[HOUSE OF LORDS.]

AND

Practice - Commercial Court - Declaratory Order - Mortgage - Redemption - Loan by Foreign Bank to English Bank on Security of Bonds - Construction - Action in King's Bench Division for Declaration as to Terms of Redemption - Transfer to Commercial Court - Jurisdiction - Discretion - Amendment - Rules of Supreme Court, Order XXV., r. 5.

An English bank obtained a loan from a Russian bank on the security of certain bonds. A question having arisen upon the construction of the contract whether the loan was repayable in roubles or in sterling, the borrowers commenced an action against the lenders in the King's

Bench Division, which was transferred to the Commercial Court, claiming a declaration that they were entitled to the possession of the bonds upon payment of the amount of the loan in roubles, and an injunction restraining the lenders from parting with the bonds save by delivery of the same to the borrowers against such payment. Roche J. held, upon the construction of the correspondence as pleaded, that the loan was repayable in sterling and dismissed the action. The Court of Appeal, after allowing an amendment which let in some further correspondence, declared that the loan was repayable in roubles, and gave liberty to the borrowers to take proceedings in the Chancery Division to redeem their securities, but granted no further relief in the action:-

Held, by Lord Dunedin, Lord Sumner, and Lord Parmoor (Viscount Finlay and Lord Wrenbury dissenting on the ground that the action ought to be dismissed as irregular) that the loan was repayable in roubles, and, notwithstanding that the action, being an action for relief which was incidental to a redemption action, was brought in the wrong Court, that there was in the circumstances no ground for interfering with the discretion of the Court of Appeal in making the declaration or in allowing the amendment.

The discretion of the Commercial Court as to making declarations under Order XXV., r. 5, considered.

Order of the Court of Appeal affirmed.

APPEAL from an order of the Court of Appeal reversing a judgment of Roche J.

In May, 1914, the respondents, the British Bank for Foreign Trade, Ld., applied to the appellants, the Russian Commercial and Industrial Bank, for a loan of 77,657l. sterling for a short term against the security of Baku 5 per cent. Bonds and Chinese Government 5 per cent. Bonds to be deposited in a bank in Brussels.

After some further negotiations the respondents, on June 26, 1914, deposited 30,000l. City of Baku 5 per cent. Gold Bonds with the CrŽdit Anversois, and 60,000l. Chinese Government 5 per cent. Gold Bonds with the SociŽtŽ Belge de CrŽdit Industriel at Brussels, at the disposal of the appellants' London branch, and on June 29, 1914, the appellants paid to the Commercial Bank of Siberia to the credit of the respondents 750,000 roubles. The sterling equivalent of the said amount of roubles at that date was 78,206l. odd.

A question having arisen upon the construction of the correspondence between the parties whether this loan was repayable in roubles or in sterling, the respondents, on September 12, 1919, issued a writ in an action in the King's Bench

Division against the appellants, claiming (1.) a declaration that the respondents were entitled to the possession of the Chinese and Baku Bonds upon payment to the appellants at their London Branch of 750,000 roubles or the equivalent thereof in British currency, (2.) an injunction to restrain the appellants, their servants or agents from parting or in any way dealing with the securities save by delivering up the same to the respondents against the payment of the 750,000 roubles or their equivalent.

By an order of Bailhache J. of November 19, 1919, this action was transferred to the commercial list.

This case is reported only on the question whether in the circumstances the Court ought, in the exercise of its discretion under Order XXV., r. 5, to make a declaratory order.

At the trial of the action Roche J. on December 4, 1919, held, upon the construction of the correspondence as pleaded, in favour of the defendants (the appellants) that the loan was a sterling loan. With reference to the question whether in any event the Court ought to make the declaration claimed the learned judge proceeded: "It is said on behalf of the defendants that at all events this Declaration that is asked for ought not to be made, and the injunction which is asked for ought not to be granted because if it is a rouble loan, contrary to my decision, then the Plaintiffs are not able to repay the persons who have made it in the currency of the country, or at the place where the payment ought to be made. Therefore, this relief that is asked for, which is really ancillary to or in lieu of the relief which would be granted to a mortgagor of securities in a redemption action, ought not to be granted, and I think there is a great deal in that contention. The fact is this: if it was a rouble advance, it was certainly made by the main office of the Defendant Bank in Petrograd. The deposit of securities in Brussels was made in favour of the London Agency, who were here represented before me. There is no question that the London Agency can be sued and can be brought here, but the matter does not rest there. The point is whether it would be equitable or proper if I thought that the repayment ought to be made in Petrograd that in

an indirect way redemption should be decreed when no such repayment is possible owing to a misfortune that is common to both parties as well as common to a vast number of the members of suffering humanity, namely, that an uncivilised Government is running in Russia and that matters are in such chaos that no repayment call be made or is possible. If my opinion as to the contract were different from the one which I have indicated, I should hesitate very long before I thought it either equitable or proper to grant the relief claimed in this action." He accordingly dismissed the action with costs. By the formal judgment it was "adjudged that the plaintiffs do recover nothing against the defendants" and that the defendants recover their costs against the plaintiffs.

The Court of Appeal (Bankes, Scrutton and Atkin L.JJ.), after allowing an amendment which let in some further correspondence, upon a review of the correspondence as a whole, declared that the loan was a rouble loan repayable in roubles and not a sterling loan, and gave liberty to the respondents to take such proceedings in the Chancery Division as they might be advised to redeem their securities, but made no order upon the claim for an injunction. The Court allowed the appeal with costs, but ordered that there should be no costs of the action inasmuch as it was wrongly brought in the Commercial Court.

1921. May 6, 9, 10. Douglas Hogg K.C. and W. P. Spensfor the appellants. This being an action in the nature of a redemption action, it has been brought in the wrong Court. This is an attempt by the mortgagor, by means of a declaration in the Commercial Court in an action brought in the King's Bench Division, to obtain by anticipation relief which could only be obtained in a redemption action in the Chancery Division, and then only on condition that the plaintiff offered to redeem. It is a device to secure the advantages of a redemption action without incurring the liability which such an action involves. This is therefore not a proper case for the exercise by the Court

of the discretion conferred upon it by Order XXV., r. 5. The power of the Court to make a declaration under that Order where no consequential relief is granted should be exercised with great caution: In re Staples (1); In re Clay (2); Guaranty Trust Company of New York v. Hannay & Co. (3); Faber v. Gosworth Urban Council (4); Grand Junction Waterworks v. Hampton Urban Council (5); Burghes v. Attorney-General (6); Austen v. Collins (7); Markwald v. Attorney-General. (8) And it is not the practice of the Court, in the absence of special circumstances, to make a declaration with reference to future rights: In re Staples (1); Honour v. Equitable Life Assurance Society of the United States (9); Barraclough v. Brown. (10) The action is misconceived and ought to be dismissed in any event.

Sir John Simon K.C. (with him R. A. Wright K.C., Sir Cassie Holden and du Parcq) for the respondents. It was plainly within the jurisdiction of the Court of Appeal to make the declaration appealed against. Therefore the question becomes one of discretion. It is true that one of the claims in the action might have been included in a redemption action, but it was perfectly legitimate for the respondents to seek to ascertain the true construction of the contract. Commercial people wanting to know where they stand would naturally come before the Commercial Court. If this had been an unsecured loan and the time for payment had not arrived it could not have been doubted that the Commercial Court could properly have made a declaration as to the effect of the contract, and it is submitted that the giving of the security makes no difference.

Douglas Hogg K.C. replied.

The House took time for consideration.

1921. July 1. VISCOUNT FINLAY. My Lords, the appellants are a Russian bank with their head office in Petrograd

(1) [1916] 1 Ch. 322.

(2) [1919] 1 Ch. 66.

(3) [1915] 2 K. B. 536.

(4) (1903) 88 L. T. 549.

(5) [1898] 2 Ch. 331, 345.

(6) [1911] 2 Ch. 139, 156.

(7) (1886) 54 L. T. 903, 905.

(8) [1920] 1 Ch. 348, 357.

(9) [1900] 1 Ch. 852, 855.

(10) [1897] A. C. 615, 624.

and a branch in the City of London. The respondents are a British bank incorporated under the Companies Act carrying on business in the City of London. The action was begun on September 12, 1919. The British bank had borrowed from the Russian bank, depositing certain securities. The writ claimed a declaration that the British company were entitled to the possession of the securities upon payment to the Russian bank at their London branch of 750,000 roubles, or the equivalent value thereof in British currency. The question which this action was intended to settle is whether the loan which the Russian bank had made was a sterling loan or a rouble loan. Owing to the enormous depreciation in the value of the rouble the lenders would, if the loan was a rouble loan, be entitled to receive a mere fraction of the sum to which they would be entitled if the loan was a loan in pounds sterling.

The case has been argued at your Lordships' Bar on two points which are quite distinct - namely, whether a declaration of this nature can properly be asked for in a declaratory action, or whether it should be left for determination in a suit for redemption, and whether the loan in the present case was a sterling or a rouble loan. [Upon the latter question his Lordship thought that if no more evidence was available than that which was at present before their Lordships the loan ought to be held to be a sterling loan, but, in view of the possibility that there might be further evidence when the point came up for decision in a regular way in a suit for redemption, he expressed no final opinion on the point; and he continued as follows:]

In my opinion the present suit was improperly brought and ought not to have been entertained. Scrutton L.J. states very clearly and forcibly the grounds on which he doubted whether the action ought to have been entertained although he ultimately agreed in allowing the appeal: "This is a very unsatisfactory, and, on the point we have to decide, a rather difficult case. The unsatisfactoriness appears to me to arise from the fact that the Plaintiffs have brought into the Commercial Court an action in which they have

picked out such parts of an action of redemption as are in their favour, and have avoided the consequences against them which would have followed in bringing the action for redemption in the proper Tribunal, in the Chancery Division. If they had proceeded in the Chancery Division for redemption, they would have had to offer to pay the sum found due by the Court. They do not want to do that apparently, they want to redeem if they can pay in roubles, but they have no particular anxiety at present if they have to pay in sterling. Roche J. was quite impressed with this aspect of the case; he found against the Plaintiffs on the declaration they wanted, but he said if he had found in their favour he was not at all clear, in fact he was inclined to think he would not have given them the declaration they asked for for the reasons he pointed out, and I have seriously doubted whether this Court ought not simply to dismiss the action on the ground that it is brought before an inappropriate Tribunal. But I cannot help seeing the result of that is, if an action for redemption is brought in the Chancery Division, the Chancery Judge will feel, out of the courtesy which prevails between Judges, bound to follow the opinion of the Judge in the King's Bench Division, and the parties would then have to come to the Court of Appeal again and argue over again the question which has been argued at length in this Court. On that ground I think we may be justified in making the declaration on the one point of construction whether on the documents and facts this loan was a sterling loan repayable in sterling or a rouble loan repayable in roubles; but I hope that the Commercial Court Judges will be strict in seeing that their Court is not made use of for purposes which do not properly fall within its jurisdiction, as I think has been done in this case." The jurisdiction to give a declaratory judgment rests on Order XXV., r. 5, which is as follows: "No action or proceeding shall be open to objection, on the ground that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether any consequential relief is or could be claimed, or not."

This is a very wide power and it is obvious that it is one that should be exercised with the utmost caution. The appellants (the Russian bank) objected to its exercise before Roche J. and also before the Court of Appeal. We are informed that they also objected to the making of the Order of November 19, 1919, by which the case was transferred to the Commercial list. They ought, I think, to have made a much more determined stand at that point than they did, and they should have applied to have the action stayed on the ground that it was not a case for a declaration, and that the point should be decided in due course in a suit for redemption. There are, as Scrutton L.J. points out, grave objections to permitting a mortgagor to pick out one point and ask the Court to give its opinion on it to help him to make up his mind whether it is in his interest to apply to redeem. The appellants, however, did press in both Courts below the objection to making any declaration of the kind. I think they ought to have acted more decisively and at some earlier stage. But the matter is not one which concerns the parties merely; it concerns also the proper administration of justice, and it appears to me that we ought to express our opinion upon the point whether the suit was rightly brought and should be entertained. The question in what cases the jurisdiction to give a declaratory judgment should be exercised has been considered in a number of cases which were called to our attention by Mr. Hogg. It should be exercised sparingly (In re Staples (1)); "with great care and jealousy" (Austen v. Collins (2)); "with extreme caution" (Faber v. Gosworth Urban District Council (3).) Stirling J. took the same view on this subject in Grand Junction Waterworks Co. v. Hampton Urban District Council (4), and Lord Sterndale, in Markwald v. Attorney-General (5), said that there had been "too great a tendency of late years to ask for declarations."

Of course it is true that there are at present no Courts in Russia in which it is possible to have questions of this kind

(1) [1916] 1 Ch. 322.

(2) 54 L. T. 903, 905.

(3) 88 L. T. 549, 550.

(4) [1898] 2 Ch. 331, 345.

(5) [1920] 1 Ch. 348, 357.

conveniently decided, but if the case is one in which the English Courts are to exercise jurisdiction it must be in the regular way. Order XXV., r. 5, was never intended to enable the mortgagor to pick out a point on which it might be convenient for him to know the law before applying to redeem and ask the Commercial Court to decide it for him in this summary way by declaration. It is also by no means clear that further evidence may not be available bearing upon the question on which a declaration is asked. This is indeed the vital question as between the mortgagor and mortgagee in the case of this loan. There ought to be a suit for redemption, and it would be, in my opinion, very rash to rush into a decision on this most important point in proceedings irregularly instituted and when it is uncertain whether we have all the proper materials before us. If it is to be decided now I think that the declaration of Roche J. should be restored, but in my view the proper course to take is to dismiss the action, giving the appellants the costs of this appeal but no costs in the Courts below.

LORD DUNEDIN. My Lords, the facts upon which the question before the House arises are, in the briefest form, as follows: The appellants, on the eve of the war, lent the respondents a sum of money who, in security for repayment, transferred to them, by way of mortgage, certain securities. The appellants and the respondents are not at one as to the terms of the loan. The appellants say it was a sterling loan - repayable in sterling. The respondents say it was a rouble loan - repayable in roubles. If the respondents are right, it is obviously in their interest to take advantage of the present rate of exchange, pay the loan, and get back the securities. In order to bring the matter to a test they raised the present action, asking for a declaration to the effect that the loan was a rouble loan. Such an action was, they said, competent under Order XXV., r. 5. The respondents enrolled the action for transference to the Commercial Court. It was transferred, and no application was made to have it taken away from that Court. The Commercial judge found, on the

reading of two letters which were in the pleadings set forth as containing the contract, that the loan was a sterling loan and dismissed the action. On appeal, it was argued that the contract was not contained in the two letters only on which the Commercial judge had proceeded, but on an extended correspondence. Reading that correspondence, the Court of Appeal allowed an amendment of the pleadings and made the declaration asked - namely, that the loan was a rouble loan. [Upon that question his Lordship agreed with the result arrived at by the Court of Appeal, and he continued as follows:]

Though I have, for convenience sake, dealt with the merits of the dispute between the parties, there is another question raised, and very strenuously argued, before your Lordships, which logically comes first; and that is, whether this was a proper case for granting such a declaration as the one asked and given. As I am aware that your Lordships are divided in opinion on this point, I have considered the question with repeated care. The power to grant a declaration rests on Order XXV., r. 5, which is in the following terms: "No action or proceeding shall be open to objection, on the ground that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether any consequential relief is or could be claimed, or not."

It is said that it ought not to have been granted by the Court of Appeal in a case coming to them from the Commercial Court, in view of the fact that an action of redemption can only be raised in the Chancery Division.

Now, the Chancery Division, as I understand it, is not in the strictest sense of the word a separate Court from the King's Bench Division. They are each of them parts of the High Court of Justice. I do not think, therefore, that it can be successfully urged that this is the case of a Court granting a declaration in a matter where it was powerless to grant consequential relief. But then it is said that the granting of a mere declaration is a matter of discretion, and that that discretion ought to be shown in granting such

declaration "sparingly," "with great care and jealousy" and "with extreme caution." My Lords, I confess that to my mind such expressions give little guidance. It may be that I am swayed by my experience of another system of law, but a rule which can be expressed in the form of a principle may well be proper to any legal system. Your Lordships are aware that the action of declarator has existed for hundreds of years in Scotland. It was praised, with envy, by Lord Brougham, in your Lordships' House, in the case of Earl of Mansfield v. Stewart (1) long before the genesis of Order XXV. r. 5. The rules that have been elucidated by a long course of decisions in the Scottish Courts may be summarized thus: The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought.

Applying this rule to the present case, this is in no sense a theoretical question. Moreover it is obvious that it is a matter of real importance to the respondents, as guiding their rule of conduct, to know whether the loan is truly a rouble loan or a sterling loan. In the one case, they will probably redeem; in the other case, they will not. Further, there is no doubt that there is here secured a proper - and, indeed, the only - contradictor.

In my opinion, unless you are to rob declarations of much of their real value, this is a case in which a declaration ought to be given. It was argued by the appellants' counsel that this was a mere device on the part of the respondents to evade the liability which would necessarily ensue if they raised an action of redemption in which no progress could be made until they had become bound to pay what the Courts should find due. But was it not a legitimate device? I think it was. May I here give an illustration of the same sort of position from one of the many decided cases in Scotland: Chaplins' Trustees v. Hoile. (2) In that case an estate was held by a person in liferent under a disposition by a

(1) (1846) 5 Bell, 139, 160.

(2) (1890) 18 R. 27.

testator. The deed contained a provision by which the liferenter was debarred from voluntarily selling his liferent, and the provision was fortified by clauses of forfeiture and irritancy. The liferenter raised an action to have it declared that the clauses of forfeiture and irritancy were bad, and he called as defender the fiar in whose favour the clause of forfeiture would operate. Besides pleading on the merits the fiar tabled a plea to the competency of the action. The competency was sustained, and the action dismissed on the merits. Lord Young, who gave the leading judgment in the Inner House, said that it would be out of the question to hold that the liferenter could only find out what were his rights by the test of actual experiment - an experiment that would be fatal to him if his views as to his legal position were wrong.

I confess I can see no impropriety, but rather the reverse, in the respondents wishing to know whether they or the appellants were right as to the point whether the loan was a sterling loan or a rouble loan before they made up their minds as to whether they should or should not set up an action of redemption. I should say the same if the persons asking for declaration were contemplating an action of foreclosure.

I have had the advantage of reading the opinion which is about to be delivered by my noble and learned friend Lord Wrenbury. I note that he says that if a declaration such as this had been asked for in the Chancery Division the action would have had short shrift unless amended so as to turn it into an action of redemption. I accept my noble friend's statement, and I find that Scrutton L.J. refers to this practice of the Chancery Division as the Ark of the Covenant. Perchance I venture the fate of Uzzah at the threshing floor of Nachon, 2 Samuel, cap. 6, yet I say that in my opinion the practice is wrong; that it stultifies Order XXV., r. 5, and denies justice to the litigant who asks it; and that the sooner it is altered the better.

While these are my opinions, I should not feel justified in giving a vote which is virtually a casting vote on this ground,

for I recognize that I can scarcely lay down by myself in this House rules for exercise of discretion by the English Courts when such discretion has not hitherto been administered so far as I can see by any rule.

I can only hope that my remarks will be taken as obiter dicta and that when the occasion next arises they will be considered on their merits.

But taking the matter as one of pure discretion, then I find that a discretion has been exercised, and I do not see why I should interfere with it. I am also greatly moved by the cogency of the remarks of Scrutton L.J., who considered what would be the result in this case of a refusal to make a declaration.

The only thing that troubled me was the idea that, the amendment being allowed only after the case was debated in the Court of Appeal, it might not be fair to make such a declaration then. If the appellants had been really prejudiced by this course, I should not have felt that the declaration should be granted. But it was open to the appellants to ask for an opportunity of leading further evidence. This they did not do. And it is not sufficient reason, in my view, for denying a declaration that, if a declaration is not given and the respondents are driven to a fresh action, something may turn up which may help the appellants' case.

I am therefore of opinion that the appeal should be dismissed. In view, however, of the fact that a great deal of the controversy has been caused by the transference of the cause to the Commercial Court - a course which I understand all your Lordships think was erroneous - I think there should be no costs of this appeal. I move accordingly.

LORD SUMNER. My Lords, the defendants had such a branch in London as made service of a writ there good service and obliged them, though a foreign corporation, to appear or allow judgment to go by default. The action was therefore validly begun and the High Court had jurisdiction to try it. This does not appear to be disputed or disputable. In what division

of the High Court ought such a writ to have been issued? It is endorsed thus:- "The Plaintiffs' claim is for (1.) A Declaration that the Plaintiffs are entitled to the possession of" certain securities "upon payment to the Defendants at their London branch of 750,000 roubles or the equivalent thereof in British currency. (2.) An injunction to restrain the Defendants .... from parting .... with the .... securities aforesaid save by delivering up the same to the Plaintiffs against payment of 750,000 roubles .... (3.) A receiver. (4.) Further or other relief." My Lords, I think it is fairly plain that this indorsement is a claim for a declaration that the plaintiffs, as borrowers, are entitled to redeem a security on certain terms, and for intermediate relief, but that the words "redeem" and "redemption" have been advisedly omitted. The action, therefore, was one which the Judicature Act assigns to the Chancery Division. It may be that in that Division the action might have been dismissed forthwith in the form in which it was begun, leaving the plaintiffs to commence another action claiming redemption in the usual way. In any case it should not have been allowed to proceed without amendment of the indorsement, and, as will be seen later, I do not think anything more would have been heard of the claim for a declaration, but it is a different question which arises now. Within two months of the service of the writ and as the first step in the action Bailhache J. transferred it to the Commercial List of King's Bench actions. To any one familiar with the practice in commercial actions it is quite plain what happened.

There is no doubt a preliminary question, I will not say a separable one - namely, whether the loan was a rouble loan or a sterling loan or, more precisely, whether in order to redeem the plaintiffs ought to tender roubles or sterling. This was not a mere question for the plaintiffs to decide for themselves with or without legal advice; a sufficient issue had arisen before writ between borrowers and lenders to make the question one in actual dispute between them. The borrowers had asserted an obligation on their part to repay

roubles only. The value of the rouble, or the absence of it, is such that nothing but meek assent on the lenders' part could be taken as less than a dissent from this suggestion. The lenders replied tactfully and tried to gain time, but plainly they had no mind to assent except on compulsion, and upon this point the parties were at arm's length.

For many years it has been accepted practice in cases in the Commercial List to hear and determine claims for a declaration of right, when a real and not a fictitious or academic question is involved and is in being between two parties, in order that they may know what business course to take without having to run the risk of acting and finding themselves liable in damages, when at last the matter is brought before the Court. I believe this practice, as hitherto applied, to be warranted by the rules, and that the decision of the Court of Appeal to that effect in the Guaranty Trust Case (1) was correct. I do not question that those who were concerned in endorsing this writ and in issuing it out of the King's Bench Division and asking for transfer of the cause to the Commercial List as one proper to be transferred, acted in the belief that this course was correct, though to avoid awkward questions they avoided calling it a redemption action. For all that I am sure that what was done was wrong. The cause should have gone to the Chancery Division at the outset. It is, however, no easy matter to ensure this. The judge who takes the Commercial List cannot be expected, in the press of dealing with business which in other cases would go to a Master in Chambers, to scrutinize with distrust an application which both sides concur in treating as proper, and although we were informed that in this case the gentleman who attended the summons on the defendants' behalf pointed out that the case was not one for transfer and may even have done so with insistence, the issue was certainly commercial in its nature and I can quite understand that the claim might pass muster; indeed, the spirit of the maxim boni est judicis ampliare jurisdictionem has not been unknown in dealing with these summonses to transfer.

(1) [1915] 2 K. B. 536.

In any case, even after transfer, it would be possible on further information and after the close of the pleadings to discharge the order for transfer and either direct steps to be taken to remove the case to the proper division or to stay it. The plaintiffs were at risk as to costs and it was the defendants' affair, either by immediate appeal against the order to transfer or at a subsequent stage by a substantive application, to take this course. If they failed to do so, they laid themselves open to the charge of taking their chance of succeeding on the issue at the trial and of thus depriving themselves of the right to take the objection in any higher court. It does not seem to me that before Roche J. much was really made of the fact that the action was a redemption action. From his judgment it would seem that he understood the objection to have been in the first place to the making of any declaration under the circumstances, and in the second to the grant of an injunction in any case. At any rate the defendants took their chance of winning before him and they won.

My Lords, for my own part, I think that, as a matter of discretion, it would have been better if no declaration of right had been made. I am far from saying there was no jurisdiction to do it, but practice is practice, and if the trial of this preliminary question in the Commercial List was in itself desirable, it was for a judge of the Chancery Division, if he thought fit to do so, to direct an application to be made to the judge of the King's Bench Division in charge of the Commercial List to hear and determine as a preliminary commercial question, if he in turn thought fit to do so, the issue whether this was a rouble or a sterling loan. This is not a mere question of etiquette; it is the only way of complying with the Act. I know that it seems roundabout and would have cost the parties sundry six and eightpences, but that is a small matter. Practitioners who know their business will always be able to keep down expense, and short cuts are always perilous. As a matter of fact, the hearing of preliminary questions generally decides nothing, and they have to stand over till the trial. As it is, an action has been

begun in the Chancery Division in the long run, which ought to have been brought there in the first instance. The declaration in effect was sought to enable the plaintiff bank to ascertain whether, by a mere tender of roubles, they could save costs in the redemption action, and I am sorry that they got any assistance in the matter.

There are two questions of discretion involved - namely, whether any declaration should have been made under the circumstances and whether any amendment of the pleadings should have been allowed. Both Courts below have elected to make declarations and in each case, though in the alternative, the defendants sought a declaration in their favour. Further, the Court of Appeal has allowed the necessary amendment. As to the first point, if your Lordships were to dismiss the action on the ground that no declaration either way should be made, what will be the result? The Chancery action will proceed and, as I know no power that your Lordships have to direct that the judge who tries another action shall pay no attention to judgments which your Lordships may think should not have been given in this action, it is fairly certain that that learned judge will read them all, and that, as one party or the other will certainly be dissatisfied, whichever lead he follows, the case will presently come here again after a good deal more money has been spent. I cannot bring myself to advise your Lordships to refuse to decide the preliminary issue on this ground. It is true that in the result your Lordships' freedom is clogged by errors which occurred below, but this is always liable to happen in cases where a discretionary jurisdiction is exercisable in the Court of First Instance. Here only one of two answers is possible. If the case were such that the judgments given could be pronounced wrong in any event and so got rid of and the issue be freely raised in a new proceeding a different course might be taken. Then is there any ground for saying that the defendants were seriously surprised and taken at a disadvantage by the plaintiffs' abandonment of their pleaded case or any likelihood that further evidence will be forthcoming which ought to be heard? As the transaction is

mainly on letters and telegrams, the whole of which were in counsel's possession and apparently were brought to the attention of Roche J., the contention that the contract was not limited to the two letters pleaded cannot have surprised any one, nor could the new mode of stating the contract have required more than an attentive re-perusal of a few documents. An amendment ought to have been asked for at the trial, but to allow it on appeal is a common exercise of discretion which, little as I like it, I cannot say is wrong, and of course the Court must have satisfied itself that in doing so no injustice was done to the defendants.

As to the second matter, I can see no reasonable prospect that any fresh relevant evidence will be forthcoming hereafter so far as this issue is concerned. The defendants entirely failed to suggest what it would be or who would give it; nor should it be forgotten that this was a short-term loan and doubtless would have been cleared off within a few months but for the fact that the German occupation of Brussels put it out of the appellants' power to redeliver the security. This was the beginning and for a considerable time was the whole of the difficulty. At least the lenders should then have prepared themselves to deal with any question arising upon redemption, when that should become practicable, and, if they have failed to do so, they are not entitled to further indulgence or delay. In 1915 and 1916 the Russian office was, in fact, conferring about redemption with a representative of the borrowers, Mr. Wincey, and it was Mr. Friedland, the officer who signs one of the 1914 letters, who represented the lenders on those occasions. Was no information then given to the London branch for purposes of record? The plaintiffs' evidence at the trial in 1919 shows that Mr. K™n, who negotiated the transaction in 1914, was then believed to be in Paris. The defendants did not question this. Their cross-examination of the plaintiffs' witnesses shows that they had considerable familiarity with the calculations by which the amount of the plaintiffs' requirements was originally fixed. In any case, the Court of Appeal could and would have given relief,

if a case of surprise had been made out before them. On the other hand, though counsel is instructed to say that the lenders' London branch knows nothing about the transaction beyond these letters and documents, no evidence was called on their behalf to found this statement. Before we can be asked to act on it I think some one should have been called to say what inquiries have been made and where the persons who would naturally know the facts now are, and what further evidence it is suggested that further time might make available. The matter cannot be one within the personal knowledge of the solicitors instructing counsel. My Lords, my conclusion is that, as it cannot be said that this is an action over which the High Court had no jurisdiction, or that the relief sought is relief which the High Court could not give, or that the plaintiffs had no cause of action at all, and as the appellants have participated in and at first have profited by the irregularities which have occurred, we cannot at their instance simply dismiss the action. No useful purpose would be served by setting aside all proceedings subsequent to appearance beyond the expression of a costly censure, which can equally well be expressed otherwise, and as this course would cause much expense and delay, I think we ought finally to deal with this issue, which has been sufficiently contested already. For the reasons given by Atkin L.J. I think that the loan was a rouble loan, but, as some of your lordships think otherwise, I will more fully state my reasons. [His Lordship then stated his reasons for that opinion and advised that the appeal should be dismissed but without costs.]

LORD PARMOOR. My Lords, the respondents were plaintiffs in an action against the appellants asking (inter alia) for a declaration that they are entitled to the possession of 60,000l. Chinese Government 5 per cent. Gold Bonds and 30,000l. City of Baku 5 per cent. Bonds upon payment to the appellants at their London Branch of 750,000 roubles or the equivalent thereof in British currency. The action was brought in the King's Bench Division, and transferred to the Commercial

List under an Order made by Bailhache J. on November 19, 1919. It does not appear that at this stage any objection was taken either to the commencement of an action of this character in the King's Bench Division, or to its transfer to the Commercial List. Points of claim and points of defence were duly delivered, and the case came on for trial before Roche J. The main question in issue between the parties was whether the loan was a rouble loan, repayable in roubles, or a sterling loan, repayable in sterling. Roche J. decided against the respondents that the loan was a sterling loan repayable in sterling, and dismissed the action, entering judgment for the appellants. Although it was not material to his decision, he expressed his opinion that there was a great deal in the contention of the appellants, that the declaration asked for ought not to be made, on the ground that the relief asked for was really ancillary to, or in lieu of, the relief which would be granted to a mortgagee of securities in a redemption action. I think the matter is one of discretion and not of jurisdiction, and that there is no reason for saying that the discretion has been improperly exercised. It would certainly have been within the discretion of Roche J. to have dismissed the action on this ground, without expressing any opinion on the merits.

The respondents appealed to the Court of Appeal. The Court of Appeal granted an amendment, reversed the decision of Roche J. on the merits, and declared that the loan made by the appellants to the respondents was a rouble loan repayable in roubles, and not a sterling loan. I think that the amendment was properly allowed, but the Court were unanimously of opinion that it was not possible for the Commercial Court to grant the relief asked for in the action, and therefore refused to do more than grant a declaration. The view of the Court was that by granting the declaration the Court could afford considerable relief to the parties, and that it would be open to the respondents by other proceedings, such as they might be advised to take, to obtain the necessary relief with a view to obtaining possession of their securities.

The result is that a declaration adverse to the appellants has been made by the Court of Appeal. Against this decision the appellants have appealed to this House. They are in my opinion entitled to a reversal of the order which contains the declaration, if they can show that on the merits the decision of the Court of Appeal should be set aside and the judgment of Roche J. restored. [His Lordship then discussed the case on the merits and was of opinion that the Court of Appeal was right in declaring that the loan was a rouble loan repayable in roubles and not a sterling loan. He agreed in the motion proposed by Lord Dunedin.]

LORD WRENBURY. My Lords, we have here before the House a mortgagor who has brought his mortgagee into Court claiming a declaration as to the amount due in respect of the mortgage, and a declaration that he is entitled to the mortgaged property on payment of that amount, but making no offer to redeem. He has obtained a declaration as to the amount due in respect of the mortgage. He did not bring his action in the Chancery Division. Had he done so and had he managed to get his action into Court for trial, his counsel in opening must in the first five minutes have disclosed that the position is such as stated in the initial sentence of this judgment. He would have had short shrift. The judge would at once have asked whether he would then and there amend his pleading by adding an offer to redeem, and upon his refusing to do so would have dismissed his action with costs. If on the other hand he had assented to add an offer to redeem, the mortgagee would have been assured his right to have sale or foreclosure if the amount due for redemption were not paid. But he brought his action in the King's Bench Division. It was tried in the Commercial Court. The plaintiff there obtained a declaration but not the declaration he wanted, so he brought no action to redeem. He appealed. The Court of Appeal reversed the trial judge and gave him a declaration in his favour, the declaration he wanted. Thereupon he brought an action to redeem. That

action is pending. Meanwhile the mortgagee has appealed to this House.

The first question, and that which as regards its general importance is to my mind far the most important question in the case, is whether the action ought ever to have been entertained at all, whether it ought not to have been dismissed, and whether your Lordships ought not now to dismiss it and to refuse to determine in this action what is the amount on payment of which the plaintiff the mortgagor can redeem. My judgment is that the action ought to be dismissed, and I offer no apology to your Lordships for giving my reasons for that opinion at length. Before doing so it will be convenient to outline the facts of which the result only is indicated above. In June, 1914, the appellants, the mortgagees, advanced to the respondents, the mortgagors, a sum of 77,000l. odd upon the security of certain Baku bonds and Chinese bonds. One of the parties is a Russian bank. The loan was made in Petrograd. A very serious question has arisen between the parties whether the loan is repayable in sterling or in roubles. If the latter the mortgagor can redeem on payment of about say 5000l. If the former he must pay 77,000l. In the action brought in the King's Bench Division, the mortgagor claimed a declaration that he was entitled to the possession of the mortgaged bonds upon payment of roubles, and an injunction to restrain the mortgagees from parting or dealing with the bonds. It seems that in the course of the proceedings the mortgagor moved for an injunction to restrain the mortgagees from collecting the money due on the coupons of the bonds. It is no matter for surprise that he failed. His ideas as to the relative rights of mortgagor and mortgagee seem to be unique. With this exception we have heard nothing of the claim for an injunction. Some propositions require no argument, and may be stated as obvious. The rights of mortgagor and mortgagee are different at law, and in equity. At law the mortgagee is the owner of the mortgaged property. In equity his right in that respect is subject to the equity of redemption, but he has the benefit of sale or foreclosure if the mortgagor fails

to redeem. Any cause of action as between mortgagor and mortgagee arises solely upon the mortgage contract. In equity the mortgagor can reach the mortgaged property but only by enforcing the equity of redemption. If he sues he must offer to redeem, and if having done so he fails to redeem he will be exposed to sale or foreclosure. A redemption action is assigned business. It can be brought only in the Chancery Division. This being so, the mortgagor has in this case sued not in the Chancery Division but in the King's Bench Division. He is in the wrong Court, and the Court of Appeal has rightly held that he is in the wrong Court. He cannot, even if he offered it, have redemption in that Court, and cannot be exposed to sale or foreclosure in that Court. But nevertheless that Court has made a declaration as to the mortgagor's liability which will bind the mortgagees when an action is brought as it has since been brought in the right Court.

First, was there jurisdiction to entertain this action at all? I think there was, and for two reasons. The one is that the High Court of Justice is after all one Court although divided into Divisions and with certain business assigned to one Division to the exclusion of another. When this writ was issued it was issued in the High Court of Justice, and if it was issued in the wrong Division the proper course was not to dismiss it but to transfer it to the right Division, where it could have been prosecuted if the plaintiff offered to redeem. The second is that there is jurisdiction in the Court to determine the construction of any document, although I have no doubt at all that there are cases in which the Court would without hesitation refuse to exercise the jurisdiction. Suppose there were documents comprising a correspondence between a man and a girl, and an action were brought for a declaration that upon their construction there was or was not a promise of marriage with a view to bringing or not bringing an action for breach of promise of marriage according to the result. It may be that there would be jurisdiction in that case, but I can have no doubt at all as to the fate of such an action. Assuming that there was jurisdiction in the King's Bench

Division to entertain this action, the next question is whether Order XXV., r. 5, applies, and if it does how the Court ought to have acted in applying the rule. It may be, and I think it is the case, that to call Order XXV., r. 5, into operation nothing more is essential than that "an action or other proceeding" shall be competent to the plaintiff and shall have been brought. I doubt however whether it applies when the action brought is not a competent action duly instituted in the proper Court but an action brought in the wrong Court to evade the consequences which would ensue to the plaintiff for the benefit of the defendant if it were brought in the right Court. The duty of the primary judge when this action was brought before him was I think to refuse to entertain it at all unless the plaintiff amended his pleading by adding an offer to redeem, and then to have transferred the action to the Court which alone could exercise the jurisdiction of the High Court in that class of action. By not taking this course he was depriving the defendant of his right as mortgagee to have in that action sale or foreclosure if the plaintiff failed to redeem. Upon this ground I incline to the opinion that Order XXV., r. 5, does not apply at all. Next, assuming that it does apply, the authorities are numerous that the discretion of the Court to make a declaration "whether any consequential relief is or could be claimed or not" is to be most carefully and jealously exercised. The present case is so extreme that if the discretion is to be exercised in favour of entertaining an action for a declaration without relief in this case, I cannot at the moment picture any state of facts in which the Court might not exercise its discretion in that direction - for it is here exercising its discretion with the result that the mortgagor gets a decision upon the point on which he desires it without exposing himself by an offer to redeem to the consequences of sale or foreclosure if the declaration should be against his interests. And he seeks and has here sought successfully to put himself in a position to redeem or not to redeem according as the construction is for him or against him. Even upon the low ground of costs he has no right to bring his

mortgagee into Court and expose him to the defence of an action in which, even if the mortgagor is ordered (as in my opinion he certainly ought to be) to pay in any event all the costs of the action, the mortgagee will not be fully reimbursed.

My Lords, as far as I can see, the principles upon which I have been insisting have been very imperfectly understood in the conduct of this case. If the mortgagee had adequately presented them to the attention of the Court I should have expected to have traced the result more clearly in the judgments delivered. It is plain that something was argued upon it, but the trial judge, Roche J., deals with it only by this sentence in his judgment: "It is said on behalf of the Defendants that at all events this Declaration that is asked for ought not to be made, and the injunction which is asked for ought not to be granted, because if it is a rouble loan, contrary to my decision, then the Plaintiffs are not able to repay the persons who have made it in the currency of the country, or at the place where the payment ought to be made. Therefore, this relief that is asked for, that is really ancillary to or in relief of the relief which would be granted to a mortgagee of securities in a redemption action, ought not to be granted, and I think there is a great deal in that contention." The ground which he assigns - namely "because if it is a rouble loan, &c." shows that he was not appreciating the real point. In the Court of Appeal Scrutton L.J. appreciated its importance up to a certain point, but I cannot think that he had obtained from counsel in argument an adequate explanation of the rights of the mortgagee in the matter, particularly as regards sale or foreclosure, and of the consequences of the course which the Court was taking. When Bankes L.J. affirmed that "the remedy which the Plaintiffs sought was quite inappropriate," that the plaintiffs' real claim was to redeem, and the proper place to decide that was the Court of Chancery, he seems to be quite unconscious that upon those statements, which were quite accurate, he ought to have gone on to say that the Court would not allow him to evade making the offer to redeem which the Court of Chancery would have

required as a condition precedent to listening to him at all and the right of sale or foreclosure which would have ensued. The concluding paragraph of Atkin L.J.'s judgment is this: "Having decided that I entirely agree that it really was a not possible for the Commercial Court to grant the relief asked for in this action, I think there are many matters to be determined that would be much better determined, and, indeed, can only be properly determined according to the rules of the Chancery Division, and to my mind, the right view is merely to make this declaration, which does, I think, afford considerable relief to the parties, in the sense that it sets at rest, at present at any rate, the important question in difference between them, and, having determined that, it would be open to the Plaintiffs by other proceedings, such as they may be advised, to obtain the necessary relief with a view to obtaining possession of their securities." I cannot trace in this that the point I have been discussing was present to his mind.

My Lords, I have felt my responsibility in this case to be the greater because not one of the four judges before whom this case has come below is a judge who has been trained in Courts of Equity, and (a fact which is to myself the keenest matter of regret) no one of your Lordships with whom I am privileged to sit in deciding this case has been so trained either. Under these circumstances, I feel my voice to be indeed a voice crying in the wilderness, but I have felt bound to cry even though I cry in vain. I am, indeed, in the present case in a worse plight than I was in the full Court of Appeal in the Continental Tyre Case (1), for, although I there found myself standing alone, there was in that case (being in the Court of Appeal) an opportunity (and it was utilised) of putting the matter right in your Lordships' House.(2) But from the decision of this House there is no appeal, nor even opportunity for reconsideration even by the House itself.

My Lords, so far I have not even touched upon that which is to the parties the really important point - namely, whether

(1) [1915] 1 K. B. 893.

(2) [1916] 2 A. C. 307.

this is a loan repayable in sterling or a loan repayable in roubles. And I do not intend to say anything whatever upon that point. If I did, I should be doing the very thing which, as I think, the Court below had no business to do. Had Your Lordships been divided two and two upon that point I might have been compelled to do violence to my own convictions and to have expressed an opinion upon it. But as a majority of your Lordships think it to be a rouble loan it is immaterial whether I agree in that view or not. I ought, I think, to add (although under the circumstances it is not a matter of moment) that I am far from satisfied with the course taken in the Court of Appeal in giving leave to amend. The plaintiffs' case down to reply in the Court of Appeal was rested upon two documents and two documents only - namely, those of June 1 and 3. In reply in the Court of Appeal they asked for and obtained leave to amend by introducing on the question of construction several other subsequent documents, and it was upon those subsequent documents that they succeeded. It may be, and I think it is the fact that the defendants might then have asked that the further hearing should stand over and that they should be allowed to call further evidence in the Court of Appeal. But I do not think the plaintiffs can be allowed to treat that which was done as a fair trial of this new case. It would have been only right and just I think that the Court itself should have allowed the amendment only upon the condition that the defendants should have an opportunity of advancing further evidence if they desired to do so. The action and the proceedings in the action are, to my mind, alike unsatisfactory. I am, however, satisfied to rest my judgment in this case upon the ground which I have discussed at length. In my opinion the action, in the absence of an offer to redeem, ought never to have been entertained. It ought, I think, to have been dismissed with costs at the outset. It ought, I think, to be dismissed now and the mortgagees ought to have their costs throughout the proceedings. It is scarcely necessary to add that the matter cannot be set right by the plaintiffs now making (if they are minded so to do) an offer to redeem,

for in the Division in which this action is found, there is no power to make the order proper in a redemption action.

Solicitors for the appellants: Freshfields & Leese.

Solicitors for the respondents: Roney & Co.