Habib Bank Ltd v Central Bank of Sudan

A court may order a trial on the merits in the defendant’s absence where that course is likely to produce a judgment more capable of enforcement than a default judgment. Service out of the jurisdiction may be authorised by an alternative method where the method does not contravene the law of the place of service, even if that law does not expressly permit it. A debt is acknowledged for limitation purposes where the writing sufficiently admits the claim; it need not state the precise amount. Contractual interest, including six-monthly compounding, may be recoverable where established by agreement, banking usage, or estoppel. A bank which pays against discrepant documents may nevertheless recover where the issuing bank authorised or waived the discrepancies, or failed to object within the reasonable period required by the applicable documentary-credit rules.

Habib Bank Ltd, a Pakistani bank with a London branch, claimed reimbursement from the Central Bank of Sudan under two confirmed letters of credit issued in 1982. The defendant acknowledged liability but failed to pay the balance and did not participate in the proceedings.

The claim was served out of the jurisdiction after extensions of time and an order permitting alternative service in Sudan. Colman J directed a trial on the merits in the defendant’s absence. The issues included validity of service, jurisdiction, compliance with the credits, limitation, the contractual rate and compounding of interest, and the effect of later rollovers and acknowledgements.

1. Procedure and service. The court had jurisdiction to try the claim in the defendant’s absence. Following Berliner Bank v Karageorgis [1996] 1 Lloyd’s Rep 426, a trial on the merits was appropriate because a merits judgment was more likely to be enforceable internationally than a default judgment. Under CPR 6.24, an alternative method of service abroad could be authorised under CPR 6.8 provided that it did not contravene the law of the country of service. Shiblaq v Sadikoglu [2004] EWHC 1890 (Comm) did not require the method to be expressly permitted by foreign law. Service on CBS’s legal director was therefore valid.
2. Governing law and forum. The reimbursement undertakings were governed by English law because the contemplated performance by the confirming bank, including confirmation, document inspection and negotiation, was to occur in England. England was also the appropriate forum.
3. Liability under the credits. HB had paid the beneficiary. CBS had authorised negotiation of discrepant documents under one credit and had not objected under the other. It had therefore waived any entitlement to insist on strict documentary compliance. In any event, the issuing bank lost the right to object by failing to do so within the reasonable time required by Article 8 of the UCP (1974 Revision).
4. Limitation. The written acknowledgements in 1984, 1989, 1994, 1997 and 2002 restarted or extended the limitation period under sections 29 and 30 of the Limitation Act 1980. The claim issued in 2003 was therefore in time. An acknowledgement required a sufficiently clear admission of the claim, not an express statement of its exact amount.
5. Interest and quantum. The agreed rates were 2 per cent over LIBOR for the first 180 days and 3 per cent thereafter. Six-monthly compounding was recoverable as established bankers’ usage and, independently, by estoppel. CBS’s conduct accepted the proposed realignment of maturity dates to 30 June and 31 December each year.
6. Disposition. Judgment was entered for HB for US$101,881,346.14.