Standard Bank Plc & Anor v Agrinvest International Inc & Ors

Factual and Procedural Background

This case concerns an appeal against an order dismissing an application to set aside a default judgment entered by the respondent, Company A, against the appellant, Company B. The dispute arose from two pairs of contracts entered into on 26th May 2000, under which Company B sold certain securities to Company A for prompt delivery and agreed to repurchase them later at a price reflecting a commercial rate of interest. These contracts, governed by a Master Forward Sale Agreement dated 12th May 2000, effectively constituted short-term loans secured by bonds and global depository receipts issued by an Egyptian healthcare company, with a total nominal value of approximately US$15.5 million.

Company A was entitled under the Agreement to require margin payments if the value of the securities fell below specified levels, and failure to make such payments constituted an event of default, allowing Company A to terminate the transactions and demand immediate payment of outstanding amounts.

In June 2000, Company A made a margin call which was only partially satisfied by Company B. Company A sent letters in June 2000 warning of default and indicating possible termination and liquidation of the securities if payment was not made by specified dates. Company B responded with proposals which Company A did not accept. Despite this, Company A did not immediately exercise its right to terminate, and the parties engaged in discussions and extensions of the settlement date over the following years.

In August 2005, Company A's solicitors declared Company B to be in default and terminated the contracts. Company A then commenced proceedings in January 2006, which were initially not properly served, resulting in a default judgment that was later set aside by consent. A second action was commenced in July 2007, properly served, but Company B again failed to respond, and a default judgment was entered in February 2008.

Company B applied to set aside this judgment in March 2009, claiming a real prospect of successfully defending the claim. The application was dismissed for lack of promptness. This appeal challenges that dismissal.

Legal Issues Presented

1. Whether Company B had a real prospect of successfully defending the claim against Company A.
2. Whether the application to set aside the default judgment was made promptly in accordance with Civil Procedure Rules (CPR) 13.3.
3. The proper construction and effect of the letter sent by Company A on 20th June 2000, specifically whether it constituted a valid termination of the contracts under clause 13.2 of the Agreement.

Arguments of the Parties

Appellant's Arguments (Company B)

• Company B contended that the letter of 20th June 2000 from Company A constituted a clear and effective election to terminate the contracts with effect from 22nd June 2000.
• Company B argued that if the contracts had been terminated at that time, it would be entitled to recover a significant balance from Company A, as the securities’ market value declined substantially between June 2000 and August 2005.
• Company B asserted that it had a real prospect of successfully defending the claim and sought to set aside the default judgment on that basis.

Respondent's Arguments (Company A)

• Company A submitted that the letter of 20th June 2000 did not constitute a notice of termination under the Agreement but was merely a statement of intent or commercial pressure to induce payment.
• Company A argued that the contracts were not terminated until August 2005, when formal notice was given.
• Company A emphasized that Company B’s application to set aside the default judgment was not made promptly and that the defence was "far from overwhelming."

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by examining whether Company B had a real prospect of successfully defending the claim. The relevant contractual clause (13.2) allowed Company A, upon an event of default, to elect whether or not to terminate the contracts and declare all amounts immediately due. Such an election had to be clear and unequivocal, and notice of termination was required, though it need not be in writing.

The court found that the letter of 20th June 2000 did not amount to a notice of termination under clause 13.2. Instead, it was a conditional statement indicating Company A's willingness to close out the position if payment was not made by 22nd June but did not effect immediate termination or declare amounts due. The letter was a commercial pressure tactic rather than a binding election to terminate.

Because Company A did not exercise its termination right at that time and continued to extend settlement dates and accommodate Company B until August 2005, the contracts were not terminated in June 2000. Company B's defence, which depended entirely on the alleged termination in June 2000, therefore lacked a real prospect of success.

The court also discussed the importance of promptness in applications to set aside default judgments under CPR 13.3. While previously delay was less determinative if a real prospect of success existed, the CPR emphasizes promptness as a significant factor. Company B's delay of over a year in applying to set aside the judgment was unjustified, and its explanations were unconvincing.

Given the absence of a real prospect of success and the delay, the court concluded that the judge had not erred in dismissing the application to set aside the judgment.

Holding and Implications

DISMISSED

The appeal was dismissed. The court held that Company B did not have a real prospect of successfully defending the claim because the letter of 20th June 2000 did not constitute a valid termination of the contracts. Additionally, the application to set aside the default judgment was not made promptly as required by the Civil Procedure Rules. The decision confirms the importance of clear contractual termination notices and timely applications in default judgment proceedings. No new precedent was established; the ruling applies the existing legal principles to the facts of this case.