![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |
England and Wales High Court (Commercial Court) Decisions |
||
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Barclays Bank Plc v Kufner [2008] EWHC 2319 (Comm) (10 October 2008) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2008/2319.html Cite as: [2009] 1 All ER (Comm) 1, [2008] EWHC 2319 (Comm) |
[New search] [Printable RTF version] [Help]
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Cathays Park Cardiff CF10 3ND |
||
B e f o r e :
____________________
Barclays Bank plc |
Claimant |
|
- and - |
||
Alfons Kufner |
Defendant |
____________________
Jonathan Nash QC (instructed by Withers LLP) for the Defendant
Hearing dates: 17 & 18 September 2008
____________________
Crown Copyright ©
Mr Justice Field :
Introduction
Clauses 5.1 and 5.3 of the Kel guarantee
5.1 This Guarantee is independent of any other security or guarantee which we hold or may hold in the future for the Customer Liabilities. When we hold any other security or guarantee, we may choose which security or guarantee we will enforce and, if we enforce more than one, the order in which we do so. However, we will not have to enforce any other security or guarantee, or take any steps or proceedings against the Customer, before we enforce this Guarantee.
5.3 From time to time we may:
a provide the Customer with any credit or facilities;
b vary, cancel or refuse any credit or facilities;
c give the Customer time to pay any money owing to us;
d make any other arrangement, compromise or settlement with the Customer or any other person;
e take or deal with any security, guarantee or other legal commitment for the Customer Liabilities; or
f release, enforce or not enforce our rights under any such security , guarantee or commitment.
If we carry out any of the above acts, or do or fail to do anything else, this will not affect our rights under this Guarantee, even if it would have done so if this condition did not exist.
Mr Kufner's defences to the Bank's claim on the Kel guarantee
A. Discharge of the Kel loan
32 At all material times the Bank owed duties in equity to Mr Kufner not to release any security held for the guaranteed indebtedness and/or not to lose any such security by its negligence.
36 By reason of the discharge of the Mortgage (viz the Kel mortgage) Mr Kufner is wholly discharged from any liability in respect of his Guarantee.
37 Further or alternatively, the Mortgage was discharged in breach of the Bank's duty in equity to take care not to lose securities for the guaranteed indebtedness by its negligence. If, which is denied, the Bank is entitled to assert that Kel remains indebted to it, the Bank was negligent in discharging the Mortgage before Kel's indebtedness had been discharged by an advance to Paelten secured by a registrable Mortgage over the Vessel supporting Paelten's borrowings.
C Set-off of a claim by Kel and/or by Mr Kufner against the Bank for negligent misstatement
Discussion
Release of the Kel mortgage by the Bank without procuring a replacement mortgage executed by Paelten registrable in Madeira.
These Regulations apply in relation to unfair terms in contracts concluded between a seller or a supplier and a consumer.
"consumer" means any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession; .
any natural or legal person who, in contracts covered by these regulations, is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned.
"consumer" means a natural person who, in transactions covered by this Directive, is acting for purposes which can be regarded as outside his trade or profession;.
a natural or legal person who, for the transaction in question, acts in his commercial or professional capacity;.
This Directive shall apply to contracts under which a trader supplies goods or services to a consumer and which are concluded during an excursion organised by the trader away from his business premises or during a visit by trader (i) to the consumer's home…..(ii) to the consumer's place of work…
18. In determining whether a contract of guarantee securing performance of a credit agreement by the principal debtor can fall within the scope of Directive 85/577, it should be noted that, apart from the exceptions listed in article 3 (2), the scope of the Directive is not limited according to the nature of the goods or services to be supplied under a contract; the only requirement is that the goods or services must be intended for private consumption .The grant of a credit facility is indeed the provision of a service, the contract of guarantee being merely ancillary to the principal contract, of which in practice it is usually a precondition.
19. Furthermore, nothing in the wording of the Directive requires that the person concluding the contract under which goods or services are to be supplied be the person to whom they are supplied. Directive 85/577 is designed to protect consumers by enabling them to withdraw from a contract concluded on the initiative of the trader rather than of the customer, where the customer may have been unable to see all the implications of his act. Consequently a contract benefiting a third party cannot be excluded from the scope of the Directive on the sole ground that the goods or services purchased were intended for the use of the third party standing outside the contractual relationship in question.
22. However, it is apparent from the wording of article 1 of Directive 85/577 and from the ancillary nature of guarantees that the Directive covers only a guarantee ancillary to a contract whereby, in the context of "doorstep selling", a consumer assumes obligations towards the trader with a view to obtaining goods or services from him. Furthermore, since the Directive is designed to protect only consumers, a guarantee comes within the scope of the Directive only where, in accordance with the first indent of article 2, the guarantor has entered into a commitment for a purpose which can be regarded as unconnected with his trade or profession.
23 The answer to the question referred to the court must therefore be that, on a proper construction of the first indent of article 2 of Directive 85/577, a contract of guarantee concluded by a natural person who is not acting in the course of his trade or profession does not come within the scope of the Directive where it guarantees repayment of a debt contracted by another person who, for his part, is active within the course of his trade or profession.
Set-off of a claim by Kel and/or by Mr Kufner against the Bank for negligent misstatement
Set-off of a claim by Kel for negligent misstatement
Set-off of a claim by Mr Kufner for negligent misrepresentation
These authorities support the following propositions:
1) Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder's shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if the company's assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss. So much is clear from Prudential, particularly at pages 222-3, Heron International, particularly at pages 261-2, George Fischer, particularly at pages 266 and 270-271, Gerber and Stein v. Blake, particularly at pages 726-729.
2) Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding. This is supported by Lee v. Sheard, at pages 195-6, George Fischer and Gerber.
3) Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other. I take this to be the effect of Lee v. Sheard, at pages 195-6, Heron International, particularly at page 262, R. P. Howard, particularly at page 123, Gerber and Stein v. Blake, particularly at page 726. I do not think the observations of Leggatt L.J. in Barings at p. 435B and of the Court of Appeal of New Zealand in Christensen v. Scott at page 280, lines 25-35, can be reconciled with this statement of principle.
These principles do not resolve the crucial decision which a court must make on a strike-out application, whether on the facts pleaded a shareholder's claim is sustainable in principle, nor the decision which the trial court must make, whether on the facts proved the shareholder's claim should be upheld. On the one hand the court must respect the principle of company autonomy, ensure that the company's creditors are not prejudiced by the action of individual shareholders and ensure that a party does not recover compensation for a loss which another party has suffered. On the other, the court must be astute to ensure that the party who has in fact suffered loss is not arbitrarily denied fair compensation. The problem can be resolved only by close scrutiny of the pleadings at the strike-out stage and all the proven facts at the trial stage: the object is to ascertain whether the loss claimed appears to be or is one which would be made good if the company had enforced its full rights against the party responsible, and whether (to use the language of Prudential at page 223) the loss claimed is "merely a reflection of the loss suffered by the company." In some cases the answer will be clear, as where the shareholder claims the loss of dividend or a diminution in the value of a shareholding attributable solely to depletion of the company's assets, or a loss unrelated to the business of the company. In other cases, inevitably, a finer judgment will be called for. At the strike-out stage any reasonable doubt must be resolved in favour of the claimant. ([2001] 2 WLR at 94-95)
[T]he shareholder's loss, in so far as this is measured by the diminution in value of his shareholding or the loss of dividends, merely reflects the loss suffered by the company in respect of which the company has its own cause of action. If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders. Neither course can be permitted. This is a matter of principle; there is no discretion involved. Justice to the defendant requires the exclusion of one claim or the other; protection of the interests of the company's creditors requires that it is the company which is allowed to recover to the exclusion of the shareholder. [p. 121E-G]
Reflective loss extends beyond the diminution in the value of the shares; it extends to the loss of dividends… and all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds. All transactions or putative transactions between the company and its shareholders must be disregarded. Payment to the one diminishes the assets of the other. In economic terms, the shareholder has two pockets, and cannot hold the defendant liable for his inability to transfer money from one pocket to the other. In principle the company and the shareholder cannot together recover more than the shareholder would have recovered if he had carried on business in his own name instead of through the medium of a company. On the other hand, he is entitled (subject to the rules on remoteness of damage) to recover in respect of a loss which he has sustained by reason of his inability to have recourse to the company's funds and which the company would not have sustained itself. The same applies to other payments which the company would have made if it had the necessary funds even if the plaintiff would have received them qua employee and not qua shareholder and even if he would have had a legal claim to be paid. His loss is still an indirect and reflective loss which is included in the company's claim. The plaintiff's primary claim lies against the company, and the existence of the liability does not increase the total recoverable by the company, for this already includes the amount necessary to enable the company to meet it. [p. 125G-126C]
Conclusion
Note 1 Mr Kufner abandoned his estoppel defence founded on the discharge of the Kel mortgage before the hearing. [Back]
Note 2 Followed in Williamson v Bank of Scotland [2006] EWHC 1289 (CH) (Mr Anthony Bompas QC) and Manches v Freer [2006] All ER (D) 428 (Judge Price QC). [Back]
Note 3 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts [Back]