Shukhin Bhakoo (Male) and Another v Alexanders Discount Plc
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BINGHAM,LORD JUSTICE BUTLER-SLOSS,LORD JUSTICE STAUGHTON |
| Judgment Date | 28 July 1992 |
| Judgment citation (vLex) | [1992] EWCA Civ J0728-5 |
| Docket Number | 92/0747 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 July 1992 |
[1992] EWCA Civ J0728-5
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR. JUSTICE SWINTON THOMAS)
Royal Courts of Justice
Lord Justice Bingham
Lord Justice Butler-Sloss
Lord Justice Staughton
92/0747
MR. SIMON GOLDBLATT Q.C. and MR. ROBERT JAY (instructed by Messrs. Fuglers) appeared for the Appellants.
MR. ROBIN KNOWLES and MR. STEPHEN ATHERTON (instructed by Messrs. Linklaters & Paines) appeared for the Respondent.
This is an appeal against the decision of Mr. Justice Swinton Thomas on 1st July of this year when he dismissed the defendants' appeal against an order of Master Creightmore refusing to set aside a judgment entered by the plaintiff against the defendant on 14th January 1992 on the defendant's failure to give notice of intention to defend. The basis of the learned judge's decision was that the defendant had no defence to the claim made against him and that no purpose would accordingly be served by allowing him to defend the action. The decision is of obvious importance to the defendant but there are also a considerable number of other defendants, I am told about 53 actions in all, turning on the same or very similar facts. The issue is, therefore, one of greater importance than in this one single case.
The background facts so far as relevant can be quite briefly summarised and they are these. The plaintiff in the action is a discount house, from which it follows that its business includes the discounting of bills of exchange. A company named Charandas & Lajpatrai Limited ("C. & L.") drew a bill of exchange number CL 1394 dated 22nd March 1991 for the sum of £23,583.20 on the defendant, who accepted the bill. A director of C. & L. named Mr. A. K. Vaid added his personal endorsement. C. & L. endorsed the bill to the plaintiff, who discounted it and, when presented for payment by the plaintiff on the maturity of the bill on 19th July 1991, the bill was dishonoured. It was one of a large number of bills that the plaintiff had discounted in 1991 drawn by C. & L. many, perhaps all, of which were dishonoured on presentation. A number of the other bills were accepted by other parties than the defendant, but almost all the bills similarly bear the personal endorsement of Mr. A. K. Vaid.
An agreement was reached between the plaintiff C. & L. and Mr. Vaid which was reduced to writing and contained in two letters signed by all three parties dated 15th August 1991. The terms of that letter are crucial in determination of this appeal and I shall come back to it, but I should add that the bill remains unpaid.
In addition to those facts various other matters were accepted for purposes of this hearing, but only for purposes of this hearing, and were accordingly not matters in controversy. The plaintiff accepted that there was a triable issue whether the defendant was an accommodation party to this particular bill and also accepted that there was a triable issue whether the plaintiff knew that the defendant was an accommodation party to the bill. For purposes of this interlocutory appeal, therefore, both those matters must be assumed against the plaintiff. It was accordingly accepted by the plaintiff that the appeal should be argued on the basis that the defendant was a surety to the bill, that C. & L. was the principal debtor and that the plaintiff as the creditor knew both that the defendant was a surety and that C. & L. was the principal debtor.
Agreement, for purposes of the appeal only, was also reached on the law. For purposes of the appeal the plaintiff accepted that an agreement by a creditor (indorsee and holder) to give time to a principal debtor (drawer and indorser) to pay under a bill of exchange may discharge a surety such as an accommodation acceptor who does not know of or agree to the giving of time unless the creditor indorsee and holder reserves the right to sue the surety. I stress in fairness to the plaintiff that he accepts that proposition of law only for purposes of this appeal, and he expressly reserves the right to challenge the correctness of that principle should the matter ever reach the House of Lords.
Given the degree of consensus as to the law, it is not, I think, necessary to go into the legal principles which underlie this appeal in great detail, but I should, I think, refer to a passage in the judgment of Mr. Justice Blackburn in Bailey v. Edwards (1864) 4 B. & S. 761 and Volume 122 E. R. 645. Addressing himself to the question of principle Mr. Justice Blackburn said at pages 770 and 649 respectively as follows:
"The principle upon which the Courts of equity have proceeded appears to be this:—A surety has, as such, a variety of rights; amongst others, he has the right in equity to call upon the creditor to enforce all his, the creditor's, remedies against the principal debtor for the surety's benefit and at the surety's risk and expense; ( Wright v. Simpson 6 Ves. 714, 734). No doubt a Court of equity would put the surety under terms to give indemnity to the creditor before it would enforce this right; and consequently the right which the surety has is of very little practical value, and is seldom, if ever, exercised. Still, the surety has this right, and if the creditor wilfully deprives the surety of this right he so far alters the surety's position. Lord Eldon, in his judgment in ( Samuel1 v. Howarth 3 Mer. 272, 278), says that where time is given by virtue of a positive contract between the creditor and the principal 'the surety is held to be discharged, for this reason, because the creditor, by so giving time to the principal, has put it out of the power of the surety to consider whether he will have recourse to his remedy against the principal, or not; and because he, in fact, cannot have the same remedy against the principal as he would have had under the original contract.' Whether, if the matter were resintegra, it might not have been better to confine the surety's right in such cases to compensation in damages for this injury, which is generally only nominal, it is not now open to us to consider: a long series of decisions, many of which may be found collected in the notes to Rees v. Berrington (2 White and Tudor's Leading Cases in Equity, 2nd ed., 822), have settled that such an alteration in the position of the surety discharges him, even though the delay may be shewn to be for his benefit. Lord Eldon, in ( Samuell v. Howarth 2 Mer. 272, 279), gives, as the reason for this apparent harshness, that 'the law has said that the surety shall be the judge of that, and that he alone has the right to determine whether it is, or is not, for his benefit.'
The principle has been imported from the Courts of equity into those of law, and is clearly stated by Williams J. in ( Strong v. Foster 17 C. B. 210). He there says, p. 219, 'What I understand by a giving of time in such a case as this,—the surety has a right at any moment to go to the creditor, and say, "I have reason to suspect the principal debtor to be insolvent, therefore I call upon you to sue him or to permit me to sue him." If the creditor has voluntarily placed himself in such a position as to be compelled to say he cannot sue him, he thereby discharges the surety. The case then falls within the general doctrine as to principal and surety, which equally obtains at law and in equity, that, if the—creditor does any act to alter the position of the surety, he thereby discharges him.'"
Mr. Justice Blackburn continued at page 774 and 651 of the two reports in this way:
"It is quite true that where the contract by which the creditor binds himself to the principal debtor not to sue him for a time is so worded as to shew that it was intended only to apply to suits for the benefit of the creditor, and to except from its operation suits at the instance of sureties and on their behalf, no alteration...
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