Awal Bank BSC v Al- Sanea

A contractual notice exercising an option is valid only if it complies with the agreement’s express requirements. Errors may be disregarded where the notice remains sufficiently clear when construed against the contractual background, but the court cannot rewrite a notice which identifies a different contractual date or demands a differently calculated sum. A notice under an alternative settlement provision may describe an amount by reference to a future market price where that amount cannot yet be calculated. On an application for service out of the jurisdiction, the claimant must show a serious issue to be tried. Material non-disclosure on an ex parte paper application may justify setting aside permission and consequential orders where the true position cannot be appreciated merely by working through an exhibit.

The claimant, a Bahraini bank in administration, sought payment from its former chairman under a put option agreement concerning HSBC shares. It served a notice purporting to exercise the cash-settlement alternative and claimed a sum calculated by reference to the previous day’s closing price.

Permission had been granted to serve the defendant out of the jurisdiction. Alternative service was effected and default judgment followed. The defendant applied to set aside the permission, service and judgment, principally contending that the notice was invalid and that there was no serious issue to be tried. The central issue was whether the notice complied with the agreement’s requirements concerning the option closing date and amount payable.

1. The application was granted. The order permitting service out of the jurisdiction, the consequential service and the default judgment were set aside.
2. The contractual notice had to specify the number of shares, the amount payable at the option closing and the option closing date. The number of shares was sufficiently specified. Where the cash-settlement alternative had been selected, it was unnecessary to state an amount which could not yet be calculated. It was sufficient to identify the contractual formula by reference to the price listed at the future option closing.
3. The notice was nevertheless invalid. It treated the option closing as having occurred on the previous day and demanded a fixed sum calculated by reference to that day’s closing price. That bore no relationship to the contractual mechanism, under which the closing was to occur 14 days after the notice and the amount was to be calculated by reference to the price then listed. This was not an error capable of being ignored under Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749; it was not a notice under the agreement at all.
4. There was therefore no serious issue to be tried, as required for service out of the jurisdiction under Seaconsar Far East Ltd v Bank Markazi [1994] 1 AC 438. The claimant’s pleading materially recast the notice and failed to present its true effect.
5. The disclosure on the paper application was also materially inadequate. The fact that the true position might be discovered somewhere in an exhibit did not cure the failure to draw it to the judge’s attention, particularly on an ex parte application: Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyds Rep 428.
6. The judge would, had it been necessary, have upheld the alternative-service order and rejected the other asserted defences, including lack of authority, alleged unavailability of the shares and set-off. The additional requirements concerning alternative service identified in Bayat Telephone Systems International Inc v Lord Michael Cecil [2011] EWCA Civ 135 were assumed to apply and were satisfied.

First-instance decision. The court set aside an earlier order of Andrew Smith J permitting service out of the jurisdiction, together with the resulting service and default judgment.