MONTENEGROBANKA AD PODGORICA v BISHOPSCOURT (BB&CO) LIMITED (IN LIQUIDATION) [2002] EWCA Civ 1468

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR JUSTICE MORISON)
[2002] EWCA Civ 1468Case No A3/2002/1803Venue Royal Courts of Justice, Strand, London, WC2, Thursday, 10 October 2002
Between
MONTENEGROBANKA AD PODGORICAClaimant/RespondentBISHOPSCOURT (BB&CO) LIMITED (IN LIQUIDATION)Defendant/Applicant
Before
Lord Justice PillLord Justice WallerMR S RAINEY QC (instructed by Stephen Harwood, London EC2V 7LE) appeared on behalf of the ApplicantMR T OTLEY (instructed by Constant & Constant, London SE1 9LT) Appeared on behalf of the RespondentDate 10 October 2002

LORD JUSTICE WALLER:

On

[1]8 August 2002 Morison J gave summary judgment against the defendants in relation to a claim on a contract of indemnity. When permission to appeal was sought, I was inclined to refuse the same on paper but, appreciating that the application would almost certainly be renewed orally, directed that the application be adjourned with appeal to follow if permission was granted. I directed in that way because where points are short it is possible that time may be taken up arguing about reasonable prospects of success or arguability, when it would be quicker simply to decide the point. This is that adjourned hearing.[2]The facts are not really in dispute, at least so far as the Part 24 application is concerned. In July 1983 there was an oil spill off the Montenegrin coasts leading to claims by the local authorities. The motor tanker Seaborne was alleged to be responsible. The vessel was entered with the Britannia P&I club. The club arranged for a guarantee to be put up locally in favour of the local authorities so as to secure the freedom of the vessel from arrest. That happened by the sending of a letter and telex of 5 August 1983.[3]It is helpful to look at that letter, or telex, which is at page 115 of the bundle. It is from Baring Brothers, but it is directing a bank to send a telex on their behalf. The telex was to be in these terms:
"Urgent -- attention guarantees This is Baring Brothers And Co., Limited London -- bankers to Britannia P&I Club Re vessel 'Seaborne' We should be grateful if you would urgently contact Captain Ivko of Jadroagent Obala [giving an address] who is our principal's representative to advise him that you have this instruction and then issue your guarantee for up to USD 350,000."
[4]Then it refers to the oil spill, names the joint beneficiaries and sets out the terms of the guarantee, which was in these terms:
"In consideration of, and upon condition that, you refrain from arresting or otherwise detaining the 'Seaborne', or any other ship or property in the same or associated ownership or management and that you refrain commencing legal or other proceedings anywhere in the world other than before the court referred to below in connection with the potential claim/fine against the owners of the 'Seaborne' in connection with the above incident we hereby undertake to pay to you such sum as may be agreed by the owners as a result of an amicable settlement, or as may be found and adjudged to be due from the owners of the 'Seaborne' by a final judgment of the Yugoslavia Court provided always that our liability hereunder shall not in any circumstances exceed the sum of USD 350,000 . . . "
[5]The telex continued:
"We confirm that we hold you fully indemnified in this matter, our undertaking remaining in force until such time as you formally release us and, furthermore, we confirm that we will reimburse you on your first written demand without contestation for payment made under this guarantee providing always that the issuing branch certify either in writing or by tested telex, that payment is made strictly in accordance with the terms and conditions thereof. Additionally, we also agree to pay your commission charges in this connection. We look forward to receiving your confirmation that you have acted as requested, and await a note of the charges in this matter. Please let us have two copies of the guarantee you issue in due course."
[6]It is on the letter of indemnity that liability as between the claimants and the defendants turns in this case. There is no dispute that a judgment was entered in the commercial court of Podgorica on 29 June 1991. The sum for which it was entered was the sum of US $350,000, or the dinar equivalent thereof. It would further seem that there was an order for substituted service of that judgment on 2 October 1992. The claimant's expert on Yugoslav law suggests that that meant that the judgment became a final judgment on 17 October 1992. However, the defendants' expert, Mr Milosevic, has opined that the court had no jurisdiction to order substituted service when one looks at the rules, and has thus opined that as a matter of Yugoslav law the judgment never became final. It seems that when the judgment was brought to the attention of the defendants or their predecessors, the point was taken that the judgment had never been served and that it might not be final. It was in that context that the judgment was taken to the Yugoslav court and on the judgment was placed a stamp or certificate by the judge who had given the judgment to the effect that the judgment was final. Again, Mr Milosevic for the defendants has opined that that certificate had no effect in Yugoslav law.[7]Thus, on the expert evidence, there is -- and it has been accepted that there is -- a dispute as the finality of the judgment in Yugoslav law and, if that were the only point that arose, it is accepted that there would have to be a trial to resolve that issue.[8]What, however, is clear is that no one has in fact sought to challenge the judgment or to appeal it and, again for the purposes of Part 24, it is accepted that the claimants paid the local authorities $350,000 on 20 December 1996. By letter dated 6 March 1997, the claimants made a demand under the indemnity and, as required by the terms of the indemnity, certified that they had made a payment "strictly in accordance with the terms and conditions both of the guarantee we issued and the aforesaid letter of indemnity."[9]Two points were argued before the judge, and indeed two points have been put to us as being arguable points which should come to the Court of Appeal. The first was based on certain paragraphs in the opinion of the expert, Mr Milosevic (who put in an opinion shortly before the hearing), as to the effect of the certificate. Mr Milosevic sets out his qualifications, and there is no doubt about his qualifications. He is clearly a lawyer of considerable experience. A substantial part of the opinion that he delivered deals with the question whether the judgment of the Yugoslav court was final or not. In that connection, he goes into the articles of the Civil Procedure Code and he ultimately concludes that, in his view, as a matter of Yugoslav law, that judgment was not final. He then also deals with the point raised by the stamp of finality.[10]He then says, under a heading, "Barings are not liable under the guarantee to Investiciona Banka", as follows:
"Under the guarantee between Investiciona Banka and BB & Co, a certificate is required that payment was made in accordance with the original guarantee with the Commune of Bar. In March 1997 Montenegrobanka sent a notice of demand where they certified that payment was made in accordance with the terms of the original guarantee. But Montenegrobanka did not make payment pursuant to a 'final' judgment of the Yugoslav Court. As a result the notice of demand does not contain a proper certification and therefore as a matter of Yugoslav law, it is not [a] valid demand. Based on my knowledge and experience I as a Yugoslavian lawyer consider that under Yugoslav law Barings are not liable under their guarantee, because no valid certificate has been (or, until the judgment has been properly served, can be) given."
[11]It is right to say that it was conceded by the claimants that it is at least arguable, and certainly should be assumed for the purposes of the Part 24 application, that the proper law of the indemnity was Yugoslav law. That is said in essence to be so by virtue of the fact that the guarantee would be governed by Yugoslav law and that the indemnity thus also would be governed by Yugoslav law. It is unnecessary to go into the arguments as to whether that point is right or whether it is not. But the point taken by the defendants is that they have this opinion of a Yugoslav lawyer to the effect that certification is not valid, and that that thus must present them with an arguable point so far as the trial is concerned.[12]The second point which is taken is that, even if the judge were right to reject that first point, it is said there is some other compelling reason why there should be a trial. That involves consideration of the way in which the judgment was obtained, points taken on service and then the payment of the same, all said to build up a picture that there are facts which require investigation at trial.[13]As I have said, it is common ground that Yugoslav law is the proper law of the letter of indemnity. But that said, one is entitled to take judicial notice of the fact that these documents are documents as between bankers, one of which certainly is an English banker. What is more, they are documents that use English words. Mr Rainey suggests that it is only as a matter of English law that these words have been given the meaning that undoubtedly the English cases give them. But one has to say that there seems little point in a certification process, unless the meaning of the words, as English words, did not mean that in order to be entitled to claim on the indemnity, and in order that the liability to pay was guaranteed, it was simply certification which was required. Furthermore, it is not simply the fact that there was a certification provision. There are also the words "no contestation". One must remember that lying behind a transaction of this sort is the customer's liability to reimburse the bank, and it is for that reason that the bank -- a bank and any bank -- will want a very clear basis on which it is liable to pay under this form of indemnity.[14]As it seems to me, in the context of that background, English language and banking practice, it would need very powerful evidence if this court were to be persuaded that the plain language led to a different result in Yugoslavia as compared with the result in England or in other countries. Of course, if there were a textbook relating to banking which suggested that the Yugoslav court had taken a different view so far as this form of language was concerned; if there were some case law which indicated a different view being taken; if, indeed, there had been a spelling out in Mr Milosevic's opinion of the way he had gone about construing these English words, including translating them into Serbo-Croat or the relevant language and going back to the principles that he said would be applicable and some citation of those principles which had led him to say that those words had some different meaning from those they naturally have, then that form of evidence might have compelled a different view. But in this instance one simply has a bald statement of opinion to the effect that, because he has the view that the judgment was not a final judgment, then a certificate could not be a proper certificate. As a matter of logic that does not follow, and in my view the judge was entitled to say that the evidence of Yugoslav law put in by the defendants was not sufficient to show that they had a real prospect of defending the claim at a trial.[15]I ought to say that some criticism is made of the judge as to some of the reasons that he gave. For example, he appears to have taken into account the size of the sum that was being claimed. In my judgment it is not logically right to take into account the size of the sum, but the question at the end of the day is whether he is right on the viw he took, and in my judgment he clearly was.[16]I ought to add that at the commencement of his submissions Mr Rainey suggested that the claimants were in difficulty because in a case of this sort, once it is accepted for the purpose of the summary judgment application that Yugoslav law is the proper law, then it was incumbent on the claimants to, in effect, swear that by Yugoslav law the result was the same as by English law. In my view that is not a burden imposed on a claimant in this situation. There is no reason why a claimant on a summary judgment application should not be in the same position as a claimant at a trial. A claimant is entitled to plead his case on the basis that foreign law is the same as English law and swear that he has the right to judgment and, if the defendant wants to say there is a different result by the proper law, it is for the defendant to put that evidence in. That evidence, as it seems to me, the judge is entitled to approach in exactly the same way as he would approach any evidence which is put in by a defendant. He does not have to accept it simply on the say-so of the defendant. He is entitled to test it. In this instance, in my view, the judge was right in relation to the view he formed of this evidence.[17]That leads to the second point, as to whether there is some other compelling reason for ordering a trial. Mr Rainey, both before the judge and before us, has made some attempt to cast doubt on the good faith of the claimants. There is no allegation of fraud and, in some measure, my understanding of the submission was that this was a case where a trial should be ordered so that there could be discovery, which would allow the defendant an opportunity to see whether some allegation of fraud could be made. That is not an attractive starting-point.[18]The real key, as it seems to me, is that on any view a judgment was obtained. Its authenticity cannot be in any doubt. No attempt has been made to appeal that judgment by anybody. Payment has been made in accordance with it. The expert evidence of the claimants is to the effect that the judgment was final and nobody suggests that that is not an opinion that someone is entitled to hold. It may have taken many years for this matter to come to court and for the claim to be made and pursued, but in the context of the conflicts that have taken place in Yugoslavia that is not a surprising position and it is certainly, as it seems to me, not a basis for challenging the claimants' good faith. In my view the judge was right on this aspect also, that there is no compelling reason for ordering a trial. That is particularly so in the context of indemnities and guarantees. It is, as it seems to me, exceedingly important that on the whole these matters can be dealt with on a Part 24 application.[19]In my view, permission to appeal should be refused.

LORD JUSTICE PILL: I agree. Accordingly the application for permission to appeal is refused.

ORDER

[21]Application refused

Cited in 1 later judgment