Bank of India v Trans Continental Commodity Merchants Ltd and Another

• Jurisdiction: Singapore
• Judge: Abdul Wahab Ghows J
• Judgment Date: 24 March 1986
• Neutral Citation: [1986] SGHC 10
• Court: High Court (Singapore)
• Year: 1986
• Published date: 19 September 2003
• Plaintiff Counsel: R Raj Singam (Drew & Napier)
• Defendant Counsel: S Selvadurai (Selvadurai Pala Krishnan & Partners)
• Subject Matter: Civil Procedure,Foreign judgments,Enforcement,Judgment and order obtained in England,Registration in Singapore,Application to set aside registration,Illegality,Whether just and convenient to enforce judgment,s 3 Reciprocal Enforcement of Commonwealth Judgments Act (Cap 24, 1970 Ed),0 67 r 9 Rules of the Supreme Court 1970
• Citation: [1986] SGHC 10

This is an application to set aside the registration under the Reciprocal Enforcement of Commonwealth Judgments Act (Cap 24, 1970 Ed) of a judgment of the High Court of Justice, Queen`s Bench Div dated 22 October 1981 and an order of the Court of Appeal dated 24 May 1983. The judgment creditors in this case are the Bank of India which I shall refer to as the Bank and the first judgment debtors are the Trans Continental Commodity Merchants (hereinafter referred to as TCCM) and the second judgment debtor is Jashbai Nagjibhai Patel (hereinafter referred to as Patel).

The facts are briefly as follows. The Bank is an Indian bank with a branch in the city of London. It carried on the business of an international bank including the handling of documentary credits and the provision of finance for exports. It also had a foreign exchange department. TCCM was one of the Bank`s customers. TCCM carried on the business of trading in edible oils and other commodities. TCCM sought banking facilities in London with the Bank and these facilities included the handling of documentary credits and all the company`s foreign exchange deals. These deals took the form of forward contracts for the sale or purchase of foreign exchange, under which the amount, the currency, the rate, and the date of delivery were agreed.

When TCCM became the Bank`s customer a form of guarantee of TCCM`s liabilities to the Bank was entered into by Patel. The guarantee was dated 13 March 1975. Thereafter the Bank handled a number of foreign exchange transactions described aforesaid. There were about 30 of such transactions in all, some of sale, some of purchase, entered into between 11 March and 3 July 1975. Of these contracts, 18 were performed satisfactorily but the remaining 12 were not. Under these 12 contracts TCCM had agreed to sell certain amounts of dollars to the Bank at specified rates of exchange, for delivery on specified dates. On the due dates for delivery of the dollars to the Bank, TCCM failed to make such delivery. Accordingly the Bank commenced proceedings against TCCM and Patel, claiming damages from TCCM for breach of contract and claiming a total of £186,000 from Patel under his guarantee. Pleadings were exchanged. On 10 April 1981 TCCM`s defence and counterclaim were struck out and judgment was entered against TCCM for damages to be assessed. In the result two matters fell to be decided by Bingham J at the trial in the High Court of Justice, Queen`s Bench Div:

(1) the assessment of damages payable by TCCM and

(2) the determination of the issue of liability between the Bank and Patel, and if Patel was held liable, the determination of the sum due from him. Since TCCM for all practical purposes was no longer in existence, the crucial question before the trial judge was the liability of Patel.

Patel contested liability on a number of grounds, only two of which are relevant for our purposes. They are:

(1) that on a true construction of the terms of the guarantee it did not apply to any liability of TCCM under foreign exchange transactions of the type in question, and

(2) that the foreign exchange transactions between the Bank and TCCM were ex facieillegal, so that no liability arose in respect of them, either of TCCM itself or of Patel, under his guarantee.

Counsel for Patel sought before the trial judge and the Court of Appeal to place a restricted meaning upon his guarantee but Bingham J rejected his submissions and held that the guarantee had been `deliberately drawn in the widest possible language so as to cover any liability of the company to the Bank, arising out of their mutual relations as bankers and customer, however that liability might arise and whether it arose out of what may be called a pure banking activity or not`. The Court of Appeal agreed both with Bingham J`s conclusion and with his reasoning in this connection.

As regards the submission that the foreign exchange transactions were ex facie illegal, there were two limbs to the argument. The first was that there was ex facie illegality in that the foreign exchange transactions were contrary to s 30(3) of the UK Exchange Control Act 1947. Bingham J rejected Patel`s counsel`s submissions in this connection. Secondly, that by virtue of r 15 of the Regulations set out in a Notice No EC 54 issued under the said Exchange Control Act, the transactions were only lawful if certain conditions were complied with, in particular, the condition that the customer was due to receive foreign currency from a third party under a firm contractual commitment. Here, according to Patel`s counsel, that condition was not fulfilled. However Patel had been refused leave by the judge to plead illegality and so he could only succeed on the point if there was ex facie illegality. Patel could not overcome this evidential difficulty. Bingham J`s decision herein was affirmed by the Court of Appeal. Patel`s appeal was dismissed with costs.

In his application to set aside the registration under the Reciprocal Enforcement of Commonwealth Judgments Act of the aforesaid judgment of the High Court of Justice, Queen`s Bench Div and of the order of the Court of Appeal dated 24 May 1983 Patel contends that in all the circumstances it is not just and convenient for the High Court of Singapore to permit the registration of the said judgment as such judgment and the cause of action on which it was given and the agreement or agreements from which the cause of action arose are an infringement of s 2(b) of Article VIII of the Bretton Woods Agreement and are also infringements of ss 4(2), 9(1) and 36(1) of the Malaysian Exchange Control Act 1953. Mr Selvadurai, Patel`s counsel, argued that the registration of the said judgment is tantamount to enforcing a judgment rooted in illegality in that the said judgment is based on a cause of action stemming from an agreement or agreements which are wholly corrupted by illegality as the said agreement or agreements infringed the said Bretton Woods Agreement and the Malaysia Exchange Control Act. Mr Selvadurai added that the registration of the judgment of the High Court of Justice, Queen`s Bench Div and the Order of the Court of Appeal is contrary to the public policy of Singapore as they infringe the Bretton Woods Agreement and the Malaysian Exchange Control Act 1953.

The contracts between the Bank and TCCM were entered into in London and were English contracts. There is no dispute that English law was the proper law of these contracts. Mr Selvadurai conceded that the London branch of the Bank and TCCM were resident in England at the time these contracts were entered into. TCCM was in fact a company incorporated in England. The leitmotif of these contracts was the purchase of American dollars with Sterling or vice versa. There is no evidence that any of the foreign exchange contracts between the Bank and TCCM made any reference to Malaysian currency. The contracts were to be wholly performed in England. That being so, they cannot as a result of the Bretton Woods Agreement be affected by foreign exchange regulations - see Sharif v Azad [1967] 1 QB 605

Mr Selvadurai, however, contended that the actual parties to these foreign exchange contracts were the Bank and Patel because TCCM was a `creature` of Patel created to enable Patel to enter into forward foreign exchange contracts without overtly contravening the Malaysian Exchange Control Act. Mr Selvadurai said his contention was mainly based on the trial judge`s finding that TCCM was under Patel`s control as he was the beneficial owner of almost all its shares. Mr Selvadurai also referred to the affidavit of Hemant Patel of 30 April 1984 which exhibited a letter dated 30 September 1975 from the Bank to its London solicitors wherein the Bank stated: `The guarantee of Mr Patel was taken by the Bank as we understood that Mr Patel was, through a series of nominees the virtual owner of the company.` Mr Selvadurai then argued that on the facts that TCCM was formed on 30 January 1975 that the Bank negotiated with TCCM and conferred with Patel in February 1975 and that the guarantee was sent to Patel who was then in Penang on 1 March 1975 for his signature, the inference was clear that TCCM was a puppet manipulated by Patel.

I cannot accept Mr Selvadurai`s aforesaid contention as it contradicts what...