Standard Bank Plc & Anor v Agrinvest International Inc & Ors

A regular default judgment should ordinarily remain in place unless the defendant has a real prospect of successfully defending the claim. Whether a contractual communication constitutes a binding election depends on a clear and unequivocal choice between inconsistent rights. The contractual requirements governing that choice must be considered.

A threat to terminate in the future if payment is not made is ordinarily a statement of intention, rather than an immediate and irrevocable exercise of a contractual right to terminate. On an application under rule 13.3 of the Civil Procedure Rules 1998, promptness is always important, though it is not an absolute precondition to relief.

Standard Bank obtained a regular default judgment against Agrinvest for sums allegedly due under forward sale contracts. Agrinvest applied more than a year later to set aside the judgment. It argued that a letter sent by the bank in June 2000 had irrevocably terminated the contracts, which would substantially alter the parties’ financial positions.

Field J held in [2009] EWHC 1692 (Comm) that Agrinvest had a real prospect of successfully defending the claim. He nevertheless dismissed the application because it had not been made promptly. Agrinvest appealed. The central questions were whether its construction of the letter provided a real prospect of success and, if so, how its delay affected the discretion under rule 13.3 of the Civil Procedure Rules 1998.

1. Appeal dismissed. Moore-Bick LJ, with whom Etherton and Ward LJJ agreed, held that Agrinvest had no real prospect of successfully defending the claim. The judge below had therefore reached the correct result, although the Court of Appeal relied on a different ground.

2. A binding election requires a clear and unequivocal choice between inconsistent rights. Where the rights arise under a contract prescribing how the choice is to be made, those terms govern whether an election has occurred. The agreement required notice making clear both that the transaction was terminated and that all outstanding sums had become immediately payable. No particular formality was necessary, but the agreement did not contemplate a conditional notice taking effect in the future if a condition remained unsatisfied.

3. The bank’s June 2000 letter was not a termination notice. Its proposal to help Agrinvest avoid a loss was inconsistent with immediate termination. Its statement that it would close out the position unless payment was made by a future date was a threat applying commercial pressure. It remained open to the bank either to implement or disregard that threat. The letter also omitted any statement that outstanding sums had become immediately payable. The contracts consequently remained in force until their termination in August 2005.

4. The interpretation issue was a short question of construction which required no fuller factual inquiry and could properly be determined on the application. Since Agrinvest’s defence depended entirely upon termination in June 2000, the defence had no real prospect of success.

5. Obiter: under rule 13.3(2) of the Civil Procedure Rules 1998, promptness is not an absolute condition of relief, but is always a factor of considerable significance. Other matters, including an especially strong defence, may outweigh delay. A marked failure to apply promptly may nevertheless justify refusing relief despite a possible prospect of success. Agrinvest’s delay exceeded one year and its explanations were unconvincing. Even had the defence possessed a real prospect of success, the court would have been slow to interfere with Field J’s exercise of discretion.

1. Court of Appeal (Civil Division): In [2010] EWCA Civ 1400, the court unanimously dismissed Agrinvest’s appeal. It held that Agrinvest lacked a real prospect of successfully defending the claim.
2. High Court, Commercial Court: Field J held in [2009] EWHC 1692 (Comm) that Agrinvest had a real prospect of successfully defending the claim, but dismissed its application to set aside the default judgment because the application had not been made promptly.