Eurobank Ergasias SA v Kalliroi Navigation Company Ltd & Ors

Summary judgment may be given on an undisputed loan claim where an effective no-set-off clause prevents a related counterclaim from operating as a defence. Foreign-law illegality may nevertheless provide a real prospect of defending part of an English-law claim where performance abroad may contravene mandatory foreign law. The Ralli principle applies at least arguably to the affected part of the contract. A separate loan claim may proceed. The residual ground of a compelling reason for trial under CPR 24.2(b) is exceptional and should be applied sparingly.

Eurobank, successor in title to Proton Bank SA, sought summary judgment on two shipping loan agreements and guarantees. The defendants relied on counterclaims alleging fraud and breach of contract concerning a US$20m Tranche A transaction, and argued that Greek-law illegality and other compelling circumstances required a trial.

The court also considered an asserted implied term in the earlier Kalliroi agreement, dismissal of part of the counterclaim, release of freight payments, and security for costs. The central questions were whether the counterclaim could operate as a set-off or defence, whether the Tranche A issue was triable, and whether the remaining claims could be determined summarily.

1. Starfish Loan Agreement. The defendants accepted that the no-set-off clause was binding and excluded reliance on the fraud and breach counterclaims as a defence. The counterclaims could proceed separately, but they did not prevent judgment on an otherwise undisputed debt.
2. The evidence made it realistically arguable that the Tranche A fee was an illegal commission under Greek law. Applying the approach in Ralli Brothers v Compania Naviera Sota Aznar [1920] 2 KB 287, the court held that there was a triable defence to Tranche A because performance of that part might be illegal at the place of performance. The court considered that Ralli Brothers remained good law, although it left the wider interaction with article 9 of Rome 1 undecided.
3. The court provisionally considered that Chapter F was not an overriding mandatory provision within article 9(1) of Rome 1. Even if it were, article 9(3) would affect only the performance rendered unlawful. The Greek Civil Code provisions on nullity did not govern enforceability of the English-law agreement.
4. Tranche B was a separate loan. Even on the defendants’ wider illegality case, the blue-pencil rule and clause 13.06 preserved the Tranche B claim. No compelling reason justified delaying judgment on it. The word “compelling” indicated an exceptional residual ground, applicable only where particular circumstances cry out for a trial so that justice can be done and seen to be done.
5. The alleged implied term in the Kalliroi agreement failed. The duty relied on had not been owed to Kalliroi, the claimant relied on non-payment rather than its own breach, and there was no causal link between the alleged wrongdoing and the non-payment.
6. The counterclaim was not fanciful generally, but its claim for the lost opportunity to obtain US$300m was speculative and was dismissed. No freight payments were released. Security for costs was ordered in the reduced sum of £200,000.

Judgment was entered for Eurobank for US$9.8m under the Kalliroi agreement and US$41.8m under the Starfish agreement, subject to calculation and accrued interest; the Tranche A claim and the remaining counterclaim proceeded to trial.