Israel Discount Bank of New York v Hadjipateras
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STEPHENSON,LORD JUSTICE O'CONNOR,LORD JUSTICE ROBERT GOFF |
| Judgment Date | 25 May 1983 |
| Judgment citation (vLex) | [1983] EWCA Civ J0525-1 |
| Docket Number | 83/0230 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 May 1983 |
[1983] EWCA Civ J0525-1
Lord Justice Stephenson
Lord Justice O'Connor
and
Lord Justice Robert Goff
83/0230
1982 I No. 6289
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 (JUDGE IN CHAMBERS)
(MR. JUSTICE NEILL)
Royal Courts of Justice
MR. GAVIN LIGHTMAN QC and MR. NICHOLAS CHAMBERS (instructed by Messrs. Cameron & Markby, Solicitors, London EC2) appeared on behalf of the Plaintiffs (Appellants)
MR. SIMON CROOKENDEN (instructed by Messrs. McHale & Co, Solicitors, London EC2) appeared on behalf of the Second Defendant (Respondent)
This is an appeal by the plaintiff bank from an order of Mr. Justice Neill of 4th February of this year, giving the second defendant, Mr. George Hadjipateras, unconditional leave to defend an action brought against him and his father on guarantees.
On or about 23rd July 1981 the father of the respondent and the respondent each executed a guarantee in favour of the appellant bank whereby each of them guaranteed the repayment of large sums of money lent by the bank to two Liberian companies, Seabound Shipping Corporation and Seaport Shipping Corporation. These guarantees replaced earlier guarantees given by the respondent and his father in 1980, when the respondent was 20 years of age. In August 1981 Seabound and Seaport failed to make certain payments in accordance with the terms of the agreements between them and the appellant. The appellant demanded repayment of the loans; Seabound and Seaport failed to pay and the appellant instituted legal proceedings.
The guarantees contained clauses whereby the guarantors, father and son, irrecoverably submitted to the jurisdiction of the New York courts and whereby the proper law of the contracts was New York law. Accordingly, on 31st August 1981 the appellant brought an action against the respondent and his father on their guarantees in the United States District Court, Southern District of New York ("the New York action"). But on 11th September 1981 the appellants also brought an action in the High Court of Justice, Queen's Bench Division here, for recovery of the loan monies and on the guarantees against the respondent and his father among others ("the English action").
On 1st October 1981 the respondent and his father filed a short answer in New York denying liability. On 21st October that answer was amended. Fourteen affirmative defences were set up, including defences that the court lacked jurisdiction. In addition, certain counterclaims were made, which included a charge of fraud. The relief sought included a claim for punitive damages in the sum of $20 million.
On 10th December 1981 the respondent swore an affidavit in the English action setting up a defence of undue influence in connection with the execution of the guarantee.
The only question raised by the plaintiff's appeal is whether the respondent has an arguable defence in law; might he, in the English action, successfully resist the plaintiff's claim under the guarantee with his plea of undue influence? That question is divided by the respondent's notice into two: first, a plea that in July 1981 he signed the guarantee, including the clause giving jurisdiction to the New York court, under the undue influence of his father; and secondly that he submitted to the jurisdiction of the New York court later by serving an answer to the plaintiff's claim in the New York action in October of 1981 under the same influence.
It is conceded that for the purposes of these 0.14 proceedings (a) it was arguable that the guarantee signed by the respondent in July 1981 was given in circumstances which amounted to undue influence by his father; and (b) it was therefore arguable that the contractual submission to the jurisdiction of the New York courts contained in the guarantee was ineffective. There is no evidence as to the law of New York on undue influence, so it must be assumed to be the same as English law. The respondent could therefore have raised it in the New York action unless he was prevented by the continuing undue influence of his father from doing so. Even if that influence must be presumed to have continued from July until October, it is conceded on the son's behalf that it had terminated by 10th December 1981 when he swore the affidavit to which I have referred. Thereafter the respondent took no steps to raise the plea of undue influence in the New York action; on the contrary, he took out a summons for a stay of the 0.14 proceedings in the English action on 10th February 1982, on the ground that the New York action was lis alibi pendens, and his leading counsel on the hearing of that summons on 15th and 16th February recognised that any judgment obtained in the New York action might be enforceable, though he would not go so far as to concede it; and leading counsel for the plaintiffs then gave an undertaking not to proceed with the 0.14 summons, except on 7 days' notice.
The respondent did nothing, except to join his father in failing to comply with the orders of the New York Court of Appeals and in moving the New York district court unsuccessfully to dismiss the New York action for lack of subject matter of jurisdiction. On 19th October 1982 judgment in default was given against both the father and the respondent. On 29th October 1982 the plaintiffs claimed in the second English action the sum of $210,720,477.07 and judgment for that sum, which consisted of the amount of the New York judgment and some further interest. On 23rd December 1982 the summons under O.14 was restored. The respondent's father did not oppose the plaintiff's application for summary judgment, and on 4th February of this year summary judgment was given against the father.
On those facts, can the respondent raise with any hope of success in the English action the defence that he was not bound by the guarantee or by submission to the jurisdiction of the New York court because he agreed to both through the undue influence, not of the appellants but of his father? I am clearly of the opinion that he cannot.
The learned judge stated the general rule as to the enforcement of foreign judgments shortly and correctly thus:
"A foreign judgment in personam made by a court of competent jurisdiction is enforceable by action in England provided that it is for a definite sum of money and is final and conclusive. To this general rule there is an exception in the case of sums payable in respect of taxes or penalties. Furthermore, a foreign judgment can be impeached (a) if the judgment was obtained by fraud, or (b) if the registration or the enforcement of the judgment would be contrary to English public policy or (c) if the proceedings in which the judgment was obtained were contrary to natural justice".
The judgment of 19th October 1982 is admittedly enforceable in this jurisdiction unless the respondent can establish (1) that it was made without jurisdiction; or (2) that its enforcement would be contrary to public policy. Mr. Crookenden, on behalf of the respondent, has sought to raise further grounds for claiming that this judgment is unenforceable and should not be acted upon by the courts of this country, but we have not allowed him to go beyond the two defences which were alleged below to be arguable defences entitling him to unconditional leave to defend.
The learned judge decided that the respondent had no arguable case on (1), jurisdiction; but on (2), public policy, he said this:
"As at present advised, I feel bound to say that I regard the defence as unconvincing, but I do not feel able to say it is unarguable. With considerable hesitation, therefore, having regard to the history of this matter, I have finally come to the conclusion that it would not be right for me to give judgment for (the appellant) bank against (the respondent) Mr. George on this summons. In other circumstances a conditional order might be appropriate, but the sum claimed here is in excess of $US 10 million. There will therefore be unconditional leave to defend….."
On (1), jurisdiction, I agree with the learned judge.
In the light of the appellant's concessions this question, which I deal with first as the learned judge did, is whether, apart from the jurisdiction clause in the guarantee, the New York court acquired jurisdiction because the respondent voluntarily appeared and took part in the New York action.
What the respondent swore relating to that on 1st February of this year was this; I read paragraphs 18, 19 and 20 of his affidavit:
"18. I was advised that my chances of defending the proceedings in England were far greater than defending the proceedings in New York. Although I was advised that there was a potential conflict of interest between my father and myself, at no juncture was it suggested to me that I could defend the proceedings in New York on the grounds of undue influence. The decision not to defend the proceedings in New York was taken by my father.
"19. I was advised by Elborne Mitchell" (they are solicitors) "in January that they were unable to represent both my father and myself. I had made no decision about separate representation before because firstly I understood that it was better to try and run both cases together, secondly, my father took all the decisions on what steps should be taken and, thirdly, I neither have nor had any financial means and I had to discuss the case and seek financial help from other...
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