Safa Ltd v Banque du Caire
| Jurisdiction | England & Wales |
| Judge | Hale L JJ.,Waller,Schiemann |
| Judgment Date | 20 July 2000 |
| Judgment citation (vLex) | [2000] EWCA Civ J0720-23 |
| Docket Number | Case No: A3/2000/0221; 2000/5272; 2000/5331; 2000/5332; 2000/6338 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 July 2000 |
[2000] EWCA Civ J0720-23
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
Mr Justice Timothy Walker
QUEEN'S BENCH DIVISION (COMMERCIAL)
Royal Courts of Justice
Strand,
London, WC2A 2LL
lord Justice Schiemann
Lord Justice Waller and
Lady Justice Hale
Case No: A3/2000/0221; 2000/5272; 2000/5331; 2000/5332; 2000/6338
Mr J Bogle (instructed by Grunfeld Davis for the Appellant)
Mr R Slade (instructed by Norton Rose for the Respondent)
Introduction
This is an appeal from a decision of Timothy Walker J given on 21 st October 1999 by which he refused to give summary judgment in favour of the claimant who claimed as assignees of a beneficiary under two letters of credit.
The facts
Safa Limited (Safa) are the assignees of two letters of credit opened by Banque Du Caire (the Bank) on 3 rd July 1998, but amended on 30 th July and 3 rd August. The beneficiary of the letters of credit and the assignor was Paul Group International Insurance Brokers/T.L.Dallas (London) Limited (PGI) a Lloyds Insurance broker. Under the letters of credit as amended the Bank undertook to pay in one case a sum not exceeding US$ 5,550,000, and in the other a sum not exceeding US$ 3,700,000 "available for payment against the presentation of Financial Insurance guarantee in the name of Banque Du Caire El Dokki branch to Barclays Bank PLC at 54 Lombard Street�.by Merrion Reinsurance Company Ltd, this guarantee to be authenticated from [various bodies] and this financial insurance guarantee will be: deed of guarantee for non-payment of loan's instalments with the following text:
Whereas, we acknowledged that [the Bank]�has agreed to grant its client Aboul Fotouh Establishment (the borrower) a loan amounting to [in the one case $30,000,000, and in the other $20,000,000] with the terms mutually agreed upon for which borrower issued cheques numbering 7 representing the instalments for payment on said loan �which said cheques are drawn and detailed in the enclosed schedule�which is deemed to be integral and complementary part of this deed�.
"We, Merrion Reinsurance Company Ltd., (the guarantor). located at �commercial registry no �of the year issued in the city of hereby declare that our liability is absolute, unconditional and irrecoverable now or in the future for whatever reasons, to secure and guarantee, in our capacity as joint guarantor vis-a-vis Banque Du Caire, Branch Dokki (lender), all obligations of Aboul Fotouh Establishment (borrower) with the bank. and thus, in the one case $30,000,000, and in the other $20,000,000, and we hereby undertake to pay the lender bank any amount or amounts representing the value of any of the cheques for the instalment mentioned in the enclosed payment schedule in the event of non-payment by the borrower of the value of the cheque or cheques on their maturity dates for whatever reasons, and thus, immediately and upon first written request from the lender bank sent by fax confirmed by registered mail to our address as above mentioned, without consideration to any objection or dispute from the borrower or anybody whatsoever." "
The letters of credit as amended [see C1 169 and 178] continued
"1. The only document is the deed of guarantee�
2. Payments will be made against receipt of the deed of guarantee�.
3. The total amount in [one case US$5,550,000, and the other US$3,700,000] paid as follows:�ten equal monthly payments of [in the one case $550,000, and the other $370,000] starting with receipt of the deed of guarantee for non-payment of loan's instalments".
It will be apparent, as the judge himself remarked, that these letters of credit are somewhat unusual on their face. Nothing has been made by Mr Slade for the Bank of the fact that the sums due were to be paid in instalments which might be thought to be unusual, but other features which are unusual are that the letters of credit are undertaking to pay a sum to an insurance broker against the obtaining of financial guarantees of which the Bank itself was to be the beneficiary, in connection with a loan which the Bank was itself negotiating with its customer. Even without looking at any surrounding documents the inference would appear to be that the Bank is promising to pay money for the obtaining of the financial guarantees. Indeed it is not unimportant that the relationship between the beneficiary in this case and the Bank is clearly not covered simply by the terms of the letter of credit. PGI were acting as brokers. It is submitted by Safa that PGI were acting for the borrower (AFE), but the financial guarantee they were obtaining was in favour of the Bank, and that seems to me at least prima facie to demonstrate that they were acting as brokers for the Bank.
Indeed the relationship between PGI and the Bank was such that Mr Bogle, for Safa, in my view very properly felt constrained to accept that, if the Bank had paid money under the letter of credit to the brokers PGI, but the Bank had decided not to lend money to its customer, and had cancelled the guarantee from Merrion without Merrion ever having been on risk, the Bank would have had a claim against the broker for the return of the moneys. Mr Bogle suggested that the broker might not have to return brokerage or any remuneration agreed to be paid to the broker for obtaining the financial guarantee, but without debating that issue, the very proper concession demonstrates the unusual nature of the relationship of the Bank and the beneficiary in this case, and demonstrates that that relationship, I emphasise again, is not simply governed by the terms of the letters of credit.
Background
The history of the matter appears to be as follows and I shall indicate where disputes lie.
As is already apparent, AFE were desirous of borrowing money from the Bank. To obtain those loans they were prepared to offer by way of security, financial guarantees. PGI were insurance brokers who were to find insurers prepared to offer such guarantees. Merrion were selected as those insurers. PGI would not have recommended Merrion and PGI assert that they informed AFE that Merrion was not to be recommended. They informed AFE, so it is alleged, that Merrion were not in the security list of Lloyds. The Bank do not accept that AFE were told these things, indeed the Bank allege that they were informed by their customer Mr Fotouh that he had had excellent reports on Merrion from PGI. [see para 39 of Mrs Sapur C2 490]. This may be in dispute but it is certainly not alleged by Safa that PGI ever told the Bank that it did not recommend Merrion. It seems that references from bankers, solicitors and accountants were obtained by AFE and passed to the Bank, and the Bank made its own inquiries of Citibank, but it is not suggested that the Bank discovered the poor rating of Merrion.
AFE applied to the Bank for the opening of a first letter of credit (not the subject of these proceedings) naming Merrion as the issuer of an insurance policy and also at this stage naming Merrion as the beneficiary of the letter of credit. At some stage PGI became the beneficiary. This letter of credit undertook to pay $1,950,000, $1,250,000 within five days of receiving the "complied documents", and $350,000 on 1 st July 1998, and $350,000 on 1 st August 1998. A financial guarantee was presented under the letter of credit and the Bank paid the sums due. Unknown to the Bank, PGI had instructed Barclays Bank to discount the letter of credit, and required $1,053,000 to be paid to Merrion, $1,500 to be paid to Tower Risk Management (a subsidiary of Merrion), and $600,000 to a Mr M. Shakir Ahmed [C2�296]. There was a balance which presumably represented PGI's brokerage.
An instruction to distribute the proceeds of the two letters of credit the subject of these proceedings included an instruction to make payments to Mr Ahmed. Before the judge the Bank's case was that PGI were obtaining dishonestly more under the letters of credit than they required for the payment of premium to Merrion. Indeed, part of their case by a statement put in very late before the judge was that PGI had represented to AFE that they were not even taking brokerage on the deal, and that PGI were dishonestly obtaining all moneys which were in excess of that which was required to pay premium. Safa, having produced evidence that PGI were to be remunerated (see C3�648), the Bank have not pursued that point on appeal. On the appeal Safa have sought to put in statements from representatives of PGI, Mr Towey and Mr Sterry. They assert that the payments to Mr Ahmed were payments made on the instructions of AFE through agents of AFE. As Mr Towey states "As far as I was concerned the surplus was not my property and neither that of PGI and I had to transfer it to wherever AFE wished. Neither I or PGI were benefiting from this surplus."[C3�544]
In June 1998 the arrangements were made for the issue of the further letters of credit the subject of this action. Once again Merrion were named as the providers of the financial guarantees. The credits were issued originally on 3 rd July 1998, but amendments were made on 30 th July and 3 rd August. There are certain features emphasised on behalf of Safa or the Bank.
First, Safa points to the fact that Mrs Sapur in her evidence for the Bank suggests that she "objected vehemently about the idea to secure financial guarantees by means of a letter of credit" and that Mr Fotouh (AFE) "dictated it to us".[C2�492]
Second, AFE lodged as security for the two letters of credit the full amounts due to be paid under them...
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