Habib Bank Ltd v Dawood

Permission to appeal should be refused where a proposed appeal has no reasonable prospect of overturning detailed factual findings reached after careful evaluation of stale and conflicting evidence. A trial judge retains a residual discretion to refuse strike-out for delay, particularly where the delay has been fully considered. A guarantor is discharged only where the creditor, without consent, varies the extent or nature of the guaranteed risk in a manner prejudicial to the guarantor. Internal dishonesty which does not alter the principal debt or enforceability of security, and possible additional interest caused by enforcement delay, do not meet that threshold. An unpleaded prejudice argument cannot found permission to appeal.

The bank claimed that the defendant was liable under a guarantee securing advances made to the bank’s customer. The defendant disputed signing the guarantee, alleged that it had been completed dishonestly after signature, and alternatively argued that breaches of the banker–customer contract discharged him from liability. He also relied on the substantial delay in bringing the matter to trial.

An earlier application to strike out for delay had been dismissed by His Honour Judge Kershaw QC on 18 October 2000. After trial, His Honour Judge Heggarty QC found that the guarantee had been executed, rejected the discharge argument and declined to strike out the claim. The defendant renewed his application for permission to appeal on factual findings, delay and discharge.

1. Disposition. Lord Justice Waller held that there was no reasonable prospect of success on any proposed ground of appeal. Lord Justice Kennedy agreed. The renewed application for permission to appeal was refused.
2. Factual findings. The trial judge had carefully examined the entire evidential background because of the long delay, the unusual conduct of a bank employee and the resulting risks to conventional assumptions about documents and transactions. He assessed the witnesses in detail and addressed the defendant’s strongest points, including uncertainty about the witness to the guarantee and the customer’s apparent lack of knowledge of it. There was no reasonable prospect of reversing those findings on appeal.
3. Delay. The trial judge had a residual discretion to strike out the claim for delay. He had taken the delay fully into account and had conducted the trial with appropriate care. There was no reasonable prospect of showing that the discretion should have been exercised in favour of striking out the claim.
4. Discharge of the guarantor. Discharge would require conduct by the bank which, without the guarantor’s consent, varied the extent or nature of the guaranteed risk in a way that prejudiced the guarantor. The principal debt remained owing and the bank had enforced the available security. Internal dishonesty therefore did not establish a material variation of risk. The further argument that enforcement delay increased interest was unpleaded, gave the bank no proper opportunity to respond and, in any event, did not identify the type of increased risk capable of discharging the guarantor.

• Court of Appeal (Civil Division) — On 16 July 2002, the renewed application for permission to appeal was refused.
• Mercantile List — His Honour Judge Heggarty QC found that the guarantee had been executed, rejected the alleged discharge and declined to dismiss the claim for delay.
• Earlier interlocutory decision — His Honour Judge Kershaw QC dismissed the defendant’s application to strike out the claim for delay on 18 October 2000.