England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR JUSTICE CARNWATH
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL Tuesday 31st July, 2001

LORD JUSTICE MUMMERY:

1. This is an appeal from an order made by Carnwath J on 12 October 2000. He dismissed an application by Mr Mian Aftab Ahmed to set aside the registration of a judgment obtained against him in Karachi , Pakistan on 12 April 1999.Mr Ahmed is a Pakistan national who carried on business in Pakistan, but has not been resident there since December 1995. The judgment was in favour of Habib Bank Limited (the Bank), which is based in Pakistan, for the sum of Rs 451,113,547 (about £5.7m) due under bank guarantees. That judgment was registered in England on 17 September 1999.
2. The appeal is brought on two grounds: first, that the judgment was not one of a recognised court and so should not have been registered; and, secondly, that the judgment was obtained by fraud. The two grounds are independent of each other. Mr Ahmed would be entitled to have the registration of the judgment set aside, if he were to succeed on either ground. The judge found against Mr Ahmed on both points. Mr Ahmed appeals with the permission of this court. He is represented by Mr Richard Salter QC and the Bank by Mr Alastair MacGregor QC. The court is indebted to both counsel for their excellent arguments.

The Recognised Court Point

3. This point does not require an examination of the facts underlying the dispute which culminated in the Bank obtaining the substantial money judgment against Mr Ahmed.
4. Under section 4(1)(a) of the Foreign Judgments (Reciprocal Enforcement) Act 1933 (the 1933 Act) the registration of a foreign judgment "shall be set aside if the registering Court is satisfied -

(i) that the judgment is not a judgment to which this Part of this Act applies;...."

5. The Reciprocal Enforcement of Judgments (Pakistan) Order 1958, which was made under section 1 (1) of the 1933 Act, extended the 1933 Act to Pakistan and by paragraph 4 applied it to judgments of the following courts:

" (a) The Supreme Court of Pakistan and all High Courts.

(b) All District Courts.

(c) All other Courts whose civil jurisdiction is subject to no pecuniary limit provided that the Judgment sought to be registered under the Act is sealed with a seal showing that the jurisdiction of the Court is subject to no pecuniary limit."

6. The main issue on this appeal is whether the judge was wrong in holding that he was satisfied that the judgment of 12 April 1999 was a judgment of the High Court in Pakistan.
7. The judgment is headed

"DECREE

IN THE HIGH COURT OF SINDH AT KARACHI.

(ORIGINAL CIVIL JURISDICTION)"

8. Each page of the document, the authenticity of which is not in dispute, bears the seal of "The High Court of Sindh." The document is signed by Mr Justice Sarwana.
9. Carnwath J held that the form of the document was conclusive for the purpose of section 1 of the 1933 Act and that he was not entitled to go behind it to investigate the capacity in which the High Court was acting under the law of Pakistan. He said (Paragraph 15)-

".....In my view, it is not part of my function under the 1933 Act to go behind what purports to be a judgment of the High Court, assuming it to be genuine (which is not in doubt in this case). I see nothing in the Act or the 1958 Order which entitles me, sitting as an English court, to do other than take the judgment as I find it. It is undoubtedly a judgment of the High Court of Sindh, under its own name. Whether it had jurisdiction to issue it in that form, as a matter of Pakistani law, was a matter to be litigated, if at all, in the Pakistan courts. The English court has no power to set it aside or amend it. That approach is reinforced by the general policy of the Act."

10. In case that approach was wrong, however, the judge went on to review the evidence on the law of Pakistan and to express his conclusion on the issues raised in evidence by two experts on the status of the High Court of Sindh under the domestic banking jurisdiction. He rejected Mr Salter's submission, based on expert evidence of statutory provisions and judicial decisions on domestic banking law, that the judgment was not that of the High Court of Sindh, but of the Banking Court, which is not a recognised court for the purposes of the 1933 Act.
11. His conclusion on this point was that-

"....there is nothing in Pakistani law which makes it inappropriate (in the context of the 1933 Act) to treat the judgment as what it purports to be, that is a judgment of the High Court of Sindh."

12. I agree with the judge's ultimate conclusion on this point, but I am not in complete agreement with his approach to the determination of the question whether the judgment is one to which the 1933 Act applies.
13. In my judgment, if the registering court is to be satisfied that this is a judgment to which the 1933 Act applies, it is entitled to admit relevant expert evidence of the law of Pakistan on the issue whether the judgment is of the High Court of Sindh or of some other court or tribunal. The justification for a limited inquiry of that nature in this case is that the judgment itself states that this was a

"SUIT UNDER SECTION 6 OF THE BANKING TRIBUNALS ORDINANCE 1984 FOR RECOVERY OF Rs:502,221,229.33."

14. Reference by the English Court to the 1984 Ordinance is not made in order to go behind the judgment: it is for the legitimate and necessary purpose of determining whether it is the judgment of a recognised court or not. Unless the court is satisfied that it is, the registration of the judgment must be set aside under section 4 of the 1933 Act.
15. The 1984 Ordinance provided machinery for the expeditious recovery of money due to Pakistan's nationalised banks. For that purpose it conferred power on the Federal Government to establish Banking Tribunals with specified territorial limits and spelt out the powers conferred on them and prescribed their procedures. The Banking Tribunals operated alongside the "Special Courts" established under the earlier Bank Companies (Recovery of Loans) Ordinance 1979 until both were replaced by the "Banking Courts" established under the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act 1997, which was in force at the date of the judgment on 12 April 1999.
16. Mr Salter's contention that that judgment was not a judgment of the High Court of Sindh is based on the 1997 Act and on decisions of the Supreme Court of Pakistan, the High Court of Sindh and the High Court of Lahore on the interpretation of its provisions and of equivalent provisions in the earlier Ordinances. He submits that the judgment was that of the Banking Court because, when it gave judgment for the Bank on 12 April 1999, the High Court of Sindh was acting as the Banking Court, and not as the High Court.
17. His starting point is the definition of "Banking Court" in section 2 (b) of the 1997 Act which provides that

"Banking Court " means-

(i) in respect of a case in which the outstanding amount of claim based on a loan or finance does not exceed thirty million rupees or the trial of offences under this Act, the Court established under section 4; and

(ii) in respect of any other case, the High Court."

18. Section 4 of the Act contains provisions conferring powers on the Federal Government to establish Banking Courts with territorial limits; for the appointment of Judges of the Banking Courts; for the transfer of cases from one Banking Court to another; and for the venue of its sittings. It is, however, provided by subsection (8) of section 4 that

"Nothing contained in this section shall apply to a High Court in the exercise of its jurisdiction under the Act."

19. Other provisions in the Act refer to the powers of Banking Courts, their procedures and to a right of appeal against its decrees to the High Court to be heard by a bench of not less than two judges.
20. Mr Salter referred to the expert evidence of Mr Munib Akhtar for Mr Ahmed and Mr GH Malik for the Bank. They disagreed on this point. He concentrated, in particular, on three decisions of the Supreme Court of Pakistan (which are binding on all other courts) for the proposition that, when acting as a Special Court, Banking Tribunal or Banking Court hearing cases under the Banking Ordinance or Act, the High Court is not acting as the High Court. Those decisions were in a different context from the registration of foreign judgments: in particular the right to appeal with leave from the High Court under Article 185(3) of the Constitution of Pakistan: Ashira Khatoon v.Muslim Commercial Bank Limited (Unreported judgment CA No 193K of 1992-1 November 1992) ; Pakistan Fisheries Limited v. United Bank Limited PLD 1993 S C 109; and Bolan Bank Limited v. Capricorn Enterprises (Pvt) Limited 1998 SCMR 1961.
21. In the Pakistan Fisheries case the Supreme Court stated at p. 128 that

"...The jurisdiction conferred on the High Court under the [1979] Ordinance is special jurisdiction and while exercising such jurisdiction the High Court bears the fictional character of Special Court as defined in the Ordinance."

22. Mr Salter contended that the focus of the Supreme Court was on the identity or character of the Special Courts created by the Ordinance and not just the nature of their jurisdiction. This was also the effect of the decision of the High Court of Sindh itself in Valuegold Limited v. United Bank Limited PLD 1999 Karachi 1, holding at p.12 that

"...This court [the High Court of Sindh], therefore,while hearing matters under [the 1997 Act] does not act as High Court in exercise of its original civil jurisdiction but as a Special Court set up under the said Act..."

23. Similar observations were made by the High Court of Lahore in Shah Jewana Textile Mills Limited v. United Bank Limited PLD 2000 Lahore 162 at p.164, holding that the High Court, while hearing cases under the 1997 Act,

" ...acts as a Banking Court and not as the High Court."

24. Mr Salter contended that Carnwath J fell into error in holding that the effect of these decisions was confined to their context and that there was "nothing in Pakistani law which makes it inappropriate (in the context of the 1933 Act) to treat the judgment as what it purports to be, that is a judgment of the High Court of Sindh."
25. Mr Salter emphasised that the decisions of the Supreme Court were binding on all other courts; that they were all one way, bearing directly on the Banking Court issue which arose for decision by Carnwath J; and that they were of general application, as they were determinations of the status of the Banking Court for the purposes of the Constitution. He urged this court, which has before it the same materials as were before the judge, to upset the finding of Carnwath J on this point and to find instead that the judgment of 12 April 1999 was not one of the High Court of Sindh.
26. In my judgment, the judge was right to reject Mr Salter's submissions. There is nothing in the legal materials on the Banking Courts (and their predecessors exercising a similar jurisdiction), which prevents the judgment of 12 April 1999 from being what it appears on its face to be, namely a judgment of the High Court of Sindh.
27. The relevant question under section 4 (1)(a)(i) concerns the identity of the court, which issued the judgment (i.e. is it a recognised court within the meaning of the 1933 Act?) and not to the nature of the jurisdiction exercised by the court or the capacity in which it was acting when it issued it e.g. Banking Court jurisdiction or ordinary civil court jurisdiction. Most of the reported cases discussed in the experts' reports are concerned with the nature of the special banking jurisdiction exercised by the High Court in Pakistan in the context of domestic rights of appeal against its decisions. The issue in those cases was: what jurisdiction was being exercised by the High Court? The issue under the 1933 Act is: what court gave the judgment subsequently registered in England?
28. The definition of "Banking Court" in section 2 (b) of the 1997 Act does not assist on the issue of the identity of the court. First, it does not define what is a recognised court for the purposes of the 1933 Act. Secondly, even though it is framed as a definition of a Banking Court, it in fact operates as a provision for the allocation of jurisdiction in banking cases according to the outstanding amount of the claim based on a loan or finance: under Rs 30m is within the jurisdiction of the court established under section 4 and amounts in excess of that sum go to the High Court. The terms of section 4(8) re-inforce the view that it is the High Court which is exercising the special jurisdiction in the more substantial cases under the 1997 Act and that the judgments given are those of the High Court.
29. Accordingly I would not allow the appeal on the first ground.

The Fraud Point

30. This is a more troublesome ground of appeal.
31. Under section 4 (1) (a) (iv) of the 1933 Act the registration of the judgment shall be set aside if the registering Court is satisfied "that the judgment was obtained by fraud."
32. This ground inevitably entails an examination of factual aspects of the dispute between the Bank and Mr Ahmed in order to determine whether there has been fraud by the Bank in obtaining the judgment in Pakistan. It is common ground that the burden is on Mr Ahmed to prove fraud "to a high degree of probability": Bater v. Bater [1951] P 35.The judge heard oral evidence from Mr Ahmed, both in chief and under cross examination. No oral evidence was called by the Bank, which relied on its judgment and the underlying documents. As Mr MacGregor correctly submitted it was not for the Bank to justify the judgment which it had obtained in Karachi. He added that it was neither necessary nor appropriate for the Bank to call oral evidence on the application to set aside the judgment. Carnwath J had had the advantage, denied to this court, of seeing and hearing Mr Ahmed give evidence. The Bank's position was that parts of Mr Ahmed's original case had been abandoned and that evidence given by him to the court on other points had been discredited or disbelieved. The evidence on which he relied in this appeal was in fact unreliable and improbable and not such as to require the Bank to call oral evidence to deal with the conversations and correspondence of 10 years previously on which he relied. The judge had correctly rejected the contention that the registration should be set aside on this ground, holding that it had not been established by Mr Ahmed to the required high level of probability that the Bank's employees had

"....acted deliberately or recklessly, wholly contrary to the agreement made with the defendant..."

The Factual Background

33. It was common ground between the parties' experts that, at the time of transactions in 1990/91 between the Bank and Mr Ahmed and down to the enactment of section 17 of the Banking Companies Act 1997, it was permissible banking practice in Pakistan for the customer to sign guarantee forms in blank and for the Bank to complete them later. It was, however, necessary for the forms to be filled in within a reasonable time and strictly in accordance with the common intention of the parties.
34. Mr Ahmed and his two brothers, Gulzar and Munir, were involved in managing textile companies in the Firdous group of companies. The group was substantially in debt to the Bank. There were serious trading difficulties. There were differences between the three brothers.
35. In 1989, and again in December 1990, additional facilities were requested in discussions between Mr Ahmed and representatives of the Bank, including Mr Younus Habib. In this connection Mr Ahmed signed three personal guarantees of the liability of Firdous to the Bank and a number of other documents. The case has so far proceeded on the basis that the guarantees and other documents were blank when Mr Ahmed signed them and that the three guarantees were subsequently completed by the Bank in July 1992. They were dated 8 March 1990, 3 April 1991 and 26 September 1991. The judgment of the High Court of Sindh was obtained by the Bank on those guarantees.

Guarantee 8 March 1990

36. This guarantee was for up to Rs 382,122,200 in respect of the liabilities under a "mark up " agreement of the same date.
37. The case initially advanced by Mr Ahmed in his evidence was that the relevant agreement by the Bank to provide further finance to Firdous was not carried out and that no further loan was made. It was, however, clear from the documentary evidence that funds were sanctioned and provided and a total of Rs 232m was credited to the accounts of Firdous on 8 March 1990.
38. The only point taken before the judge, which was not taken when the claim was made against him in Pakistan in 1995, was that this guarantee and other relevant documents were only signed by him on condition that the personal guarantee would also be signed by his two brothers. The judge rejected the contention that this was a pre-condition of the 1990 guarantee (or, as Mr Ahmed had contended, of the 1991 guarantees) from his point of view or that the Bank acted fraudulently in acting on the 1990 guarantee. There is no appeal against that finding.

The 1991 Guarantees

39. The guarantee dated 3 April 1991 was for up to Rs 6,024,220m in respect of the liabilities of Firdous under a "mark up" agreement of the same date. The guarantee dated 26 September 1991 was in respect of the liabilities of Firdous under a "mark up " agreement of the same date. Although signed in blank by Mr Ahmed in December 1990, these documents were not completed by an employee of the Bank, Mr Khalid Razzaq, until July 1992, by which date the facility was too late to be of value to Firdous. They were then backdated and completed by Mr Razzaq to show a "mark up" agreement and a guarantee made on 3 April 1991 for Rs 6,024,220 and a "mark up" agreement and a guarantee made on 26 September 1991 for Rs 280,631,250.
40. In summary, Mr Ahmed's case on the 1991 guarantees is that he provided them and other documents (resolutions and control documents) in blank to the Bank following his discussions with Mr Younus Habib at the end of 1990, when the financial position of Firdous was "desperate"; that it was agreed in principle that Mr Habib, who was a senior official of the Bank, but without authority to agree to the facilities requested, would submit a recommendation that facilities should be granted to Firdous for sanction by the Bank's Executive Committee; that the facility would allow Firdous Rs 31m additional working capital, which could be drawn on; that these agreements are corroborated by contemporaneous manuscript notes and figures noted by Mr Younus Habib on Bank documents, which were in evidence; that Mr Younus Habib was removed from his position at the Bank before the recommendation could be submitted; that subsequent negotiations between Mr Ahmed and the Bank were inconclusive; that no facilities were in fact ever sanctioned by the Bank's Executive Committee or notified as sanctioned to Mr Ahmed or Firdous; that he had written letters to the Bank in 1991 stating that the facility was not wanted and facilities had not been renewed; and that accordingly no genuine concluded agreement was ever made relating to facilities for Firdous, which would have entitled the Bank to complete the blank signed forms as it did in July 1992 and to present them to the court in Karachi in the honest belief that they were a valid basis for obtaining judgment against him.
41. In the meantime the amount owing by Firdous to the Bank increased as a result of the addition of "mark up" and forced debits reaching Rs 225m by the end of 1991. In July 1992 Mr Razzaq used the signed blank documents dating from December 1990 to create agreements and guarantees on which the Bank could seek to wind up Firdous and to sue Mr Ahmed.
42. The judge rejected Mr Ahmed's contention that the completion of the details of the 1991 guarantees by Mr Razzaq was fraudulent and that judgment on them was obtained by fraud. The judge did, however, accept that there were apparent discrepancies between some of the documents and lack of a full explanation of the dates of them.
43. Mr Salter pointed out that the discussions between Mr Habib and Mr Ahmed were evidenced in a contemporaneous manuscript note by Mr Habib. Correspondence with the Bank continued in 1991 after Mr Habib left. The arrangements referred to in the note were not formally approved by the Bank's Executive. No evidence that the arrangements had been approved or subsequently honoured has ever been produced by the Bank. The indebtedness of the companies continued to increase reaching Rs 225m by the end of 1991.
44. Thus, on Mr Ahmed's case, the arrangements for further finance for Firdous were not concluded or completed with the Bank. No document has been produced by the Bank recording any such concluded agreement. No further money was advanced to the Firdous companies. As the details inserted in the blank guarantees by Mr Razzaq related to transactions which did not in fact take place, he could not have honestly believed either that he was entitled to complete the documents in the way that he did or that he was entitled to present the documents to the court in Karachi as genuine and without explanation. Despite having been given ample opportunity to do so, the Bank had not called Mr Razzaq to give evidence in the English proceedings to contradict the evidence of Mr Ahmed, as corroborated by documents and uncontradicted facts.
45. On the Bank's case the details inserted on the documents by Mr Razzaq by working backwards from Bank documents simply provided the Bank with the security originally offered by Mr Ahmed in relation to the outstanding and inevitable indebtedness of the companies and the effect was that the substance of the arrangement between Mr Ahmed and Mr Habib was fulfilled. There was no fraud on the part of the Bank.
46. Mr Salter QC criticised the judge's conclusions on the 1991 guarantees. He did so by detailed reference to the Bank's own documents disclosed in these proceedings and to the answers given in cross examination by Mr Ahmed. He repeatedly highlighted the fact that no oral evidence had been called by the Bank from Mr Razzaq (or any other employee) to answer Mr Ahmed's allegations.
47. He submitted that the judge's conclusions were not justified by the evidence and did not excuse the fact that the documents were presented to the Court in Pakistan as valid and genuine without any explanation by Mr Razzaq.
48. In my judgment Carnwath J correctly identified two matters which Mr Ahmed had to show to a high degree of probability:-

(a) that these guarantee and control documents were filled in by the Bank contrary to the intentions of Mr Ahmed; and

(b) that either those filling in the documents, or those subsequently relying on them , on behalf of the Bank, did so dishonestly or recklessly."

49. The judge considered the evidence relating to the three guarantees. As already indicated his findings on the March 1990 guarantee are not challenged on this appeal. The same is true of his findings as regards the contention that the 1991 guarantees were not to take effect unless signed by Mr Ahmed's brothers.
50. The judge summarised the facts relating to the 1991 guarantees and the rival contentions, but he did not at that stage make express findings on either of the two issues (a) or (b) stated above. In the section of the judgment headed "Conclusion" the judge observed that the case originally made by Mr Ahmed was shown to be highly exaggerated. He also pointed out the difficulties for an English Court in determining precisely the boundaries between what is legitimate and what is illegitimate in relation to the banking practice in Pakistan concerning completion by a bank of documents signed in blank by the customer. His reasons for rejecting Mr Ahmed's case on the remaining fraud point which is pursued before this court are stated in paragraph 74 :

"To justify a finding of fraud against the Bank's employees would require a strong case that they had acted deliberately or recklessly, wholly contrary to the agreement made with the defendant. That in my view has not been established. I accept that there are apparent discrepancies between some of the documents and the precise dates inserted into the documents have not been fully explained. However those who filled in the forms could reasonably conclude that the substance of the arrangement between Mr Habib and the defendant was fulfilled. Even if that arrangement had not been formally approved by the Bank's executive, the defendant had had the benefit of it. He may have anticipated being able to use part of the Rs 225m as working capital,but that was not an essential element of the arrangement as noted by Mr Habib."

51. The judge was entitled to be critical of Mr Ahmed's evidence. I am, however, concerned about the lack of a fuller explanation in the judgment for rejecting Mr Ahmed's case on the 1991 guarantees. Mr Salter made points to the judge and to this court fairly based on documentary evidence and unanswered oral evidence of Mr Ahmed. Those points were not dealt with in any detail in the judgment. As was held by this court in Flannery v. Halifax Estate Agencies Limited [2000] 1 WLR 377 the scope of a judge's duty to explain why he preferred one side's case to that of the other side depends on the subject matter of the case. This part of the case did not necessarily depend solely on whether the judge believed Mr Ahmed's evidence about his discussions with Mr Habib and about his dealings with the Bank. There was some documentary evidence to support his case and there was no oral evidence from the Bank rebutting Mr Ahmed's evidence.
52. In my judgment, this is a case in which the judge was bound to give fuller reasons than he did for rejecting submissions on the parts of Mr Ahmed's evidence, which were apparently corroborated by some documentary evidence, relating to the alleged agreement reached between Mr Ahmed and the Bank and to the question whether the Bank's completion of the blank guarantees accurately reflected that agreement. Without a fuller statement of his reasons it is difficult for this court to be satisfied that there was a sound basis for rejecting Mr Ahmed's case in relation to the 1991 guarantees.
53. It remains to consider what course this court should take. I am unable to accept Mr Salter's contention that this is a case in which the Court of Appeal should substitute a finding of fraud where the judge has clearly and expressly rejected such an allegation. But I have, reluctantly and after some hesitation, reached the conclusion that this is a case in which we should follow the course taken in the Flannery case and order a new trial of this issue.
54. I would allow the appeal on this ground and order a new trial limited to the fraud issue in respect of the 1991 guarantees.

Registration or Enforcement in Part

55. This point is raised by the Bank's respondent's notice in case the court concludes that the judgment was obtained by fraud in respect of either or both of the 1991 guarantees. Mr MacGregor contends that the court can and should in any event permit partial registration of the judgment, so as to allow the Bank to enforce the part that relates to the unimpeached guarantee of 8 March 1990. Partial registration of a foreign judgment is permissible under section 2 (5) of the 1933 Act which provides:-

"If, on an application for the registration of a judgment, it appears to the registering court that the judgment is in respect of different matters and that some, but not all, of the provisions of the judgment are such that if those provisions had been contained in separate judgments, those judgments could properly have been registered, the judgment may be registered in respect of the provisions aforesaid but not in respect of any other provisions contained therein."

56. The Bank estimates that the amount of the judgment which related to the 1990 guarantee amounts to Rs 253,011,483.20 and contends that the order of Master Leslie dated 17 September should be varied so as to register the judgment in part only, if the registered judgment is, or would otherwise be, set aside on the ground of fraud to the extent of the 1991 guarantees.
57. Mr Salter contended that there is no power in the court to allow partial registration in this case and that, if the court has a discretion in the matter, it should not exercise it to produce the result contended for by Mr MacGregor. He contends that section 2 (5) deals with the situation where the judgment contains elements of different natures, some of which qualify for registration (e.g. a money judgment) and some of which do not (e.g. an injunction). He also contends that the provision is concerned with the initial application for registration.
58. In my judgment, these submissions are based on too narrow a reading of the sub-section. The judgment of the High Court of Sindh was in respect of "different matters", namely the three different guarantees, upon which separate claims were made. There is no difficulty in upholding the original registration to the extent that Mr Ahmed has failed to establish that the 1990 guarantee is tainted by fraud. The procedural objection raised by Mr Salter is without substance. Even if this court could not substitute a partial registration, it would be open to the Bank to make a fresh application to the court for partial registration of the judgment.

The Result

59. The appeal should be allowed on the remaining fraud issue in respect of the 1991 guarantees and an order made for a new trial of that issue.
60. Counsel are requested to draft for the consideration of the court an order reflecting the terms of this judgment.

SIR MARTIN NOURSE:

61. I am in complete agreement with the judgment of Lord Justice Mummery and with the order proposed by him.
ORDER: Appeal allowed in part. Draft order to be supplied by counsel. (Order does not form part of approved Judgment)