Case No: HQ01X03850
Neutral citation No: [2003] EWHC 3127 [QB]
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Date:18 /12/03
Before :
THE HONOURABLE MR JUSTICE EADY
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Between :
 	(1) PARSHOTAM MAHTANI
(2) STERLING BUREAU DE CHANGE LTD 	Claimants 	
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 	KEITH BILLINGTON 	Defendant 	
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Mr Adrian Salter (instructed by Vymans) for the Claimants
Mr P J Kirby (instructed by Hallows Associates) for the Defendant
Hearing dates : 3 – 7 November 2003
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Judgment
Mr Justice Eady: 
General introduction
 
1.	The first Claimant sues to recover sums alleged to be due from the Defendant under separate agreements entered into in 1995. The first principal debt claimed was in the sum of 637, 298 US dollars and the second 265,000 US dollars. There is no doubt that the sums in question were received by the Defendant or deployed on his instructions; nor that he has over the many years intervening made numerous promises of repayment and excuses for non-payment. 
2.	The first Claimant is Mr Parshotam ("Pishu") Mahtani. He has for some years been resident in London but was formerly living and working in Zambia, where he managed the affairs of the second Claimant, Sterling Bureau de Change Ltd, which is a Zambian company. As its name suggests, it was engaged in the business of foreign exchange. 
3.	The Claimant corporation is only joined in these proceedings by way of caution, representing an alternative case, and purely to meet the Defendant’s suggestion that the first agreement (of 16 January 1995) was made between that entity and himself rather than with the first Claimant. The Defendant’s plea in this respect enabled him to put forward, at different stages, two arguments that would not have availed him against Mr Mahtani. The first suggestion was that the loan had become irrecoverable by reason of the second Claimant’s having been wound up, but this was doomed to failure because it had only been removed from the Register in error on 30 January 1999 and was subsequently reinstated on 7 February 2002. 
4.	The second ploy was to argue that such a loan by the second Claimant would have been tainted with illegality. That plea proved to be somewhat fluid, but essentially turned upon arguments under the law of Zambia to the effect that the loan would have been ultra vires. There is no dispute that the agreement was governed by Zambian law and expert evidence was adduced on both sides. 
5.	The issues identified may be summarised as follows: 
1. Was the agreement of 16 January 1995 made with the first or the second Claimant?
2. If with the second Claimant, was it unenforceable by reason of Zambian law?
3. Did the agreement give rise to simple or compound interest?
4. Was there a second agreement relating to the loan of 265,000 dollars?
5. If so, is the claim on the second agreement barred by limitation?
6. If not, was there an entitlement to interest under the second agreement?
The parties to the first agreement
6.	The first issue arises in this way. The agreement in question was drafted by the Defendant and was described at its head as being "between Mr P Mahtani of Sterling Bureau Limited, Ndola, and Mr K Billington of 146 Gloucester Road, London SW7 4SZ". It would thus appear reasonable to construe the words "of Sterling Bureau Limited" as identifying or describing Mr Mahtani, just as the Gloucester Road address helps to identify the Defendant. There would be no need to mention the first Claimant at the head of the agreement if the company was the contracting party. In Clause 1 it recorded the indebtedness outstanding at 31 December 1994 from the Defendant to first Claimant (including accrued interest) as 437,298 dollars. To this would be added a further 200,000 dollars which was to be lent on 18 January 1995. 
7.	At the foot of the document, however, the words appear under Mr Mahtani’s signature "… for and on behalf of Sterling Bureau Limited". I find it difficult to understand how that could be said to "qualify" what has gone before – including the clear assertion that the outstanding debt was owed to the first Claimant. It is on its face inconsistent and I should therefore attempt to give effect to any reasonable construction which harmonises the two. 
8.	In determining the parties to the contract, the test must be an objective one: see e.g. ICS v West Bromwich Building Society [1998] 1 WLR 896, 912-3. Nevertheless, I heard evidence on the issue from the two main protagonists on the factual background, as well considering contemporaneous documents. It is, of course, elementary that the purport of the contract must be judged by reference to the position at the material date. I bear that in mind when addressing the submissions. 
9.	Among the factors relied upon by the first Claimant were the following: 
(a) The existing indebtedness was specifically categorised as "to Mr Mahtani".
(b) It is difficult to understand how the Defendant came so to acknowledge his liability, in his own words, if the true creditor had been the Claimant corporation.
(c) Equally, there is no rational basis for aggregating the new indebtedness with the existing debt, thereby acknowledged, unless the creditor was identical.
(d) As the auditors of the second Claimant have confirmed, the debt was never recorded in the company’s accounts or ledgers as being owed to the company.
(e) The Defendant’s own loan broker, Mr Roberts, gave written assurances to the first Claimant’s bank that the Defendant was arranging to make a payment "to the account of Mr Mahtani" and that "Mr Billington takes very seriously his commitment to Mr Mahtani". (Mr Roberts had been asked to assist the Defendant in clearing his debts to "Mr Mahtani".) There was no suggestion by the Defendant that this was intended to be other than a truthful letter.
(f) What is more, as he confirmed in the witness box, Mr Roberts had been told by the Defendant that it was from Mr Mahtani that he had borrowed the money.
(g) Such payments as were made were not made to the second Claimant – nor were they described as being made to the first Claimant only in the capacity of agent for the company. The unpresented cheques were indisputably drawn in favour of the first Claimant.
(h) When a meeting took place in March 1996, the agenda referred to "repayment of loan by KB to PM. PK". In other words, the debt was apparently accepted as owing to the first Claimant and/or his business partner Mr P. K. Patel. 
10.	Thus, it is submitted, it is quite clear that all concerned recognised the debt as owed to the first Claimant personally rather than to the foreign exchange company. The only document of the relevant period which goes in any way to bear out the contrary suggestion now espoused by the Defendant is a manuscript note of his, which is undated but appears to relate to discussions at the time of or prior to the first agreement which is headed "Sterling Bureau Account situation @ 31.12.94" and which also refers to commission payable "to Sterling" in respect of the Mtine share sale (see below). This is an informal document, the precise status of which is unclear, but I should give priority to the express acknowledgement in the Defendant’s own draft of the agreement that the money was owed to the first Claimant. 
11.	It is true that large sums of money passed through the accounts of the second Claimant, as one would expect of a foreign exchange company, but obviously this does not demonstrate that they were funds to which it was beneficially entitled. Moreover, as to its own assets, the accounts show that the second Claimant had a net surplus in its first year of trading equivalent only to 93,000 dollars (i.e. to 31 December 1994) and in its second year to 23,500 dollars. It did not therefore have the wherewithal to make the substantial loans in question. 
12.	Various rather non-specific attempts were made to discredit Mr Roberts, who was described as "an embittered man who possibly had his own agenda so far as Mr Billington was concerned". Nothing emerged to substantiate the theory, and I found no reason to reject his evidence. 
13.	I am quite satisfied that it was well understood by all concerned, at the time, that the loans were to be made personally on behalf of the first Claimant and that the contract of 16 January 1995 was between him and the Defendant. Insofar as the Defendant’s evidence sought to contradict this, I am equally satisfied that it was untrue and opportunistic. 
14.	I am certainly conscious of the points made by Mr Kirby, on the Defendant’s behalf, as to the credibility of the first Claimant and his witnesses – in particular, Mr P.K. Patel, who at one point when questioned about tax and the structuring of his financial affairs exercised his right not to answer certain queries lest he incriminate himself. I was also reminded, quite properly, of apparently misleading information contained in statutory declarations made by the first Claimant. The suggestion that the first agreement was for the purpose of enabling Mr Billington to purchase his house was not accurate. I do not suggest that either of these two witnesses was wholly satisfactory or that I would necessarily take everything they said at face value. Nevertheless, as Mr Kirby anticipated in his closing submissions, it was submitted by Mr Salter in the light of the uncontroversial evidence, and especially the contemporaneous documents, that the question marks over credibility do not undermine the Claimants’ case. Moreover, Mr Billington’s credibility is more directly relevant to the issues I have had to determine and, on those, I certainly preferred the evidence of the first Claimant and Mr P. K. Patel insofar as they were in conflict with him. 
Illegality
15.	I go on to consider the question, albeit strictly unnecessary to do so, whether such a loan would have been unlawful if made by the Claimant company. There was conflicting evidence from the two experts. The Claimants called a former High Court judge of Zambia, Mr Care, who had also many years ago been a legal adviser to the Central Bank of Zambia. The Defendant called Mr Banda a Zambian advocate of the firm "MNB". Curiously, he seemed to differ from the view proffered by his firm in March 2002 when the Defendant was seeking to resist summary judgment. At that stage, the view was expressed that a loan by the Claimant company to an individual such as the Defendant would not be illegal. That was entirely consistent with the opinion of Mr Care. As he pointed out, the power to make loans is expressly recognised by the company’s memorandum and articles of association. 
16.	In paragraph 23 of the Amended Defence, the suggestion advanced was that such a power would be inconsistent with and overridden by the Zambia (Foreign Currency) Regulations 1994. These were made under the Bank of Zambia Act (No 24 of 1985) and are concerned with the grant of licences to buy and sell foreign currency. There is no express or implied prohibition against any such licensee making incidental loans of the kind made here (by the first Claimant) to the Defendant. Accordingly, I reject the evidence of Mr Banda insofar he asserts, in his Report at paragraph 2.4, that the Regulations are "quite clear if not unequivocal as to what the Bureau may … not do". As Mr Salter put it on the Claimants’ behalf, the Regulations are to be characterised as "prescriptive not proscriptive". 
17.	Mr Banda came to the conclusion that "it is in my view illegal for the Bureau to give out loans to the public like in this case to Keith Billington who is neither a member of staff or a director of the Company". I have no hesitation in preferring the evidence of Mr Care, which seems to me to accord with the wording of the Regulations. 
18.	As I have said, there was at trial a shift in the Defendant’s ground so as to try and rely on the Banking and Financial Services Act of Zambia. The argument was addressed in evidence and closing submissions notwithstanding its not being pleaded. Mr Care accepted that this would have rendered unlawful a loan "to the public" in the course of the second Claimant’s business. But, on the other hand, the company did not "give out loans to the public" in the course of its business; nor did it purport to do so. The fact that the Defendant was not a shareholder, a member of staff or a director of the second Claimant does not mean that he was to be equated to "the public". As MNB had advised in March 2002, "… if he is given a loan not in the business sense but as an individual … then to that extent the transaction is not illegal". A loan of 200,000 dollars would hardly have been "in the ordinary course of business" for a bureau de change. 
Simple or compound interest?
19.	The next issue is whether the interest was to be simple or compound. Mr Care expressed the opinion that the law in this respect corresponds to that in England and Wales. An agreement as to compound interest may be express or implied. This now appears to be common ground following discussions between the experts last September. 
20.	The evidence of the first Claimant was that in all their other dealings the Defendant agreed to pay and did pay compound interest. Clause 4 of this agreement makes it express that interest will be payable at "1% per month on the outstanding balance". This was to be payable with the principal amount. As a matter of construction, it seems clear that if simple interest only were contemplated the wording would have been in terms of "12% per annum". The statements of account under the first agreement also made clear that interest was being charged on a compound basis. Far from any challenge being registered, the evidence shows that payments were made in response to those statements. 
21.	I have no doubt compound interest was payable. 
The second agreement
22.	Next I address the question of whether there was a second agreement underlying the claim for 265,000 dollars. The background was that the first Claimant was asked by the Defendant to purchase on his behalf an 11% block of shares in African Commercial Bank from Mr Mtine so as to give him effective control. The Defendant agreed to pay 265,000 dollars (which was to include the first Claimant’s fee). The shares were purchased on 24 February 1995 and the first Claimant held those shares as the Defendant’s nominee. 
23.	The first Claimant was assured by the Defendant on 17 April that he was to expect 265,000 dollars to be paid by the end of April 1995, but "there might be a day or two delay". 
24.	It was shortly afterwards recognised that the debt was to be settled in June 1995, but on 16 July of that year the first Claimant pressed him with the words "Re Shares 265,000 dollars – await your schedule of repayment". The Defendant’s only response was to write, "Watch this space". None of the debt was ever repaid. 
25.	There was a history of demands for payment thereafter and of unfulfilled promises. More to the point, the Defendant never challenged that the sum was owing. 
26.	What the Defendant now asserts in paragraphs 13-16 of his Amended Defence is that the second Claimant agreed to buy the Mtine shares and that the intention was for the Defendant’s existing shareholding in the African Commercial Bank to be combined with that acquired by the second Claimant. It is also suggested that the joint holding was to be sold to a third party for three million dollars. If this did not materialise (as it did not), then the second Claimant was contractually bound to pay the Defendant 1.6 million dollars. The Bank in fact collapsed, but the Defendant made no demand for the 1.6 million dollars. His explanation is that he generously waived it. 
27.	I am quite satisfied that this arrangement, for which there is no convincing documentary support, is fictitious. On the contrary, the documents over the intervening years all point in the opposite direction. This debt was originally claimed separately from that under the first agreement and acknowledged in the various documents, for example on 6, 17 and 24 April 1995. Later it was aggregated with the outstanding debt under the first agreement and accounts were sent in respect of both outstanding liabilities. 
28.	There was thereafter the same pattern of acknowledgment, promises and evasion. There is no single document querying or challenging the indebtedness. For example in May 1997 the Defendant wrote and asked for an up-to-date statement. He was sent one on 16 May that was current to the end of April. He also asked that a cheque for £20,000 dated 30 April should not be presented until 27 May. On the fax of 16 May he wrote "This is correct" and initialled it. On 15 June 1997 the Defendant asked the first Claimant not to include the 265,000 dollars on the statement as he was "trying to cross the first hurdle before approaching the second". This plainly did not mean that the previously acknowledged debt ceased to be owing or that the obligation to repay had been postponed (or, for that matter, that any interest payable had been waived). 
29.	What is more, some payments had been made against the aggregated account and half a dozen cheques were put in evidence dated between May 1997 and May 1998 and which were made out to the first Claimant. 
30.	In 1999 a copy was requested of the share purchase agreement and the Defendant again acknowledged that the shares had been acquired (and put in the name of Mbuchila Investments) on his instructions. 
31.	In his witness statement the Defendant has sought to suggest that he did not receive any of the faxed statements between December 1995 and June 2001, but he qualified this with the words "so far as I can determine". Various rather lame explanations were given in the witness box about not knowing which file to check. This may not matter very much, since there is no doubt that he did acknowledge the indebtedness on various occasions, as I have described above. In so far as he has suggested that the accounts were not received, however, I should make it clear that I did not believe him and make a finding accordingly that they were received. 
Limitation
32.	The argument raised in relation to the second agreement is that it is time-barred. The pattern of acknowledgements is important in this context by reason of s.29(5) of the Limitation Act. The right to recover is treated as accruing on and not before the date of the relevant acknowledgement. The same principle applies to payments – even if dishonoured. The last of these was sent on 15 December 1999 and the proceedings were commenced in September 2001. Even if one goes back as far as the acknowledgements of May and June 1997, referred to above, the claim was launched well within the six-year period. But, as required by s.30 of the Limitation Act, such acknowledgements would need to be in writing and signed. Mr Salter has submitted that they so qualify. The handwritten and initialled acknowledgement of 16 May is at least ambiguous. "This is correct" could refer merely to the Defendant’s confirmation that the cheque should not be presented until 27 May. On the other hand, although I regard the letter of 15 June as an acknowledgement of the 265,000 dollar debt (albeit asking for postponement), I cannot see that it has been signed. Accordingly, I am unable to find any acknowledgement in writing that is effective for the purpose of ss.29 and 30 of the Act. 
33.	One of Mr Kirby’s points is that none of the payments would count as an acknowledgment of the indebtedness over the Mtine shares because no part of them was so apportioned. To this Mr Salter responded that the first Claimant only showed the debts separately because the Defendant so requested on 15 June 1997. I infer that he is correct since I see no other explanation for the change. Nor can it be maintained, as Mr Kirby submits, that the Defendant’s payments were stipulated or understood to be solely attributable to the first agreement. There is no evidence of any such stipulation on the Defendant’s part; in such circumstances, a claimant is entitled to allocate payments as he sees fit. 
34.	For these reasons I reject the limitation defence. 
Interest under the second agreement
35.	Finally, I need say no more in relation to interest due under the second agreement (if any) than that I am satisfied, in the light of the first Claimant’s evidence, that interest was payable, in accordance with the parties’ general practice, on a compound basis. Moreover, I see no reason why this should only run from the solicitors’ demand of August 2001. It is clear that it should have been repayable by mid–1995 at the latest. It was promised by the end of April at one stage, but the first Claimant is now seeking interest from 31 May of that year. 
Conclusion
36.	There will thus be judgment for the first Claimant in respect of the principal sums together with interest. The total sum due should be agreed if possible, but there will be liberty to apply. I will hear the parties as to the appropriate sum to be payable on account meanwhile. 
1. I confirm that this is not finding of a written acknowledgment effective for the purposes of ss.29 and 30 of the Limitation Act.
2. The rejection of the limitation defence is thus based on part payments.
3. There is a finding of fact that the debts were shown separately because of the Defendant’s request in June 1997. I draw the inference because I see no other explanation.