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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> DVB Bank SE v (Shere Shipping Company Ltd & Ors [2013] EWHC 2321 (Comm) (31 July 2013) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2013/2321.html Cite as: [2013] EWHC 2321 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
DVB Bank SE |
Claimant |
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and |
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(1) ![]() ![]() (2) Tongham Shipping Company Limited (3) Uppercourt Shipping Company Limited (4) Vobster Shipping Company Limited |
Defendants |
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(1) Melli Bank PLC (2) Persia International Bank PLC |
Claimant |
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and |
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(1) ![]() ![]() (2) Uppercourt Shipping Company Limited (3) Vobster Shipping Company Limited |
Defendants |
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DVB Bank SE |
Claimant |
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and |
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(1) Woking Shipping Investments Limited (2) Islamic Republic of Iran Shipping Lines Limited |
Defendants |
____________________
Mr Peter Irvin (instructed by Stephenson Harwood LLP) for Melli Bank Plc and Persia International Bank Plc
Mr Peter de Verneuil Smith (instructed by Holman Fenwick Willan LLP) for the Defendants
Hearing dates: 26-27 June 2013
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Crown Copyright ©
Mr Justice Simon:
Introduction
Chronology
(1) Regulation 1100/2009 (dated 17 November 2009) added Melli Bank to the list of Iranian entities which were subject to sanctions under Regulation 423/2007.
(2) On 26 July 2010 Regulation 668/2010 added PIB and IRISL to the list of Iranian entities which were subject to sanctions under Regulation 423/2007.
(3) On 27 October 2010 Regulation 961/2010 introduced a new set of sanctions against Iranian entities including IRISL, Melli Bank and PIB.
(4) On 24 May 2011 Regulation 503/2011 added the Borrowers and Woking to the list of Iranian entities which were subject to sanctions under Regulation 961/2010.
(5) On 24 March 2012 Regulation 267/2012 replaced Regulation 961/2010 and continued the sanctions imposed against the Borrowers, the Guarantors and Melli Bank/PIB.
The test on an application for summary judgment
(i) The court must consider whether the claimant has a 'realistic' as opposed to a 'fanciful' prospect of success: Swain v Hillman [2001] 2 All ER 91;
(ii) A 'realistic' claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: E D & F Man Liquid Products v Patel [2003] EWCA Civ 472;
(iii) In reaching its conclusion that the court must not conduct a 'mini-trial': Swain v Hillman;
(iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10];
(v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond ...No. 5) [2001] EWCA Civ 550;
(vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group ltd v Bolton pharmaceutical Co 100 Ltd [2007] FST 63;
(vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of the documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & polymers Limited v TTE Training Limited [2007] EWCA Civ 725.
Under rules 3 and 4 of the present Order 14, the defendant can obtain leave to defend if (and I read from rule 3 (1)) the defendant satisfies the court 'that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial.' These last words seem to me to be very wide. They also seem to me to have special significance where, as here, most or all of the relevant facts are under the control of the plaintiff, and the defendant would have to seek to elicit by discovery, interrogatories and cross-examination those which will aid her. If the defendant cannot point to a specific issue which ought to be tried but nevertheless satisfies the court that there are circumstances that ought to be investigated, then I think that those concluding words are invoked. There are cases when the plaintiff ought to be put to strict proof of his claim, and exposed to the full investigation possible at a trial; and in such cases it would, in my judgment, be wrong to enter summary judgment for the plaintiff.
Regulation 267/2012
All funds and economic resources belonging to, owned, held or controlled by the persons, entities and bodies listed in Annex IX shall be frozen.
Article 23(3) provides
No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of the natural or legal persons, entities or bodies listed in Annexe ... IX
(h) 'economic resources' means assets of every kind, whether tangible or intangible, movable or immovable, which are not funds, but which may be used to obtain funds, goods or services;
(j) 'freezing of economic resources' means preventing the use of economic resources to obtain funds, goods or services in any way, including, but not limited to, by selling, hiring or mortgaging them;
(k) 'freezing of funds' means preventing any move, transfer, alteration, use of, access to, or dealing with funds in any way that would result in any change in their volume, amount, location, ownership, possession, character, destination, or other change that would enable the funds to be used, including portfolio management;
(l) 'funds; means financial assets and benefits of every kind, including, but not limited to:
(i) cash, cheques, claims on money, drafts, money orders and other payment instruments;
(ii) deposits with financial institutions or other entities, balances on accounts, debts and debt obligations;
(iii) publicly-and privately-traded securities and debt instruments, including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures and derivatives contracts;
(iv) interest, dividends or other income on or value accruing from or generated by assets;
(v) credit, right of set-off, guarantees, performance bonds or other financial commitments;
(vi) letters of credit, bills of lading, bills of sale; and
(vii) documents showing evidence of an interest in funds or financial resources
By way of derogation from Article 23 and provided that a payment by a person ... listed ... is due under a contract or agreement that was concluded by, or an obligation that arose of the person ... concerned, before the date on which that person ... had been designated ... the competent authorities may authorise ... the release of certain frozen funds or economic resources, if the following conditions are met:
(a) the competent authority has determined that:
(i) the funds or economic resources shall be used for a payment by a person ... listed ...
...
(iii) the payment is not in breach of Article 23(3) ...
The Borrowers' Grounds of Defence
(1) The argument that the Loan Agreement is an economic resource
The notion of 'funds, other financial assets and economic resources' as used in Regulation No 2580/2001 also takes on, by virtue of the related definition given in Article 1(1) of that regulation, a wide meaning which covers assets of every kind, however acquired. It is not important, in that regard, whether own assets or assets which have been collected or obtained from third persons are concerned.
(2) The argument that a bank transfer is prevented by Articles 23(2) and (3).
... settled law in England ... that a supervening prohibition of some contractually undertaken obligation, which can be overcome by obtaining a licence, will only frustrate a contract at once if the person affected by the prohibition can show that no licence could in any event have been obtained. If this is uncertain, then his obligation is to use his best endeavours to obtain the necessary licence, and the contract then only becomes frustrated if and when all such efforts have failed.
... promptly obtain ... all consents required ... for that Borrower to perform its obligations ... under any Finance Document
'Finance Document' was defined in Clause 1.1 to include the Loan Agreement.
to determine that
(1) the funds or economic resources shall be used for a payment by a person entity or body listed in ... Annexe IX;
(2) the payment will not contribute to an activity prohibited under this Regulation; and
(3) the payment is not in breach of Article 23(3).
... the designation of the Bank did not render obligations under the Facility Agreement ... incapable of performance where, as here, a licence could be sought and, on the evidence, could be expected to be forthcoming.
(3) The effect of the Regulations on the repayment obligations
Temporary war-time restrictions may not frustrate a long-term lease, which will continue in force for many years after the restrictions are lifted; so long as it exists, the restrictions will however, provide an excuse for not complying with the covenant in the lease.
The lease at the time had more than 90 years to run, and though we do not know how long the present war, and the emergency regulations which have been made necessary by it, are going to last, the length of the interruption so caused is presumably a small fraction of the whole term.
DVB's claim against the Guarantors
The Unfair Prejudice defence
The Court of Appeal has affirmed that there is no general principle that 'irregular' conduct on the part of the creditor, even if prejudicial to the interest of the surety, will discharge him. Short of bad faith, misrepresentation or concealment amounting to misrepresentation, connivance with the default of the principal debtor, or variation of the terms of the contract to the possible prejudice of the surety, the creditor can act as he chooses ... the courts have clearly set their face against imposing a duty of care in the tort of negligence on a creditor to the surety to safeguard the economic welfare of the latter's position.
... despite the apparent width of the principle it is difficult to find any clear examples in either England or Australia of the discharge of a guarantor on this basis ;
and conclude (at §8-111) with their view that:
... the weight of authority is contrary to the existence of a general rule that the guarantor will be discharged if the creditor acts in a prejudicial manner towards the guarantor.
But as a matter of principle I cannot accept [Counsel's] submission that a surety is discharged if a creditor acts towards the principal debtor in a manner which is irregular and prejudicial to the interests of the surety. Leaving aside what may be the special case of fidelity guarantees, I consider the true principle to be that while a surety is discharged if the creditor acts in bad faith towards him or is guilty of concealment amounting to misrepresentation or causes or connives at the default by the principal debtor in respect of which the guarantee is given or varies the terms of the contract between him and the principal debtor in a way which could prejudice the interests of the surety, other conduct on the part of the creditor, not having these features, even if irregular, and even if prejudicial to the interests of the surety in a general sense, does not discharge the surety.
3.1 The Guarantor shall be liable under this Guarantee as if it were a principal and independent debtor and accordingly it shall not have, as regards this Guarantee, any of the rights or defences of a surety.
3.2 Without limiting the generality of Clause 3.1, the liability of the Guarantor under this Guarantee shall not be reduced, discharged or otherwise adversely affected by:
(a) any ... dealing with ... of any right or remedy which any Creditor Party may now or after the date of this Guarantee have against the Borrowers (or any of them) ...
...
(g) ... anything done or omitted by any person which, but for this provision, might operate to exonerate or discharge the Guarantor or otherwise reduce or extinguish any of its liabilities under this Guarantee.
On or before 31 October 2012, the Claimant had discussions with the [United States] Office of Foreign Assets Control ('OFAC'), which is part of the US Department of the Treasury that administers economic sanctions. OFAC pressurised the Claimant to terminate the Loan Agreement and to arrest the Ships in order to put economic pressure on the Defendants. In making the Demand the Claimant acted pursuant to a collateral purpose and had it not done so would not have made the Demand.
... the Borrowers invited [DVB] to nominate an account in a suitable country (meaning one not subject to the sanctions regime) and currency to which the Borrowers could make payments under the Loan Agreement. [DVB] deliberately failed to do so and unfairly prejudiced the Borrower's ability to make payments and thereby unfairly prejudiced the Guarantors.
The Supervening Illegality defence
No claims in connection with any contract ... the performance of which has been affected directly or indirectly, in whole or in part, by the measures imposed under this Regulation, including claims ... under a guarantee ... shall be satisfied, if they are made by:
(a) designated persons ...
The performance of a contract ... shall be regarded as affected by the measures imposed under this Regulation where the existence or content of the claim results directly or indirectly from those measures.
This Article is without prejudice to the right of persons, entities and bodies referred to in paragraph 1 to judicial review of the legality of the non-performance of contractual obligation in accordance with this Regulation.
(4) The Claim by Melli Bank/PIB
Conclusion