Kahler v Midland Bank Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Lord Simonds,Lord Normand,Lord MacDermott,Lord Reid,Lord Radcliffe |
| Judgment Date | 20 October 1949 |
| Judgment citation (vLex) | [1949] UKHL J1020-2 |
| Date | 20 October 1949 |
| Court | House of Lords |
[1949] UKHL J1020-2
Lord Simonds
Lord Normand
Lord MacDermott
Lord Reid
Lord Radcliffe
House of Lords
Upon Report from the Appellate Committee, to whom was referred the Cause Kahler against Midland Bank Limited, that the Committee had heard Counsel as well on Tuesday the 21st, as on Wednesday the 22d days of June last, upon the Petition and Appeal of Viktor Kahler, of 45 Park Avenue, New York, in the United States of America, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal of the 19th of April 1948, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioner might have such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed case of Midland Bank Limited, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 19th day of April 1948, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellant do pay or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
The facts of this case are fully stated in the opinion which my noble and learned friend Lord Normand will deliver and I need not rehearse them. Nor, but for the fact that, as I understand, some of your Lordships do not concur in the view that this appeal should be dismissed, should I have thought it necessary to add any words of my own.
It appears to me, my Lords, that the solution of this case depends upon the view which is taken of the relation in which the Appellant stood, or must be deemed to have stood, to the Bohemian Bank after that Bank had succeeded the Zivnostenska Bank as the customer of, and bailor to, the Midland Bank in respect of the securities which are the subject of this appeal. I advisedly say "stood or must deemed to have stood," for whatever alternative contention might have been open to the Appellant, he has by his pleading, original, amended and re-amended, committed himself—and I do not doubt, for very good reason committed himself—to the view that the securities were properly transferred from the depot of the Zivnostenska Bank to that of the Bohemian Bank with the Midland Bank. This view of the transaction materially narrows the area of debate.
In the first place I am clearly of opinion that the Court of Appeal was right in holding that between the Appellant and the Midland Bank there was no contractual nexus. Upon this point there is no disagreement among your Lordships.
But it is upon the alternative plea that a difference arises. The Appellant, contract failing him, claims in detinue. The securities, he says, are his. Neither the Midland Bank nor the Bohemian Bank claims any beneficial interest in, or lien over, them. The answer made by the Bank is that that is not enough to support a claim in detinue; the Appellant must show also that he is entitled to immediate possession, and that he cannot do, for the Midland Bank holds the securities in safe custody for the Bohemian Bank and that Bank is entitled to refuse delivery to the Appellant. It is the validity of this answer which is in issue and it is, I think, a matter of regret that the Appellant did not think fit to bring before the Court the Bohemian Bank whose answer it is. The question however is the same whether the answer is made by the one Bank or the other.
It becomes necessary then to examine the answer made by the Midland Bank. It involves two propositions which are to some extent interdependent. The first is that under Czechoslovak law the Bohemian Bank cannot lawfully deliver the securities to the Appellant; the second, that, therefore, their bailee, the Midland Bank, ought not to be compelled by the Courts of this country so to deliver them up.
The first of these propositions is clearly established by the evidence of, Dr. Hartmann, which does not appear to me to be open to challenge. It is necessary only to say that the relevant law relating to foreign exchange, under which the delivery without a consent that was in fact withheld would be illegal, is not in my opinion a law of such a penal or confiscatory nature that it should be disregarded by the Courts of this country.
The second proposition presents greater difficulties. It involves the consideration of two matters; first, what were the terms of the contract of bailment between the Appellant and the Bohemian Bank, and second, what was the law governing its performance so far as that consisted of delivery of the securities upon termination of the bailment. First, as to the terms of the contract. Here, my Lords, we are, I think, in a region of artificiality. that the securities were properly transferred to the depot of the Bohemian Bank with the Midland Bank, yet it remains to determine what as between him and the Bohemian Bank were the contractual terms. Herein lies the difficulty. But it appears to me that, admitting the proper transfer of the securities to the depot of the Bohemian Bank and alleging no other terms as between himself and that Bank than had formerly obtained between himself and the Zivnostenska Bank, the Appellant is driven to the admission that he is in the same position, no better and no worse, as he would be in, if no transfer had taken place. What then would the position be if, on behalf not of the Bohemian Bank but of the Zivnostenska Bank, the Midland Bank had pleaded that the Appellant was not entitled to immediate possession because their bailors were entitled to refuse delivery? This would depend, I think, on one thing only, viz.: what is the proper law of the contract between the parties. If the proper law is the law of Czechoslovakia, I have no doubt that the defence is a valid one; for the Courts of this country will not compel the performance of a contract if by its proper law performance is illegal. And it follows that it must be admitted as a good defence in an action of detinue that the bailor, whose bailee is sued, is entitled to deny possession to the Plaintiff because it is illegal to give him possession.
What then is the proper law of the contract that was made with the Zivnostenska Bank and that I have assumed to have been renewed with the Bohemian Bank? In my opinion, it was the law of Czechoslovakia. The contract was made in that country between an individual and a corporation both resident there. At the date of the contract and at the material times thereafter the law of Czechoslovakia included a law regulating transactions in foreign exchange substantially the same as that which prevailed at the date of the issue of the writ. At all material times it was illegal for the Bank, Zivnostenska or Bohemian, to part with foreign securities in its custody without the consent of the National Bank or other proper authority, whether those securities were at the date of the contract in fact situate in Czechoslovakia or in some other country. In these circumstances I cannot accede to the contention of the Appellant that the proper law of the contract so far as it concerns the delivery of the securities is governed by the law of England or of any other country in which they may chance to be situate. I do not doubt that the Appellant may have hoped to obtain some advantage by having his securities kept in London. But, whatever his hopes or fears, it is impossible to suppose either that the Bank intended any other law than that of Czechoslovakia to govern the contract or that the Appellant could impute any such intention to them. Why should they be presumed to subject themselves to a foreign law, whose application might make them liable to penalties under their own law? And why should he be presumed to have made a contract in the faith that its performance would be governed by a foreign law, when he must have known that the Bank would by no means agree to submit to it? On the other hand it is easy to presume that a contract, clearly governed by the lex loci contractus in its interpretation and in all aspects of the rights and obligations it creates except that of delivery up, should in that aspect also be governed by the same law. I doubt whether your Lordships can get any assistance from the very numerous authorities on this branch of the law and I refrain from reviewing them. Ultimately the test is that stated by Dicey in Rule 136 (p. 579 of the 6th Edition of the Conflict of Laws): the proper law of a contract means the law by which the parties intended or may fairly be presumed to have intended the contract to be governed. I think that the fair presumption to be derived from the whole of the circumstances of the contract, unusual and artificial as they are, is that the parties intended the law of Czechoslovakia to govern it in all its aspects.
Coming to this conclusion. I must hold that the Bohemian Bank would be entitled to deny possession of the securities to the Appellant so long as under Czechoslovakian law it was lawfully forbidden to hand them over. If so, its bailor the Midland Bank should not be compelled in the absence of the Bohemian Bank to deliver them up.
For these reasons, which will be amplified by some of your Lordships, I am of opinion that this appeal should be dismissed with costs.
My Lords,
This appeal involves questions of difficulty...
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