[2010]JRC129
royal court
(Samedi Division)
13th July 2010
Before : |
M. C. St. J. Birt, Esq., Bailiff, and Jurats Le Breton and Marett-Crosby. |
Between |
Suresh P. Mirpuri |
Appellant |
And |
Bank of India |
Respondent |
Advocate N.F. Journeaux for the Appellant.
Advocate J. Harvey-Hills for the Respondent.
judgment
the deputy bailiff:
1. This is an appeal by Mr Mirpuri ("the defendant") against a decision of the Master dated 14th April, 2010, whereby he granted summary judgment under Rule 7/2 RCR 2004 against the defendant in the sum of US$645,585.69 plus interest and struck out the defendant's counter claim.
The factual background
2. Most of the factual background is not in dispute. Bank of India ("the plaintiff") carries on business in Jersey through a branch. Between October 2000 and September 2003 the plaintiff made three loans to the defendant. The first was on 25th October, 2000, in the sum of £700,000. This was subsequently converted into a US dollar loan on 21st February, 2003. The second loan was made on 13th November, 2002, in the sum of US$2,106,245.67. The third was in the sum of US$300,000 and was made on 16th September, 2003. Although there were various repayment terms initially, it is agreed that, by the relevant time in 2008, all three loans were repayable on demand.
3. The loans were supported by fairly standard documentation including a facility letter and a promissory note. Security in respect of all three loans was provided by way of a security interest over a deposit account ("the deposit account") which the defendant held with the plaintiff. The deposit account was a multi-currency account which had the option of being designated in sterling or US dollars. Security interest agreements were entered into in respect of the first two loans and it is agreed that the agreements also covered the third loan. There was a margin requirement in that it was a term of the loans that the defendant should maintain a specified margin of 4% in the deposit account over and above the amount owing under the loans.
4. The security interest agreements were in standard form and gave the plaintiff control over the deposit account. The agreements also provided that the defendant was not able to deal with the deposit account in any way without the consent of the plaintiff, which could be given or withheld in its sole and absolute discretion.
5. On 30th September, 2005, an event took place which lies at the heart of the defendant's case that he has an arguable defence. At that time the deposit account was in sterling whereas of course the loans were in US dollars. On that date the level of margin appears to have fallen below the required level and the plaintiff, without reference to the defendant, converted the sterling amount in the deposit account of £2,033,311.05 into US$3,573,544.17. By letter of the same date the plaintiff wrote to the defendant informing him what it had done in the following terms:-
"You have availed loans to the tune of USD3,520,641.67 for which your deposits of GBP2,033,311.05 (in addition to others) are held as security.
As you are well aware the outstanding loan amount is required to be secured by adequate value of Deposits, providing for the minimum stipulated margin.
In order to ensure adherence to the above term of loan as agreed by you, your GBP deposits of GBP2,033,311.05 have been converted into USD at 1.7575 (equivalent USD3,573,544.17)."
6. As can be seen, no specific reference was made to the level of margin but according to the Affidavit of the defendant prepared for the application before the Master, the aggregate of the loans and required margin at the time was US$3,676,467.67 which meant that, at the time of the conversion, the deposit account was US$102,923.50 below the required level.
7. As can further be seen, no specific authority for the plaintiff's action was referred to in the letter but it is the plaintiff's case that it was relying upon clause 10(d) of the security interest agreements which provided as follows:-
"Every power and remedy given to the Secured Party under this Security Agreement shall be in addition to and not a limitation of any and every other power and remedy vested in the Secured Party hereunder and all the powers so vested in the Secured Party may be exercised from time to time and as often as the Secured Party may deem expedient and the Secured Party shall without prejudice to its other rights and powers under this Security Agreement be entitled (but not bound) at any time and as often as may be necessary to take any such action as it may in its discretion think fit for the purpose of protecting the security constituted by this Security Agreement."
8. On 28th August, 2008, the defendant took a decision which he has no doubt come to regret. He decided to convert the entire balance of the deposit account from dollars into sterling. This meant that thereafter the defendant was assuming a currency risk; the loans were designated in dollars whereas the security for those loans was designated in sterling.
9. The defendant's decision proved to be extremely unfortunate. In the latter part of 2008 there was a steep decline in the value of sterling as against the dollar. On 12th November, 2008, (following a telephone conversation between the defendant and a representative of the plaintiff to like effect) the general manager of the plaintiff wrote to the defendant pointing out that, as a consequence of the depreciation of the pound against the dollar, the balance of the deposit account was US$3,093,428.11 whereas the outstanding amount under the loans was US$3,547,945.22. There was therefore a shortfall of US$454,517.11. Allowing for the required margin the plaintiff requested the defendant to provide an additional deposit of US$610,343.11. The letter further pointed out that, in view of the continuing fall in sterling rates, the defendant may wish to consider converting the loans from dollars to sterling.
10. The defendant did not respond to this letter nor to follow up letters from the plaintiff of 19th November, 4th December, 16th December, and 6th January, 2009. The defendant did however telephone on 19th January, 2009, and spoke to a Mr Sasidharan. According to the affidavit of Mr Brij Lal, Deputy Manager of the plaintiff, the defendant said that the plaintiff had failed to inform him of the fall in the value of the margin. Mr Sasidharan raised the issue of the defendant being responsible for what had happened to which the defendant responded that he had been away for four weeks and "could not see the level and hence missed the level". The defendant said that he did not have any other funds.
11. In due course, on 23rd January, 2009, the plaintiff made formal demand for payment of all amounts due under the three loans. There were further telephone calls on 26th January, and 30th January, but no further payment to the deposit account was made nor was any interest paid. Accordingly on 6th February, 2009, the plaintiff wrote notifying the defendant that there had been an event of default under clause 8 of the security interest agreements and making formal demand that the defaults be remedied within 14 days failing which the plaintiff would exercise its power of appropriation of the deposit account. The defendant failed to take any steps to remedy the default or repay the loans and accordingly on 9th March, 2009, the plaintiff appropriated the total deposit account and applied it against the first and third loans. This left the second loan outstanding which as at 9th March, 2009, totalled US$645,585.67. The plaintiff instituted proceedings for that sum and those are the proceedings currently before the Court.
12. The defendant has filed an Affidavit in which he elaborates on certain points in connection with the above bare outline of facts. In relation to the plaintiff's action on 30th September, 2005, he says that he understood that it was the margin breach which triggered the plaintiff's action and its unilateral action of conversion was taken in order to protect both the margin, or at least part of it, as well as the deposit to loan value. Accordingly it was for the mutual benefit of both him and the plaintiff and from that time he was not concerned with monitoring, nor did he monitor, the value of the deposit account in so far as it was related to the value of loans at times when it was denominated in a different currency from that of the loans. He understood that the plaintiff's actions had been to preserve the value of his deposits as well as to protect the plaintiff's interest, which in turn gave rise to a continuing obligation to act accordingly going forward. He referred to a telephone conversation on some unspecified date when he discussed with the plaintiff its letter of 30th September, 2005, to which the relevant employee of the plaintiff replied words to the effect of "... it was done so as to protect our interests as well as yours". He adds that he did not consider that, prior to 30th September, 2005, the plaintiff had any right pursuant to clause 10(d) of the security interest agreements to protect the value of the deposit account.
13. As to the instructions on 28th August, 2008, to convert the entire balance of the deposit account from dollars into pounds, he says that he spoke with the manager of the plaintiff who had advised in words to the effect of "you realise that if the currency goes against you, we will have to convert back in to dollars" to which the defendant had replied that he would expect the plaintiff to do so. He adds further that on 30th September, 2008, he telephoned the plaintiff and advised that he would be travelling for the next 6 weeks but that he would be contactable during that time. However he was not contacted and only received news about the declining value of the deposit account in a telephone call on 12th November, 2008. The officer of the plaintiff requested that he deposit further funds in order to satisfy his obligations under the loan agreement. The defendant says that he was very surprised to receive this information and demanded an explanation from the officer as to why the plaintiff had failed to contact him when the sterling depreciation commenced and secondly why the plaintiff had allowed his deposit account to remain denominated in sterling when the exchange rate was depreciating so quickly. He says that he told the officer that, as they had failed to monitor the deposit account and had allowed its value to depreciate, the responsibility for the shortfall was theirs. He says that the officer apologised for not contacting him beforehand, disagreed that the shortfall was the responsibility of the plaintiff and said words to the effect of "I suppose we should have called you sooner". The officer said that it was not the plaintiff's responsibility to monitor the deposit account. The defendant said that he queried as to why, in that case, the conversion was effected in the way it was on 30th September, 2005, if it was not the plaintiff's responsibility, but the officer had no response. The defendant advised the officer that he did not have any funds to deposit and that the situation was created by their negligence and so was not his responsibility. He then advised the officer that the plaintiff should convert the deposit account into dollars to avoid any further exposure. This action was not taken at that time.
14. He spoke of a further conversation on 19th January, 2009, with Mr Sasidharan of the plaintiff following receipt of the correspondence from the plaintiff and he reiterated that the fault was theirs and suggested a retrospective conversion of US$1.60 and that a buy back at US$1.45 would restore the position. He said that Mr Sasidharan told him, without basis, that they were not able to perform the conversion suggested in November.
15. On 26th January, 2009, following receipt of the three formal letters demanding repayment, he telephoned Mr Sharma to demand that he take the action suggested in his phone call to Mr Sasidharan. There was clearly a disagreement as to whose fault it was that the deposit account had not been monitored. He says that he spoke to Mr Sharma again on 30th January who finally agreed to convert the deposit account to avoid any further depreciation. The defendant asserted that, as a result of the action that the plaintiff took on 30th September, 2005, there was a presumption that the plaintiff would take the same action in the same or similar circumstance. The defendant consequently relied on this presumption and it was this reliance which had led him to believe that, upon the depreciation of sterling shortly following his departure from the UK in September 2008, the same defensive action would be taken as per the assurance he felt had been given to him by the manager at the time of the execution of the conversion to sterling on 28th August, 2008. The loss was therefore realised as a result of the depreciation which was caused by the plaintiff's failure to take the precautionary action that it had taken in such circumstances in the past and upon which the defendant had relied.
The test on appeal and for striking out
16. Counsel were agreed on the test for appeal. This Court is entitled to look at the matter afresh and exercise its own discretion while paying due regard to the decision of the Master.
17. As to the test for summary judgment, this was set out in some detail in the Master's judgment and the parties were agreed that this was the correct test. Paragraphs 14/4/3 - 14/4/5 of the Supreme Court Practice (1919 edition) provide a helpful commentary on the equivalent rule which was in force in England. So far as Jersey cases are concerned, the position was conveniently summarised by Bailhache Bailiff in Tomes-v-Coke-Wallis and others, 2002/131A 17 July 2002 where he said at paragraph 8 of his judgment:-
"The legal test on an application for summary judgment is well settled. The following passage from the White Book has been adopted and applied in a number of cases:-
'As a general principle, where a defendant shows that he has a fair case for defence, or reasonable grounds for setting up a defence, or even a fair probability that he has a bona-fide defence, he ought to have leave to defend. Leave to defend must be given unless it is clear that there is no real substantial question to be tried; that there is no dispute as to facts or law which raises a reasonable doubt that the plaintiff is entitled to judgment. ... where the defence can be described as more than shadowy but less than probable, leave to defend should be given...'"
In addition at paragraph 15 of his skeleton argument for this appeal, Mr Journeaux referred us to three additional passages in the White Book, which we have taken into account.
The defendant's submissions
18. In response to the particulars of claim filed by the plaintiff, the defendant filed an answer and counter claim. In effect he admitted the loans but contended he should not have to pay the difference between the amount outstanding under the loans and the amount realised from the deposit account. During the hearing before the Master, the defendant produced a draft amended answer and counter claim with further suggested changes in manuscript. Subsequent to the hearing, but before the Master delivered his judgment, the defendant formally issued a summons seeking leave to amend the answer and counter claim which attached a version in accordance with that (including the manuscript amendments) produced to the Master. The Master refused to hear the application for leave to amend before he gave judgment on the summary judgment application.
19. For the hearing before us, a further version of the draft amended answer was produced which contained an additional change to that submitted with the summons to amend. The essential change was to add a proposed new paragraph 6(A) concerning mitigation of loss. At the commencement of the hearing, Mr Journeaux said that he wished to make yet a further amendment in that he did not intend to proceed with the argument on quasi-contract. Although we had initially been inclined to give leave to amend, we decided not to do so at this stage but to consider the arguments of the defendant as summarised in the latest draft answer and counter claim. We indicated that, were we to allow the appeal, we would grant leave to amend. We have therefore considered the matter as if leave had been given to amend in accordance with the latest draft supplied to us.
20. In order to clarify the defendant's position, we think it would be helpful to set out paragraphs 6 and 6(A) of the latest version of the amended answer:-
"6. In respect of paragraphs 26, 28 and generally where liability on the Defendant is asserted by the Plaintiff, the Defendant will aver that as a result of the Plaintiff's conduct by the fact that the Plaintiff had previously acted on or around 30 September 2005, of its own volition, to effect currency conversions to protect not only the deposits held in the Defendant's deposit accounts with the Plaintiff, but also to ensure that the margin in respect of each was protected, varied the terms of the contract by which the Loans were governed and/or made a representation to the Defendant as to the manner in which the Plaintiff would act and/or would be obliged to the Defendant to act in future if similar circumstances arose in future and/or gave rise to a quasi-contractual obligation to act in that way in the future. The Defendant reasonably relied upon that variation and/or representation and/or assumed obligation to his detriment in the loss claimed in his counterclaim in this proceeding, by permitting the Plaintiff to act in the way that it warranted and/or represented it would should similar circumstances arise. The Plaintiff's failure to act similarly in the period between August and November 2008 was a breach of contract and/or quasi- contract and/or negligence and/or amounted to conduct concerning which the Plaintiff is estopped from denying that it was bound so to act and the Plaintiff is estopped from claiming recovery of the sums claimed by it in this proceeding. The Defendant will aver that the Plaintiff's said obligations extended to the monitoring of the deposits in just the same way as it had done in 2005. Further that the Plaintiff's said obligations were to protect the margin and that had the Plaintiff acted properly, or at all, in accordance with its obligations, it would have effected exchanges so to have protected more then just the margin and afforded the Defendant the chance thereafter of having the deposits reconverted when the exchange rates fluctuated again. The Defendant will aver that the Plaintiff failed to communicate with the Defendant at all, nor to provide any information or warning that a position was approaching where the margin was threatened. Accordingly, it is admitted that telephone conversations took place, including but not limited to that on 12 November, 2008, that the Plaintiff wrote to the Defendant as it asserts in Paragraphs 26, 27, 28 and 29 but it is denied that any liability falls on the Defendant for any so called "shortfall" or otherwise and it is denied that the Defendant did not respond to the Plaintiff's letters as the Defendant was in telephone communication with the Plaintiff. The Defendant sets out his counterclaim below.
6A. In the alternative, the Plaintiff failed to mitigate its loss by not converting the sterling amount in the Deposit Account into US Dollars before it did."
The underlining shows the amendments from the original answer.
21. Advocate Journeaux accepted during the hearing that the counterclaim stood or fell with the application for a summary judgment and accordingly we do not deal separately with it. He also accepted that, for the purposes of the application for summary judgment, the defence based on negligence added nothing to the remaining heads of claim and need not therefore be considered separately.
22. All the defences raised in paragraph 6 are based upon the plaintiff's conduct in unilaterally effecting the currency conversion of the deposit account on 30th September, 2005. The defendant alleges that in the first place this amounted to a variation of the contract, alternatively it gives rise to an estopped. In paragraph 6A the defendant alleges that the plaintiff failed to mitigate its loss by not converting the sterling amount in the deposit account into dollars before it did. We shall consider each of these in turn.
Variation of contract
23. Advocate Journeaux accepted that, if the plaintiff was right in suggesting that its action on 30th September, 2005, was authorised under clause 10(d) of the security interest agreement, his defence under variation of contract must fail. If the power to convert already existed under the contractual documents, there would have been no variation and there would also be no "cause" even if there were a variation. However, he argued that clause 10(d) did not confer a power to convert the deposit account from one currency to another. Accordingly we must consider whether that is a tenable argument.
24. Excluding irrelevant wording, clause 10(d) provides that:-
"... the Secured Party shall... be entitled (but not bound) at any time... to take any such action as it may in its discretion think fit for the purpose of protecting the security constituted by this Security Agreement."
25. Advocate Journeaux accepted in argument, as he must, that that wording must naturally include power to protect the value of the security. However, he said that while the power under clause 10(d) could be used to protect the absolute value of the security, it could not be used to protect the value of the security relative to the obligation which it secured. Thus it could not be used in the way in which the plaintiff purported to use it in September 2005.
26. We have to agree with Mr Harvey-Hills that such a construction is untenable. In the first place there are simply no proper reasons for reading such complicated wording into a simple provision. Secondly, there could be no commercial or other justification for interpreting the provision in this way. Security has no intrinsic worth; its sole purpose is to provide value in relation to the obligation which it is securing. To argue that a power for a lender to take steps to protect the value of its security does not include steps to protect the value of the security in relation to the obligation secured seems to us to fly in the face of common and commercial sense. Interestingly, in paragraph 6 of the proposed amended answer, the defendant himself uses similar language when asserting that the plaintiff's obligation extended to protecting the margin and that as a result it should have converted the currency of the deposit account. In our judgment, it is not reasonably arguable that the plaintiff did not have power under clause 10(d) of the security interest agreement to do what it did on 30th September, 2005.
27. As already mentioned, Advocate Journeaux accepts that, if the Court so finds, his argument in relation to variation of contract cannot avail him. But even if we are wrong in our conclusion in relation to clause 10(d), so that the plaintiff did not have any power under the contract to do what it did in September 2005, we do not consider it arguable that, merely from such conduct, a variation of contract arose whereby the plaintiff agreed to undertake the obligation set out in the draft answer.
28. In order for there to be a variation of the contract, there has to be an agreement to vary. The requirements for an agreement to vary are the same as those for a contract itself, namely consent, capacity, objet and cause (see Selby-v-Romeril [1996] JLR 210 per Bailhache B at paragraphs 35 - 45). In order to decide whether there is consent, it is necessary to see if there has been an offer and an acceptance. We accept, as submitted by Advocate Journeaux, that a contract can arise through conduct. However, in our judgment, it is not reasonably arguable that, simply by assuming (incorrectly on this basis) a power to switch the currency in the deposit account in order to protect the value of the security, the plaintiff was offering to assume a duty or obligation towards the defendant to monitor the value of the security and intervene to protect the value of the security by switching currency if necessary. Such a duty would be quite contrary to the normal relationship between a bank and its borrower. As was said in Toothill-v-HSBC Bank PLC [2008] JLR 77 at para 37, a bank and a borrower are on the opposite sides of the contract. The bank owes no duty, (whether in contract or in tort) to advise the borrower. The bank is entitled to have regard only to its own interests. In our judgment, it would require very clear evidence for the Court to find that the plaintiff as lender undertook such an obligation towards the defendant as borrower. There is in fact no such evidence in this case. The defendant does not assert any discussion about the issue and relies purely on the fact that, in September 2005, the bank intervened to protect the value of its security by switching currency. This cannot, in our judgment, even arguably amount to sufficient to find an agreed variation of the original contract so as to impose a duty on the plaintiff to do likewise in future.
29. Furthermore, as was made clear in Selby-v-Romeril, the objet of a contract i.e. what a party has agreed to do, must be sufficiently clear. Paragraph 6 of the draft amended answer asserts that the obligations undertaken by the plaintiff as a result of its conduct on 30th September were "to monitor the deposits in just the same way as it had done in 2005' and 'to protect the margin". A few lines further on there is a reference to it protecting more than just the margin and affording the defendant the chance thereafter of having the deposits reconverted when the exchange rates fluctuated again. The Court put to Advocate Journeaux during the hearing what exactly this involved. Did it mean that the plaintiff was obliged to intervene the moment the margin requirement was breached? Alternatively did it mean that the duty to intervene arose when the deposit account only equalled in value the loans? Alternatively was there some point in between when the plaintiff had a duty to intervene, which is what it appears to have done in September 2005. Advocate Journeaux was unable to be more specific other than to say that the duty of the plaintiff was to do in 2008 what it had done in 2005. In our judgment, such a term is not sufficiently certain. It would not necessarily be possible from such a vague term to establish whether the plaintiff was or was not in breach of the term in any particular case.
30. For these reasons, we find that the defendant's case on variation of contract is doomed to failure.
Estoppel
31. As an alternative argument, the defendant seeks to raise a defence of estoppel. Before the Master he relied upon the doctrine of promissory estoppel. Thus he quoted from paras 10-08 and 10-09 of Snell's Equity. Para 10-08 contains a useful summary as follows:-
"Where by his words or conduct one party to a transaction freely makes to the other a clear and unequivocal promise or assurance which is intended to affect the legal relations between them (whether contractual or otherwise) or was reasonably understood by the other party to have that effect, and, before it is withdrawn, the other party acts upon it, altering his or her position so that it would be inequitable to permit the first party to withdraw the promise, the party making the promise or assurance will not be permitted to act inconsistently with it."
32. Before this Court, Advocate Journeaux categorised the matter rather as a matter of estoppel by representation. We do not think anything turns on this although we would consider it more properly to be an issue of promissory estoppel in that what is alleged is that the plaintiff made a promise or assurance as to its future conduct i.e. that it would intervene to protect the security by switching the currency of the deposit account as it had done in September 2005 should a similar situation arise in future.
33. The defendant asserts that he understood the plaintiff to have given an assurance to this effect and he relied upon it to his detriment. Whether the defendant really understood that or actually relied upon it to his detriment would be issues of fact to be resolved at trial and if the matter turned on them, this would not be an appropriate case for summary judgment.
34. However, estoppel requires there to have been a clear and unequivocal promise or assurance either by words (oral or written) or by conduct. There is no allegation in this case of a specific assurance on the part of the plaintiff. The assurance is said to have arisen purely by conduct and the only conduct relied upon is the action of the plaintiff in September 2005 in switching the currency of the deposit account at that time.
35. We do not consider it reasonably arguable that this simple action (whether authorised by clause 10(d) of the security interest agreement or not) could give rise to the clear and unequivocal assurance that is required for estoppel. For much the same reasons as we have given in relation to variation of contract, it is inherently unlikely that a bank in the position of the plaintiff would give such an assurance and we cannot see that it is even arguable that the actions of the bank carried any implication or assurance as to its future conduct. The fact that the defendant may have chosen to assume - without ever raising the matter with the plaintiff - that the plaintiff would intervene in similar circumstances in future was at his risk. We do not think it even arguable that it was reasonable for him to have understood that such an assurance was being given simply by the single instance of intervention on the part of the plaintiff in September 2005.
36. For these reasons we consider that the defendant's argument on estoppel is also doomed to failure.
Mitigation of loss
37. The defendant's final ground of defence is set out at paragraph 6A of the draft amended answer quoted at paragraph 20 above. This refers to the well known principle that, in an action for breach of contract, a plaintiff must mitigate his loss i.e. he must take all reasonable steps to mitigate the loss to him consequent upon the defendant's breach and cannot recover damages for any such loss which he could thus have avoided.
38. This argument appears to have been something of an afterthought as it was not referred to in the written skeleton argument lodged for the appeal. Nevertheless it was developed by Mr Journeaux in oral argument.
39. He accepted that this was not an action for breach of contract; on the contrary it was a simple action for debt. The defendant admits owing the outstanding amount due under the loan. We were referred to various passages from chapter 7 of McGregor on Damages but, as Advocate Harvey-Hills pointed out, para 1-005 of that text book states that actions for debt are to be distinguished from actions for damages for breach of contract and are outside the scope of that text book.
40. Although this was not referred to by counsel, the Court would also quote from Chitty on Contracts 30th Edition Volume 1 at para 26-009:-
"Distinction between claims for payment of an agreed sum and claims for damages. There is an important distinction between a claim for payment of a debt and a claim for damages for breach of contract. The debt is a definite sum of money fixed by the agreement of the parties as payable by one party in return for the performance of a specified obligation by the other party or upon the occurrence of some specified event or condition; damages may be claimed from a party who has broken his contractual obligation in some way other than failure to pay such a debt.... The relevance of this distinction is that rules on damages do not apply to a claim for a debt e.g. the claimant who claims payment of a debt need not prove anything more than his performance or the occurrence of the event or condition; there is no need for him to prove any actual loss suffered by him as a result of the defendant's failure to pay; the whole concept of the remoteness of damage is therefore irrelevant; the law on penalties does not apply to the agreed sum; the claimant's duty to mitigate his loss does not generally apply; and the claimant will usually be able to seek summary judgment. ..."
41. The footnote to the reference to the duty to mitigate not generally applying refers to the case of White and Carter (Counsels) Limited-v-McGregor [1962] AC 413. That was a case of anticipatory repudiation of contract. The plaintiff refused to accept the repudiation and was able thereafter to complete the performance of his side of the contract without the co-operation of the defendant. The majority of the House of Lords held that the plaintiff could recover the full amount due for his performance. The minority thought that the plaintiff should have mitigated his loss by discontinuing his performance of the contract.
42. Advocate Journeaux referred to the dictum of Lord Reid, one of the majority, where he said at 431:-
"It may well be that, if it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself. If a party has no interest to enforce a stipulation, he cannot in general enforce it: so it might be said that, if a party has no interest to insist on a particular remedy, he ought not to be allowed to insist on it. And, just as a party is not allowed to enforce a penalty, so he ought not to be allowed to penalise the other party by taking one course when another is equally advantageous to him."
43. However, as Advocate Journeaux conceded, this remark was in the context of whether a party can continue to perform and enforce a contract where the other has committed a repudiatory breach. That is a very different situation from the present where the plaintiff is simply seeking to recover the amount of its loan. Advocate Journeaux argued that he was seeking only a modest extension of the principle described by Lord Reid and was asking the Court to apply the general equitable principle referred to by Lord Reid. He accepted, however, that he was unable to refer to any text book or any case in which it had been stated that a plaintiff seeking to enforce a simple contractual debt is under a duty to mitigate his loss.
44. In our judgment, this point is unarguable. It is in effect another way of trying to imply into the security interest agreement or the loan agreements some form of duty on the plaintiff to monitor and protect the value of the security. The defendant admits that he borrowed money from the plaintiff and has not repaid it. The claim is a simple action for recovery of that debt. In the absence of any contractual or other legal obligation on the plaintiff to monitor and protect the value of the security, there can be no duty on the plaintiff to mitigate its loss and the principles of mitigation are simply inapplicable. We do not consider the contrary to be arguable.
Conclusion
45. This is not a case where the issue of whether the defendant has an arguable defence depends upon facts which he may wish to prove at trial. As can be seen, the arguments are entirely based on whether, even on the factual basis put forward by the defendant, there is an arguable case in law. For the reasons we have given, we have no doubt that none of the three grounds of defence put forward by the defendant are arguable; on the contrary they are doomed to failure. Accordingly we conclude that the Master reached the right decision and we dismiss this appeal.
Authorities
Royal Court Rules 2004.
Tomes-v-Coke-Wallis and others, 2002/131A.
Selby-v-Romeril [1996] JLR 210.
Toothill-v-HSBC Bank PLC [2008] JLR 77.
Snell's Equity.
McGregor on Damages.
Chitty on Contracts 30th Edition.
White and Carter (Counsels) Limited-v-McGregor [1962] AC 413.