Schering v Stockholms Enskilda Bank Aktiebolag
| Jurisdiction | England & Wales |
| Judge | Lord Thankerton,Lord Russell of Killowen,Lord Macmillan,Lord Porter,Lord Goddard |
| Judgment Date | 29 November 1945 |
| Judgment citation (vLex) | [1945] UKHL J1129-1 |
| Court | House of Lords |
| Docket Number | Case No. 160 |
| Date | 29 November 1945 |
[1945] UKHL J1129-1
House of Lords
Lord Thankerton
Lord Russell of Killowen
Lord Macmillan
Lord Porter
Lord Goddard
After hearing Counsel, as well on Monday the 22d and Tuesday the 23d, days of January last, as on Monday the 18th, Tuesday the 19th, Wednesday the 20th, Thursday the 21st, Monday the 25th, Tuesday the 26th and Wednesday the 27th, days of June last, upon the Petition and Appeal of Schering, Limited (in voluntary liquidation), of 185/192 Holborn, in the County of London, 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 12th of October, 1943, 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 Petitioners 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 Stockholms Enskilda Bank Aktiebolag, lodged in answer to the said Appeal (in which said Appeal Arthur William Edwards and Henry Morris, called as Respondents, did not lodge a printed Case in answer thereto, it being stated in the case of the said Respondents, Stockholms Enskilda Bank Aktiebolag, that the said Respondents Arthur William Edwards and Henry Morris were concerned only as Trustees); 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 12th day of October 1943, 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 Appellants 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,
This is an Appeal from an order of the Court of Appeal, dated the 12th October, 1943, which discharged an order of Simonds J., dated the 10th March, 1943, and dismissed the Appellants' action.
By the order of Simonds J. (1) it was declared that a contract dated the 16th of April, 1936, which I will call the April contract, and made between the Appellants acting on behalf of themselves and on behalf of Schering Kahlbaum (India) Ltd., which I will call the Indian Company, and the Respondent Bank, had been abrogated by the outbreak of war between Great Britain and Germany and could no longer be enforced against the Appellants, and (2) it was ordered inter alia that the Respondents Arthur William Edwards and Henry Morris should release to the Appellants £25,000 and any interest thereon which was standing in joint names of the liquidator of the Appellant Company and these two Respondents under the terms of a letter dated the 16th April, 1936, to provide security to the Respondent Bank for the Appellants' performance of their obligations under the April contract.
In this Appeal the Appellants seek restoration of the order of Simonds J. Alternatively they maintain that the April contract, by reason of circumstances arising out of the war, became impossible of further performance, and that the parties were thereby excused from further performance.
Early in the year 1936 the Respondent Bank was possessed of a sum of German reichsmarks, the value of which at the current rate of exchange was £84,000, which Schering-Kahlbaum Aktiengesellschaft, which I will call the German Company, desired to acquire. The German Company was the parent company of the Appellant Company, and owned or controlled all its share capital; it was also the parent company of the Indian Company. The German Company found it convenient, owing to restrictions in Germany, to provide for the sterling payments to be made to the Respondent Bank through its two subsidiaries, with whom it could settle its indebtedness by means of the manufactured goods which it supplied to them. The contractual relations between the parties were contained in three agreements, vizt.,
1. A contract in writing dated the 24th and 28th February, 1936, which I will call the February contract which was made between the Respondent Bank of the one part, the German Company of the other part, and the Appellants and the Indian Company as sureties.
2. The April contract, made between the Appellants, the Indian Company and the Respondent Bank.
3. A letter dated the 16th April, 1936, by the Appellants to the Respondent Bank, which I will call the April letter.
The February contract was in German, and subject to German law, but for the legal relationship between the sureties and the Respondent Bank the English law was to apply. In the absence of evidence to the contrary, it may be assumed that, for present purposes, the German law does not differ from the English law. Though there was some argument to the effect that the price payable by the German Company for the reichsmarks was £50,400, I am satisfied, looking at the various provisions, that, on the reichsmarks being placed at the disposal of the German Company, the latter became debtors to the Respondent in the sum of £84,000, payable without interest, in effective pounds sterling on the expiry of eight years thereafter. The reichsmarks were placed at the disposal of the German Company on the 28th April, 1936. For the debt, the sureties became surety jointly and severally as principals to the amount of £50,400, with the proviso that, against the liability as sureties all payments must be set off which the Respondent Bank should receive from the sureties or one of them or from the principal debtor or from third persons for account of the sureties or of the principal debtor. Clause 4 begins by providing that the sureties would acquire from the Respondent Bank its claims against the German Company by a series of fourteen six-monthly instalments, gradually decreasing in amount, beginning one and a half years after 28th April, 1936, with an instalment of £6,300, and ending eight years after the said date with a final instalment of £1,680. The instalments make up a total of £50,400. Clause 4 then proceeds,
"If, and to the extent that the sureties do not acquire the claim at the dates specified, the remission resulting from Clause 2 in conjunction with Clause 1 shall, without prejudice to the provisions of Clause 3, lapse rateably in respect to that amount of debt which remains in relation to Enskilda after setting off any payments which may have been made (Example: Enskilda has received £6,300 and no further payments have been made; there remains a debt of Schering to Enskilda to the amount of £73,500). With regard to the due date and repayment of the remaining amount of debt the provisions of Clause 2 paragraphs two and three shall apply. The remaining amount of debt is owing free of interest."
It may be noted that this paragraph does not affect the amount of the liability of the sureties, that the remission referred to is clearly the reduction of the debt from £84,000 to £50,400, and that the effect of this paragraph was somewhat obscurely modified by a letter dated the 17th March, 1936, from the Respondent Bank to the German Company, but the effect of it would seem to be that the benefit of the remission was preserved to the latter, provided that the payment of the instalments, or some of them, though made after their due dates, was made prior to the expiry of the eight years. I will only add that the February contract is headed "Contract of Debt" and is so described at least four times in the body of the agreement.
By the April contract, which was in English, the liability of the Appellants and the Indian Company as sureties is not materially altered, but under Clause 8 they jointly and severally undertook as "principals and not as guarantors to make the following payments to you in consideration of the assignment by you to us on the occasion of each such payment of a like sterling amount of your claim against the German Company. Such payments shall be made as follows namely:�" Here followed a list of fourteen six-monthly instalments of decreasing amount, corresponding to those in Clause 4 of the February contract. Clause 9 provided that each payment under Clause 8 should be a satisfaction pro tanto of their liability as sureties, and that they should not be liable to make such payment, in so far as the amount in question had been paid by the German Company or any other person or company. Clause 10 provided that default in payment of any one instalment should not accelerate the date for payment of any other instalment, provided that that provision should not prejudice the Respondent Bank's rights of proof in a liquidation of either the Appellants or the Indian Company.
On the same day, the Appellants addressed the April letter to the Respondent Bank, providing for the pledging by them of goods to the value of £25,000 as security for the discharge by the Appellants of their obligations to the Respondent Bank, whether as sureties or principals, under the April contract. The assets of the Appellants have been realised in the liquidation, and the sum of £25,000 has now been placed as security in joint names as already mentioned.
Stripped of its somewhat intricate provisions, it appears that, in substance, the contract was for the sale of commodities, vizt., German reichsmarks, for a price, which was to be paid in sterling. The commodities had been supplied and accepted, and all that remained was the payment of the price, and the only provisions remaining operative related to the payment of the debt due in respect of...
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