United Bank of Kuwait Ltd v Hammoud
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE GLIDEWELL,LORD JUSTICE STAUGHTON |
| Judgment Date | 29 June 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J0629-5 |
| Docket Number | 88/0560 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 June 1988 |
[1988] EWCA Civ J0629-5
The Master of the Rolls
(Lord Donaldson)
Lord Justice Glidewell
Lord Justice Staughton (not Present)
88/0560
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDERS OF MR JUSTICE STUART-SMITH AND MR JUSTICE FRENCH
Royal Courts of Justice
U.B.K. V. Hammoud
THE HON. CHRISTOPHER BATHURST Q.C. and MR RAYMOND COX, instructed by Messrs Rowe & Maw, appeared for the Appellants (Plaintiffs).
MR STEPHEN SILBER Q.C. and MISS JANE OWEN, instructed by Messrs Reynolds Porter Chamberlain, appeared for the Respondents (Third and Fourth Defendants).
City Trust v. Levy
MR STEPHEN SILBER Q.C. and MISS JANE OWEN, instructed by Messrs Reynolds Porter Chamberlain, appeared for the Appellant (Defendant).
MR R.M. PERKOFF, instructed by Messrs Rakisons, appeared for the Respondents (Plaintiffs).
I will ask Lord Justice Glidewell to give the first judgment.
In both these actions the underlying question is, as between innocent parties, who should bear the loss occasioned by the dishonest activities of others? In both the plaintiffs advanced sums of money in reliance upon undertakings given by a solicitor, Mr Emmanuel, which were not backed by funds or any form of security, and were thus worthless. Both actions raise similar, though not identical, issues, and in both the defendants, who are in each case solicitors, were represented by the same leading counsel. We heard the two appeals consecutively. It is therefore convenient to give one judgment dealing with both appeals but distinguishing between them.
THE UNITED BANK OF KUWAIT LTD. V. HAMMOUD & OTHERS THE FACTS
Mr Emmanuel is the second defendant in this action. In November 1983 he was a salaried partner in a firm of solicitors, Messrs Donald Darlington and Nice, who practise in Rickmansworth, Hertfordshire. He had joined the firm in 1974, and until the events which led to this action had an unblemished character. In 1983 the equity in the firm was vested solely in the third defendant, Mr Bloch. The fourth defendant, Mr Darlington, was in 1983 a salaried partner in the firm, but is now an equity partner. Both these gentlemen are respectable and honest. I shall refer to Messrs Bloch and Darlington as "the two partners".
The first defendant, Mr Hammoud, was succinctly described by the judge as a rogue. On 3rd November 1983 Mr Emmanuel signed, purportedly on behalf of the firm, a form of guarantee and an undertaking addressed to the plaintiff bank, which resulted in the bank lending to Mr Hammoud a total sum of £105,700. None of this loan has been repaid by Hammoud. The bank has signed judgment in this action against both Mr Hammoud and Mr Emmanuel, but it hardly needs to be said that those judgments have not been satisfied. The question for the judge, and in this appeal, is whether the two partners were responsible in law for Mr Emmanuel's signature of the undertaking and/or the guarantee so as to make them also liable to the bank for the amount of the loan with interest.
The facts are fully set out in the judgment of Stuart-Smith J., but it is necessary to refer to them in a little more detail.
The bank first had the misfortune to meet Mr Hammoud on 1st November 1983, when he went to the Davies Street Branch and opened a current account with a payment of £500. On that occasion and again on 3rd November 1983 Mr Hammoud spoke to Mr Sheward, the manager of the branch bank. He told Mr Sheward that early in January 1984 he expected to receive a sum of £700,000, which was on deposit with Barclays Bank until then and under the control of his solicitors, Donald Darlington & Nice. He said that until the maturity of the £700,000 deposit he needed money for living expenses, and asked for a temporary loan of £100,000. He gave the name of Mr Emmanuel as a reference.
Mr Sheward told Mr Hammoud that we would consider loaning the £100,000 provided that the solicitors undertook to transfer the £700,000 to Mr Hammoud's account with the bank when the deposit matured early in January 1984, and that the solicitors would guarantee the loan. Mr Sheward then prepared and handed to Mr Hammoud drafts of three documents:
" RE: Mr Ali Soubhi Kassim Hammoud
We hereby guarantee that on or before January 6th 1984 we will transfer the sum of £700,000.00…to the account of Mr…Hammoud…held with you.
We agree that this is an unconditional undertaking and can only be revoked with your written agreement."
-
(i) A form of guarantee of the loan to Mr Hammoud,limited to £700,000.
(ii) A letter to be signed by Mr Hammoud addressed to Donald Darlington and Nice, instructing them
"Upon maturity i.e. 3rd January 1984 of my deposit with you of £700,000.00…, please transfer this amount immediately to my account…with the United Bank of Kuwait Limited…
These instructions are irrevocable on my part unless agreed by the bank in writing."
(iii) A form of letter of undertaking addressed to the bank to be signed by or on behalf of Donald Darlington and Nice. This read:
Mr Hammoud handed the draft guarantee and the form of undertakings to Mr Emmanuel. The judge found as a fact that Mr Emmanuel then spoke to Mr Sheward and asked why the bank wanted the full £700,000. Mr Sheward replied that the bank wanted to have that sum on deposit. Mr Emmanuel said that the sum was at that time deposited with Barclays Bank, who had promised that they would transfer the £700,000 to the firm of solicitors on 3rd January 1984.
That same day Mr Emmanuel's secretary, taking her courage in both hands, went to see Mr Bloch and told him that she was much concerned that Mr Emmanuel had been giving undertakings in large sums which he would not be able to fulfil. She showed Mr Bloch a copy of the undertaking to be given to the bank.
Mr Bloch interviewed Mr Emmanuel, who said that he had not given any undertaking, but admitted that he had prepared the undertaking which his secretary had shown to Mr Bloch. He said that he was going to London to try to secure a guarantee to back the undertaking and that, if he were successful, he intended to sign the document. Mr Bloch took the form of undertaking from him and tore it up. He made it clear in evidence, however, that he did so not because he objected in principle to Mr Emmanuel giving the undertaking provided that it was backed by funds or a suitable guarantee, but because he objected to him going to London to transact this sort of business. He took the view, which some might consider old-fashioned, that business should be done in the office and that solicitors should not run round after clients.
Mr Bloch said in evidence that it never occurred to him that after this interview Mr Emmanuel would nevertheless give the undertaking without it being backed, but this is exactly what happened. Mr Emmanuel prepared another undertaking, in the same words as the document Mr Bloch had destroyed, and thereupon signed both that document and the form of guarantee: "K. Emmanuel. Donald Darlington & Nice".. Subsequently, the bank obtained the confirmation of Barclays Bank in Rickmansworth (with whom the firm banked) that these were indeed Mr Emmanuel's signatures, though this confirmation is of no relevance to this appeal.
On receiving these documents so signed and a reference for Donald Darlington & Nice from their bankers, Mr Sheward recommended to his superiors that the bank should loan the £100,000. By letter dated 10th November 1984 he formally offered the loan to Mr Hammoud, to be repaid by 10th January 1984. By 2nd December 1983 Mr Hammoud had drawn almost the whole £100,000, and subsequently the total loan increased to £105,700.
It was not until 2nd December that Mr Bloch learned that anything was amiss. The information he first received was that a writ was about to be issued against the firm in respect of other undertakings given by Mr Emmanuel to persons other than the plaintiff bank. On 6th December Mr Bloch learned of the undertaking given to the plaintiffs.
As I have said, the loan was not repaid when it fell due, and the bank commenced this action by a specially indorsed writ issued on 16th January 1984.
In the statement of claim, in its final form after re-amendment, the claim against Messrs Bloch and Darlington was put in the following ways:
-
(i) That both the guarantee and the undertaking were contracts between the bank and all the partners in Donald Darlington & Nice, the consideration being the opening by the bank of a loan account in favour of Hammoud.
-
(ii) That the undertaking should be enforced under the inherent jurisdiction of the court.
-
(iii) That Emmanuel was guilty of the tort of fraudulent misrepresentation, for which the two partners were vicariously liable.
-
(iv) That the two partners were both negligent. In his judgment the learned judge said that the claim in contract was not pursued before him. He considered the claims under the other three heads and found for the defendants on all of them. Against this decision the bank now appeal.
Before us Mr Silber, for the two partners, accepts that the claim in contract on the undertaking was pursued before the judge, and indeed parts of his judgment related to it. Mr Bathurst, for the bank, agrees that the claim in contract on the guarantee was not pursued before the judge since it was accepted that the guarantee would only have been enforceable if it had been signed by all the partners. The learned judge's conclusions on the claim in negligence were not...
To continue reading
Request your trial
-
Halliwells LLP v NES Solicitors
...clauses 1.1 and 7.19 of the policy. 34 The test whether an undertaking is given in the capacity of a solicitor was considered in United Bank of Kuwait v Hammoud [1988] 1 WLR 1051. There Staughton LJ confirmed that the test was an objective one, albeit one which had regard to how the matter ......
- Datuk M Kayveas v Bar Council
-
ACC Bank Plc v Johnston (t/a Brian Johnston & Company Solicitors) and Others
...& AD 11 TOWER CABINET CO LTD v INGRAM 1949 2 KB 397 1949 1 AER 1033 UNITED BANK OF KUWAIT v HAMMOUD & ORS; CITY TRUST LTD & ANOR v LEVY 1988 1 WLR 1051 1988 3 AER 418 MOLONEY v LIDDY & ORS (T/A HUGHES & LIDDY SOLICITORS) UNREP CLARKE 1.6.2010 2010 IEHC 218 CIVIL LIABILITY ACT 1961 S11(1) CA......
-
Harcus Sinclair LLP and another v Your Lawyers Ltd
... ... ] PNLR 8 , CA Attwood v Lamont [ 1920 ] 3 KB 571 , CA Bank of Credit and Commerce International SA v Ali [2001] UKHL 8 ; [ 2002 ] ... 907 ; [ 1987 ] 3 WLR 465 ; [ 1987 ] 3 All ER 262 , CA United Bank of Kuwait Ltd v Hammoud [ 1988 ] 1 WLR 1051 ; [ 1988 ] 3 ... ...
-
Agency and Liability
...not simply hold himself out as having authority. 10 Mercantile Credit v Garrod [1962] 3 All ER 1103. 11 United Bank of Kuwait v Hammoud [1988] 1 WLR 1051. 12 JJ Coughlan v Ruparelia [2003] EWCA Civ 1057, [2004] Lloyds Rep PN 4. 13 Niemann v Niemann (1890) 43 Ch D 198. 14 Hirst v Etherington......
-
Table of Cases
...Firm) [2010] EWHC 2720 (Ch), [2011] 3 All ER 982, [2010] NLJR 1615, [2010] All ER (D) 85 129, 130, 131 United Bank of Kuwait v Hammoud [1988] 1 WLR 1051, [1988] 3 All ER 418, 11 LDAB 158, CA 83 Universal Project Management Services Ltd v Fort Gillicker Ltd [2013] EWHC 348 (Ch), [2013] Ch 55......
-
Case Note
...1062 at [100]-[104]. 28 Lim Hsi-Wei Marc v Orix Capital Ltd [2010] 3 SLR 1189 at [34]-[35], citing United Bank of Kuwait v Hammoud [1988] 1 WLR 1051 at 1059 (CA), and JJ Coughlan Ltd v Ruparelia [2003] EWCA Civ 1057; [2004] PNLR 4 at [22]. 29 Lim Hsi-Wei Marc v Orix Capital Ltd [2010] 3 SLR......
-
Digest: ADAG Corp. Canada Ltd. v SaskEnergy Inc., 2018 SKCA 14
...DLR (4th) 640, [2007] 7 WWR 381, 29 BLR (4d) 175, 29 BLR (4th) 175, [2007] 4 CTC 172, 67 BCLR (4th) 1 United Bank of Kuwait v Hammoud, [1988] 1 WLR 1051 Western Commercial Co. v Murr (1914), 29 WLR 945 ...