[*167] 1985 November 6.

 

(NIKITAS, P.D.C.)

IN THE DISTRICT COURT OF NICOSIA

Midland Export - Creditbank of Austria,

Plaintiffs,

v.

E. Philippou Ltd.,

Defendants.

AND BY COUNTERCLAIM:

E. Philippou Ltd.,

Plaintiffs by Counterclaim,

v.

1. Midland Export - Creditbank of Austria,

2. Buben & Fried KG.,

Defendants by Counterclaim.

(Action No. 2975/83).

Civil Procedure - Parties - Addition of a person as a co-plaintiff and co-defendant to a counterclaim - The Civil Procedure Rules, 0.9, r.10 - Ambit of - Present application based on allegation of assignment - The Court need not at this stage determine its effect - Application granted.

N. Pelides, for the Applicants.

D. Ioannides with P. Liveras, for the Respondents.

RULING

The following ruling was delivered by:

NIKITAS, P.D.C.: The plaintiff in this action, Midland Export - Creditbank, is a company incorporated in Austria. [*168] They issued their writ indorsed with a statement of claim on the 30th May, 1983. The position is that a claim is brought for the sum of U.S. $ 129, 154.52 against the defendants, a Cyprus company, by virtue of a bill of exchange for the same amount payable to the order of the plaintiff on 12th April, 1983. It is alleged in the statement of claim that the bill, on presentation, was dishonoured and was subsequently on the 14th April, 1983, protested in the District Court of Nicosia. There is a further claim for 9% interest on the amount of the bill from the date of maturity.

On the 7th January, 1984, the defendants delivered a defence and a counterclaim claiming U.S. $65,000 for breach of a contract for the purchase of timber from Buben & Fried KG., another Austrian company, and for declarations that the bill, which is the subject matter of the action, is invalid.

The counterclaim was headed as being between the defendants in the action as plaintiffs and the plaintiffs in the action and the other Austrian company as defendants. For brevity I shall throughout refer to the latter as the exporters. The allegations contained therein are, in substance, as follows: The defendants deny drawing or accepting the bill on which the action is founded and in any event say that the provisions of the Bills of Exchange Law, Cap. 262 relating to protest of bills have not been complied with. [*169]

Subject to those defences the defendants set up an oral agreement (denied by both Austrian concerns) said to have been made in September, 1982, between the defendants’ managing director Mr. Aristos Kritikos and a Mr. Kontoulis as agent for Buben & Fried Kg., to the effect that the latter would consign timber from their existing stock to the defendants for reselling it to Middle Eastern countries on the terms agreed with Mr. Kontoulis, which are set out in paragraphs 3(a), (b) and (c) of the pleading. One of those terms being that upon any difference arising on resale of the goods concerning their quality or quantity, payment of the subject bill was to be suspended until the dispute would be resolved by a Court of law or would be settled out of Court, the exporters agreeing to indemnify the defendants for any loss they might have suffered.

It is then alleged that Buben & Fried Kg. shipped for the defendants in pretended performance of the said terms and of pro forma invoice No. 30/6 supplied by that company, of a certain quantity of timber, but the timber so shipped under invoice No. 790 was not of the agreed quantity and quality nor were the dimensions specified in the pro forma.

Though admitting signing the bill, subject matter of the action, the defendants say that they were induced to do so by the fraud of the exporters; that the bill was, in essence, an accommodation bill; that it was furnished solely for the purpose of [*170] enabling the exporters to comply with the Austrian banking regulations; and that for the reasons just mentioned the bill was not a negotiable instrument.

By their reply and defence the plaintiffs and both the defendants by way of counterclaim not only deny fraud or that any agreement was ever made with the said Kontoulis as alleged, but contend that in actual fact Kontoulis had negotiated the deal in all its details with the exporters as the agent of the defendants; and that eventually he had signed the bill of lading on their behalf acknowledging that the goods had been inspected and found to comply with the pro forma invoice. Lastly it is alleged that the plaintiffs are entitled to judgment as against the defendants as holders for value of the subject bill which was duly indorsed to them (paragraph 2(a) of the reply and defence to counterclaim) and pray along with the exporters for the dismissal of the counterclaim.

There are now three applications before the Court. First, one by the plaintiffs whereby they ask that an Austrian public utility corporation called Oesterreichische Kreditversicherungs - Aktengesellschaft, to whom I will refer as the assignees, and Midland Export - Creditbank in their capacity as trustees of that corporation be added as co-plaintiffs and as defendants to the counterclaim in the action, and that the statement of claim be amended in the following terms:- [*171]

"(α) Να προστεθή ως παράγραφος (1) η ακόλουθος παράγραφος, των παραγράφων 1 έως 4 αναριθμουμένων ως παραγράφων 2 έως 5.

'αι ενάγουσαι είναι εταιρείαι εγγεγραμμέναι συμφώνως των Νόμων της Δημοκρατίας της Αυστρίας, έχουν δε την έδραν των εκτός των καθορισθεισών περιοχών' (Scheduled Territories) εν τη εννοία του Περί Ελέγχου Συναλλάγματος Νόμου Κεφάλαιον 199'.

(β) Εις την παράγραφον 1, τρίτη γραμμή, της Εκθέσεως Απαιτήσεως ν' απαλειφθούν αι λέξεις 'των εναγόντων την 12ην Απριλίου, 1983' και ν' αντικατασταθούν δια των λέξεων 'της Bank Fur Oberosterreich Und Salburk' η οποία Τράπεζα μετεβίβασε (assigned) τα δικαιώματα της εις την Midland Export - Creditbank και η οποία εν συνεχεία μετεβίβασεν εις την Oesterreichische Kreditversicherungs - Aktiengessellschaft της Τραπέζης Midland Export - Creditbank παραμενούσης ως καταπιστευματοδόχου (trustees) προς είσπραξιν".

Secondly, an earlier application by the defendants for leave to raise a preliminary objection in their defence that by reason of the assignment the action is not maintenable, and, thirdly, a separate application by the defendants for the dismissal of the action on the ground that neither the plaintiffs nor the exporters [*172] have a locus standi to bring the proceedings in view of the assignment of their rights to the said corporation mentioned earlier. A fourth application again by defendants is pending for discovery relating to the documents of assignment.

All applications had been filed successively within a short space of time, but it was eventually agreed that the plaintiffs’ application for amendment should be tried first. The parties relied on their respective affidavits and counsel were permitted to file written addresses. The grounds upon which the application is made appear in the affidavit of Mr. Marios Pelides, one of the advocates appearing for the plaintiffs in the action. The material allegations are contained in paragraphs (2), (3) and (4) and it is better to cite them in full:

"2. Ως με πληροφορούν οι ενάγοντες, δυνάμει των νόμων της Δημοκρατίας της Αυστρίας περί εξαγωγικού εμπορίου όλαι αι Τράπεζαι υποχρεούνται όπως, εν περιπτώσει μη αμέσου εισπράξεως της αξίας των εξαχθέντων εμπορευμάτων και εντός τακτής προθεσμίας, μεταβιβάσουν άπαντα τα σχετικά έγγραφα εις τον κρατικόν Οργανισμόν Osterreichische Kreditversicherungs - Aktienge- sellschaft υπό την εγγύησιν της Κεντρικής Τραπέζης της Δημοκρατίας της Αυστρίας Oesterreichische Kontrollbank Aktiengesellschaft. [*173]

3. Παρά την ως άνω μεταβίβασιν οι νόμιμοι κάτοχοι και/ή εκδόται και/ή δικαιούχοι των ανωτέρω αναφερομένων εγγράφων παραμένουν καταπιστευματοδόχοι (trustees) προς είσπραξιν.

4. Οι ενάγοντες εκ παραδρομής δεν εγνωστοποίησαν εγκαίρως τα ανωτέρω δια να ληφθούν πάραυτα τα αναγκαία διαβήματα προς τροποποίησιν του τίτλου της αγωγής και της Εκθέσεως Απαιτήσεως και επομένως το αιτούμενο διάταγμα εκ των πραγμάτων είναι αναγκαίον".

It will be observed that in a letter dated the 2nd May, 1984, appended to the application for amending the defence, apparently sent and signed by the plaintiffs and the exporters, the defendants were informed that according to the relevant Austrian Legislation, that is, the Export Promotion Act 1981 “the receivables due under invoice No. 790” for the amount of the claim in this action had been assigned to the state company in question who could give a discharge for the alleged debt. It will also be observed that in another document produced by counsel for the plaintiffs and purporting to be signed by the assignees it is stated that plaintiffs act as their trustees in this matter.

In resisting the application counsel for the defendants argued, without however referring me to any authority, that the assignment has taken away any right of action that plaintiffs might have against the defendants; and that the proposed new parties should be left to pursue their claims, if any, against the [*174] defendants in a separate action. I was also invited to hear first the application for dismissal of the action for that would put an end to the case for the plaintiffs, a course that would save time and expense. This is indeed surprising as the directions of the Court concerning the order of trial of the applications were given with the full concurrence of all concerned. See the record of proceedings of the 13th May, 1985. But apart from that it is obvious that the provisions of Order 27, rules 1 to 3, on which that application is based, cannot be invoked for trying an issue which has not as yet crystallized on the pleadings.

What is basically urged upon the Court on the other side may be condensed as follows: The said assignment has not affected the plaintiffs’ rights under the subject bill for they have not transferred their rights there under to the assignee. The transaction merely relates to the receivables under the underlying contract without involving the transfer or indorsement of the bill which is still in their possession. Under the Austrian Act quoted earlier, counsel said, the Austrian Government through the said agency sought to be joined as a party indemnifies up to 80% any Austrian trader whose claim against a foreign trader remains outstanding on the expiry of a specified period. However, once indemnified the trader is legally bound (1) to transfer to the assignee his rights over any receivables due, and (2) to act as agent of the assignee for collecting the receivables due and this is what has really happened here. [*175]

In the submission of counsel the present case comes within the scope of Order 9, rule 10, on which this application is based since it is clear that the rights of the proposed new parties will be directly affected by the outcome of the case.

Should I then grant leave to amend. The real point in dispute is the effect of the assignment. It is a substantial question as to whether the true effect of the assignment is that contended for on behalf of the plaintiffs or that such assignment is a bar to their maintaining the action as submitted by defendants. I do not think that I can go into the matter at this stage and I give no opinion on it. The plaintiffs wish to join the interested parties so that the question may fairly be brought before the Court and be effectually and completely determined.

In Gurtner v. Circuit (1968) 1 ALL E.R. 328, a case cited to me by counsel for plaintiffs, Lord Denning defined the ambit of the rule as to the addition of parties. He said at page 332:-

“.... It seems to me that, when two parties are in dispute in an action at law and the determination of that dispute will directly affect a third person in his legal rights or in his pocket, in that he will be bound to foot the bill, then the court in its discretion may allow him to be added as a party on such terms as it thinks fit. By so doing, the court achieves the object of the rule. It enables all [*176] matters in dispute ‘to be effectually and completely determined and adjudicated upon between all those directly concerned in the outcome’”.

For a more elaborate analysis of the principles on this topic see the judgment of Lord Devlin in Amon v. Raphael Tuck & Sons Ltd. (1956) 1 ALL E.R. 273 . In the present case it appears that the interveners would be directly affected in the matter described by Lord Denning. There is one final matter the defendants’ submission about undue delay on the part of the plaintiffs in applying. The complaint is, I believe, unjustified for two reasons. Firstly, it is clear that the assignment occurred as late as May 1984 after the commencement of the action, and secondly, the hearing of the action had to be adjourned last March on account of the three consecutive applications filed by the defendants. In my opinion no injustice would be done to the defendants by allowing the amendments for it is better to try the question in this than in a new action. For the above reasons I allow the amendments of the title of the action and the statement of claim in the terms set out in the application. The rules of practice to be followed. The defendants to pay the costs incurred and thrown away by these amendments and the costs of this application. [*177]

Before leaving the matter I must mention that a similar application for amendment is pending in Action No. 2976/83 in which the plaintiff is the same but the defendant is A. Kritikos & Sons Ltd., another Cyprus company. The pleadings and the amendments sought are almost identical save that the sums claimed are different. It is to be noted further that the same points were raised and discussed in the written addresses of counsel. I accordingly make the same order for amendment in that action for the reasons stated in this ruling, but I reserve the costs.

Order for the amendment of the title.