Commodity Broking Company Ltd v Meehan

• Jurisdiction: Ireland
• Judgment Date: 07 February 1985
• Date: 07 February 1985
• Docket Number: [1982 No. 7740P]
• Court: High Court

High Court

[1982 No. 7740P]

Commodity Broking Company Ltd. v. Meehan

The Commodity Broking Company Limited

Plaintiff

and

Fergus Meehan

Defendant

Cases mentioned in this report:—

Harburg India Rubber Comb Company v. Martin [1902] 1 K.B. 778.

Alliance Bank Limited v. Broom (1864) 2 Dr. & Sm. 289.

Miles v. New Zealand Alford Estate Company 32 Ch.D (1886) 266.

Fullerton v. Provincial Bank of Ireland [1903] A.C. 309.

Combe v. Combe [1951] 2 K.B. 215; [1951] 1 All E.R. 767.

Contract - Breach - Indemnity - Consideration - Forebearance.

Plenary Summons.

On the 9th June, 1982, the plaintiff issued a plenary summons in the High Court and therein claimed for loss and damage sustained by it as a result of the breach of contract and fraudulent and negligent misrepresentation of the defendant. Paragraphs 4, 5 and 6 of the plaintiff's statement of claim pleaded as follows:—

"4. At a meeting which took place between the representatives of the plaintiff and the defendant on or about the 19th October, 1981, the defendant in consideration of the plaintiff foregoing to sue Pistola Investments Limited and furthermore foregoing certain interest payments which would become payable by Pistola Investments Limited to the plaintiff on foot of its outstanding indebtedness, agreed to indemnify the plaintiff in respect of any amounts outstanding from Pistola Investments Limited to the plaintiff. The defendant agreed to discharge the amounts due by Pistola Investments Limited to the plaintiff at a monthly rate of £1,000 Sterling.

5. In order to induce the plaintiff to enter the said agreement with the defendant, which it did, the defendant inter alia represented either expressly or impliedly:—

• (a) that he was prepared to indemnify the plaintiffs in respect of the amounts due from Pistola Investments Limited to the plaintiff,

• (b) that he was then and would in the future be in a position to discharge those amounts to the plaintiff,

• (c) that he would discharge those amounts by repayments of Stg.£1,000 per month.

  • 6. The aforesaid representations were made by the defendant to the plaintiff in order to induce the plaintiff to enter the said agreement and the plaintiff acting on the faith of the said representations and induced thereby did enter into the said agreement and forebore to sue Pistola Investments Limited and furthermore waived interest payments due by that company to the plaintiff."

On the 2nd March, 1983, the defendant delivered his defence in which he pleaded that the plaintiff's decision not to sue Pistola Investments Limited was made because they knew that the said company was insolvent and denied that there was any consideration for the agreement and that the defendant had as a matter of honour agreed to try to pay some of the debt of the company.

The plaintiff by reply delivered the 8th December, 1983 denied that its decision not to sue the company was made because it knew the company was insolvent but that the plaintiff was not obliged to pursue any remedy it might have against the company having regard to the agreements and representations and undertakings by the defendant.

The matter came on for hearing on 24th October, 1984, before Barron J.

In February, 1981, Pistola Investments Limited (the company) opened an account with the plaintiff. The defendant was the sole beneficial owner of the company. The company traded in the futures market through the agency of the plaintiff and by 8th October, 1981, owed some Stg.£36,000 to the plaintiff. Calls were made on the company which it did not meet. At a meeting with the plaintiff's managing director the defendant acknowledged the company's indebtedness and intimated that the company was insolvent and said that he would try to repay the debt of the company at the rate of Stg.£1,000 per month. The defendant refused to sign a guarantee of the company's liability. The defendant made a total of two payments of Stg.£1,000 each. The plaintiff claimed inter alia that there was an agreement with the defendant and/or it was represented by the defendant that the defendant would indemnify the plaintiff in respect of the money owed by the company to the plaintiff and that the plaintiff acting on that agreement and/or the faith of the representations forebore to sue the company.

Held by Barron J., in dismissing the plaintiffs claim, 1, the agreement between the plaintiff and the defendant amounted to an indemnity by the defendant and not a guarantee as the defendant agreed to pay the money in any event and not only if the principal debtor did not.

2. However, the indemnity was unenforceable as it was not given for consideration. There was no request express or implied to forebear from bringing proceedings, which if it induced such forebearance would amount to good consideration.

Alliance Bank Ltd. v. Broom 2 Dr. & Sm. 289; Miles v. New Zealand Alford Estate Company32 Ch.D 266; Fullerton v. Provincial Bank of Ireland[1903] A.C. 309; Combe v. Combe[1951] 2 K.B. 215; [1951] 1 All E.R. 767, considered.

Cur. adv. vult.

Barron J.

The defendant was at all material times the sole beneficial owner of the entire shareholdings in Pistola Investments Limited ("the company"). In the month of February, 1981, he approached the plaintiff with a view to opening with it an account on behalf of the company. He was given details of the terms upon which client accounts were accepted and some two weeks later returned and opened the account with a cheque for £2,000. At the same time he signed the standard form of client agreement clause 2 of which was as follows:—

"All orders for commodities for future delivery executed by us for your account are so executed on the following terms:—

A. All risks (financial or otherwise) are borne by you and The Commodity Broking Company of Ireland Limited (CBI) will be indemnified by you in the event of default of your obligations in this Agreement.

B. All deposits and margins shall be paid on demand. In the event of default of this condition, CBI have...