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Janus-faced judgments in Greenland Bank Ltd.

10/08/2016 | Judith Ratcliffe

Judgments of the higher courts can raise important issues and the rare smile.  They can be striking, persuasive or simply memorable because of the manner in which a particular judge has expressed an opinion.  In this series of articles, I will look briefly at three such cases: Greenland Bank Limited (in Liquidation) (Neutral Citation Number: [2009] EWCA Civ 14 – Case No: A3/2008/0662), Sirius International Insurance [2004] UKHL 54, and Floe Telecomm Limited (in Liquidation) (Neutral Citation Number: [2009] EWCA Civ 47 – Case No: 1024/2/3/04).

In this first article, on Greenland Bank Limited (in Liquidation), I will look at and briefly summarise the difficulties encountered by counsel when they are instructed to present opposing arguments for the same client and based on the same set of facts before courts in different jurisdictions.

Greenland Bank Ltd (Greenland Bank) was in dispute with one of its customers, Westmont Power (Bangladesh) Ltd (Westmont).

Until it went into liquidation, Greenland Bank maintained a banking business in Africa.

In June 1998, Westmont entered into a “power purchase agreement” in respect of a supply of electricity to the Bangladesh Power Development Board. The contract was for a period of 15 years.  Westmont agreed to provide a performance bond as continuing security in the sum of USD$1.5m to cover its obligations.

Greenland Bank arranged for American Express Bank Ltd (“Amex”) to issue the bond, and Amex agreed subject to receipt of a deposit of USD$1.5 million. Both parties agreed that, in order for it to remain valid, the performance bond would need to be renewed annually from June 2000. Under the terms of the bond, it was the responsibility of the Bangladesh Power Development Board to request renewals.

Westmont claimed that it had sent a fax, dated 9 May 2000, on behalf of the Bangladesh Power Development Board, to renew the bond for another year, up to 10 June 2001.

Amex denied receiving the fax and responded that it had, on two separate occasions (11 June 2000 and 27 June 2000), faxed the Bangladesh Power Development Board and the Bank of Uganda advising that the performance bond had expired on 11 June 2000.

In July 2000 the UK liquidators of Greenland Bank wrote to Amex requesting the return of the USD$1.5 million deposit.  They argued that, as the bond had expired, the deposit should be returned. Amex initially agreed.  However, Westmont issued proceedings against Amex in the High Court of Bangladesh on 20 July 2000, claiming that the performance bond should not be cancelled.  As a result, Amex advised the liquidators that, unless or until the case was resolved in Bangladesh, Amex remained potentially liable under the performance bond and, accordingly, was entitled to retain the deposit.

The High Court of Bangladesh ruled against Amex in May 2004.

The district judge in Dhaka took the view that the fax of 9th May 2000 “was not a forgery”, that it was sent to Amex by Westmont and received by Amex and that it amounted to a formal written request for an extension of the performance bond for a further year.

According to the Court in Dhaka, Amex’s consent to the extension was implied from its apparently having charged a fee of US$15,000 for the year 2000 – 2001 on 21 July 2000, which was after the date on which Amex claimed the bond had already expired.

Amex appealed the Bangladesh Court’s decision, but the appeal had not been heard by the time the liquidators’ claims came before the High Court of England and Wales for the return of the deposit.

In the UK High Court, where Mr Justice Evans-Lombe heard the case, in an interesting volte-face, Counsel for Amex successfully argued in the claim brought against it by Greenland Bank that they (Amex) “could have been wrong” in their defence of the claim in Bangladesh and that, in fact, the bond was still active and therefore that Amex continued to be ‘liable under the performance bond’ and therefore it had a right to ‘retain the deposit’ given for the bond.

At the same time, Amex was nevertheless continuing its litigation in Bangladesh, where it was in the process of appealing against the very judgment on which it sought to rely in the UK proceedings.

By the time the UK proceedings reached the Court of Appeal, the issue had become whether Amex had a chance (“real as opposed to fanciful”) to persuade the Bangladesh court on appeal, in that jurisdiction, that the bond had lapsed.  That argument was dependent on whether the Court in Bangladesh would admit the “fresh evidence” of correspondence sent by Amex in June, July and August 2000.

The Court of Appeal held that Amex would have difficulty in this respect but, on the question whether the bond was able to be construed under Bangladesh law to be irrevocable until 2013, with “considerable reluctance”, the appeal judge concluded that despite prospects of success not being high, they were not purely fanciful. The Court therefore imposed a stay of the action pending the outcome of the Bangladesh litigation.

It is not, of course, an ideal situation for a lawyer to be instructed to argue one thing in one jurisdiction, and to argue the exact opposite in a different jurisdiction.

The UK Court of Appeal drew its own conclusions:

 Lord Justice Ward commented that this is the kind of litigation that could feed the public’s worst perception of lawyers and the law and quoted Jonathan Swift ( author of Gulliver’s Travels)’s, description of lawyers as:

“… a society of men … bred up from their youth in the art of proving, by words multiplied for the purpose, that white is black, and black is white …according as they are paid” and that a ‘cynical observer’ of Amex/Amex Counsel’s position within the litigation could easily be persuaded to believe this statement to be true.

However, Lord Justice Ward was suitably impressed with Counsel’s efforts to go on to say:

“Riding two horses at the same time is always difficult enough: riding them when they are charging in opposite directions is an altogether remarkable feat, so let me begin by praising the skills of counsel for Amex, Mr David Wolfson, who with customary courtesy, cogency, and not a little charm, managed to stay in the saddle.”

Amex’s barrister had persuaded the Court that, in this exceptional case it was reasonable to advance opposing arguments, for the same side, in different countries.

Lord Justice Ward concluded:

“Mr Wolfson has persuaded me that even though the prospects of successfully arguing that are not high, the prospects of success cannot be said to be fanciful. To return to Jonathan Swift’s view of lawyers, while Mr Wolfson has not shown that black is white nor that white is black, he has managed to paint the problem in a shade of grey.”

Of course, had Amex conceded in the UK before the outcome of the litigation in Bangladesh, it could have faced the prospect of repaying the amount of the bond, but still being liable for the amount guaranteed – a very real situation of double liability which can confront lawyers and their clients in a range of situations from taxation matters to what appear at first sight to be straightforward land and property issues.

In the next article I will look at the issue of literalism, as dealt with in Sirius International Insurance [2004] UKHL 54.

 

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