Integral Petroleum SA v Scu-Finanz AG

The Court of Appeal held that the central issue was one of corporate authority: whether the sole signature of a prokurist bound the Swiss company SCU-Finanz AG. That question concerns the company's constitution and capacity and is governed by the law of the place of incorporation (Swiss law), not by the formal validity rules in the Rome I Regulation. Under Swiss law a prokura granted to more than one person required joint signatures and the single signature was ineffective to bind the company. The judge's exercise of discretion under CPR Part 13 to set aside a default judgment was therefore correct because SCU had a defence with real prospects of success. The court also took into account the claimant's procedural breaches in obtaining the default judgment and the defendant's delay in applying to set it aside; on balance the potency of the defence and procedural unfairness justified relief.

Background and procedural posture:

• Integral, a Swiss oil trader, obtained judgment in default of defence on 17 July 2013 for breach of a supply contract said to be governed by English law and subject to exclusive English jurisdiction.
• SCU applied under CPR Part 13 to set aside the default judgment; Popplewell J allowed that application on 28 March 2014 ([2014] EWHC 702 (Comm)). Integral appealed to the Court of Appeal.

Nature of the claim and relief sought:

Integral sought to enforce a default judgment for damages for alleged non-delivery under an international oil supply contract. SCU sought to set aside that default judgment and defend the claim.

Issues framed:

1. Characterisation of the legal issue: whether the absence of a second signature went to formal validity governed by the law of the contract (English law under the parties' choice and Rome I Article 11) or to company capacity/authority governed by the law of incorporation (Swiss law) and Dicey conflict rules.
2. Application of the Rome I Regulation, in particular Article 11 (formal validity), Article 1(2) (exclusions for company law and agent authority) and Article 20 (exclusion of renvoi).
3. Effect of The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 and the Companies Act 2006 (sections 43 and 44) on whether an overseas document purporting to be signed could be treated as duly executed in England.
4. Exercise of judicial discretion under CPR Part 13 having regard to promptness of the application and the potency of the defence.

Court's reasoning:

• The court characterised the dispute as about the authority of a single prokurist to bind the company. That is an aspect of a company's constitution/capacity and is governed by the law of incorporation (Swiss law) under the common-law conflict rules and authorities such as Meridian and Dicey rules.
• The Rome I concept of "formal validity" as used in Article 11 is not apt to cover questions whether a corporation has in substance expressed the will to be bound when that depends on the authority of corporate agents; moreover Article 1(2)(f) and (g) expressly exclude matters of company law and whether an agent can bind a principal.
• Swiss law (Code of Obligations, Articles 458, 459, 460 and Article 933(1)) treats the prokura and its public registration as constitutive; where prokura is granted to more than one person joint signatures are required and the single signature was ineffective to bind SCU.
• The 2009 Regulations did not assist Integral because the contract did not purport to be signed in accordance with Swiss law (it lacked the joint signature required by Swiss law) and so the "purchaser" deeming provision could not be invoked on the evidence.
• Applying CPR Part 13, the judge was entitled to set aside the default judgment: promptness was a relevant factor but the strength of SCU's Swiss-law defence and Integral's procedural breaches in procuring the default judgment justified setting it aside despite SCU's delay in applying.

Subsidiary findings: the judge found the factual evidence about performance sparse; the judge decided defence (ii) (letter of credit) was not yet time-barred and was not pursued on appeal; defence (iii) (quantification/limitation of liability) was relevant to discretion but the principal ground was defence (i).

Wider context: the court acknowledged potential commercial inconvenience of reference to foreign formalities but upheld the principled application of conflict rules and the exclusion in Rome I for company/agent matters.

The appeal was dismissed. The Court of Appeal agreed with the judge below that the issue was one of authority/capacity and thus governed by Swiss law; under Swiss law a prokura in favour of more than one person required joint signatures and a single prokurist's signature could not bind SCU. Given that defence had real prospects of success and having regard to the claimant's procedural breaches, the judge properly exercised his discretion under CPR Part 13 to set aside the default judgment.

Appeal from the High Court of Justice, Queen's Bench Division, Commercial Court, Popplewell J ([2014] EWHC 702 (Comm)). Underlying events: default judgment entered 17 July 2013 in favour of Integral; SCU applied under CPR Part 13 and Popplewell J set aside the default judgment by order of 28 March 2014. This Court (EWCA) heard the appeal and dismissed it on 26 February 2015 ([2015] EWCA Civ 144).