Raiffeisen Zentralbank Osterreich AG v Crossseas Shipping Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Cresswell J. |
| Judgment Date | 19 March 1999 |
| Date | 19 March 1999 |
| Court | Queen's Bench Division (Commercial Court) |
Queen's Bench Division (Commercial Court).
Cresswell J.
Stephen Hofmeyr (instructed by Stephenson Harwood) for the plaintiffs.
Richard Salter QC and Geraldine Andrews (instructed by Lawrence Jones) for the fourth defendant.
The following cases were referred to in the judgment:
Aldous v CornwellELR(1868) LR 3 QB 573
Bank of Hindostan, China & Japan Ltd v Smith(1867) 36 LJCP 241
Barclays Bank plc v LaneUNK(unreported, 29 October 1986)
Caldwell v Parker(1869) Ir Rep 3 Eq 519
Co-operative Bank plc v TipperUNK[1996] 4 All ER 366
Crediton (Bishop of) v Bishop of ExeterELR[1905] 2 Ch 455
Davidson v CooperENR(1844) 13 M & W 343; 153 ER 142
Eagil Trust Co Ltd v Piggott-BrownUNK(unreported, 9 January 1987)
Ellesmere Brewery Co v CooperELR[1896] 1 QB 75
Gardner v WalshENRENR(1855) 5 El & Bl 83; 119 ER 412
Koch v DicksELR[1933] 1 KB 307
Lombard Finance Ltd v Brookplain Trading LtdWLR[1991] 1 WLR 271
Master v MillerENR(1791) 4 TR 320; 100 ER 1042
Pigot's Case (1614) 11 Co Rep 26b; 77 ER 1177
Suffell v Bank of EnglandELR(1882) 9 QBD 555
Banking Guarantee Whether alteration of guarantee by insertion of name and address of agent for service rendered guarantee unenforceable.
This was a trial of preliminary issues raising the question whether the alteration to a guarantee by the insertion of the name and address of a service agent was material so as to render the guarantee unenforceable.
The plaintiff bank claimed against the defendant, S, under a guarantee. The guarantee was a standard form of guarantee containing 38 clauses. Clause 37, which was left blank when S signed the guarantee, allowed the guarantor to appoint an agent to accept service of documents in England. After S signed an officer of the bank filled in the name and address of a company connected with S. S alleged that the guarantee had thereby been avoided since that was a material alteration made to it after execution relying on Pigot's Case (1614) 11 Co Rep 26b; 77 ER 1177.
Held ruling that the alteration was not material and that the guarantee was not thereby rendered unenforceable:
The question whether an alteration was material depended on the instrument in question. Clause 37 formed part of a standard form of guarantee. The central obligations were contained in cl. 2 (guarantee) and cl. 3 (indemnity). The service agent clause was procedural in nature and the contract of guarantee and indemnity would not operate differently whether cl. 37 was filled in or not. The bank was entitled to issue proceedings without prior demand and it was arguable that a demand had to be served on the guarantor as well as the service agent (as had been done in this case). The legal incidence and business effect of the guarantee was not altered and the alteration was accordingly not in the context material.
Cresswell J: I give this judgment following the trial of preliminary issues set out below.
In this action RZB claims against Mr Shah the sum of U$5m and interest, which is alleged to be due under a guarantee dated 29 July 1997 (the guarantee). One of the matters relied on by Mr Shah by way of defence is the allegation that the guarantee has been avoided by a material alteration made to it after execution, the particular alteration complained of being the insertion without Mr Shah's knowledge or consent in cl. 37 of the guarantee (which had been left blank) of the name, address, telex and fax numbers of Crossseas Shipping Ltd as purported service agent.
On 4 December 1998 Rix J ordered that the following issues of fact and law be tried as preliminary issues before all other questions or issues in this action, namely:
(1) Whether cl. 37 of the deed of guarantee dated 29 July 1997 and signed by Mr Shah (the guarantee) was filled in by Mr Andrew Church of the plaintiff before Mr Shah signed the guarantee and returned it to the plaintiff or after.
(2) If cl. 37 was filled in after Mr Shah signed the guarantee, whether, in determining whether that alteration to the guarantee was material, so as to render the guarantee unenforceable against Mr Shah, the court would be entitled to take into account any factual matters pertaining to the relationship between Mr Shah and the service agent named in cl. 37 which may hereafter be pleaded by the plaintiff by way of amendment to its points of reply.
(3) Whether (leaving out of account any such factual matters as aforesaid) the alteration to the guarantee by the insertion of the name and address of the service agent in cl. 37 was material so as to render the guarantee unenforceable against Mr Shah.
Mr Shah's guarantee was dated 29 July 1997. It is, however, common ground that at a meeting between RZB (by Mr Intranova) and Mr Shah on 31 July 1997 Mr Shah executed the guarantee. At the time the guarantee was executed cl. 37 (service agent) contained blanks against the words Name: Address: Telex: Fax:. The guarantee was otherwise completed and witnessed and Mr Shah confirmed that he had received a copy of the guarantee.
By letter dated 2 February 1998 Lawrence Jones, solicitors for Mr Shah, reserved Mr Shah's position in relation to the question of material alterations to the form of guarantee.
By letter of demand dated 13 February 1998 addressed to and couriered (with an accompanying letter) to Mr Shah, PO Box 46342, Nairobi, Kenya, RZB demanded payment under the guarantee. A copy of the letter of demand (with an accompanying letter addressed to Mr Shah c/o Crossseas Shipping Ltd) was also served on Crossseas Shipping Ltd at an address in Leicester on 13 February. Mr Shah received a copy by fax from Crossseas on or about the same day. A copy of the letter of demand was also sent to Mr Shah's solicitor Lawrence Jones by fax and post on 13 February.
In an affidavit sworn on 18 February 1998 on behalf of RZB in support of its application for a Mareva injunction, Mr Intranova stated:
The guarantee as signed by Mr Shah was undated (as well as certain other blanks in the document). Accordingly I asked Mr Shah to insert the date etc. Each additional manuscript amendment was signed by Mr Shah. Together with Mr Raju Vora I then witnessed the document. I believe that Mr Shah then signed again to acknowledge receipt of a copy. I retained the original copy of the guarantee
On 19 February 1998 RZB applied ex parte on notice for Mareva and disclosure orders. Colman J granted an injunction against, inter alia, Mr Shah prohibiting disposal of assets worldwide (with ancillary disclosure orders). The writ of summons was issued on 20 February. On 27 February an order of Colman J varied the order of 19 February. Points of claim followed on 12 March. On 20 March an order of Longmore J varied the order of 19 February (as varied on 27 February). On 9 April an order of Thomas J varied the order of 19 February (as varied on 27 February and 20 March).
On 1 May the second affidavit of Mr Angus Johnson sworn on behalf of RZB in support of RZB's application for summary judgment stated that the guarantee does not contain any material alterations made without the fourth defendant's consent.
On 18 May affidavits were sworn by Mr Jignesh Desai and Mr David Hughes on behalf of Mr Shah. Mr Shah's second affidavit of 20 May 1998 sworn in opposition to the application for summary judgment set out his case in connection with cl. 37 of the guarantee.
On 21 May 1998 Clarke J by consent ordered that Mr Shah have unconditional leave to defend the action and gave directions for trial. Points of defence and counterclaim followed on 15 June and points of reply and defence to counterclaim on 9 July. On 17 July Tuckey J ordered RZB to produce original documents bearing the handwriting of Mr Intranova and Mr Church for comparison purposes. The order that preliminary issues (as above) be tried was made on 4 December. The points of defence and counterclaim were amended on 5 February 1999. On 12 February Rix J ordered RZB to answer interrogatories as to who filled in cl. 37 of the guarantee.
On 26 February Lawrence Jones (solicitors to Mr Shah) received a letter from Stephenson Harwood (RZB's solicitors) which stated:
In view of the evidence served on behalf of Mr Shah, we can inform you that our clients will not contest the first of the preliminary issues and will accept for the purposes of this action that cl. 37 of the guarantee was completed after the guarantee was executed by Mr Shah.
It is agreed between the parties that issue 1 should be answered as follows. Clause 37 was filled in by Mr Church after Mr Shah signed the guarantee and returned it to RZB.
I turn to consider issue 3.
Whether the alteration to the guarantee by the insertion of the name and address of the service agent in cl. 37 was material so as to render the guarantee unenforceable against Mr Shah.
At the time Mr Shah signed the guarantee cl. 37 provided:
The Guarantor hereby irrevocably appoints the following as its agent to accept service of all legal process issued in England in any legal action or proceedings against the Guarantor or its assets arising out of or in connection with the Guarantee:
Name:
Address:
Telex:
Fax:
(The Service Agent).
The Guarantor agrees that any notice, demand or other communication to be given hereunder and any legal process shall be sufficiently served if delivered to the Service Agent at its address as specified in this Guarantee or such other address in England as it may have notified to the Bank for such purpose. The Customer agrees to notify the Bank in writing within (7 days) of any replacement Service Agent which it appoints if the Service Agent named above (or any replacement Service Agent) ceases to act. Failing the appointment of a replacement Service Agent acceptable to the Bank, the Bank shall be entitled by notice in writing to the Customer to appoint a replacement Service Agent on the Customer's behalf.
Mr Church of RZB filled in the...
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Raiffeisen Zentralbank Osterreich AG v Crossseas Shipping Ltd
...guarantee unenforceable — Test for avoidance for material alteration. This was a defendant's appeal from the judgment of Cresswell J ([1999] CLC 973) that a bank guarantee was not rendered unenforceable by an alteration to insert the name and address of an agent for service. The plaintiff b......