Case No: CL-2016-000176
Neutral Citation Number: [2016] EWHC 3353 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL

Date: 21/12/2016

Before :

MR JUSTICE BLAIR

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Between :

	BANQUE CANTONALE DE GENÈVE (a company incorporated in Switzerland) 
	Claimant/Applicant	
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	Mr IGHO CHARLES SANOMI 	Defendant/Respondent	

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CLARE REFFIN (instructed by Sutherland (Europe) LLP) for the Claimant
PAUL TOMS (instructed by Clyde & Co LLP) for the Respondent

Hearing dates: 14 December 2016

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Judgment
Mr Justice Blair: 
1.	This is a claim for summary judgment on two promissory notes. Both are dated 24 September 2015, and are in identical terms save as to amount. In one case the amount was US$18m, and in the other case it was US$4m. The form of the first note is annexed to this judgment. The claimant, Banque Cantonale de Genève, seeks to enforce the promissory notes as such. 
2.	The defendant, Mr Igho Charles Sanomi, resists the application for summary judgment on the basis that:
(1) Despite their terms, the notes are not in fact promissory notes.
(2) Prior to signing the documents, the defendant was assured by Mr Nicolas Demierre, Vice President, Head of Commodity and Structured Finance, on behalf of the claimant bank, that the claimant would make no demand under the promissory notes.
(3) No consideration was given for any promise on the part of the defendant to pay.
(4) Alternatively, liability is not in the face value of the notes, that is US$22m, but whatever was the outstanding indebtedness of the defendant’s company Taleveras in respect of two transactions being i) finance in relation to a cargo of gasoline on board the vessel MT “Two Million Ways” (the larger of the notes) and ii) finance provided by the claimant to Taleveras to pay freight for the chartering of a LPG vessel by Taleveras’ chartering division, a company called Tadema.
The facts
3.	The claimant is a bank incorporated in Switzerland, which among other things provides trade finance. The defendant is a businessman and a founder of Taleveras Petroleum Trading Ltd (a BVI registered company) which trades and markets crude oil and petroleum products. 
4.	The facts of the case are set out in some detail in a judgment given by Mr Simon Bryan QC (sitting as a Deputy Judge of the High Court) on 29 July 2016 on the claimant’s application for the continuation of a freezing order. It suffices in this judgment to set out a summary. 
5.	In his evidence, Mr Sanomi explains that at the material time, Taleveras’ oil trading business related to purchase and supply arrangements with two Nigerian state entities. Taleveras sold gasoline to and purchased crude oil from these entities. 
6.	The business suffered substantial losses in 2015 caused by the general collapse in oil prices, and a review ordered by an incoming Government in Nigeria into existing contracts held by counterparties with the Nigerian state entities.
7.	Taleveras had done a number of trade finance transactions with the claimant bank of which two are particularly relevant for present purposes. 
8.	One related to a cargo of gasoline on board the vessel “Two Million Ways”. Unfortunately, when the vessel arrived at Lagos in May 2015, there was no buyer for the gasoline. The claimant bank provided finance in June 2015 in the sum of $16,286,250. Separately in June, the bank provided finance to Taleveras in respect of freight for the chartering of a LPG vessel by Taleveras’ chartering division, a company called Tadema Shipping and Logistics Ltd. A sum of $4,000,064.52 was provided by way of finance by the bank. 
9.	By the end of August 2015, Taleveras had been unable to find a buyer for the gasoline, and was incurring huge demurrage liabilities in the sum of $24,000 per day. 
10.	It is clear that the claimant bank was becoming very concerned about its exposure, and some of the main points in factual terms appear in a chronology set out in the defendant’s skeleton argument. The subject of a personal guarantee of his company’s indebtedness was first mooted by Mr Sanomi at a meeting on 21 August 2015.
11.	On 26 August 2015, the bank indicated that it accepted this suggestion, stating as the “simplest solution” the giving of a promissory note signed by Mr Sanomi.
12.	On 26 August 2015, the claimant bank proposed the issue of four promissory notes. Each related to particular shipments. 
13.	Mr Sanomi demurred at this suggestion, pointing out that two of the transactions were fully secured. 
14.	On 27 August 2015, the bank responded to the effect that four separate promissory notes were proposed “which will be cancelled after each reimbursement”. In the event, repayment was made in respect of two of the cargos, which left the “Two Million Ways” and Tadema financing outstanding. 
15.	Drafts of the promissory notes had been emailed by the bank on 28 August 2015, and in due course these were reviewed by the defendant’s lawyers. 
16.	A meeting was arranged between the defendant and the claimant bank in Geneva on 25 September 2015.
17.	The two draft promissory notes were emailed in advance under a letter of 23 September stating:
“We refer to our outstanding financings to Taleveras Petroleum Trading BV (“the BCGE Financing”) and our meetings of 21 August 2015 and 9 September 2015 pursuant to which you offered to issue promissory notes as security for the performance of the repayment obligations of Taleveras Petroleum Trading BV with respect to the outstanding amounts under the BCGE Financing.
Please find attached two draft promissory notes corresponding to such outstanding amounts: (i) the USD4 mios freight payment financing and (ii) our financing of the unsold floating cargo MT Two Million Ways.” 
18.	What happened at that meeting is in dispute between the parties. 
19.	Mr Sanomi’s account of what was said in respect of this matter is set out in the Defence:  “Nicolas Demierre told the Defendant that the Claimant had no intention to draw down on the promissory notes.  He advised the Defendant that the promissory notes were being obtained by him in order to keep senior management within the Claimant happy.  Nicolas Demierre told the Defendant that his superiors needed some comfort because of the current level of indebtedness of Taleveras.  He said the purpose of the notes was to give the impression that there was security for the indebtedness of Taleveras in respect of the Two Millions Way and Tadema Finance.  Nicolas Demierre told the Defendant that the Claimant would make no demand under the promissory notes.  The Defendant then signed the promissory notes and handed them to Nicolas Demierre”.
20.	In his evidence, he says, “I explained to Nicholas (sic) Demierre that I did not like the demand clause and that I would not agree to something that they could simply demand on me the next day.  He told me that the bank had no intention to drawn down on the promissory notes.  They were to keep senior management happy, and that there would be no demand under the promissory notes.  He told me that his superiors needed some comfort because of the current level of indebtedness of Taleveras”.
21.	Mr Nicolas Demierre has a different version of what happened. He says that when Mr Sanomi was asked to sign the notes, he made a call asking whether the lawyers had approved the wording. The implication is that the lawyers did so.  He says that the understanding was that Mr Sanomi would sign in return for time being granted to Taleveras. As he was handing back the signed promissory notes, according to Mr Demierre, Mr Sanomi said he was concerned that the bank might make a demand under the notes the following Monday. Mr Demierre says he replied that the bank was giving him until 9 October to make repayment proposals. He did not say that the bank would not make demand on the notes, or that they were merely “to keep senior management happy”. The intent was to obtain enforceable instruments as valuable security. 
22.	On 28 September 2015, the bank emailed Mr Sanomi referring to the meeting, and giving him two weeks, that is up to 9 October 2015, to come back with an up to date reimbursement plan. There were two credits prior to then, which reduced the overall debt by Taleveras. Mr Sanomi also offered further security over Taleveras’ offices in Geneva.
23.	On 10 November 2015 the bank sent Mr Sanomi what it described as an “agreed plan” validated by its credit committee allowing for repayment in two phases beginning with the charge over the Geneva office, followed by repayment of the outstanding in six instalments by 31 March 2016, upon which all securities would be released. Mr Sanomi says in his evidence that he felt the plan he had agreed is reflected in this email. 
24.	Mr Sanomi says he did provide additional security by way of charges on properties once it became clear that Taleveras did not have sufficient cash available to make the instalment payments. There was one credit from a property sale. As at 11 December 2015, the Taleveras indebtedness had been brought down to US$20.3m. 
25.	On 23 March 2016, Mr Sanomi offered to pay off the promissory notes in monthly instalments ending in November 2016. However, that was not acceptable to the bank, and these proceedings were commenced. 
Are the documents dated 25 September 2015 promissory notes?
26.	The form of the documents Mr Sanomi signed is annexed.  Each was headed “PROMISSORY NOTE” and each was subject to English law and jurisdiction.
27.	In English law, the rules as to promissory notes (along with bills of exchange and cheques) are found in the Bills of Exchange Act 1882.  Section 83 defines “promissory note” as:
“A promissory note is an unconditional promise in writing made by one person to another signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to, or to the order of, a specified person or to bearer.”
28.	It is accepted by the defendant that the documents satisfy this definition on their face.  It is said by the defendant that in law they are nevertheless not promissory notes.  This is on the basis that the agreement between the parties was that the notes would be returned to the defendant upon satisfaction of the liabilities of Taleveras under the two transactions (the “Two Million Ways” and Tadema financings referred to above),  which meant that the bank would have to retain the notes.  This is inconsistent with the notes being negotiable (it is contended) and since to be a promissory note the instrument must be negotiable, these are not promissory notes.
29.	This contention is incorrect.  A promissory note which is not negotiable is valid between the parties: see s.8(1) applied to promissory notes by s.89 of the 1882 Act.  In any case, these notes were negotiable because they lacked any words prohibiting transfer or indicating an intention that they should not be transferable (see s.8(1)).  The fact that payment was to be made to a named account at the bank does not in itself indicate such an intention. The defendant may be right that the bank agreed to return the notes upon repayment and so it was unlikely that the notes would be transferred – however, that is a factual matter which does not affect the legal status of the notes.  Such an agreement would not have affected the rights of a transferee taking the notes for value in good faith, in other words a holder in due course within s.29 of the 1882 Act, in the event that transfer did take place.  Promissory notes payable on demand are often taken as security (Chalmers and Guest on Bills of Exchange, Cheques and Promissory Notes, 18th edn, Sweet & Maxwell, 2017).  The fact that they are to be cancelled on repayment of the secured liability does not affect the legal status of such an instrument if it otherwise complies with the requirements of the 1882 Act.  The notes in the present case were plainly valid promissory notes.
30.	It was also contended that the true position was that since the notes were given in respect of the two particular transactions, the terms of the notes did not reflect the parties’ agreement.  However, this does not follow as a matter of logic, and in oral argument it was accepted that the objection was limited to ensuring that recovery was limited to the actual indebtedness of Taleveras, i.e. not the full US$22m, if it is less.  As set out below, since these notes were taken as security rather than payment I agree with this approach. 
Summary judgment on promissory notes
31.	An important feature of bills and notes in English law is that the holder is usually entitled to summary judgment on the instrument. This is because in principle a bill of exchange or promissory note is to be treated as cash (Fielding & Platt Ltd v Najjar [1969] 1 W.L.R. 357 at 361).  The defendant is not permitted to set off or counterclaim for damages for breach of some other contract and a stay of execution will not be given for this purpose (see the White Book at CPR 24.2.7).  On the other hand, as between immediate parties to the instrument (in the case of a promissory note, the maker of the note and the payee), defences such as lack of consideration can be raised (Chalmers, ibid, at para 5-072).   However a transferee taking the notes for value in good faith so as to be a holder in due course within s.29 of the 1882 Act takes free of personal defences available to prior parties amongst themselves (see Chalmers, ibid, at para 5-069). There is much case law (see Encyclopaedia of Banking Law at para F[105]), and it is not always easy to reconcile, but there has been no dispute between the parties as to the basic principles as stated.   
The “no demand” defence
32.	The defendant’s case is that immediately prior to him signing the notes on 25 September 2015, Mr Demierre on behalf of the bank told him that the bank would make no demand under the notes.  He says he was told that the notes were obtained “to keep senior management happy”.  Though Mr Demierre denies this, the defendant’s case is that this raises a factual issue which the court cannot resolve on a summary judgment application.  If correct, the defendant contends it raises a triable issue that (i) the parties had no intention to create any legal relations such that the notes are not binding, (ii) the claimant is estopped from making a demand, and (iii) if Mr Demierre did have the intention to make a demand in future, this was a misrepresentation which entitles the defendant to rescind contracts contained in the notes.
33.	The claimant takes objection to this defence in limine, arguing that in the case of promissory notes, the effect of the requirement in s.83(1) of the 1882 Act that the instruments be in writing “will be to exclude oral evidence which is offered for no other purpose than to contradict, vary, add to or subtract from the contract as contained in writing” (Chitty on Contracts, 32nd edn at para 13-104).  
34.	The defendant relies on Kazeminy v Siddiqi [2009] EWHC 3207 (Comm) where it was suggested (though not decided) that as applied to bills and notes this principle may be no more than an example of the parol evidence rule and subject to an arguable exception where there is evidence to suggest that the note may not contain the parties’ entire agreement.  It was held that the scope and applicability of the principle would be better decided at trial, and summary judgment was refused ([50] et seq).
35.	In Kazeminy v Siddiqi, the defence was that the notes were not to be repaid until profits began to flow from the technology that was being developed between the parties.  The present case is completely different.  The defence is to the effect that the promissory notes by which the defendant promises to pay the sums stated on demand in fact require him to pay nothing.  That reduces the notes to worthless paper.  I do not think that Kazeminy v Siddiqi assists the defendant.
36.	In any event, the present case seems to me to be covered by authority.  In New London Credit Syndicate Limited v Neale [1898] 2 QB 487, the oral agreement was to the effect that the holder of a bill of exchange would renew it, if at maturity the acceptor could not pay.  That is similar in effect to the oral agreement advanced in this case, because the acceptor might never be able to pay.  The Court of Appeal held that evidence of the contemporaneous oral agreement to renew the bill was inadmissible on the ground that its effect would be to contradict the terms of the written instrument.  I accept that the extent of the rule is uncertain (Chalmers, ibid, at para 2-157), but it has been applied in other cases (Hitchings and Coulthurst Co v Northern Leather Co of America [1914] 3 KB 907, Nicol's Trustees v. Sutherland [1951] SC (HL) 21, 6 LDAB 184).  Additionally in the present case, it makes good commercial sense not to admit evidence that would completely undermine the certainty and finality of negotiable instruments being used in the finance of oil trades (Chalmers, ibid, at para 2-155).
37.	In case that is wrong, I consider the evidence relied on in support of the alleged oral agreement, bearing in mind the principles applicable as to factual disputes at the summary judgment stage, which are common ground.
38.	The defendant submits that this is a simple conflict of evidence, and other persons present who could have provided supporting evidence for the claimant bank have not done so. 
39.	The claimant bank on the other hand submits that the defendant’s account is not credible. The defendant himself had earlier offered a personal guarantee, and the bank would not have taken this up by way of promissory notes whilst at the same time assuring the defendant that it would never make demand under them. I agree with the claimant in this respect.
40.	Further, the contemporary evidence is consistent with the claimant’s case. 
41.	In an internal update dated 6 October 2015, Mr Demierre described how (from the bank’s perspective) matters stood. He dealt in some detail with the meeting of 25 September 2015. He wrote as follows:
“The shareholder [that is the defendant] states that he will need time to realise certain assets and cover the whole of the commitment. He asks us for time to come back to us with a repayment solution. In order to satisfy the bank during this period the shareholder is signing for us, in his name, promissory notes for $22m, on sight, with no restrictive clauses. We have agreed a period until 09 October for him to come back to us with a repayment plan”. 
42.	There is no evidence in the contemporary record that goes the other way and suggests that the bank would not make demand under the notes, or that the notes were anything other than security which the bank could rely on if it needed to.
43.	Further, I agree with the claimant, that the defendant’s response when demand was finally made under the notes on 15 March 2016 is significant.
44.	As noted above, by letter of 23 March 2016, the defendant proposed payment by way of settlement of the promissory notes over a period of time. There is no suggestion that the claimant had agreed not to make a demand under the notes which the defendant would plainly have raised if there was any substance in this point. 
45.	I agree with the claimant that this defence has no real prospect of success.  The result is the same as regards the various ways in which the defendant puts his case in this respect in paragraphs 29 to 32 of his Defence (including the misrepresentation plea).
The “no consideration” defence   
46.	The notes on their face are said to have been executed as a deed, in which case consideration is not required under English law. However, as I understand it, it is common ground that the notes were not executed as deeds, because the defendant’s signature was not witnessed. That being so, there is no dispute that the notes required to be supported by consideration, and that otherwise the bank cannot enforce the notes against the defendant.
47.	The applicable principles are well established, and are largely not in dispute.  A promissory note requires to be supported by consideration given by the promisee (Byles on Bills of Exchange and Cheques, 29th edn, 2013, at para 19-107) and its absence provides a defence as between immediate parties.  Although by s. 27(1)(b) of the Bills of Exchange Act 1882  an antecedent debt constitutes good consideration (this being an exception to the usual rule as to past consideration) this provision is not relied upon by the claimants because the indebtedness owed to the bank at the time the notes were made was that of a third party, the company, and not the defendant personally (Oliver v Davis [1949] 2 K.B. 727).  
48.	The claimant bank relies on forbearance as consideration, following the long line of authority starting with Alliance Bank Ltd v Broom (1864) 2 Dr & Sm 289.  As stated by Denning LJ in Oliver v Davis at p.743, “Now as to what is sufficient consideration, an express or implied agreement by the creditor to forbear from suing the third person is, of course, good consideration. So also is the simple fact of forbearance by the creditor, even if it only arises ex post facto, providing that the promise to pay was given with the intention of gaining forbearance …”.
49.	The claimants also rely on s. 30 (1) of the 1882 Act, which (by way of further exception to the usual rule) provides for a presumption of value, stating that, “Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value”.
50.	The defendant’s case in this regard is that the evidence as to whether there was in fact a promise to forebear by the claimant or actual forbearance at the request, express or implied, of the defendant in respect of the debts of Taleveras is a question of fact not suitable for summary judgment. 
51.	In argument, it was submitted that the question is whether the forbearance was given in exchange for or in respect of the promissory notes, or whether the claimant would have acted in the same way that it did act in any event. If there was no intention to take steps to seize the cargo, or otherwise take legal action against Taleveras, it was argued that the lack of such conduct could not be referable to the grant of security. There is, it is submitted, the need to demonstrate that the grant of the security made a difference, and there can be no consideration by way of forbearance if the claimant would have acted in the same way as it did anyway. Reliance was placed on the absence of threats to enforce legal rights in the contemporary documentation.
52.	The starting point, in my view, is that this was short term trade finance. The defendant himself pleads that whilst there was no agreement that the finance would be repaid only out of sale proceeds or within any particular time period, it was anticipated that the “Two Million Ways” finance would be paid at the time of the sale of the gasoline. It will be recalled that the vessel arrived at Lagos in May 2015. The original due date for repayment was the end of July 2015, and the contemporary record shows the bank pressing for repayment at the end of August at the very latest. By then, the debt on the account of Taleveras with the bank included the US$4m paid to Tadema. By 28 August, this money was repayable by reason of cancellation of the voyage.
53.	The contemporary emails show the bank agreeing to extend the financing “but this transaction absolutely must be settled by the end of August at the latest”. 
54.	By 26 August 2015, promissory notes issued by the defendant were being required. 
55.	On 1 September 2015, the bank told the defendant that “rapidly setting a solution remains essential for the bank”. It seems that there was some delay in arranging a meeting for the defendant to sign them. On 15 September 2015, references were made to the bank needing some progression in solving the current situation.
56.	An internal note of 21 September 2015 states, “A legal review has been prepared; should we file action against the ship owner of the Two Million Ways”. According to the note, “the daily pressure is being maintained in order to achieve a good outcome for our finances without a breakdown”. The note says that the bank required a personal undertaking from the defendant as shareholder.
57.	As regards the signing on 25 September 2015, reference is made to the internal note of 6 October 2015 set out above. The note records that the bank had agreed a period until 9 October for the defendant to come back with a repayment plan. This two week period was referred to “as agreed” in an email to the defendant of 28 September 2015. 
58.	In fact it was not until the email of 10 November 2015 (see above) that the rescheduling was agreed, albeit the payments agreed were not in fact made.
59.	On those facts, it cannot seriously be disputed that the bank was pressing hard for a personal guarantee (provided in the event by the promissory notes) from the defendant. 
60.	As regards the law, “… it is not necessary that there should be an arrangement for forbearance for any definite or particular time. It is quite enough if you can infer from the surrounding circumstances that there was an implied request for forbearance for a time, and that forbearance for a reasonable time was in fact extended to the person who asked for it” (Fullerton v Provincial Bank of Ireland [1903] AC 309 at p313).
61.	Although the instruments at issue in this case were promissory notes, they played the same functional role as guarantees.  As is said in Andrews and Millett, Law of Guarantees, 7th edn, 2015, at p.32, “It is rare nowadays for a contract of suretyship to fail for want of consideration, because even if that contract post-dates entry into the transaction giving rise to the obligations that it secures, the court will look at the commercial realities”.
62.	I agree with the claimant that there was both promised and actual forbearance in this case. Forbearance was promised until 9 October, and although in itself this is a short period, actual forbearance lasted considerably longer. There is no real prospect of the defendant establishing that the bank would have behaved in the same way whether or not it had obtained the promissory notes. On the contrary, the overwhelming inference is that had the defendant refused to give the notes, in circumstances where he himself had offered a personal guarantee, the bank would have taken all alternative steps open to it, including legal action. This is a clear case of forbearance, and the defence is not arguable in this respect.
Conclusion
63.	The defendant also maintained what was described as the “limited security” defence, which was to the effect that the notes were given in respect of the “Two Million Ways” and Tadema financing, and not the indebtedness of Taleveras to the bank generally. In fact, the evidence is that the bank maintained a single account of the overall indebtedness of the company. However, my understanding is that the relevant indebtedness does in fact relate to these two financings. This point makes no difference therefore to the overall outcome. 
64.	Although the bank did not seem to accept this, given that these promissory notes were taken as security, on ordinary principles the bank is entitled to recover only up to the extent of the outstanding indebtedness of Taleveras to the bank. It should be in a position to provide a statement of the balance when judgment is handed down. 
65.	For reasons set out above, the claimant is entitled to summary judgment on the promissory notes.  I am grateful to the parties for their assistance, and will hear them as to any consequential matters.

ANNEX
PROMISSORY NOTE

No. 2015-I

USD 18,000,000

Dated: 24 September 2015

I, Igho Charles SANOMI (of plot 1065 Adetokunbo Adenda Crescent – Wuse II – Abuja; Nigeria) for value received (Promisor) promise to pay to BANQUE CANTONALE DE GENEVE, a Swiss Bank incorporated in Switzerland (Payee), the principal amount of USD 18,000,000 (eighteen million US Dollars) (Principal Amount) on demand (Due Date).

Interest shall not accrue on this promissory note save that if the Promisor fails to pay under this promissory note on the Due Date, then the Promisor shall pay interest on the Principal Amount from and including the Due Date until the date of actual payment in full of the Principal Amount and all interest accrued under this promissory note, at the rate of 5% per annum. Such interest shall accrue on a daily basis and shall be payable immediately on demand.

All payments shall be made in US Dollars in immediately cleared funds in full and without any deduction or withholding, by crediting the following account:

IBAN: CH14 0078 8000 0504 2825 3 – Account number 5042.8253 with BCGE

The Promisor hereby waives presentment, demand for payment, notice of dishonour, protest and any and all other notices or demands in connection with the delivery, acceptance, performance, default or enforcement of this promissory note.

This promissory note shall be governed by, and construed in accordance with, the law of England and Wales. The Promisor irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction over any dispute or claim arising out of or in connection with this promissory note. The Promisor irrevocably appoints Taleveras Services (Uk) Ltd, 23 Berkeley Square, London W1J 6HE, UK; +44 20 3178 6937 as its agent to receive on its behalf in England or Wales service of any proceedings in connection with this promissory note. Such service shall be deemed completed on delivery to such agent (whether or not it is forwarded to and received by the Promisor). If for any reason such agent ceases to be able to act as agent or no longer has an address in England or Wales, the Payee may appoint another agent for this purpose in any such manner as it sees fit in its sole and absolute discretion.

This promissory note has been entered into as a deed on the date stated at the beginning of it.

Executed in Geneva, as a deed by Igho Charles SANOMI

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