Sanders Lead Company Inc. v Entores Metal Brokers Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE STEPHENSON,LORD JUSTICE KERR
Judgment Date24 November 1983
Judgment citation (vLex)[1983] EWCA Civ J1124-3
Date24 November 1983
Docket Number83/0461

[1983] EWCA Civ J1124-3

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

(MR. JUSTICE BINGHAM)

Royal Courts of Justice

Before:

Lord Justice Stephenson

and

Lord Justice Kerr

83/0461

1983 S No. 369

Between:
Sanders Lead Company Inc
Plaintiffs (Appellants)
and
Entores Metal Brokers Limited
Defendants (Respondents)

MR. M. TUGENDHAT (instructed by Messrs. Simmons & Simmons, Solicitors, London EC2M 2RJ) appeared on behalf of the Plaintiffs (Appellants)

MR. C. MOJER (instructed by Messrs. Smiles & Co, Solicitors, London WC1R 4EF) appeared on behalf of the Defendants (Respondents)

MR. J. HIRST (instructed by Messrs. Middleton Potts & Co, Solicitors, London EC2R 8DS) appeared on behalf of Metal Traders (UK) Ltd, proposed Defendants

1

LORD JUSTICE STEPHENSON
2

We allowed this appeal last Friday and we have today handed down our reasons for that judgment. The first judgment is that of Lord Justice Kerr.

LORD JUSTICE KERR
3

I will refer to the plaintiffs as "SLC" and to the defendants as "Entores". This is an appeal by SLC from an order made by Mr. Justice Bingham on 20th October 1983 ordering another party, Metal Traders (UK) Ltd. (to whom I will refer as "Metal") to be added as a defendant to this action pursuant to 0. 15 r.6 of the Rules of the Supreme Court. Since the action is fixed for 28th November 1983, the appeal was expedited and we heard counsel for all three parties on 17th and 18th November. We then announced that the appeal would be allowed for reasons to be given as soon as possible. My reasons for allowing this appeal are accordingly set out below.

4

The case is very unusual and of some general importance on the question whether an alleged creditor who has obtained a Mareva injunction should be allowed to intervene in an action with which he is in no way concerned, other than that the outcome of the action is liable—to put it generally for the moment—to destroy the effectiveness of the injunction.

5

The background is complex and requires to be explained in some detail. In February and August 1982 certain contracts for the purchase and sale of quantities of lead were concluded between Metal and a company called Sanders Lead International Inc., a subsidiary of SLC, to which I will refer as "SLI". The contracts called for performance in November 1982 and January to March 1983 respectively. Metal contend that SLI have committed serious breaches of these contracts and are claiming about US $1,482,000 by way of damages against SLI. SLI have denied liability and have also denied that the contracts are subject to arbitration under the rules of the London Metal Exchange. In the latter connection it should be mentioned that, since SLI (as well as SLC) are incorporated in Alabama USA, SLI have purported to rely on the law of Alabama as entitling them to revoke a submission to arbitration in London, even though there appears to be no doubt that the contracts in question were subject to English law. I mention this because it is part of the background which explains the unremitting—and in the circumstances perhaps understandable—efforts by Metal to obtain, and maintain, some security for their claims against SLI. For present purposes, however, this court is not otherwise concerned with the arbitration claims by Metal against SLI, and cannot take any account of whatever may be the merits of Metal's position in relation to these claims.

6

In these circumstances Metal cast around—as they frankly admit—to see whether they could find any asset of SLI within the jurisdiction of the English courts. Their enquiries led them to Entores, who informed Metal that Entores had purchased 500 tons of lead from SLI at a price of US $223,197, and that this sum was, or would shortly be, owing by Entores to SLI. On hearing this, Metal issued an originating summons against SLI for a Mareva injunction which, in its ultimate form, comprised all assets of SLI within the jurisdiction of the English courts and the whole of the debt owed by Entores. Metal had persuaded Entores to pay the amount of $223,197 into a special account, and the application for a Mareva injunction referred specifically to the monies standing in that account. I will refer to the originating summons between Metal and SLI for convenience as "the Mareva proceedings".

7

I must next say something about the purchase contract made by Entores. Although it is clear that Entores genuinely believe that this was made with SLI, as has been deposed on affidavit on behalf of Entores and as they informed Metal in good faith, it is in fact doubtful whether this contract was made with SLI or with SLC. In the present action SLC are suing Entores for the price of $223,197 on the ground that SLC and not SLI were the sellers to Entores, which Entores deny. The doubts as to the identity of the sellers arise from the fact that both companies carry on business from the same address in Alabama, that a Mr. Wiley Sanders is the President of SLI, that a Mr. George Sanders is the Senior Vice President of Sales for both SLC and SLI, and that both appear to have been concerned in the making of this contract. The contract was made partly by telephone and partly by telegrams or telexes, and the fact that all of these were addressed to SLC and not to SLI at their common address may not be conclusive as to the identity of the sellers. Moreover, SLC appears to be the producing company and SLI—at any rate in relation to international sales such as the one in the present instance the marketing company, with possible fiscal reasons for this set-up. It is also common ground that all previous contracts between Entores and the Sanders group were made with SLI and that they have never previously made a contract with SLC. Some of the information (or allegations) concerning SLC and SLI emanates from Metal, a subsidiary of Metal Traders Inc. of New York, who have some knowledge of the organisation of the Sanders group and feel that they have strong reasons for believing that the sellers to Entores were SLI and not SLC. However, these are all matters which will or may require investigation in the present action by SLC against Entores.

8

I then turn to the history of the Mareva proceedings and of the present action, which has been very unusual. As already mentioned, Metal sought a Mareva injunction against any assets of SLI within the jurisdiction, with particular reference to the monies in the special account set up by Entores, representing the price which Entores contend to be due to SLI. This injunction was initially granted by Mr. Justice Lloyd to a limited extent on 13th January 1983, and was then increased by him on 20th January 1983 to comprise all SLI's assets within the jurisdiction and the whole of the sum of $223,197 in this account. We have heard no argument on the question whether a Mareva injunction in this form should or should not have been granted, and for the present purposes I assume that it was validly granted without in any way seeking to indicate any view to the contrary. However, in relation to the next stage of the proceedings it is necessary to bear in mind the nature and effect of a Mareva injunction in relation to the monies standing in this account.

9

What happened was that, virtually simultaneously, SLC issued two proceedings. On 25th January 1983 they applied to be joined as defendants to the Mareva proceedings between Metal and SLI and for the discharge of the Mareva injunction so far as concerned the monies standing in the special account set up by Entores. Secondly, on 26th January 1983 they issued their writ in the present action against Entores to recover the price of the lead which SLC contend that they, and not SLI, had sold to Entores. I will deal first with the position concerning the Mareva proceedings.

10

Affidavits were filed on behalf of SLC and Metal in support of the discharge and maintenance of the Mareva injunction respectively. These, and a later affidavit sworn on behalf of Entores, show that the position adopted by all the parties, no doubt for tactical reasons, involved a misconception and misstatements about the legal status of the monies in the special account. So far as SLC are concerned, this is at once apparent from their summons asking that the Mareva injunction be discharged "on the grounds that the assets referred to in the said Order are the property of Sanders Lead Co and not the defendants", i.e. SLI. On the other side, the affidavits on behalf of Metal and Entores equally erroneously treated the effect of the Mareva injunction as having created a charge in favour of Metal over the monies standing in the special account. The fallacy in the position taken up by SLC is virtually self-evident. The monies in the special account belong to Entores and not to SLI, let alone SLC. They were merely monies which Entores had earmarked for the purpose of paying the debt which in their view was due to SLI. So far as the position of Metal and Entores is concerned, it is settled law that although the monies standing in the special account were expressly mentioned in the terms of the Mareva injunction obtained by Metal against SLI, this created no charge or any proprietary interest of any kind in favour of Metal over these monies; see Iragi Ministry of Defence v. Azcepey Shipping Co. S.A. (The "Angel Bell"), (1981) 1 Queen's Bench 65, per Mr. Justice Robert Goff (as he then was), as approved by this court in A.J. Bekhor Ltd. v. Bilton (1981) 1 Queen's Bench, 923. As it seems to me, this misapprehension of the legal position has given rise to some of the problems with which this appeal is concerned.

11

SLC's...

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