Union Bank of Finland v Lelakis [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Clarke J |
| Judgment Date | 03 November 1994 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 November 1994 |
Queen's Bench Division (Commercial Court).
Clarke J.
Graham Dunning (instructed by Watson Farley & Williams) for the plaintiffs.
Vasanti Selvaratnam (instructed by Holman Fenwick & Willan) for the defendant.
The following cases were referred to in the judgment:
Allen v TaylorUNK [1992] 1 PIQR 255 (CA).
Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc (“The Saudi Eagle”)UNK [1986] 2 Ll Rep 221.
Anlaby & Ors v PraetoriusELR (1888) 20 QBD 764.
Banque Russe et Frangaise v Clark [1894] WN 203.
BarclaysBank plc v Khaira & AnorWLR [1992] 1 WLR 623.
Barclays Bank plc v O'Brien & AnorELR [1993] QB 109; [1994] 1 AC 180 (HL).
Boocock v Hilton International Co LtdWLR [1993] 1 WLR 1065; [1993] BCC 289.
Caparo Industries plc v DickmanELR [1990] 2 AC 605; [1990] BCC 164.
Charlesworth v Focusmulti Ltd (unreported, 17 February 1993, CA).
Chetwynd-Talbot v Midland Bank Ltd (unreported, 21 June 1982, McCullough J).
Cornish v Midland Bank plc (Humes, third party)UNK [1985] 3 All ER 513.
Hedley Byrne & Co Ltd v Heller & Partners LtdELR [1964] AC 465.
Lloyds Bank Ltd v BundyELR [1975] QB 326.
National Westminster Bank plc v MorganELR [1985] AC 686; [1985] 2 WLR 588; [1985] 1 All ER 821.
Newborough (Lord) v JonesELR [1975] Ch 90.
O'Harav Allied Irish Banks Ltd & AnorUNK [1985] BCLC 52.
White v WestonELR [1968] 2 QB 647.
Judgment in default — Application to set aside — Bank loan to company wholly owned by guarantor — Payment demanded of company and guarantor on default — Writ issued — Writ served on guarantor by delivery at ofice of agent named in guarantee — Writ addressed to guarantor but not identified on envelope or by deliverer as writ — Judgment in default 14 days ajler writ issued— Whether grounds for settinn writ aside — Whether writ properly served — Whether bank owed duty of care to — advise prospective guaranto; toseek independent legal advice — whether undue inance or unconscionability — Companies Act 1985, s. 725 — RSC, 0. 10, R. 1 (1), 3.
This was an application by the defendant to set aside a judgment entered by the plaintiffs in default of acknowledgment of service on the ground that the writ was not properly served on the defendant on the relevant date, or that the court ought to set aside the judgment in the exercise of its discretion.
The defendant was a Greek shipowner with shares in shipowning companies. On 1 May 1992 an agreement for a loan of US$6.4m was entered into between the borrower, a company wholly owned by the defendant, and the plaintiff bank as lenders. On 28 May 1992 the defendant executed a personal guarantee of the borrower's obligations under the loan agreement. On 20 August 1992 the same parties entered into a further agreement for a loan of US$4.2m personally guaranteed by the defendant. All the contracts were governed by English law. By cl. 13.02(b) of the guarantees proceedings were to be served on the defendant's agent.
On 26 August 1994 the plaintiffs sent notices of default and demands for repayment both to the company and to the defendant for all sums due. On 14 September a writ was issued against the defendant claiming US$8.4m in respect of principal and interest due under the guarantees. The plaintiffs purported to serve the writ on that date at the London address of the defendant's agent specified for service of process in cl. 13.02 of the guarantees. On 28 September the plaintiffs entered judgment in default of acknowledgement of service in the sum of US$8.4m.
The defendant applied to set aside the judgment on the ground that it was not properly served on him within cl. 13.02(b) of the guarantees on 14 September, being addressed to the defendant care of the agent rather than to the agent, and neither the person who delivered it nor the envelope giving any indication that it contained a writ. In consequence the plaintiffs were not entitled to enter judgment on 28 September.
Held, dismissing the defendant's application:
1. The defendant as guarantor, rather than the agent, was the proper person to whom to address the writ within cl. 13.02(b) of the guarantees. It followed that the writ was properly served on the defendant within cl. 13.02(b), and accordingly was deemed to be duly served on the defendant by RSC, O. 10, r. 3.
2. The rule in RSC, O.10, r. 1(1) that service had to be effected personally on each defendant did not apply to English companies because s. 725 of the Companies Act 1985 expressly provided for service on a company by leaving the writ at or posting it to the company's registered office. Accordingly an envelope containing a writ addressed to the defendant and handed to a director of the defendant's agent at the agent's offices was properly served on the defendant within s. 725.
3. A bank owed a duty of care to a prospective guarantor only where the circumstances, including relevant banking practice, required the bank to advise that prospective guarantor to seek independent legal advice before signing the guarantee. Where the prospective guarantor was an experienced shipowner advised by an in-house lawyer giving a guarantee to secure a loan to a company wholly owned by him from an international bank, no duty of care arose. Similarly there were no grounds for setting aside the contracts of guarantee on the grounds of undue influence or unconscionability in those circumstances. Accordingly, the defendant having no arguable case on the merits, there was no basis for exercising the court's discretion to set aside the judgment.
Clarke J: This is an application by the defendant, Mr Antonios Lelakis, to set aside a judgment. The judgment was entered by the plaintiffs in default of acknowledgment of service. It is dated 28 September 1994 and is in the sum of US$8,424,545.97. The defendant says that he is entitled to have the judgment set aside ex debito justiciae, alternatively that the court should set the judgment aside in the exercise of its discretion. The ground upon which the defendant says that he is entitled to have the judgment set aside ex debito justitiae is that the writ was not properly served upon him on 14 September 1994. If the writ was not served on that day, it is accepted that the judgment could not properly have been entered on 28 September.
The main facts relevant to this question are these. The defendant is an experienced Greek shipowner. He is a shipowner in the-sense that he owns shares in shipowning companies. In the April 1992 edition of Lloyd's World Shipowning Groups there is a list of nine vessels and one new building, each owned by a separate company. The entry is under Tony Travel & Agency Ltd, which is now and was then the defendant's company in Piraeus. Two of the vessels were called “The Port Talbot” and “The City of Taranto”; they were owned by Halda Shipping Corp and Jo-Dim Investment Ltd respectively. The new. building was to be named “The Regent Sky” and was to be owned by Sea Nomad Maritime Inc. On 1 May 1992 a loan agreement was entered into between Starlite Cruises Inc as borrower and the plaintiffs as lenders. The amount of the loan was US$6,507,396 and was for the purpose of purchasing four Wartsila diesel engines for The Regent Sky. All the shares in the borrower are owned by the defendant. On 28 May 1992 a personal guarantee was executed by the defendant, guaranteeing the borrower's obligations under the loan agreement. On 20 August 1992 a further loan agreement was entered, into between the same parties as before. The amount of the loan was US$4,272,647 and was for the purpose of purchasing four auxiliary engines for the same vessel. On the same date a further personal guarantee was executed by the defendant, guaranteeing the borrower's obligations under the second loan agreement. All the contracts are governed by English law. On 26 August 1994 the plaintiffs sent notices of default and demands for repayment to Starlight Cruises Inc. On the same date the plaintiffs sent notices of default and demands for payment under the guarantees to the defendant for all sums due. On 14 September 1994 the writ was issued in this action against the defendant. It claimed a total of US$8,400,277.11 in respect of principal and interest said to be due under the guarantees. The plaintiffs say the writ was properly served on that day. On 28 September the plaintiffs entered judgment in default of acknowledgment of service in the sum of US$8,424,545.97. If the writ was served on 14 September 1994, it is common ground that the plaintiffs were entitled to enter judgment. However, the defendant says that the writ was not properly served on that date.
Was the writ properly served on 14 September? The plaintiffs say that the writ was properly served upon the defendant pursuant to cl. 13.02(b) of each of the guarantees which were in all material respects in the same form.
Clause 13.02 provides as follows:
“In relation to any dispute arising out of or in connection with this guarantee, and for the exclusive benefit of the lender, the guarantor hereby irrevocably and unconditionally: (a) submits to the jurisdiction of the High Court of Justice in England and waives any objection to proceedings with respect to this agreement in such court on the grounds of venue or inconvenient forum; and (b) appoints Internav (Chartering) Ltd presently of Suite 2, Telford Yard, 6-8 The Highway, London El 9BQ as his agent for service of process in respect of proceedings before such court and undertakes that, throughout the term of this guarantee, he will maintain an agent in England for such purpose. Nothing in this clause shall affect the right of the lender to serve process in any manner permitted by law or limit the right of the lender to take proceedings with respect to this guarantee against the guarantor in any jurisdiction nor shall the taking of proceedings with respect to this guarantee in any jurisdiction preclude the lender from taking proceedings...
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