UBAF Ltd v European American Banking Corporation

JurisdictionEngland & Wales
Judgment Date09 December 1983
Judgment citation (vLex)[1983] EWCA Civ J1209-4
Docket Number83/0500
CourtCourt of Appeal (Civil Division)
Date09 December 1983
Ubaf Limited
European American Banking Corporation

[1983] EWCA Civ J1209-4


Lord Justice Ackner

Lord Justice Oliver







Royal Courts of Justice

MR. K. S. ROKISON Q.C. and MR. T. R. CHARLTON (instructed by Messrs. Clifford-Turner) appeared for the Appellants.

MR. L. H. HOFFMANN Q.C. and MR. V. R. SIBERRY (instructed by Messrs. Freshfields) appeared for the Respondents.


This is the judgment of the court. The plaintiffs, who are the appellants, are an English banking corporation, and the defendants, the respondents, are a New York banking corporation. The defendants have had a history of dealing with the Colocotronis group of shipping companies. Apparently, in September 1974, the defendants approached the plaintiffs and requested them to take a participation in two loans which the defendants were intending to make to two Panamanian corporations in the Colocotronis group, namely Marcresta Armadora SA ("Marcresta") and Astrocamino Armadora SA ("Astrocamino"), which corporations owned respectively the MT "Illustrious Colocotronis" and the MT "Pacific Colocotronis".


Under cover of a letter dated 12th September 1974 and signed by Francios Macheras as Assistant Secretary of the defendants, there was sent to the plaintiffs:

  • (a) Two "term" sheets prepared by the defendants to give information to prospective participants about the loans to Marcresta and Astrocamino.

  • (b) A study of the Colocotronis group prepared by the defendants and dated April 1974.

  • (c) A copy of a letter dated 20th August 1974 from H. Clarkson & Co. Ltd. to the defendants giving valuations of the vessels "Pacific Colocotronis" and "Illustrious Colocotronis".


In their points of claim the plaintiffs allege that, in so doing, the defendants represented to them that the intended loans to Marcresta and Astrocamino were "attractive financing of two companies in a sound and profitable group". In support of this allegation the plaintiffs rely inter alia upon the following matters. Firstly, that the purpose of the loans to the two companies was the re-financing of their tankers, to re-pay the defendants' existing financing loan and to make down payments on the building of certain tankers; secondly, that the collateral for the loan to each of the companies would be a first preferred mortgage on their respective vessels which had an appraised value as at 20th August 1974 of US $18,000,000 and $20,000,000; and that, by way of further collateral for the loans, there would be assignments of charter hire due under a transportation agreement with Petrofina SA and that the cash flow to be expected from the vessels was more than enough in each case to meet total debt service requirements of the two companies under the loans. The plaintiffs also relied upon representations contained in the Colocotronis group study and in the very letter of 12th September to which reference has already been made.


In reliance upon these representations the plaintiffs lent US $500,000 to each company.


In detailed particulars in their pleadings the plaintiffs contend that a number of the representations referred to, and others, are untrue, in particular as to the purposes of the loan, the value of the vessels, the transportation agreement and the financial position of the Colocotronis group.


Following the deterioration in the shipping market in 1975/76, the Colocotronis group got into difficulties, the two companies defaulted and US $880,000 remains outstanding. The plaintiffs' claim is in the sum of US $900,000 plus interest.


They plead three separate causes of action:

  • (1) Deceit, the representations being alleged to be untrue to the knowledge of the defendants.

  • (2) Misrepresentations under section 2 (1) of the Misrepresentation Act 1967.

  • (3) Negligence in and about the presentation to the plaintiffs of the transactions in which they were inviting the plaintiffs to participate.


It is common ground that the representations were made in England and, accordingly, there was no objection raised to the jurisdiction of the English courts, nor was it contended that England was not the appropriate forum. The defendants, however, contended that the plaintiffs do not have a good arguable case for two reasons:

  • (1) As regards the claim in deceit, they say first that any such claim is precluded by the provisions of section 6 of the Statute of Frauds Amendment Act 1828 (Lord Tenterden's Act), and, secondly, that that equally rules out any claim under section 2 (1) of the Misrepresentation Act 1967.

  • (2) As regards any claim in negligence, they say that it is statute-barred, the writ having been issued more than six years after the cause of action (if any) arose.


On this basis they sought, and obtained from Leggatt J., the appropriate orders to set aside the service out of the jurisdiction which had been permitted by Staughton J. on 8th October 1981.


The appeal thus raises only two issues, it being well established that the court will not seek at this stage to decide disputed questions of fact, but that in relation to issues of law it will, however, refuse leave, even though the point raised may be of some difficulty, if satisfied that the plaintiff is bound to fail (see Cow v. Casey (1949) 1 K.B. 481), a case concerning Order 14, but where the principle is essentially the same.


1. Lord Tenterden's Act Section 6


The section provides: "…no Action shall be brought whereby to charge any Person upon or by reason of any Representation or Assurance made or given concerning or relating to the Character, Conduct, Credit, Ability, Trade or Dealings of any other Person, to the Intent or Purpose that such other Person may obtain Credit, Money, or Goods upon, unless such Representation or Assurance be made in Writing, signed by the Party to be charged therewith."


The following propositions are common ground:


(1) The section applies to fraudulent misrepresentations only ( Banbury v. Bank of Montreal (1918) A.C. 626). Accordingly, the section has no application to the alleged innocent but negligent misrepresentations—hence the second issue referred to hereafter.


However, the representations alleged to give rise to liability under section 2 (1) of the Misrepresentation Act 1967 are also within Lord Tenterden's Act, because the person making the representation is liable only if he "would be liable to damages in respect thereof had the misrepresentation been fraudulent".


(2) The word "person" in the section includes a corporation ( Banbury v. Bank of Montreal, cit supra, approving Hirst v. West Riding Union Banking Co. Ltd. (1901) 2 K.B. 561).


(3) In order to be within the section the representations upon which the action is based must relate in some way to the credit or creditworthiness of a person ( Diamond v. Bank of London and Montreal Ltd. (1979) Q.B. 333).


The two matters upon which the parties are at issue, however, are (a) whether the signature of Mr. Macheras could, as a matter of law, constitute the signature of the party to be charged within the meaning of the section, and (b) whether, even assuming against the plaintiffs that it could not, the representations relied on in this case were in fact representations as to the credit or creditworthiness of a person so as to entitle the defendants to rely upon the section.


The learned judge considered that the first of these two issues was concluded against the plaintiffs by authorities which were binding upon him and which Mr. Hoffmann submits are equally binding upon this court. Essentially, the question is whether Mr. Macheras, the defendants' Assistant Secretary, who signed the alleged misrepresentations, either had or could have had the requisite authority from the defendants which would even render it arguable that his signature was the signature of "the party to be charged" within the meaning of the section.


The learned judge seems to have started from the assumption that the only case capable of being raised from the affidavits was that the document containing the representations was one which was signed by Mr. Macheras in the course of his ordinary duties as an Assistant Secretary of the defendants' and that the document was one of a type which it was within Mr. Macheras' general authority to sign. Making that assumption, he considered that he was bound by authority—albeit, as he put it, only "indirectly" bound—to hold that the defendants were entitled to the protection of the Act. It does not appear that, in reaching this conclusion, he was accepting a proposition that a corporation as such cannot sign a document and is, therefore, always protected by the section, no matter who signs a representation on its behalf. Indeed, it is difficult to see how that proposition could reasonably be sustained, for a corporation cannot sign a document save by some human agency and, once it is established, as it is on the authorities referred to above, that the section applies to a corporation, the signature of some person must be sufficient for the purposes of the Act. Otherwise, one is compelled to the absurd conclusion that, although a company being a "person" is entitled to claim the protection of the Act, it is never capable of losing that protection because, as a legal abstraction, it cannot literally and physically "sign" anything. Mr. Hoffmann, for the defendants, did not feel able to embrace so unattractive a conclusion. He did, however, contend both before Leggatt J. and before us that, in order to cause a corporate person to lose protection...

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