Cargill International Trading PTE Ltd v Uttam Galva Steels Ltd

An application is made by the Claimant Cargill today for summary judgment on its claim for default compensation under clause 8.12 of two Advance Payment and Steel Supply Agreements (“APSA I and II/the Agreements”) between Cargill and the Defendant Uttam, alternatively for pre-judgment interest at rates which are proposed and post-judgment

In this regard Cargill's application for summary judgment against Uttam was successful before Teare J in an amount of US61,800,000 which represented a sum advanced by Cargill but not repaid and found to be due to Cargill in the circumstances and for the reasons set out in Mr Teare J's judgment dated 9 November 2018, as reported at 2018 [EWHC] 2977

At the handing-down hearing on 9 November 2018 the parties representatives were to address the issues of pre-judgment and post-judgment interest. At that hearing it became apparent that Uttam intended to raise issues that could not be dealt with in the time available

In summary, Cargill submits that it is entitled under Clause 8.12 of the APSA Agreements to "default compensation" at a rate of 1 month LIBOR plus 12 %, which is the rate contractually agreed between the parties and which applies both pre-judgment and

In the alternative, Cargill seeks (a) pre-judgment interest at a rate proposed by it and (b) post-judgment interest at a rate proposed by it (the judgment being in US Dollars).

Uttam does not dispute that the Agreements make provision for Default Compensation as claimed in Clause 8.12. However it raises three points by way of alleged defence:

I should add that none of these alleged defences were pleaded in Uttam's Defence dated 5 June 2018, itself supported by a Statement of Truth, but they have subsequently been foreshadowed at and/or after the time of the November Judgment, culminating in a very

Cargill submits that Uttam's arguments have no realistic prospect of succeeding at trial and that there is no other compelling reason why the issue should be disposed of at trial, especially in circumstances where the main claim has already been decided in Cargill's

At the hand down hearing Teare J directed that Uttam serve its skeleton argument for the present hearing first, no doubt because it was considered sensible that Uttam articulated the defences on which it wished to rely so that Cargill could respond to them as it saw fit; not least in circumstances where its Defence did not, at that time, set out the points

Cargill then served its skeleton argument on 15 February 2019 addressing such matters and pursuing the claim for summary judgment. However on 22 February 2019, so very shortly before this hearing, Uttam filed and served an application requesting permission for reply evidence to be admitted in the form of a third witness of Mr Sawhney of that date (“Sawhney 3”) and for permission to amend the Defence, first at paragraph 14 to state , in headline terms, the three alleged defences I have referred, but also at paragraphs 31 to 34 to plead at some length, and in some detail, why it says that the Default Compensation Rate Clause is unenforceable. Whilst Cargill does not object to Uttam putting in further evidence, it does object to the amendments to the Defence.

Uttam's defence can only be amended with either Cargill's consent or the permission of the court (see CPR17.1(2)). Cargill has not given its consent to Uttam's proposed amendments and opposes the grant of permission on the basis, it says, that to allow substantial amendments at this unduly late stage would cause Cargill undue prejudice. It is said that to allow the amendments would also be contrary to the overriding objective in that they would put the parties on an unequal footing with respect to be ability to respond to the other side's case (see CPR1.1(2)(a)) and they will increase Cargill's expenses of the hearing (see CPR1.1(2)(b)), which it is said is especially serious in light

CPR17.1(2) provides:

The circumstances in which amendments may be put forward are infinitely variable and each contested application for permission to amend will require an exercise of the court's discretion which takes into account the particulars facts of the case at hand. In relation to the principles to be applied by the court when exercising its discretion in relation to amendments, Uttam refer to me the case of Daniel Alfredo Vilca v Xstrata Limited [2017] EWHC 2096 at [27] to [29] and [46] to [48].

For its part, Cargill refer me to what was said by the Court of Appeal in Swain Mason v Mills and Reeves LLP [2011] 1WLR 2735 where Lloyd LJ at [69] to [70] quoted from a previous Court of Appeal decision in Worldwide Corporation Limited v GPT Limited [1998] CA Transcript No. 1835, noting that the other party would be "mucked

Uttam rightly accept that permission should only be given for an amendment, whatever its timing, if there is a real prospect of success, the same test as on summary judgment (see the Supreme Court Practice at [17.3.6]).

In the present case, there was a real danger that the hearing of full argument upon, and the determination of, the application to amend would have occupied a substantial part of the time available today which was fixed to hear and determine the summary judgment application and which would therefore in of itself necessitate a re-fixed summary

In such circumstances I considered that the best use of the available time was to hear the application for summary judgment, including arguments advanced by Uttam and on which it sought permission to amend, without ruling on the amended application on the basis that if this was an appropriate case for summary judgment then it would not be an appropriate case to allow the amendments, whereas if it was not an appropriate case for summary judgment then the objections to the amendments would in whole or part be

This approach carried the risk that Cargill might find itself in a situation whereby it was unable to obtain summary judgment but might have been able to do so had there been an adjournment and time for it to put in further evidence and develop its submissions further. However, Cargill made clear to me orally at the start of the hearing that it did not wish an adjournment and it was content for me to proceed in the manner I have identified.

The factual background to Cargill's claim, and Uttam's default under the APSA Agreements is described in the November Judgment at [1]-[8] and it is not necessary to set the background out at any great length given that the issue before me today concerns

In summary, and as already foreshadowed, Cargill and Uttam concluded two almost identical Advance Payment and Steel Supply Agreements in 2015, i.e. the APSA Agreements/the Agreements, which I understand themselves were successors of prior agreements, Cargill and Uttam had enjoyed. As Uttam puts it at paragraph 3 of its Defence supported by a Statement of Truth, "a cordial business relationship since about 2005"; Uttam further pleading that "the agreements were two of a series of similar

Under the APSA Agreements Cargill agreed to provide advance payments to Uttam in respect of contemplated future sales by Uttam of steel products to Cargill. Uttam was obliged to repay those advances within a specified time period either by the sale of steel products to Cargill if contracts for such sales were concluded or if they were not concluded then in cash. Between February and July 2015 Cargill made advance

Each of the advance payments amounts had to be repaid to Cargill on different dates from January to March 2016, either by Uttam selling and delivering products to Cargill

Cargill commenced its claim on 8 August 2017. On 22 September 2017, Uttam applied to strike out the claim under CPR3.4(2) alleging that it had not properly been served (having terminated the appointment of its English process agent notwithstanding the terms of the APSA Agreements which required Uttam irrevocably and unconditionally to maintain such an agent). On 17 April 2018 Popplewell J handed down judgment in Cargill's favour, summarily assessed Cargill's costs and ordered that Uttam file a Defence within six weeks. Uttam then filed its Defence, but more than two weeks late on 5 June 2018.

I would repeat that the defences which are now raised were not in fact set out in that Defence, notwithstanding the fact that the Particulars of Claim included a claim for interest under Clause 8.12. In fact an entirely different point, which has now been

Cargill applied for summary judgment by an Application Notice dated 26 June 2018 and, as I have said, the application was heard by Teare J on 30 October 2018 for a full day. Uttam raised two arguments in defence. First, that Uttam had made a valid offer to repay the first of the amounts due which Cargill neither accepted nor declined and that this was a breach of the APSA Agreements by Cargill. It was said that Cargill's breach had prevented Uttam from making further offers and so Cargill was debarred from making

Uttam's second argument was that there was an estoppel by convention. Teare J found that the contemporaneous documentary evidence was inconsistent with a recognition that the parties were dealing with each other on that basis (see the November Judgment at [26] and [29]. Further, Teare J found that the argued estoppel could not in law provide a defence to the claim: Uttam's asserted estoppel would have obliged Cargill to enter into

Teare J concluded that Uttam had "no real prospect of establishing a defence to the claim at trial" and that "(t)o order a trial would merely serve to delay the date on which [Cargill] obtains its inevitable judgment and cause further legal costs to be incurred for

As I have already foreshadowed, Teare J ordered that judgment be entered in favour of Cargill for the full amount of the advanced payments, that is for US$61.8 million to be paid to Cargill no later than 30 November 2018, and also ordered that Uttam pay Cargill its costs of the application to date summarily assessed at £100,000, to be paid to Cargill

Uttam applied for leave to appeal both the award of the judgment sum and Teare J's summary assessment of costs. On 12 February 2019 the Court of Appeal refused leave, finding that none of Uttam's nine grounds of appeal had any prospect of success. The

As I have also foreshadowed, to date Uttam has not paid either the judgment debt or the

The applicable principles are uncontroversial and were common ground before me. CPR24 provides summary judgment may only be given where the defendant has no real prospect of defending the claim and there is no other compelling reason for a trial. Prospects of success are considered by reference to the principles set out by Lewison in Easyair v Opal [2009] EWHC 339 (Ch) at [15] and approved by the Court of Appeal in AC Ward v Catlin [2009] EWCA Civ 1098 at [24].

They are as follows:

Clause 8.12 of the Agreement provides:

Under Clause 8.12 the Default Compensation Rate applies up to the date Uttam repays

It is not in dispute that Uttam has not paid Default Compensation to date. In this regard Cargill issued a demand notice requiring payment of total advance payments and payment of default compensation on 24 March 2016. The terms of Clause 8.12 are not in dispute, nor does any issue of construction arise. Unless Clause 8.12 is for some reason not enforceable then Uttam is liable under Clause 8.12 of the APSA Agreements to pay default compensation on the entire debt at a rate of one month LIBOR plus 12% both before and after the November Judgment. The amount of that interest as at today's

Cargill submits that Uttam has no real prospect of success on any of the three purported defences to which I will now turn. It is convenient to address first those which are

Is Clause 8.12 arguably a penalty?

Uttam submits that Clause 8.12 is a penalty and as such unenforceable. Whether Clause 8.12 of the APSA agreements is a penalty is a matter that is appropriate to be determined at a summary judgment hearing - see Chitty on Contracts, 33rd edition, at paragraph [36-196] as a short question of law. The leading case is Cavendish Square Holding BV v Makdessi [2016] AC 1172. Lord Neuberger JSC and Lord Sumption JSC (with whom Lord Clarke agreed) stated at [32] as follows:

At [152] in Cavendish, Lord Mance stated:

At [255] Lord Hodge stated as follows:

Whilst Lord Toulson, at [293] stated as follows:

Cargill submits, rightly in my view, that Uttam has failed to have regard to the

That previous test was addressed by Lord Neuberger and Lord Sumption at [31] in these

As is made clear in the passages I have quoted above, in particular at paragraph [32] in Cavendish, the question at the first stage is whether Clause 8.12 imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party

Cargill then submits that the default compensation rate was not disproportionate or

Thus at page 763E-G, Colman J stated as follows:

As was recognised by the parties during the course of the argument, some of the language of Colman J's judgment is obviously set against the backdrop of the prevailing authorities

The principles to be derived from Cavendish were summarised by Nugee J in Holyoake v Candy [2017] EWHC 3397 (Ch) at [467]. I will not set them all out, but sub-paragraph (4) in particular is relied upon by Ms Vora who appears on behalf of the

Reference has also been made before me today to the case of Vivienne Westwood v Conduit Street [2017] EWHC 350 (Ch) where Fancourt J said as follows at

In the present case it is common ground that the obligation to pay under Clause 8.12 is a secondary obligation which arises out of the situation where Uttam is in breach of its

Turning then to the question whether Clause 8.12 imposes a detriment on Uttam out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation, it is self-evident in my view that there is a good commercial

Unsurprisingly, the evidence before me is that this is the reason that Clause 8.12 was included in the APSA Agreements, as stated in paragraph 16(d) of Mr Snelling's fifth witness statement. That, of course, leaves a consideration as to whether the rate of default compensation which the parties agreed to in the APSA Agreement was itself legitimate as commercially justified and also whether or not it was exorbitant or

The evidence before me in paragraphs 16(c) and (d) of Mr Snelling's fifth witness statement is that the compensation rate was fixed to reflect Cargill's genuine assessment of Uttam's creditworthiness especially in the event of default. Clearly in the event of default there is an increased risk that Uttam would be unwilling or unable to repay sums in future. Cargill also rightly point out that the loan concerned is unsecured and unsecured lending necessarily attracts a higher lending rate due to the lack of security.

There are issues between the parties as to appropriate comparators to test whether Clause 8.12 imposes a detriment on the contract breaker Uttam that is out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation and also as to whether, having regard to that legitimate interest, the

The evidence before me is that this rate was the commercial norm for Indian companies comparable to Uttam - see Mr Snelling's fifth witness statement at paragraph 15(b). There has not been contrary evidence to that evidence, notwithstanding Uttam having had every opportunity to adduce similar evidence as to market rates, and notwithstanding the fact that no less than four witness statements have been served, including two outside the mandated time and once the point was fully in play. Uttam submits that Cargill should have pleaded what it says were market rates, but this was a matter for the witness evidence that was contemplated, and Uttam had every opportunity to lead evidence as to market rates if it had wished to do so. There was also an issue between the parties about

Secondly, the evidence of Mr Snelling was that the Indian steel industry generally was experiencing difficulties in 2015 which meant that companies like Uttam were a greater credit risk and their cost of finance increased - see Mr Snelling's fifth witness statement at paragraph 16. Again, no evidence to the contrary has been adduced before me. Indeed the reason that Uttam has subsequently given for being unable to repay the debt was just such a downturn. Certainly it is common ground that the market was in decline at the relevant time.

These market based factors themselves strongly support the conclusion that there was a legitimate commercial justification for the rate set and indeed that the rate set, having regard to the legitimate interest in enforcement of the primary obligation, was not

Such evidence is relevant both at the stage of considering the extent and nature of the legitimate interest and also when determining whether or not, having regard to that legitimate interest, the secondary obligation is exorbitant or unconscionable in amount or its effect. I do not consider that it can be seriously suggested that the sums involved are exorbitant or unconscionable in amount. In addition there can, in my view, be no suggestion that clause 8.12 is incorporated in terrorem, nor was the contrary suggested

Cargill also made comparisons by reference to Uttam's costs of borrowing. There is some issue taken in relation to that. Cargill’s evidence is set out in Snelling 5 at paragraphs 15 and 16(b) and was to the effect that the Default Compensation Rate was a little lower than Uttam's average financing cost at around the time it defaulted under the APSA Agreements (see also Snelling 5 at paragraph 15(a) in this regard).

Uttam take issue with such calculation. However, ultimately, on analysis, this debate, which of course only goes to Uttam's borrowing costs and not market rates generally (and market rates are probably the more important comparator) does not assist Uttam in circumstances where Uttam’s own evidence suggests that its borrowing costs were

The very fact that the Effective Rate of Interest comes out between 7 and 7.25 per cent may suggest that these loans in fact are of some standing because by the time under consideration LIBOR rates were very much less than the implicit 3 per cent-odd which

But on any view this shows that, at a time prior to any default, this defendant Uttam itself had US borrowings of between 7 and 7.25 per cent, and of course a (significant) uplift from that in the event of default has a legitimate commercial justification. Nor do I consider that an uplift from those sorts of figures to a figure of LIBOR plus 12 per cent would be in any way, shape or form exorbitant. I have, however, already referred to evidence of Mr Snelling as to higher market rates, which is unchallenged. In such circumstances there is no real prospect of it being established that the rate under Clause

I should say that Uttam also put in evidence a document which appears to originate figures from its annual report at page 32 of the same bundle which ends up with an interest cost of 7.09%. There are certain questions as to whether that is an appropriate figure because it includes, as well as long-term borrowings and short-term borrowings and current maturities of long-term debt, trade payables. For its part, Cargill suggests that it is not appropriate to include trade payables and the effect of doing so artificially decreases the interest rates. But Ms Vora, for the Defendant, says that, in fact, the APSA

It is not necessary for me to resolve that debate between the parties. I consider that the most important evidence is market rate evidence, in the form of the evidence of Mr Snelling. But I am comforted by reference to the evidence adduced by Uttam itself as to Uttam’s borrowing, including US$ borrowings prior to default which are rates prior to default when Uttam was no doubt a (much) better credit risk. Uttam relies on certain other evidence that it also had borrowings at a lower rate. The available evidence in relation to this was limited. One is a loan agreement with the State Bank of India that Uttam had, and Ms Vora draws attention to the fact that under that agreement the default

However, I am satisfied that this loan is not a relevant comparator. Firstly, it is a secured loan, as is apparent from clause 4.1. Secondly, and in addition to that, there is a personal guarantee. It is quite clear, therefore, that there is no comparable increase in credit risk because, of course, if the security has been set in advance at an appropriate level the effect of being in default is simply that the security becomes available. That is very different from unsecured borrowing. There are also other terms of that agreement, including the right to nominate either a director on to the board and also to instigate a review of the management set up and require restructuring. I am satisfied that Ms Jackie McArthur, who appears for Cargill, is right when she characterises that agreement as comparing apples with oranges in circumstances where the increase in

It is also no answer to say that the default compensation rate was markedly higher than the rate of effective interest that Uttam paid on the advances prior to its default. That is a point referred to by Uttam in their skeleton argument at paragraph 14. It is well established that a provision for default interest on late repayment is not a penalty just because the rate is higher than the interest rate prior to default. Indeed that is one reason

A second reason relates to the specific facts of this case, which is that, on the evidence, the normal rate of interest was set artificially low in order to comply with any obligations Uttam had under the Reserve Bank of India regulations, i.e. at under LIBOR plus 1 per cent - see paragraph 23(a) of Mr Snelling's fifth witness statement. Cargill say that the RBI regulations did not put a limit on a default compensation rate, with the result that the default compensation rate was free accurately to reflect market conditions and Uttam's credit risk in a way that the normal rate of interest did not. I will return to the

Uttam's skeleton argument at paragraphs 8 and 13 also sought to attack evidence filed by Cargill in relation to whether or not the Default Compensation Rate was commercially justifiable and reasonable. I am satisfied that those attacks are without basis. Firstly, it is not true that the only relevant evidence relates to the interest rate that Cargill would

In the present case, the prevailing commercial rates at the time the APSA Agreements were negotiated is relevant to that inquiry and I have already identified the evidence of Mr Snelling as to market rates at the time which are probably the most useful comparators – though the rates that it appears that Uttam itself borrowed at the time are also relevant as evidence of borrowing rates (although I bear well in mind the marker put down by Ms McArthur that Uttam's evidence as to such borrowing rates is internally inconsistent

It is also said that interest rates in India are higher than interest rates in the US. That is taken by Uttam at skeleton paragraph 8(a), which may be true but that does not mean that interest for loans nominated in US dollars but advanced to a borrower in India would be calibrated necessarily to the US interest rate. Rather the evidence before me is that the borrower is in an Indian market and the credit risk represented by that borrower is assessed in the context of that market. As a result, interest rates would normally reflect Indian interest rates and therefore it is entirely valid to use Uttam's cost of borrowing in the normal course of events as a comparator. However, as I say, there is now evidence before me from Uttam itself which includes evidence of US$ borrowing which is in the

Even outside of the context of the Indian market and the Indian steel industry, I am satisfied there is no basis for concluding that the Default Compensation Rate was arguably so obviously exorbitant or oppressive as to constitute a penalty. On the contrary, as illustrated by a number of existing reported cases, higher rates of default

In Taiwan Scott Co Limited v the Masters Golf Company Limited [2009] Civ

Obviously every case turns on its facts and one has to bear in mind the dates of the cases, when rates may be different, but they illustrate that comparable or greater rates have been

The Default Compensation Rate is comparable and indeed (subject to LIBOR at any

On the evidence before me there is no basis for concluding that the Default Compensation

Courts have consistently stated that they are reluctant to declare a contractual provision to be a penalty where it has been freely negotiated at arm's length between commercial parties and there is no indication of oppression: Chitty on Contracts (33rd edition) at [26-195] and Cavendish, supra, at [33] and [152].

Mr Snelling's evidence (see Snelling 5 at paragraphs 20 and 26(d)), is that Uttam and Cargill are both sophisticated parties who freely negotiated and agreed the APSA Agreements. I have already referred to how Uttam described their relationship in its Defence, and the history of the APSA Agreement in the Defence is supported by

In any event I consider the rate speaks for itself and is not arguably so obviously exorbitant or oppressive as to constitute a penalty. On the contrary, it appears to be an entirely normal commercial rate set against the backdrop of unsecured lending in

In all the circumstances, and for the reasons that I have given, I am satisfied that Clause 8.12 is not arguably a penalty and Uttam's defence to the contrary stands no realistic prospect of success. Nor is there any other compelling reason why the issue

Uttam's next contention in relation to the application of Clause 8.12 is that it was not validly incorporated into the Agreements being, it is said, an onerous term that was not brought to Uttam's attention. This involves an entirely new set of arguments which are not pleaded in the existing Defence and which were not raised in its skeleton argument for the last hearing. That is hardly a propitious start for the argument and it bears all the hallmarks of a lawyer's construct in an attempt to exclude what is ultimately a common feature of commercial contracts, namely a provision as to the rate of default interest in circumstances where a borrower has defaulted on a loan or equivalent commercial

Subject to the question of whether it is an onerous term, it is premised on the basis that Clause 8.12 is not incorporated into the APSA Agreements because Uttam's

Where an agreement is in writing and signed by the parties, the parties will ordinarily be bound by those written terms whether or not they have read the agreement and whether or not they are ignorant of the agreement's effect. See Chitty on Contracts 33rd addition at paragraphs 13-002. This is a trite principle of English law taught to every law student and often illustrated by the case of L’Estrange v Graucob [1934] 2 KB 34. There are very good reasons why a party is held to its contractual bargain whether or not it has read or paid attention to its terms. As was said in Peekay Intermark Ltd v Australia and

No doubt recognising that a party will accordingly usually be bound by the terms of the contract it has signed, Uttam seeks to fall back on that category of case where a particular term is unusual or onerous and the counterparty will not be bound by it unless it was brought specifically to the parties' attention. One of the most well-known illustrations is Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433 in which a party who was in practice unable to negotiate the terms of a contract was held not to be bound by unusual or onerous terms unless they were specifically brought to his attention. That case concerned a contract that had been neither negotiated between the parties nor signed by them. It was in relation to a standard form sheet and a failure to return goods

The principle is also addressed in Goodlife Foods Limited v Hall Fire Production [2018]

There is then a reference to Interfoto and a quote from Interfoto where Lord Justice Bingham observed that: "The more outlandish the clause the greatest the

Coulson LJ then continued:

Then at [46] Coulson LJ said this:

And at [91] he stated:

Situations where such considerations arise most often tend to be cases relating to contracts that are not signed and many of them are indeed “ticket cases” and the like from which the principle originates, where a party is presented with printed standard terms and has no time to consider them. The principle offers someone, who is often a consumer, protection against unusual or onerous clauses if they have not been drawn to their

In contrast, in the present case, the APSA Agreement is signed and stamped on every single page and it is not suggested this was done other than by a person having authority. I have already identified that the normal position is that a written contract signed by

Of course there are exceptional cases in which the signing party was under undue

Uttam, by its very recent proposed amendment, seeks to argue that the APSA Agreements were standard form agreements imposed by Cargill, but as I have already noted, there is no credible evidence before me of that, evidence that I would have expected Uttam to be able to produce had that been the case. As I have already identified, the description of the parties' relationship in the existing Defence and also in Mr Sawhney's second witness statement, is not consistent with the Agreements being standard form contracts. Indeed it was not until the skeleton argument on 5 February, at that stage not supported by any

In any event, there is no credible evidence before me that this was a standard form

I should say, in any event, that the mere fact that a contract is on a standard form does not in of itself mean that particular terms within it will not be incorporated absent them being drawn specifically to the attention of a party. In any event Mr Snelling's evidence before me is that the terms of both the APSA agreements were negotiated and agreed between the parties, as had the previous contracts between them. Both Cargill and Uttam are on any view large commercial entities and I consider that they can both rightly be characterised as sophisticated parties. Uttam has advanced no evidence to support the submission that the APSA agreements were standard form agreements and therefore the

The fatal flaw in Uttam's argument is, in any event, that Clause 8.12 is not an unusual or onerous clause. It is readily apparent, from the reported cases that I have referred to, that default interest rate clauses are commonplace. It is not an unusual clause, nor is it particularly onerous in terms of the rate it specifies, not least given the findings I have

It must be expected that a contract under which money is advanced would normally

I would also add that Uttam's evidence on the clause in question is itself unsatisfactory.

This paragraph follows on from paragraph 12, which states:

But there is evidence before me that in the agreements between Uttam and Cargill prior to the APSA Agreements the default compensatory rate had been LIBOR plus 6 per cent - see paragraph 26(b) of Mr Snelling's fifth witness statement. It would make no sense for Mr Sawhney to refer to a "change in the prior default compensation rate making it higher than LIBOR plus 1 per cent" when it has always been higher than LIBOR plus 1 per cent. Therefore either paragraph 14 of Mr Sawhney's second statement must be interpreted as actually referring to the normal rate of interest on advances, in which case it is irrelevant for present purposes, or else, as pointed out by Cargill, to the extent Mr Sawhney is referring to late payment interest it demonstrates that Mr Sawhney has an incomplete understanding of the parties' prior agreements and as such his evidence

Be that as it may, the short answer is that Clause 8.12 is neither unusual nor onerous and on established principles Uttam are bound by the terms of the contracts they have signed, whether or not they have read the contract and whether or not they have noticed any particular terms therein. Uttam's defence that Clause 8.12 is an unusual or onerous term that was not incorporated into the contract stands no prospect of success and as such does not amount to a defence to the claim. Nor is there any other compelling reason why this

Before turning to the question of illegality and Indian law, I should mention the fact that there was one further alleged defence based on an alleged estoppel by convention but which was seemingly abandoned before this hearing, and Ms Vora confirmed to me at the start of the hearing that it was, indeed, not being pursued. It was an argument which had echoes of the argument in relation to liability that was rejected by Teare J. In any event I do not need to address it as it has been abandoned. I simply note that it was, in

Uttam has argued that the Default Compensation Rate provided in the APSA Agreements is invalid on the basis that it is said to be unlawful under Indian law - see paragraphs 18 to 24 of Uttam's skeleton. The APSA Agreements are expressly governed by English law (see Clause 22.1). The contract is not governed by Indian law and accordingly the fact, were it to be the case, that such a contractual term would be invalid and

However the first, and preliminary, question is whether or not in fact the default interest clause is unlawful as a matter of Indian law. Uttam relies on regulation 15 of the Foreign Exchange Management (Export of Goods and Services) Regulations 2016 (the 2016 Regulation), a foreign law which it did not plead in its Defence, which is not an auspicious start, but on the basis of which it now seeks to advance an illegality defence

On this question expert evidence is admissible and each party has put in expert evidence. Simply because an issue involves consideration of expert evidence on foreign law does not necessarily mean that the issue is not suitable for determination by way of summary judgment in an appropriate case. In the present case the issue is a narrow one and the evidence confined. The court is entitled to look at the evidence and test what, if any, support there is for opinions that are expressed, in circumstances where those experts express different views on the correct interpretation of the Regulation, to see whether the

In this regard I have been referred to, and had regard to, the Eurobank case at [35], [37] and [39], but I am satisfied that there are no points of general application in that case which would prevent me considering the expert evidence and considering whether, in the light of all the material before me, there is any realistic prospect of success in relation to

Regulation 15.1(ii) provides:

I will refrain at this point from passing any comment on this provision and turn instead to the expert evidence before me. Cargill relies upon a letter opinion from a Mr Promod Nair a partner in Arista Chambers in Bangalore who states that he has over 17 years of experience in litigation and arbitration in India. When providing that letter of opinion he had the benefit of seeing a "memorandum of opinion" of Uttam's expert Mr Arif Doctor.

For its part, Uttam relies on a “memorandum of opinion” from Mr Arif Doctor dated 7 January 2019, an advocate enrolled with the Bar Council of Maharashta and Goa in 1999, who specialises in litigation and arbitration. He opines that the default

Indeed he makes no attempt to grapple with the language of the Regulation in paragraph 15(1)(ii) or identify any rule of construction or any special meaning that contradicts the ordinary and natural meaning of the words used as a matter of language. I find this all the more surprising given that he has also provided a second “memorandum of opinion” dated 22 February 2019 in response to that of Mr Nair, in which he again offers neither authority nor any rule of construction, nor indeed any reason why, as he asserts at paragraph 8 of his further opinion, the Regulation extends to default compensation following a breach of contract.

It will be seen, therefore, that in paragraph 8 there is a bare assertion that the provision of the Regulation concerned relates to default compensation rate. But no attempt is made to grapple with the language of the Regulation, nor indeed to identify any rule of construction of Indian law which would suggest that it is not to be construed in accordance with the ordinary natural meaning of the words, nor any authority which

In such circumstances I am unable to place any weight on the opinions he expresses, which are unreasoned and are contradicted by those of Mr Nair. In that regard if I had to

However, in circumstances such as the present, where there is an apparent conflict of expert evidence, it is appropriate and permissible for the court to look at the wording of the regulation itself. See MCC Proceeds Inc v Bishopsgate Investment Trust Plc [1999] CLC 417 at [19] to [20] and Dicey, Morris & Collins (15th edition) at paragraph [9-015].

I am fortified in the appropriateness of doing so by reason of the fact that neither expert suggests that there is any rule of construction in Indian law that is applicable in this case or which changes the ordinary and natural meaning of the words of the Regulation or

It will be recalled that regulation 15.1(ii) provides:

There is also an RBI master circular whose purpose is to explain such provisions which

The ordinary and northerly meaning of the words used on their face is plain - this provision is directed to the rate of interest on an advanced payment - that is the normal interest payable on an advance payment is limited to LIBOR plus 1 per cent. It does not address, and does not set out any rule or prohibition in relation to, default compensation following a breach of contract where the borrower is in default. That is an entirely separate scenario and not one against which the Regulation is directed on its face and on

Ms Vora, on behalf of Uttam, suggests the words "if any" are to be understood as meaning that any interest payable in any circumstances must not exceed LIBOR plus 1 per cent. But what is being referred to is, "the rate of interest, if any". In that context the words "if any" are self-evidently referring to if there is any interest payable. They do not relate to, or shed any light upon, whether this provision has any application to a contractual payment due upon an event of default such as default compensation under Clause 8.12 which happens to be calculated by reference to LIBOR plus 12 per cent.

There is nothing in the wording of the Regulation to support the construction that it relates to anything other than normal interest on the advance payment in the ordinary

In such circumstances I am satisfied that there is no realistic prospect of Uttam

However, as I have heard argument on the question of illegality, I will express my views on such plea which upon examination itself would not have stood any real prospect of success as a defence even had it been arguable (contrary to my conclusion above) that Clause 8.12 was illegal as a matter of Indian law.

Uttam has argued Indian law is relevant under the rule in Ralli Bros v Compania Naviera Sota y Aznar [1920] 2 KB 287. That case held that where a contract requires a party to do something that is unlawful in the place where the obligation has to be performed, in whole or part, then the contractual obligation is unenforceable - see, in particular, pages 291 to 292, 296 and 300 to 301. This rule applies only if the contract actually requires performance to be done in a specific place - see Dicey, Morris & Collins on the Conflict of Laws (15th edition) at paragraph [32-098].

The rule in Ralli Bros does not result in the law of India being relevant to the validity of Clause 8.12 of the APSA agreements in circumstances where the APSA Agreements require that Uttam pay default interest in Singapore, not India. Clause 9.1(b) of the APSA Agreements states that all payments made by Uttam under Clause 8 of the APSA Agreements were to go into the Collection Account - this would include payments under Clause 8.12. The "Collection Account" is defined in Clause 1.1 as being an account held

Uttam has argued that the place of performance of its obligation to pay interest would be India because "remittance of interest will be through the defendant's bank accounts in India" - see paragraph 20 of Uttam's skeleton argument and Mr Sawhney's fourth witness

However, this argument is not in point for at least two reasons. First, the APSA Agreements did not require that Uttam pay through its bank accounts in India. It was open for Uttam to pay the default compensation from anywhere in the world. It matters not in this regard where Uttam's bank accounts in fact are. As such the rule in Ralli Bros is not engaged.

Second, an obligation to pay money into a specified bank account is performed in the place where the bank account is located, not the place where the payer is located. I am satisfied that this is a proposition which is self-evident and is obviously right. It is also

Ms Vora confirmed to me that it is not suggested by Uttam that the principle in Foster v Driscoll applies in the present case. It is not suggested that this contract had an object and an intention that there would be performance in a friendly foreign country of an act which was illegal under the law of that country. So I need say no more about the principle in Foster v Driscoll.

As an alternative to its argument on Ralli Bros, Uttam has also asserted that the parties must have intended that contractual obligations to pay will be subject to the RBI

Equally, I do not consider that Clause 23 changes this analysis. Clause 23 is a common provision seeking to ensure that the contract survives should any provision thereunder be invalid, illegal or enforceable and also provides that if a provision is invalid illegal or

In the above circumstances, even were it arguable, which it is not, that Clause 8.12 was contrary to Indian law, Uttam's illegality defence was itself one that stands no real

For the reasons that I have given, none of Uttam's purported defences to the claim for interest stand any real prospect of success and there is no compelling reason for trial.

For completeness, I would add that if I had considered that Uttam had an arguable defence to a claim based on the contractually agreed rate of default interest, which I do not, Cargill would have had an unanswerable claim to pre-judgment interest under section 35A of the Senior Courts Act 1981 and in the exercise of my discretion I would have considered what the appropriate rate was. This was debated before me and there

However, ultimately the rate advocated by Cargill was LIBOR plus 4.5 per cent which was what Uttam had stated in paragraph 25 of its skeleton was possibly a relevant measure. Had it been necessary for me to do so, I would have considered, in the exercise of my discretion under section 35A, that such a rate of LIBOR plus 4.5 per cent for

So far as post-judgment interest would have been concerned, in the light of the summary judgment that I have given, post-judgment interest is also based on the terms of the contract, that is clause 8.12, the default compensation rate applying post-judgment - see

In the absence of any evidence before me suggesting any other appropriate rate, I consider, consistent with the Judgment Debts (Rate of Interest) Order 1993 (which would have been mandatory had this been a sterling debt)), that a rate of 8 per cent would have

Accordingly, and for the reasons set out in my judgment, Cargill’s application for

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