to take proceedings in England whilst...

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