QUEEN'S BENCH DIVISION
COMMERCIAL COURT
B e f o r e :
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CHINA SHIPPING DEVELOPMENT CO. LTD. | Claimant | |
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STATE BANK OF SAURASHTRA | Defendant |
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MR. I. GEERING Q.C. (instructed by Messrs. Norton Rose) appeared on behalf of the Defendant.
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Crown Copyright ©
MR. JUSTICE THOMAS: The claimants are shipowners ("the Owners") incorporated in China. In early April 2000 there was loaded aboard their ship in Malaysia a consignment of Palm Oleate. This was subsequently discharged at Mangalore on 24th and 25th April 2000, at Karwar on 25th and 26th April 2000, and at Chennai on 2nd and 3rd May 2000. When some of the cargo came to be discharged, the bills of lading had not been received by the notify party Lanyard Food Limited ("Lanyard"). They, therefore, asked the Owners to deliver the cargo against letters of indemnity, as is customary in the shipping trade. The Owners agreed, and they were provided with four undated letters of indemnity, Nos. 1065, 1066, 1308 and 1309. The documents are all in identical form and purport to have been issued by Lanyard and the defendants ("the Bank").
The letters of indemnity were purportedly signed for the bank by Mr. Vaidya. On the letters of indemnity there are three stamps purporting to be stamps of the Bank. The first stamp is Mr. Vaidya's name, with his number V-II, that number being the number relating to his role number on the signatory cards kept by the Bank; secondly, a round stamp, giving the Bank's name and, in the middle, the words "Mandvi Branch"; and, third, a stamp which reads
"Yours Faith Fully
For And On Behalf of
State Bank of Saurashtra".
Each of the letters of indemnity provided by clause 7 as follows:
"This indemnity shall be governed by and construed in accordance with English law and each and every person liable under this indemnity shall at your request submit to the jurisdiction of the High Court of Justice of England".
After delivering the cargo to Lanyard, claims were made by others holding the bills of lading and claiming to be the true owners of the goods. The Bank was asked in June 2000 whether they were liable and accepted that they had issued the guarantees. After a response, the terms of which are in dispute, they made their position clear that they were not bound, as the signature was not that of Mr. Vaidya.
On 17th August 2000 the Owners obtained permission to serve proceedings out of the jurisdiction on the Bank in India. At paragraph 7 of the particulars of claim it is stated as follows:
"Each of the said letters of indemnity was issued by both the Defendants and Lanyard, and was sealed by the Defendants, and was signed on behalf of the Defendants by Mr. J.P. Vaidya, and was signed on behalf of Lanyard by Mr. Naku S. Mullick, Director".
On 28th September 2000 the Bank applied to have the service set aside on the grounds that it was not bound by the letters of indemnity, as the signature was a forgery and, therefore, this court had no jurisdiction.
On 13th September 2000 the Bank issued proceedings in the High Court in Bombay, for a declaration that the letters of indemnity were not binding. In those proceedings the bank issued on 18th November 2000 a notice of motion for an anti-suit injunction, but did not proceed to apply for that pending the determination of this application.
On 8th December 2000 the Owners issued an application in this court for an anti-suit injunction in respect of the proceedings in India.
It was agreed that I should first consider whether the courts of England and Wales had jurisdiction. If I decided they did not, then, clearly the argument in relation to the anti-suit injunction did not arise.
It was common ground before me that no point of law arose in this case. The only issue before me was one of fact, namely whether the Owners had made out a good arguable case that the letters of indemnity had been entered into on behalf of the Bank. It is, therefore, necessary for me to set out the facts.
The first and most important fact is that there is now expert evidence of a very clear kind from Dr. Audrey Giles and Mr. Radley. Both are handwriting experts of the highest standing. Both have concluded that the letters of indemnity were not signed by Mr. Vaidya. Dr. Giles' conclusion is expressed in these terms:
"On the basis of the evidence before me I have concluded that Mr. J.P. Vaidya did not sign the Letters of Indemnity and that the signatures on these documents are attempts to simulate his genuine signature."
Furthermore, it is the evidence of Dr. Giles that the stamps are not the same as the Bank's stamps. The Bank had two stamps similar to two of the stamps on the four letters of indemnity - that with Mr. Vaidya's name on it, and the round stamp of the branch. On the basis of the information supplied to her, Dr. Giles was confident that the stamps on the letters of indemnity were not from the stamps used by the Bank. Furthermore, the Bank says it has no stamp equivalent to the stamp that begins "Yours Faith Fully".
Dr. Radley does not really disagree, though it will be necessary to refer in other respects to Dr. Radley's evidence in due course.
Thus, on the basis which an ordinary reading of the pleadings shows, there was plainly no good arguable case. The signature purportedly binding the Bank was a forgery and the stamps were not the Bank's stamps.
However, in his skeleton argument, Mr. Berry, on behalf of the Owners, advanced what, in my view, was an entirely new case. He very properly accepted that, when the matter was pleaded in the particulars of claim, the Owners were putting forward their case on the basis that the letters of indemnity were signed by Mr. Vaidya. He, however, contended that it was open to him to advance a different case on the basis of paragraph 7 of the pleading, which I have set out. In summary, he very attractively put the matter thus:
There are two possibilities as to how Mr. Vaidya's signature had come to be on the letters of indemnity.
1. It had been placed there fraudulently by someone such as Lanyard.
2. It had been placed there by someone within the Bank, on the authority of Mr. Vaidya or some other person within the management of the Bank.
As the second possibility did not involve alleging fraud, and in view of the other evidence to which it will be necessary to refer, that possibility was the more likely and, therefore, there was a good arguable case that the signature of Mr. Vaidya and the stamps on the letter were put on with the Bank's authority.
He, therefore, submitted that, on the basis of the decision of the Court of Appeal in London County Council v. Agricultural Food Products [1955] 2 K.B. 218 which held that a person sufficiently signs a document if it is signed in his name and with his authority by someone else, that the Bank were bound. He submitted that this case could be advanced entirely within the existing pleading.
The first point made by Mr. Geering Q.C., for the Bank, was that the Owners should not be entitled to run this case at all. Mr. Berry submitted that the Owners had pleaded the case, in the paragraph I have set out, although, as I have said, he accepted that, when he pleaded it, he was running a case based on the signature of the letters of indemnity by
Mr. Vaidya; that it was broadly enough pleaded to encompass his case that it was signed by an employee of the branch who was permitted so to do by Mr. Vaidya or by the management of the branch.
Although as a matter of technical pleading it could be argued that the pleading was wide enough, it is in my view not wide enough for the purposes of service out of the jurisdiction. Under the provisions of the former Order 11 of the Rules of the Supreme court, the Court of Appeal said in Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. and Another [1990] 1 Q.B.391 at 436:
"Mr. Mark Waller, on behalf of M. & R. has, by way of amplification, explained to us the alternative ways in which they would seek to put their case, particularly in so far as it arises under the broad heads of 'Abuse of process of the court' and 'Accounting as constructive trustees.' In answer, it has been contended that some of these points are not open to M. & R. on their pleading, and, furthermore, have not been foreshadowed in the affidavit evidence sworn on their behalf. One of Mr. Waller's responses to this contention has been to refer us to the general observations made by Lord Denning M.R. in In re Vandervell's Trusts (No. 2) [1974] Ch.269, 3231, as to the modern practice concerning pleadings:
'It is sufficient for the pleader to state the material facts. He need not state the legal result. If, for convenience, he does so, he is not bound by, or limited to, what he has stated.'
"We respectfully agree with this statement as a general proposition. However, it was not made in the context of a pleading intended to be served out of the jurisdiction, to which we think rather different considerations apply. In our judgment, if the draftsman of a pleading intended to be served out of the jurisdiction under Ord. 11, r. 1(1)(f) (or indeed under any other sub-paragraph) can be reasonably understood as presenting a particular head of claim on one specific legal basis only, the plaintiff cannot thereafter, for the purpose of justifying his application under Ord. 11, r. 1(1)(f), be permitted to contend that that head of claim can also be justified on another legal basis (unless, perhaps, the alternative has been specifically referred to in his affidavit evidence, which it was not in the present case). With this possible exception, if he specifically states in his pleading the result of what he has pleaded, he is in our judgment limited to what he has pleaded, for the purpose of an Order 11 application. To permit him to take a different course would be to encourage circumvention of the Order 11 procedure, which is designed to ensure that both the court is fully and clearly apprised as to the nature of the legal claim with which it is invited to deal on the ex parte application and the defendant is likewise apprised as to the nature of the claim which he has to meet, if and when he seeks to discharge an order for service out of the jurisdiction."
Under the CPR it is made clear by Part 16 and the judgment of Lord Woolf M.R. in MacPhilemy v. Times Newspapers [1999] 3 All ER 775 that a statement of case should make out the parameters of the case being advanced so that the case being made out can be understood by the other side and they can be prepared to meet it.
It was not until the service of the Owners' skeleton argument that the outline of the new case began to become apparent and it was not until the course of Mr. Berry's able and, if I may say so, highly ingenious argument, that it really became clear. In my view, the case being advanced before me was not in any way foreshadowed and the Bank was not in a position to deal with it in full, though, as I shall explain, there was sufficient material on the affidavit evidence for me to conclude that there was no arguable case. The case pleaded against the Bank was a case that the document had been signed by Mr. Vaidya. That was my own reading of the pleadings and, as I have said, Mr. Berry properly confirmed that that was his thinking. That case was met by clear and irrefutable evidence. The new case that the Owners wished to run was not one that the Bank was prepared to meet. It seems to me that where the sole dispute relates to the question of whether there is a good arguable case, it is impermissible to develop a very different case without proper notice.
Thus, I have reached the view that it was not open to the Owners to make out such a case without either having foreshadowed it in the application to serve out or, at the very least, having given proper and adequate notice of it before the hearing. Notice in the skeleton argument served very shortly before the hearing and argument developed during the course of my hearing is not proper notice.
However, I need not decide the matter only on the basis, because it is clear to me that, on the evidence available, the Owners have failed to make out a good arguable case on the new case made. For that purpose, it is necessary to explain the background in a little more detail.
Mr. Vaidya was the manager of the Mandvi branch at Mumbai at the relevant time that the letters of indemnity, if issued by the Bank, would have been issued. He had moved in June 2000 to another branch. It appears that Lanyard had accounts at another branch of the Bank (the Vashi branch) and then opened an account at the Mandvi branch. It was the evidence of Mr. Vaidya that it was the practice in India for a bank sometimes to be asked to sign a document to verify the signature of its customer. He had done this on a few occasions for Lanyard Foods at the request of their principal, Mr. Mullick.
On 16th June 2000 Mr. N.C. Desai, an employee of a shipping agency retained by the Owners was sent by the Owners a copy of the letters of indemnity. He was requested by the Owners to check their validity. He spoke to the Bank and was put through to Mr. Ashar, the head clerk in charge of guarantees at the Bank, and asked him if the letter of indemnity was valid and truly attested by the Bank. Mr. Ashar asked him to fax a copy. He did so. Mr. N.C. Desai then called the Bank again. There is a dispute as to what happened. Mr. N.C. Desai says that he was told by Mr. Ashar that the Bank had issued the letter of indemnity signed by
Mr. Vaidya. He sent an e-mail to the Owners that day which set out his understanding.
"Reference to your fax of 15 June 2000 to G.A. ... office regarding above, contacted State Bank of Saurashtra, Mandvi Branch and they confirm the guarantee as truly attested by that branch."
Having read Mr. N.C. Desai's statement, it is clear that, by the use of the word "attested" he did not mean witnessed, but he meant signed or subscribed by the Bank.
The other account of what happened was that of Mr. Ashar. He accepts that he spoke to Mr. N.C. Desai but says that he told him that the letter of indemnity was not issued by the Bank and that their records confirmed this.
On 19th June 2000 the new manager of the Mandvi branch, Mr. Makwana, showed Mr. Vaidya, who had been on holiday the previous week when the problem had arisen, the faxed copy of the letter of indemnity. Mr. Vaidya told Mr. Makwana at once that it was not his signature.
Mr. Makwana and Mr. Vaidya then met Mr. Mullick of Lanyard and, as they say, confronted him with the forgery. According to Mr. Vaidya's evidence, Mr. Mullick said that the Bank had not signed the letters of indemnity and was not liable.
On 3rd July 2000 it seems a claim was made by the Owners, and on 4th July the Bank rejected it in writing.
A further telephone conversation then took place between Mr. N.C. Desai of the Owners' agents and the Bank. During the course of that conversation he asked Mr. Ashar why the Bank was now saying that it was not liable. Mr. Ashar agreed that this question was asked but, he said, he denied having given the confirmation and put Mr. N.C. Desai on to Mr. Vaidya. Mr. Vaidya then told Mr. N.C. Desai that he had not signed it.
On 20th July 2000 Mr. Vaidya saw representatives of the Owners and again confirmed to them the signature was not his.
It is necessary to mention one other background matter. As I have stated, Mr. Vaidya had always made it clear that he had signed other letters of indemnity to verify the signature. There were three of those specifically dealt with in his witness statement. It appears that his deputy, Mr. V.S. Desai, may have done the same, because there is a bundle of further letters of indemnity with what may or may not be his signature. However, there is no evidence from Mr. V.S. Desai. The Bank could not, in my view, reasonably have been expected to obtain evidence from him, as it was at that stage only dealing with the case of a genuine signature as advanced on the pleadings. The importance of Mr. V.S. Desai's position only became apparent in the skeleton argument and during the course of oral argument in front of me.
Having set out that background, it is possible for me to turn to the seven matters on which Mr. Berry relied for his submission that there was a good arguable case on the basis that the Bank was bound because Mr. Vaidya's signature had been put on either with Mr. Vaidya's authority or with the authority of someone else at the Bank.
The first point Mr. Berry relied on was the relationship between Mr. Vaidya and Lanyard. In October 2000 Mr. Simpson, an investigator instructed by lawyers, acting for other owners who had received similar letters of indemnity, visited India and saw a number of people. Amongst those he saw was Mr. Dash, the assistant general manager of the Bank. According to Mr. Simpson, among the things that Mr. Dash told him were two. First of all, that the Bank had conducted a full and thorough investigation of the whole matter and Mr. Vaidya would be facing disciplinary measures; that Mr. Vaidya had got far too close to Lanyard and allowed them too much; he permitted them to open a deposit account at the Mandvi branch, which had been against Bank policy, because the main Lanyard account was at the Vashi branch, and that Mr. Vaidya had been very stupid. Secondly, according to Mr. Simpson, Mr. Dash told him that the Mandvi branch had no authority to sign letters of indemnity on behalf of any customer and that Mr. Vaidya should not have signed, even to verify signatures.
It may very well be Mr. Vaidya got too close to Lanyard and should not have signed any letters of indemnity to verify the signatures. But that does not mean that he or anyone else committed for what within a bank would be a very serious disciplinary offence, namely authorising another person to sign in his name. As Mr. Berry suggests that Mr. Vaidya's conduct or that of another manager in authorising others to sign in his name was something that must have happened innocently for his case to get off the ground, I cannot see that that has anything to do with the closeness of the relationship. It seems to me that if Mr. Berry is to run a case, as he does, of innocence on the part of a Bank, this must have something to do with lax practice in the bank and the closeness of the relationship between Mr. Vaidya and Lanyard is entirely irrelevant.
The second matter on which Mr. Berry relied was Mr. Mullick's position. As I have set out, Mr. Mullick was confronted on 19th June 2000 by the Bank and accepted the Bank was not liable. Mr. Mullick was also seen by Mr. Simpson. He told Mr. Simpson that Mr. Vaidya did sign the documents to verify the signature. As recorded, the statement must plainly be a lie, as the evidence before me as to the signature, is that it was not that of Mr. Vaidya. However, Mr. Berry relied on Mr. Simpson's further evidence, that Mr. Mullick sent the letters of indemnity to the branch by messenger and thus he did not in fact see Mr. Vaidya sign. Therefore, when he said to Mr. Simpson that Mr. Vaidya signed, what he meant was that they were signed in his name. I am sorry to say that I regard such a suggestion as entirely fanciful and totally far-fetched. It is plain what Mr. Mullick meant and he was telling a straightforward lie.
The third matter on which Mr. Berry relied were the other letters of indemnity. As I have said, Mr. Vaidya has accepted that he signed three letters of indemnity to verify the signature. There is no evidence, as I have also said, from Mr. V.S. Desai whose name also appears on some of the other letters of indemnity. It is right that the Bank has not denied Mr. V.S. Desai's signature, but the Bank has not had to concentrate on this. I, for my part, cannot see how the other letters of indemnity assist. Mr. Vaidya has always accepted that he signed three of them to verify the signature of Lanyard and, if anything, that strengthens his credibility. But I cannot see how that assertion or the other documents assist in any way in showing that someone else at the Bank signed either with the authority of Mr. Vaidya or someone else at the Bank so as to make the Bank liable under the indemnity by signing and using the stamps.
Fourthly, he relied on the statement by Mr. Ashar of 16th June 2000. There is plainly a conflict of evidence on the affidavit before me as to what Mr. Ashar said on that day. I plainly also cannot resolve that. However, it is not relied on as an estoppel and it cannot, in my view, be evidence that someone else signed it with the authority of Mr. Vaidya or someone else at the bank.
The fifth matter on which Mr. Berry relied was that Mr. Vaidya's evidence was not unequivocal. I do not read it as such. It seems to me, having read his statements, that he, in the clearest possible terms, is denying that he signed the documents in question.
The sixth matter on which Mr. Berry relied is Mr. Radley's evidence. Very properly, Mr. Radley said he cannot say who forged the signature of Mr. Vaidya, nor could he comment on which was correct of the possibilities that must have been put to him as raised by Mr. Berry. His report exhibits a passage from an authoritative work "Suspected Documents - The Scientific Examination, by Wilson R. Harrison". The passage to which Mr. Radley refers sets out the fact that in some businesses people sign correspondence, copying the signature of an absent principal so that it looks like his signature. The author of this work comments:
"To allow anyone to copy and use in the course of business the signature of the principal of a firm is bad policy, because once the copyist knows that his imitation is accepted without question as genuine, he may be tempted, and often is, to use the skill he has acquired to his own advantage."
It is clear from the passage which I have cited that the author is there referring to correspondence. He is not dealing with a case where a signature is put on a document in a bank by reason of which the bank will become liable for a very substantial commitment. It seems to me inconceivable, without hard evidence, that anybody in a bank would contemplate giving authority to someone else to sign in his name. It would be the gravest possible breach of good conduct by the branch manager or anyone else to allow someone to sign a commitment in his name. I cannot, therefore, see that the passage appended to Mr. Radley's report helps in any respect at all.
I was finally asked by Mr. Berry to consider the various stamps on the documents. He takes two points. First, that we do not have all of the stamps of the Bank; and, secondly, on certain of the documents we do have, it may well be that, on a proper comparison of the stamps, some of the other letters of indemnity contain stamps that might be the stamps of the Bank. As to the second point, it seems to me wholly impermissible for a judge to try and examine photocopies of stamps and draw conclusions from them. That is a matter for expert evidence. It is clear that when Dr. Giles and Mr. Radley looked at the stamps, they looked on them using their great skill and experience as forensic document examiners and using scientific equipment. It seems to me for a judge to attempt to compare documents and stamps in the light of this evidence is something which should not be undertaken. If there was anything in these points at all, they should have been put to Mr. Radley and covered in his evidence.
As to the first point, namely, whether the variety of stamps on the other documents takes him anywhere on this case, it seems to me that the Bank has made its position very clear about the stamps it has and, on that evidence, I do not see anything in the first point.
I, therefore, have reached the very clear conclusion that Mr. Berry's argument is merely an ingenious attempt to salvage a case that was destroyed when the Owner's expert accepted the signature as a forgery. There is no evidence whatsoever to support it. It is pure speculation. Mr. Berry has had to argue, it seems to me, that the conduct of the Bank in doing this, although irregular, was innocent. But I cannot accept that. It seems to me that, if the conduct of the Bank was entirely innocent, then there would be a record of the letters of indemnity within the Bank's register. There is no such record. Thus, the suggestion that this case can be advanced in some form of innocent guise is to my mind wholly misconceived. It is an allegation of grave misconduct against Mr. Vaidya in permitting such a course of conduct to arise, and there is not a shred of evidence to support it. I have no doubt that there is no good arguable case against the Bank and therefore, for that reason also, I set service of the proceedings aside.
LATER:
MR. JUSTICE THOMAS: There has been an interesting argument before me as to the costs in this case. A number of matters arise. The first relates to the rates which City solicitors charge. In this particular case the partner's normal rate is £450 per hour, but she agreed with the clients a composite rate to cover herself and her recently admitted assistant at the rate of £250 per hour. Mr. Berry has given me the rates set out in the guidance issued by the Costs office, which are figures lower than this. They are also lower than this for the trainee. It seems to me, as the rates in this case will make a substantial difference to the ultimate outcome and the figures are large, that that is one matter which should be looked at.
The second relates to the number of people employed in this case. Although the allegations were serious, this sort of case, in my judgment, ought to be dealt with by a maximum of two people: first of all, a partner, and secondly someone to help him or her with the requisite level of experience. I see no justification at all for having more than two people. But again, that is a matter on which I only express a view. It must be a matter for costs assessment to consider whether three people are justified.
Thirdly, the amount of time spent on various matters in this case is very considerable. For example, the attendance on counsel amounted to a combined time of nearly 40 hours. The costs of dealing with the documents, including the preparation of bundles, is in excess of £19,000. Again those are matters that ought to be looked at.
Finally, there is the question of the bill of the correspondents in India, which is a total of £15,841. There are two points which arise there. First, I am concerned that there may be some duplication between the work done by the solicitors in London and the people in India, because this case would have meant that there would have been a large number of lawyers employed. Secondly, it seems to me that there is no breakdown of their rates or as to what they did. As the amount is £15,000, again that is a matter for detailed assessment. I have no observations to make in respect of the time spent at the hearing or counsel's fees, but I hope these remarks I have made, which are merely observations will assist in the assessment of costs in this case.
Mr. Geering and Mr. Berry have canvassed these various matters before me. Mr. Berry has said that it is his submission that the matter ought to go for detailed assessment. In all the circumstances, I think he is right. But, in the light of what he has told me about his own costs and his costs draftsman's assessment and my own feel for the case, I take the view that a fair figure which I would probably have awarded would be in the order of £40,000 as against £76,989.15 claimed. Therefore, I make an order for an interim payment in that amount, allowing the defendants (if they so wish) to take the matter for a detailed assessment, so that the particular matters I have outlined in these short observations can be explored in greater detail, and if the costs judge considers that more ought to be paid, then so be it.
MR. GEERING: My Lord I want it recorded, or let me just say that the costs draftsman at Norton Rose spent six hours stripping out the unreasonable duplication.
MR. JUSTICE THOMAS: I am very grateful to you both.
MR. GEERING: One final matter which bears on the question of costs. As your Lordship knows, the very foundation of the claimant's assertion as to the claim, including jurisdiction, lay in that forged document, and a foreign defendant should never have been required to come here and challenge jurisdiction. That injustice can be mitigated by a tenuous payment as to costs. One thing that can be done in future cases would be to have a procedure within the application for permission to serve out, which involves requiring the claimant to give an undertaking as to costs in the circumstances your Lordship was faced with, backed by a security within the jurisdiction. We are going to mention that to the Rules Committee and I am asking your Lordship to consider mentioning it to them on your own behalf, because, obviously, that would add considerable weight.
MR. JUSTICE THOMAS: Thank you. If you could write separately -
I mean, that is a much more fundamental problem that what I would regard as the nitty-gritty problem, which is said to be the solution, which is re bundling, because I do regard this case -- Can you write separately about that, just the time and what happened. If you can write a non-contentious letter, i.e. leaving out that it is at Mr. Berry's insistence or his solicitor's insistence, it would be much appreciated. I am not making a decision on that matter.
MR. GEERING: And as to mentioning it to the rules Committee on the question of an undertaking at the time ----
MR. JUSTICE THOMAS: Do send me a copy of the letter you are writing, but do keep them separate because one is high policy and one is not. I think I should say, what sort of time for costs, a month, Mr. Berry?
MR. BERRY: Twenty eight days is what I would ask.
MR. JUSTICE THOMAS: Twenty eight days, it seems to me, they are foreigners.
MR. GEERING: And my learned friend's application should be dismissed as well, that is the forum non-conveniens.
MR. JUSTICE THOMAS: Yes, I thought I had said that. Yes.
MR. BERRY: I am instructed to ask for permission to appeal ....
MR. JUSTICE THOMAS: No, Mr. Berry. Thank you both very much indeed.
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