Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd

APPEAL from an order of the Court of Appeal reversing a judgment of Roche J.

In May, 1914, the respondents, the British Bank for Foreign Trade, Ld., applied to the appellants, the Russian Commercial and Industrial Bank, for a loan of 77,657l. sterling for a short term against the security of Baku 5 per cent. Bonds and Chinese Government 5 per cent. Bonds to be deposited in a bank in Brussels.

After some further negotiations the respondents, on June 26, 1914, deposited 30,000l. City of Baku 5 per cent. Gold Bonds with the Crédit Anversois, and 60,000l. Chinese Government 5 per cent. Gold Bonds with the Société Belge de Crédit Industriel at Brussels, at the disposal of the appellants' London branch, and on June 29, 1914, the appellants paid to the Commercial Bank of Siberia to the credit of the respondents 750,000 roubles. The sterling equivalent of the said amount of roubles at that date was 78,206l. odd.

A question having arisen upon the construction of the correspondence between the parties whether this loan was repayable in roubles or in sterling, the respondents, on September 12, 1919, issued a writ in an action in the King's Bench Division against the appellants, claiming (1.) a declaration that the respondents were entitled to the possession of the Chinese and Baku Bonds upon payment to the appellants at their London Branch of 750,000 roubles or the equivalent thereof in British currency, (2.) an injunction to restrain the appellants, their servants or agents from parting or in any way dealing with the securities save by delivering up the same to the respondents against the payment of the 750,000 roubles or their equivalent.

By an order of Bailhache J. of November 19, 1919, this action was transferred to the commercial list.

This case is reported only on the question whether in the circumstances the Court ought, in the exercise of its discretion under Order XXV., r. 5, to make a declaratory order.

At the trial of the action Roche J. on December 4, 1919, held, upon the construction of the correspondence as pleaded, in favour of the defendants (the appellants) that the loan was a sterling loan. With reference to the question whether in any event the Court ought to make the declaration claimed the learned judge proceeded: “It is said on behalf of the defendants that at all events this Declaration that is asked for ought not to be made, and the injunction which is asked for ought not to be granted because if it is a rouble loan, contrary to my decision, then the Plaintiffs are not able to repay the persons who have made it in the currency of the country, or at the place where the payment ought to be made. Therefore, this relief that is asked for, which is really ancillary to or in lieu of the relief which would be granted to a mortgagor of securities in a redemption action, ought not to be granted, and I think there is a great deal in that contention. The fact is this: if it was a rouble advance, it was certainly made by the main office of the Defendant Bank in Petrograd. The deposit of securities in Brussels was made in favour of the London Agency, who were here represented before me. There is no question that the London Agency can be sued and can be brought here, but the matter does not rest there. The point is whether it would be equitable or proper if I thought that the repayment ought to be made in Petrograd that in an indirect way redemption should be decreed when no such repayment is possible owing to a misfortune that is common to both parties as well as common to a vast number of the members of suffering humanity, namely, that an uncivilised Government is running in Russia and that matters are in such chaos that no repayment call be made or is possible. If my opinion as to the contract were different from the one which I have indicated, I should hesitate very long before I thought it either equitable or proper to grant the relief claimed in this action.” He accordingly dismissed the action with costs. By the formal judgment it was “adjudged that the plaintiffs do recover nothing against the defendants” and that the defendants recover their costs against the plaintiffs.

The Court of Appeal (Bankes, Scrutton and Atkin L.JJ.), after allowing an amendment which let in some further correspondence, upon a review of the correspondence as a whole, declared that the loan was a rouble loan repayable in roubles and not a sterling loan, and gave liberty to the respondents to take such proceedings in the Chancery Division as they might be advised to redeem their securities, but made no order upon the claim for an injunction. The Court allowed the appeal with costs, but ordered that there should be no costs of the action inasmuch as it was wrongly brought in the Commercial Court.