#4999 - Seaconsar Far East Limited V. Bank Markazi - Conflict of Laws BCL

Seaconsar Far East Limited v. Bank Markazi

Facts

By a contract dated 30 June 1986, the plaintiffs agreed to sell a quantity of artillery shells to the Iranian Ministry of Defence. Payment was to be by letter of credit, and on 15 January 1987 the defendant bank opened a letter of credit in favour of the plaintiffs. As amended, it was payable at sight on presentation to a London bank of specified documents and compliance with certain conditions. The plaintiffs made two shipments of shells pursuant to the contract and made a presentation of documents to the London bank in respect of each shipment. The defendant bank failed or refused to make payment in respect of both presentations on the ground that the documents presented were not in conformity with the requirements of the letter of credit. The plaintiffs brought proceedings against the defendant bank for damages for breach of contract, and Hobhouse J. granted them leave ex parte to serve the proceedings on the bank outside the jurisdiction under R.S.C., Ord. 11.1. Leave to serve the proceedings on Bank Markazi outside the jurisdiction was granted to Seaconsar ex parte by Hobhouse J. Bank Markazi then applied to set aside the order of Hobhouse J. in respect of both presentations.

Seaconsar applied for leave to serve proceedings out of the jurisdiction under either paragraph (d) or paragraph (e) of R.S.C., Ord. 11, r. 1(1). The application under paragraph (d) was made either under sub-paragraph (i), on the basis that the contract was made within the jurisdiction, or under sub-paragraph (ii), on the basis that the contract was made by or through Bank Melli, as agent trading within the jurisdiction, for Bank Markazi, which was outside the jurisdiction. The application under paragraph (e) was on the basis of breach of contract within the jurisdiction, viz. refusal to pay at the counters of Bank Melli in London. Bank Markazi has never disputed that the case fell under either paragraph (d) or paragraph (e), its sole contention being that Seaconsar had not established a sufficiently strong case on the merits of its claim

Issues

(1) What is the test of a sufficiently strong case on the merits to justify the grant to a plaintiff of leave to serve proceedings out of the jurisdiction under Order 11?

(2) Whether Seaconsar has satisfied this test in relation to the merits of the following issues.

Holding

The relevant provisions as it stood then were, Order 11, Paragraphs 1 and 2. They read:

“(1) An application for the grant of leave under rule 1(1) must be supported by an affidavit stating - (a) the grounds on which the application is made, (b) that in the deponent's belief the plaintiff has a good cause of action, (c) in what place or country the defendant is, or probably may be found, and (d) where the application is made under rule 1(1)(c), the grounds for the deponent's belief that there is between the plaintiff and the person on whom a writ has been served a real issue which the plaintiff may reasonably ask the court to try. (2) No such leave shall be granted unless it shall be made sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction under this Order.”

Is there a serious questioned to be tried?

On this approach, if in support of the plaintiff's ex parte application an affidavit is sworn in proper form deposing to facts which, if proved, provide a sufficient foundation for the alleged cause of action, that should generally be enough for present purposes. This is no doubt what a number of judges have referred to when they have used the expression "prima facie case" in this context. The problem arises from the fact that the court will consider, on an application to set aside leave so given, affidavit evidence on the part of the defendant, and will take such evidence into account when deciding whether or not to exercise its discretion in favour of the plaintiff. But the court cannot resolve disputed questions of fact on affidavit evidence; and it is consistent with the statement of the law by Lord Davey that if, at the end of the day, there remains a substantial question of fact or law or both, arising on the facts disclosed by the affidavits, which the plaintiff bona fide desires to try, the court should, as a rule, allow the service of the writ. If this approach is correct, the standard of proof in respect of the cause of action can broadly be stated to be whether, on the affidavit evidence before the court, there is a serious question to be tried.

What is the standard of proof to establish that the case falls under one of the jurisdictional heads?

The case was therefore in some disarray when it came before the House of Lords. This House took the view that Lord Goddard's statement of the law inMalik, or at least Slade J.'s understanding of it, was erroneous in so far as it required that the plaintiff must satisfy the court on the civil burden of proof that his case fell within one of the heads of jurisdiction in Ord. 11, r. 1(1). The applicable standard was laid down in Ord. 11, r. 4(2), which required no more than that it should be made sufficiently to appear to the court that the case was a proper one for service out of the jurisdiction, a requirement which was inconsistent with a standard of proof "which in effect amounted to a trial of the action or a premature expression of opinion on its merits:" seeperLord Simonds, at p. 879. Equally, the expression "prima facie case" was rejected as inappropriate, because a conflict may arise on the material before the court, which has to reach a conclusion on all the materials then before it. In an endeavour to assist on the degree of sufficiency required by rule 4(2) Lord Simonds (with whom Lord Normand, at p. 881, agreed) said, at p. 880, that "the description 'a good arguable case' has been suggested [by counsel for the plaintiff] and I do not quarrel with it;" and Lord Radcliffe (with whose statement of principle Lord Tucker, at p. 890, agreed) used the expressions "a strong argument," at pp. 883 and 885, and "a strong case for argument," at p. 884. There is no reason to suppose that there is any material difference between these various expressions, from which is derived the "good arguable case" test which has been applied in innumerable cases…

The “good arguable case” test applies to all requirements under the jurisdictional head

For present purposes, it is relevant to consider to which elements in what is now paragraph (e) of Ord. 11, r. 1(1) the House of Lords concluded that the "good arguable case" test should be applied. Lord Radcliffe, at pp. 883-884, was of the opinion that he was unable to be "satisfied as to where a breach of contract had taken place without being at any rate as much satisfied that the contract existed and had been broken." On this approach (with which, as I understand it, Lord Tucker was in agreement) it will be necessary for the purpose of establishing jurisdiction under paragraph (e) not merely to show (to the extent required by rule 4(2)) that, if there was a contract and it had been broken, such breach was committed within the jurisdiction (which had been the view of Lord Goddard C.J. inMalik) but so to establish all three elements of contract, breach and place of breach.

“Good arguable case” does not apply to merits – it applies to establishing the jurisdictional heads

It follows that four members of the Appellate Committee must be taken to have decided that, when considering what is now paragraph (e), all three elements of contract, breach and place of breach must be established, to the extent required by rule 4(2), before the plaintiff can successfully invoke the jurisdiction of the court under that paragraph. It also follows that, under that paragraph, no separate issue will arise on the merits of the plaintiff's claim to which a lower standard of proof might be applied; and for that reason no question arose directly as to the standard of proof applicable to the merits of the plaintiff's claim inKorner's case, though the point was adverted to by Lord Tucker. I wish to record in parenthesis my suspicion that a failure to appreciate this point has led to a belief that the "good arguable case" test established inKorner's caseis as applicable to the merits of the plaintiff's case as it is to the question of jurisdiction under Ord. 11.

As I read the paragraph, however, and having regard to the view formed inKorner's case[1951] A.C. 869, I am of the opinion that what has to be sufficiently shown by the plaintiff for the purpose of establishing jurisdiction is, in the case of, for example, sub-paragraph (i), not merely that (1) there was a contract, and (2) such contract was made within the jurisdiction. Likewise, under sub-paragraphs (ii), (iii) and (iv), the existence of the relevant contract has to be sufficiently proved. But, once that is done, there arises a separate question as to the merits...