Kotonou v National Westminster Bank Plc, Court of Appeal - Civil Division, October 30, 2015, [2015] EWA Civ 1106

Resolution Date:October 30, 2015
Issuing Organization:Civil Division
Actores:Kotonou v National Westminster Bank Plc

Case No: A3/2010/2153

Neutral Citation Number: [2015] EWA Civ 1106






Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 30/10/2015

Before :





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Between :

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David Sears QC (acting pro bono) for the Appellant

Alan Gourgey QC and Laura Newton (instructed by Berwin Leighton Paisner LLP) for the Respondent

Hearing dates: Tuesday 21st and Wednesday 22nd July 2015

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JudgmentLady Justice Gloster :


  1. This is an appeal by the claimant, Mr Angeli Luki Kotonou (``Mr Kotonou'') against a decision of Mr Justice Morgan (``Morgan J'') contained in a judgment dated 5 July 2010 (neutral citation reference [2010] EWHC 1659 (Ch)) (``the Morgan judgment''). By the Morgan judgment, the judge:

    i) dismissed Mr Kotonou's appeal from the decision of Master Teverson (``the master'') dated 21 August 2008 whereby, on an application by the defendant, National Westminster Bank plc (``the Bank''), he struck out Mr Kotonou's particulars of claim in these proceedings;

    ii) refused Mr Kotonou permission to amend his particulars of claim; and

    iii) granted the Bank summary judgment and dismissed Mr Kotonou's claim.

  2. Following an oral hearing, on 20 May 2014 Tomlinson and Vos LJJ granted Mr Kotonou permission to appeal in relation to two out of three revised grounds of appeal.

  3. In summary, the issue for determination on this appeal is whether, in dismissing the appeal, Morgan J erred in law and/or failed to take account of material matters in concluding that the original particulars of claim in these proceedings (which advanced certain allegations of fact which were allegedly inconsistent with findings made by Mr Jules Sher QC, sitting as a deputy judge of the High Court (``the deputy judge''), in a reserved judgment dated 22 May 2006 in earlier proceedings (``the Sher judgment'')) were an abuse of process in the circumstances of this case. The issue for determination on the Bank's respondent's notice is whether, additionally, Mr Kotonou's claim was an abuse of process on the basis of the rule in Henderson v Henderson (1843) 3 Hare 100.

  4. On the appeal, Mr David Sears QC appeared as counsel for Mr Kotonou and Mr Alan Gourgey QC appeared as leading counsel for the Bank.

    Factual and procedural history

  5. The proceedings between the Bank and Mr Kotonou have a long and complex history, as set out in the Morgan judgment. For present purposes I summarise them as follows.

  6. In around February 2000, Olympic Resources & Services PLC (``ORS'') wished to borrow £500,000 from National Westminster Bank Plc (``the Bank''). The Bank was only prepared to lend £500,000 to ORS if repayment of that sum by ORS was adequately secured.

  7. At the time, Mr Kotonou was a director of, and the majority shareholder in, ORS. ORS, acting through Mr Kotonou, entered into an arrangement with Mr and Mrs Theodossiades. As a result of that arrangement, Mr and Mrs Theodossiades procured their bank, Barclays Bank plc (``Barclays''), to open a standby letter of credit (``the letter of credit'') in the maximum sum of £500,000, in favour of the Bank. The letter of credit provided the security required by the Bank and it duly made a loan of £500,000 to ORS.

  8. The letter of credit provided that it could be called upon by the Bank up to 30 December 2000 and, if not called upon by that date, it would lapse. The period covered by the letter of credit was extended on a number of occasions and, finally, extended to 16 March 2001. The Bank did not call on the letter of credit before it lapsed.

  9. On 16 March 2001, Mr and Mrs Theodossiades asked Barclays to extend the letter of credit to 31 March 2001. Barclays declined to do so on the grounds that it had not been given enough notice prior to the lapse of the letter of credit on 16 March 2001. Accordingly, on that date, the letter of credit lapsed, leaving ORS's liabilities to the Bank unsecured in an amount of £500,000. Mr and Mrs Theodossiades later declined to procure Barclays to renew the letter of credit in favour of the Bank.

  10. The Bank recovered some £75,000 in respect of the debt of £500,000 due to it from ORS. On 12 July 2001, Mr Kotonou gave a personal guarantee (``the guarantee'') to the Bank in relation to the outstanding indebtedness of £425,000. ORS did not pay any part of the debt of £425,000 and went into insolvent liquidation on 2 February 2005.

  11. On 5 March 2004, ORS executed a deed of assignment (``the ORS deed of assignment'') in favour of Mr Kotonou. For present purposes it is relevant to note that:

    i) In the current proceedings the master held that it was arguable that the ORS deed of assignment could be construed as an assignment by ORS to Mr Kotonou of certain claims, which included the claims which are now put forward by Mr Kotonou in the present proceedings where he asserts that he is the assignee of causes of action previously vested in ORS. The Bank did not appeal this part of the master's decision.

    ii) One provision in the ORS deed of assignment provided that the relevant assignment was only to take effect in the event that ORS should be ``unable to continue as a going concern by entering into a voluntary liquidation or be the subject of a successful winding up petition''. Initially there was an issue before the judge in the present proceedings as to whether an assignment in those terms infringed the anti-deprivation rule: see Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd [2010] 1 BCLC 747. However the judge records in the judgment that it was later accepted by Mr Gourgey, on behalf of the Bank, that an issue of that kind would require some further investigation into the facts and that was not appropriate on the application for summary judgment.

  12. On 2 April 2004, the Bank issued proceedings against Mr Kotonou under the guarantee. Mr Kotonou defended those proceedings on various grounds and the proceedings were tried before the deputy judge in March 2006.

  13. Some two weeks before trial, Mr Kotonou instructed his then counsel, Mr Wormington, who prepared a lengthy draft amended defence which added to Mr Kotonou's own defence without deleting anything of substance. The draft amended pleading included a lengthy counterclaim which set out detailed allegations in relation to the letter of credit. These were broadly equivalent, though not identical, to the claims which Mr Kotonou now seeks to bring in the present proceedings.

  14. The deputy judge heard the contested amendment application on 8 and 9 March 2006, the first and second days of the trial. Mr Gourgey QC (counsel for the Bank) did not oppose Mr Kotonou pleading a lengthy factual history in relation to the operation, and the subsequent lapse, of the letter of credit. He did, however, take issue with Mr Kotonou pleading an assignment of ORS' causes of action to Mr Kotonou. In the circumstances, Mr Wormington withdrew the application to the extent that the draft amended defence pleaded an assignment or anything founded upon the assignment. Had Mr Kotonou pleaded an assignment of ORS's causes of action to himself there would have been a dispute of fact in relation to the assignment which would have necessitated an adjournment of the trial. Mr Kotonou wished to avoid responsibility for the costs of such adjournment and so that aspect of the amended pleading was withdrawn. In advancing his application for permission to amend, Mr Wormington submitted that the facts alleged in relation to the history of the letter of credit were not just a backdrop to the misrepresentation defence under the guarantee but rather:

    "the actual landscape in which this [misrepresentation defence] has to be solved. It is one of the most significant features of the situation, we say, in July when matters came to a head and the guarantee was given''.

  15. The Bank also opposed the amendment of the defence to plead a duty owed by the Bank to ORS in respect of the letter of credit. The deputy judge held (in a judgment dated 9 March 2006) that, without the pleading of the assignment, the pleaded duty went nowhere. In my view he was wrong on that point. He also held that the existence of such a duty was irrelevant although it was possible that the perception of the Bank's employees as to the existence of such a duty might be relevant. He concluded that he should not give permission to Mr Kotonou to plead the existence of a duty or the breach of that duty or loss flowing from such breach of duty. Mr Kotonou did not appeal against the judge's refusal to permit an amendment which pleaded a breach of a duty owed by the Bank to ORS in respect of the maintenance of the letter of credit. He could have done so.

  16. Mr Kotonou then served an amended defence and counterclaim, which pleaded, amongst other things, that the administration of the extensions to the letter of credit had been dealt with by the Bank through communication with Mr and Mrs Theodossiades and Barclays; that Mr Frampton of the Bank had been informed by Mr Kotonou of the commercial terms which had been agreed between ORS and Mr and Mrs Theodossiades; and that the Bank was at fault in not requiring the extension or calling on the letter of credit. The amended defence and counterclaim did not expressly allege that the Bank owed a duty in contract or in tort to ORS or to Mr Kotonou; nor did it expressly allege that there was a breach of duty causing loss and damage, to either ORS or Mr Kotonou or that ORS's causes of action had been assigned to Mr Kotonou.

  17. For the purposes of this appeal it is necessary to describe Mr Kotonou's position in relation to the proposed amendments and what the deputy judge decided in relation to them in some detail...

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