[IN THE COURT OF APPEAL.]

SWISS BANK CORPORATION v. BOEHMISCHE

INDUSTRIAL BANK.

[1922 S. 2858.]

Practice - Garnishee Order - Discretion of Court - Discharge of Garnishee - Liability to pay a Second Time - Debt due to Foreign Corporation - Rules of Supreme Court, Order XLV., r. 7.

Judgment having been recovered against a foreign corporation, who submitted to the jurisdiction, a garnishee summons was issued to attach a debt duo from a London bank to the foreign corporation:-

Held, that the judgment creditors were entitled to have an order nisi made absolute, inasmuch as payment under a garnishee order operates as a discharge of the amount paid and is recognized by international law as having that effect, and consequently there was no real risk of the garnishees being obliged to pay the debt over again to the foreign corporation, and there was therefore nothing inequitable in making the order absolute.

Martin v. Nadel [1906] 2 K. B. 26 commented on and distinguished.

ON June 9, 1922, the Swiss Bank Corporation issued a writ against the Bšhmische Industrial Bank claiming 54,884l. 16s. 6d., the balance of an account appearing on April 30, 1922, in respect of money lent to the defendants and money paid by the plaintiffs for and at the request of the defendants and for interest and commission thereon. The defendants were a foreign corporation carrying on business in Prague in the Republic of Czecho-Slovakia. Notice of the writ was served upon them there. The defendants entered an appearance conditionally at first, but afterwards, when the plaintiffs had taken out a summons under Order XIV., the defendants filed an affidavit in answer objecting to pay so much of the claim as represented interest on the amounts advanced.

On August 25 an order was made in chambers that the plaintiffs should be at liberty to sign final judgment for 29,422l. 16s. 10d., the amount of the principal money advanced, and that the defendants should be at liberty to defend the action as to the residue of the plaintiffs' claim. On August 28 the plaintiffs signed final judgment for 29,422l. 16s. 10d. On November 13 the defendants delivered their defence denying

that any sums other than principal money were ever due and owing from them and insisting that the plaintiffs' claim was a matter of international treaty and that the Court had no jurisdiction to entertain the action.

A garnishee summons was then issued against the National Provincial and Union Bank of England supported by an affidavit of Henri Jenne, sub-manager to the judgment creditors, stating that the judgment debt of 29,422l. 16s. 10d. remained wholly unsatisfied, that the London agents of the judgment debtors were Barclays Bank, Ld., and the National Provincial and Union Bank of England, and that from information acquired by him in the course of his duties as sub-manager of the judgment creditors he verily believed: (a) that in addition to Barclays Bank and the National Provincial and Union Bank of England the judgment debtors transacted banking business with, among others, the London Merchant Bank, and (b) that the National Provincial and Union Bank of England, the London Merchant Bank and others in the ordinary course of business would be and were then indebted to the judgment debtors in respect of moneys the property of the judgment debtors in their hands respectively as agents.

A similar summons was issued against the London Merchant Bank supported by an affidavit of the said H. Jenne in similar terms.

On August 28 a garnishee order nisi was made against the National Provincial and Union Bank of England attaching all debts owing or accruing due from the garnishees to the judgment debtors. On September 5 an order in similar terms was made against the London Merchant Bank. The last-named garnishees opposed the order upon the grounds stated in an affidavit of Arthur George Haswell, their sub-manager, which contained the following paragraphs:-

"1. The above named Bšhmische Industrial Bank, the judgment debtors herein, have an account with the garnishees and the garnishees have an account with the judgment debtors, and on taking the balances of the accounts there was due and owing by the above named garnishees to the judgment debtors

on September 5, 1922, the date of the making and service of the garnishee order nisi herein, the sum of 9,303l. 11s. 4d.

"2. The Bšhmische Industrial Bank, the above named judgment debtors, carry on business at Prague in the Republic of Czecho-Slovakia. They do not carry on business in this country and have no place of business within the jurisdiction of this Honourable Court and are not subject to its jurisdiction.

"3. The above named garnishees are advised, and I verily believe, that should they be ordered by this Honourable Court to pay the amount due from them to the judgment debtors to the above named creditors, it would still leave them liable to an action to recover the same debt brought in a competent Court in a foreign place, and that in such an action they would probably be ordered to pay the amount now sought to be recovered from them by the above named judgment creditors over again to the Bšhmische Industrial Bank, the above named judgment debtors."

On September 9 orders were made in chambers discharging the garnishee orders nisi of August 28 and September 5.

On December 8 two motions were made to the Divisional Court to discharge the orders of September 9. The Divisional Court (Darling and Salter JJ.) dismissed these motions, but ordered that the garnishee orders nisi should stand until the hearing of an appeal to the Court of Appeal.

The plaintiffs appealed and prayed for an order that the garnishee orders nisi might be made absolute.

Sir John Simon K.C. and Rayner Goddard for the appellants. The judges in the Divisional Court refused to make the orders absolute on the ground that it might be inequitable to do so. They considered themselves bound by Martin v. Nadel (1) to hold that if the garnishees should pay to the Swiss Bank Corporation the debt they owe to the Bšhmische Industrial Bank they might be compelled by proceedings in Prague to pay it over again to the Bšhmische Industrial Bank. Martin v. Nadel (1) is no authority for that proposition. In that case the foreign Court was the proper Court to exercise

(1) [1906] 2 K. B. 26.

jurisdiction over the debt sought to be garnished. It was a debt contracted in Berlin and payable in Berlin. In the present case the debt sought to be garnished was contracted in London and payable here, and the Courts of this country are the proper ones to exercise jurisdiction over it. By Order XLV., r. 7, of the Rules of the Supreme Court payment under a garnishee order is a valid discharge of the amount paid. Consequently it will be recognized by international law as a good discharge: Dicey, Conflict of Laws (1); Le Chevalier v. Lynch. (2) Nothing is more clear than that a person who has been compelled by a competent jurisdiction to pay a debt once shall not be compelled to pay it over again: Hunter v. Potts (3); Foote's International Jurisprudence.(4) The London Merchant Bank if sued in Czecho-Slovakia in respect of this debt need only prove payment under this garnishee order and the action against them must fail.

[SCRUTTON L.J. referred to Ellis v. M'Henry. (5)]

[Cammell v. Sewell (6) and Joachimson v. Swiss Bank Corporation (7) were also cited.]

Blanco White for the respondents, the London Merchant Bank. This case is covered by Martin v. Nadel. (8) The judgment of Vaughan Williams L.J. in that case is directly in point. "It appears to me to be clear," said the Lord Justice, "that a garnishee order is of the nature of an execution, and is governed by the lex fori; and by international law an execution which has been carried into effect in a foreign country under foreign law, and has taken away part of a man's property, is not recognized as binding. .... I am not going to decide on the ground that the debt was really contracted in Germany, and that prima facie German law would govern the contract. To my mind that makes no difference, and for this reason": viz., that the Court ought not to make an order for payment upon a garnishee application in a case where it would be inequitable to do so. The judgment of Stirling L.J. proceeds on the same principle - namely, that

(1) 3rd ed. (1922), pp. 342, 565.

(2) (1779) 1 Doug. 170, note f.

(3) (1791) 4 T. R. 182, 187.

(4) 4th ed. (1914), p. 304.

(5) (1871) L. R. 6 C. P. 228.

(6) (1860) 5 H. & N. 728.

(7) [1921] 3 K. B. 110.

(8) [1906] 2 K. B. 26, 29, 31.

Order XLV., r. 7, of the Rules of the Supreme Court, although it provides that payment by a garnishee is a valid discharge as against the debtor, "cannot affect the rights of a person" - in this case the Bšhmische Industrial Bank - "who is not within the jurisdiction of the Court and is not subject to its jurisdiction."

[He cited Story, Conflict of Laws, §§ 331, 332, 335, 575.]

Morle for the National Provincial and Union Bank of England.

Counsel for the appellants were not called on in reply.

BANKES L.J. This is an appeal from the Divisional Court, who in the exercise of their discretion refused to make absolute a garnishee order because they considered that the decision of the Court of Appeal in Martin v. Nadel (1) covered the facts of this case.

The judgment creditors, the Swiss Bank Corporation, recovered judgment for some 29,400l. against the Bšhmische Industrial Bank, a bank carrying on business at Prague. It is important to notice that the judgment debtors appeared to that action and thereby submitted themselves to the jurisdiction of the Court. Garnishee proceedings were then commenced upon statements made in an affidavit of M. Henri Jenne that he had reason to believe that the garnishees, the London Merchant Bank, were indebted to the judgment debtors as the result of banking business carried on with or for them. A garnishee order nisi was obtained. Thereupon the garnishees produced an affidavit sworn by Mr. Arthur George Haswell, in which he admitted that the garnishees, a bank carrying on business in London, owed the judgment debtors a sum of 9303l. 11s. 4d. He went on to state that a payment under an order of this Court would still leave the garnishees "liable to an action to recover the same debt brought in a competent Court in a foreign place, and that in such an action they would probably be ordered to pay the amount now sought to be recovered from them by the above named judgment creditors over again to the Bšhmische

(1) [1906] 2 K. B. 26.

Industrial Bank." This very vague general statement of the alleged risk has been treated as sufficient to raise the question whether there is any real risk that the garnishees, if they pay the judgment creditors under a garnishee order the amount they admit they owe to the judgment debtors, will be called upon to pay that amount over again in any proceedings which may be taken against them in Prague or elsewhere in any foreign country.

The decision of that question depends upon where the debt sought to be attached is situate. If the debt is situate, or in other words if it is properly recoverable, in this country, then it would be discharged by payment under an order of our Courts and the garnishee need have no fear of being required to pay it a second time; but if the debt is situate, that is properly recoverable, in a foreign country, then it is not discharged by payment in this country under an order of the Courts of this country, and the debtor may be called upon to pay it over again in the foreign country. There is no doubt as to the effect of payment made under a garnishee order here. It is clearly a discharge pro tanto of the debt. That was declared by s. 65 of the Common Law Procedure Act, 1854, which has been reproduced in Order XLV., r. 7, of the Rules of the Supreme Court. That rule provides that "Payment made by or execution levied upon the garnishee under any such proceeding as aforesaid shall be a valid discharge to him as against the debtor, liable under a judgment or order, to the amount paid or levied, although such proceeding may be set aside, or the judgment or order reversed."

Now when a debt payable in this country is discharged by a Court of competent jurisdiction in this country what is the result? It is clearly expressed by Bovill C.J. in Ellis v. M'Henry (1): "There is no doubt," said the Chief Justice, "that a debt or liability arising in any country may be discharged by the laws of that country, and that such a discharge, if it extinguishes the debt or liability, and does not merely interfere with the remedies or course of procedure to enforce it, will be an effectual answer to the claim, not only in the

(1) L. R. 6 C. P. 228, 234.

Courts of that country, but in every other country. This is the law of England, and is a principle of private international law adopted in other countries." In my opinion the debt due from the garnishee to the judgment debtor was a liability arising in this country, which therefore according to the law as stated by Bovill C.J. may be discharged by the laws of this country. I need say no more on the matter, but for Martin v. Nadel (1), which was relied on by the Divisional Court and strongly relied on by counsel for the respondents. There is a vital distinction between the facts of that case and the facts of the present case. In that case a judgment debtor had paid into his bank in Berlin a certain sum of money. The garnishees in that case were the London branch of that bank. They had entered into a recognizance for the same amount. The amount found due on the recognizance was less than the amount paid into the Berlin office by the judgment debtor, so that when the London branch paid this lesser sum there remained the balance due in Berlin from the Berlin office to the judgment debtor. That was a debt situate in Berlin, being properly recoverable in Berlin. That was the debt sought to be garnished. Here the debt sought to be garnished was a debt situate in England being properly recoverable in England. In this case the debt can be properly discharged in England. In Martin v. Nadel (1) the debt could be properly discharged only in Berlin. The ground of that decision is best expressed in a few lines from the judgment of Stirling L.J. After referring to the rule of law stated in Dicey's Conflict of Laws (2) that debts or choses in action are generally to be regarded as situate in the country where they are properly recoverable or can be enforced, the Lord Justice says (3): "On the facts of this case the debt of the bank to Nadel would be properly recoverable in Germany. That being so, it must be taken that the order of this Court would not protect the bank from being called on to pay the debt a second time." It may be that as reported some of the language of Vaughan Williams L.J. seems to go further than

(1) [1906] 2 K. B. 26.

(2) First ed. (1896), p. 318; 3rd ed. (1922), p. 342.

(3) [1906] 2 K. B. 31.

that, but I am satisfied that the decision of the Court proceeded on the basis that the debt in that case was situate in Germany and that garnishee proceedings in England were mere procedure which would not be recognized in international law. That is not so in the present case. The debt in this case is situate in England and is discharged in whole or in part by payment under a garnishee order in England, which is not mere procedure and is recognized in international law. In my opinion Martin v. Nadel (1) does not support the decision of the Divisional Court or the argument for the respondents. The appeal must be allowed and the garnishee order must be made absolute.

SCRUTTON L.J. I am of the same opinion. The Swiss Bank Corporation brought an action against the Bšhmische Industrial Bank carrying on business in Prague in Czecho-Slovakia for 54,000l. It is an important fact that the Bšhmische Industrial Bank entered an appearance to the writ. Apparently leave was obtained to serve them out of the jurisdiction. We are told that they entered a conditional appearance. They failed to set aside service of the writ, but then, instead of leaving the Swiss Bank Corporation to make what they could out of any judgment they might get by default, they appeared by their solicitor in the proceedings under Order XIV. and got leave to defend as to the greater part of the claim. Judgment however was recovered against them for some 29,000l., the amount of the principal money advanced to them or at their request. It was then discovered, and it has been admitted, that the London Merchant Bank owed about 9000l. to the Bšhmische Industrial Bank. The Swiss Bank Corporation obtained a garnishee order nisi against the London Merchant Bank, and the question is whether that order should be made absolute.

The Divisional Court have refused to make the order absolute, holding that the facts of this case bring it within the decision in Martin v. Nadel (1), that the Court will not make absolute a garnishee order where it will not operate to discharge the

(1) [1906] 2 K. B. 26.

garnishee in whole or pro tanto from the debt; it will not expose him to the risk of having to pay the debt or part of it twice over. That is well established as a principle of discretion on which the Court acts. The question therefore may be stated thus: Is there here any evidence that the London Merchant Bank, if they pay this 9000l. to the Swiss Bank Corporation, will run any substantial risk of being compelled to pay it over again to the Bšhmische Industrial Bank by action in Czecho-Slovakia? I am disposed to agree with the comment made by Bankes L.J. on para. 3 of Mr. Haswell's affidavit. It is certainly not sufficient to establish any risk of a double payment by the London Merchant Bank. Neither the "competent Court" nor the "foreign place" is specified, and the evidence of the alleged risk is very vague and unsatisfactory. I also agree with Bankes L.J. that the principle we have to apply is that which was stated by Bovill C.J. in Ellis v. M'Henry (1): "In the first place, there is no doubt that a debt or liability arising in any country may be discharged by the laws of that country, and that such a discharge, if it extinguishes the debt or liability, and does not merely interfere with the remedies or course of procedure to enforce it, will be an effectual answer to the claim, not only in the Courts of that country, but in every other country. This is the law of England, and is a principle of private international law adopted in other countries." Does this debt of 9000l. arise in this country? It is a sum held by a banker, who is resident in this country, for his customer and not payable until it is demanded in this country. In my view that is a debt arising in this country and situate in this country. I can understand the reluctance of a foreign Court to acknowledge the validity of a judgment recovered in this country where the debtor is not subject, or where by the foreign law he is not subject, to the laws of this country. For instance, many foreign countries do not recognize the English method of service out of the jurisdiction. If a writ, or notice of the issue of a writ, is served upon one of their subjects they decline to recognize the writ or any proceeding based upon it; but if a foreigner

(1) L. R. 6 C. P. 234.

appears to a writ, and takes part in an action and so submits himself to the jurisdiction of our Courts and obtains a benefit by so doing, I am not aware that any foreign country declines to recognize the validity of a judgment recovered against him. That is what happened in this case. The Bšhmische Industrial Bank, a Czecho-Slovakian subject, appeared to a writ issued in this country to recover a debt arising in this country, and obtained certain benefits by so appearing, the judgment ultimately recovered being for part only of the sum claimed. These facts bring this case within the principle laid down by Bovill C.J. in Ellis v. M'Henry. (1) The debt arose in this country, the debtor appeared to process in this country, and the legislation of this country, first s. 65 of the Common Law Procedure Act, 1854, and then Order XLV., r. 7, discharges a debt paid under a garnishee order absolute. In Martin v. Nadel (2), which the Divisional Court has followed, the facts were quite different. Judgment had been recovered against Nadel in this country. To enable him to appeal to the House of Lords he had to deposit in Court a certain sum and give a recognizance for a further sum of 500l. By arrangement with a branch of the Dresdner Bank in Berlin, where he resided, he paid into that branch the equivalent of 500l. and thereupon the London Branch of the Dresdner Bank entered into the required recognizance for 500l. The appeal to the House of Lords was dismissed with costs, which were paid partly by applying the sum deposited in Court and as to the balance of something over 300l. by the London branch of the Dresdner Bank under their recognizance. The result was that there remained in the hands of the Berlin branch a sum of 198l. 9s. 8d. due to Nadel. But that debt was not in London; it was in Berlin. Nadel having deposited the 500l. with the branch in Berlin could not without more have made good a claim to be paid the 198l. 9s. 8d. by the London branch. Before he could do anything he must make his claim on the Berlin branch who had the money, not on the London branch who had not. Clearly that debt did not arise in this country; equally clearly the debt in the present case did arise in this

(1) L. R. 6 C. P. 228, 234.

(2) [1906] 2 K. B. 26.

country. Moreover, in Martin v. Nadel (1) it was admitted that a garnishee order absolute in this country would have been no answer to a claim on the branch in Berlin. Vaughan Williams L.J. said (2): "I do not think that ultimately it was disputed that such a payment would be no answer to the action." Stirling L.J. said (3): "It is objected, and is to be taken as a fact, that the German law would not recognize a payment made under a garnishee order in this country." Very likely that admission was properly made in that case, because the debt was not an English debt and was not one on which the English Courts could exercise jurisdiction; but in this case there is an English debt payable to foreigners who have appeared to an action in this country. In Martin v. Nadel (1) it was taken as admitted that an action in Germany against the Berlin branch of the Bank must succeed, although the London branch had paid the debt under a garnishee order absolute. In this case it is not admitted and the evidence is quite insufficient to show that the garnishees run any serious risk of being obliged to pay over again in Prague or elsewhere the debt which they pay under this garnishee order. In short the facts in this case are quite different from those in Martin v. Nadel (1), which the Divisional Court felt to be binding upon them. For these reasons I think the decision of that Court must be reversed and the garnishee order must be made absolute.

I should like to add that since the argument I have been referred to Gould v. Webb (4), where to counts in indebitatus assumpsit it was pleaded that as to 50l. an action had been brought and judgment recovered in the Supreme Court of the United States against the plaintiff and that the 50l. due from the defendant to the plaintiff had been attached and paid over to the Sheriff of New York under an execution; and this was held a good plea by the Court of Queen's Bench.

ATKIN L.J. I agree. The plaintiffs sued a foreigner who though resident out of the jurisdiction appeared in the

(1) [1906] 2 K. B. 26.

(2) [1906] 2 K. B. 29.

(3) [1906] 2 K. B. 31.

(4) (1855) 4 E. & B. 933.

proceedings. The plaintiffs having got judgment by an order of the Court now seek to get execution by attaching a debt which to my mind clearly "arises" and "is situate" within the territorial limits of the jurisdiction of the English Courts, if there is any difference between the two expressions. Those Courts have statutory power to order execution to issue against such property, and by our law, and by the principles of private international law, such process when executed has the effect of discharging the person who owes the debt thus attached from further liability to pay it. It follows that the Court would rightly exercise its statutory jurisdiction and discretion by allowing this execution to issue, inasmuch as the effect of the execution will be to discharge the London Merchant Bank, the garnishees, of their debt to the Bšhmische Industrial Bank, the judgment debtors. Martin v. Nadel (1) is plainly distinguishable, and its only claim to be considered in this case is by reason of a sentence in the judgment of Vaughan Williams L.J. as reported in the Law Reports (2), which appears in much the same terms in the three other reports of the case. (3) The sentence in the Law Reports runs thus: "By international law an execution which has been carried into effect in a foreign country under foreign law, and has taken away part of a man's property, is not recognized as binding." That sentence taken by itself appears to me so plainly too wide that I feel satisfied that the very learned judge to whom it was ascribed cannot have intended the wide meaning now attributed to the words used. In their widest meaning they would indicate that if a judgment were recovered in a Court of competent jurisdiction in this country against a foreigner, the owner of a foreign ship, and the ship having arrived in this country were taken in execution and sold under the judgment, the former owner of that ship could, when she returned to a foreign jurisdiction, claim that he had never been divested of his property in her. That seems to me to be wrong. I think, when he used the words "execution which has been carried into effect in a foreign

(1) [1906] 2 K. B. 26.

(2) [1906] 2 K. B. 29.

(3) 75 L. J. (K. B.) 620; 95 L. T. 16; 54 W. R. 525.

country under foreign law," the learned Lord Justice intended to exclude that foreign country in which the property happened to be situate. So read, it may be that the sentence is not open to criticism. But where a competent Court issues execution upon property situate within its jurisdiction I think its jurisdiction would be recognized by any foreign Court which applies the ordinary rules of international law. For these reasons and for the reasons given by my brothers I think the appeal should be allowed and the order should be made absolute.

Solicitors for appellants: Slaughter & May.

Solicitors for respondents: Coward & Hawksley, Sons & Chance.

Solicitors for National Provincial and Union Bank of England: Wilde, Moore, Wigston & Sapte.

W. H. G.