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England and Wales High Court (Queen's Bench Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Bitar v Bank of Beirut SAL [2022] EWHC 2163 (QB) (15 August 2022) URL: http://www.bailii.org/ew/cases/EWHC/QB/2022/2163.html Cite as: [2022] EWHC 2163 (QB) |
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
GEORGE GABRIEL BITAR |
Claimant |
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- and – |
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BANK OF BEIRUT S.A.L |
Defendant |
____________________
Barry Issacs QC and Donald Lilly (instructed by Howard Kennedy LLP) for the Defendant
Hearing dates: 19, 20, 21, 22 & 26 July 2022
Judgment handed down in draft 11 August 2022
____________________
Crown Copyright ©
I Contents
SECTION NUMBER |
SUBJECT |
PARAGRAPH NUMBER |
I |
Contents |
|
II |
Introduction | |
III |
Factual background (a) The parties and their relationship (b) The Claimant's residence (c) Use of the accounts for international transfers (d) The crisis in Lebanon (e) Transfer requests of the Claimant (f) The tender and deposit procedure | |
IV |
Questions for the Court to decide | |
V |
The cases of Khalifeh and Manoukian | |
VI |
The witnesses (a) The factual witnesses (b) The expert witnesses a) Professor Marie-Claude Najm, expert witness for the Claimant b) Fadi Moghaizel, expert witness for the Defendant | |
VII |
How to deal with foreign law | |
VIII |
Sources of Lebanese law (a) The relevant codes (b) Case law (c) Status of Urgent Matters Decision Construction of contracts under Lebanese law | |
IX |
Construction of the Account Agreements (a) The express terms (b) Discussion | |
X |
Custom | |
XI |
Related issues | |
XI |
Change in custom | |
XII |
Acceptable reason exception | |
XIII |
The Bank's submission that no international transfer obligation exists due to the Lebanese law of agency | |
XIV |
Is there a new custom? | |
XV |
The effect of the tender and deposit procedure | |
XVI |
Specific performance | |
XVII |
Damages | |
XVIII |
Interest | |
XIX |
Conclusions | |
XX |
Disposal |
MR JUSTICE FREEDMAN :
II Introduction
II Factual background
(a) The parties and their relationship
(1) the First Account (numbered 469770) with his wife; and
(2) the Second Account (numbered 469775) with his parents and brother.
(1) the First USD Current Account, which is a sub-account of the First Account and is a form of current and checking account called a "winner" account;
(2) the Second USD Current Account, which is a sub-account of the Second Account and is also a "winner" account; and
(3) USD Fixed Deposit Account, a sub-account of the Second Account.
(b) The Claimant's residence
(c) Use of the accounts for international transfers
(d) The crisis in Lebanon
"20. The crisis's immediate catalyst was nationwide political unrest in the autumn of 2019, triggered by a proposal by the government to tax calls made by WhatsApp. Due to that unrest, which included protests, street riots and roadblocks, Lebanese banks were closed for two weeks between 18 October 2019 and 31 October 2019. During this time, SGBL issued a blanket directive to refuse all requests for international transfers and Bank Audi directed employees not to process any new cross-border requests until after the Bank reopened and resumed business. When the banks reopened on 1 November 2019, there was a run on all Lebanese banks, with large numbers of clients attempting to withdraw all their foreign currency or transfer it all abroad.
21. Anticipating such a run, SGBL issued a directive to its employees that, from 1 November 2019, no international transfers were to be made for any purpose. Bank Audi similarly imposed severe restrictions on international transfers, directing staff that foreign exchange transactions exceeding US$10,000 must not be accepted unless approved by Bank Audi's central Treasury Unit. Such international transfers were only to be permitted for personal expenses. These initial directives were intended as temporary, stop-gap measures. At the time, the Banks thought that the crisis would be shortlived and that clients' loss of confidence resulting from the protests and the October 2019 bank closures would be restored. Instead, the crisis deepened, due to problems at a macro-economic level in Lebanon.
22. Systemic issues within Lebanon's banking sector mean that Lebanese banks are highly exposed to fiscal issues with the Lebanese state. This is because Lebanese banks rely heavily on the Banque du Liban ('BdL'), the central bank, for their foreign currency liquidity. As the crisis unfolded, however, it meant that BdL could in practice 'turn off the taps' by restricting Lebanese banks' access to their foreign currency deposits for international transfers. The net result is that the Banks (along with all other Lebanese banks) have been operating with severe foreign currency shortages since October 2019. Lebanon's economic turmoil and political unrest have worsened since then, the Lebanese pound (LBP) having lost 90% of its value amid dwindling confidence in the Lebanese economy, which has itself shrunk by 40%".
(1) Mass protests commenced in Beirut against a Lebanese bank on 17 October 2019.
(2) On 21 October 2019, most Lebanese banks closed.
(3) On 1 November 2019, the Bank reopened, but sought to impose "informal restrictions" on withdrawals and transfers. The purpose of these informal restrictions was said to be to prevent "a run on the banks". Other Lebanese banks sought to impose similar measures, but there were inconsistencies among those measures.
(4) On 17 November 2019, apparently in response to those inconsistencies, the Association of Banks in Lebanon ("the ABL"), a professional trade association of banks in Lebanon, issued a circular in which it advised all member banks to impose uniform capital controls, which it called "temporary directives" restricting withdrawals and transfers from Lebanese banks. There was an exception for dollars transferred to Lebanon after the start of the crisis. In Manoukian, Picken J found at [24] that "the ABL Circular did not have legal force." This was accepted by Professor Najm at [391] of her report and expanded upon at [390-406] to the effect that a such a circular cannot put any restriction on financial transfers or affect or limit the contractual and legal obligations of banks. It does not provide the banks any valid basis for failing to comply with their contractual obligations, such as international transfer instructions of their customers.
(5) Mass protests continued in December 2019 and thereafter. Lebanon defaulted on a $1.2 billion Eurobond in March 2020 and the Beirut port explosion occurred in August 2020.
"The net result is that the Banks (along with all other Lebanese banks) have been operating with severe foreign currency shortages since October 2019. Lebanon's economic turmoil and political unrest have worsened since then, the Lebanese pound (LBP) having lost 90% of its value amid dwindling confidence in the Lebanese economy, which has itself shrunk by 40%."
(e) Transfer requests of the Claimant
(1) on 6 September 2020, the Claimant instructed the transfer of $470,000 to his UK account;
(2) on 20 October 2020, the Claimant (by solicitors) instructed the Bank to transfer the full balance then standing to the credit of the USD Current Accounts to his UK account;
(3) on 3 November 2020, the Claimant (himself) instructed the Bank to transfer the full balance then standing to the credit of the USD Current Accounts to his UK account;
(4) on 9 March 2021, the Claimant instructed the Bank to transfer the balance of the fixed deposit accounts to his UK account on maturity;
(5) on 7 April 2021, the Claimant instructed the Bank to transfer $459,771 and $4,275,773 from the respective USD Current Accounts to his UK account;
(6) on 20 August 2021, the Claimant instructed the Bank to transfer the balance of the USD Fixed Deposit Account to his UK account on maturity; and
(7) on 21 October 2021, the Claimant instructed the Bank to transfer $459,603 and $7,331,021 from the respective USD Current Accounts to his UK account.
(f) The tender and deposit procedure
IV Questions for the Court to decide
Question 1: Do the terms of the Account Agreements on their proper construction (leaving aside custom) require the Bank to comply with the instructions in this case?
Question 2: What is the relevant custom/practice for the purposes of assessment the Bank's obligations: (a) that prevailing at the time when the contracts were entered into, or (b) that prevailing when the instructions were given?
Question 3: If the answer to question 2 is (a) (i.e., the custom prevailing at the time of contracting), is/was the custom/practice subject to an "acceptable reason" exception?
(It will not be strictly necessary to answer questions 2 and 3 if the answer to question 1 is "yes".)
Question 4: If the answer to question 2 is (a) (i.e., the custom prevailing at the time of contracting) and the custom/practice is/was subject to an "acceptable reason" exception, did such an "acceptable reason" exist at the time when the instructions were given?
Question 5: If the answer to question 2 is (b) (i.e., the custom prevailing at the time of the instructions), has the custom existing at the time of contracting been replaced, by the time when the instructions were given, with a new custom under which banks were not required to effect transfers on instruction?
Question 6: If there is no obligation to transfer, can a BdL cheque give good discharge of the Bank's debt to the Claimant?
Question 7: Is specific performance available to the Claimant? If not, what damages is the Claimant entitled to?
Question 8: Is the Claimant entitled to interest at 9% per annum?
V The cases of Khalifeh and Manoukian
"…Mr Khalifeh does not contend that a bank which holds a foreign currency deposit account is obliged to effect an international foreign currency transfer at the customer's request, and, to that extent, does not seek to support the reasoning in the summary procedure cases which have made that finding (which, in addition to the Nakad case, include the Judge of Summary Procedure in Metn, Decision no 27/2020 dated 10 January 2020, Salah Abdel Al Jamil v Banque Libano-Suisse SAL and the Judge of Summary Procedure in Zahle, Decision no 5 dated 13 January 2020, Mohamad Ismail Abdul Rahman v Credit Libanais SAL)."
"39. At least at the start of the trial, the parties were agreed that the following issues arose: (i) whether an international transfer right exists under the contract with each of the Banks (the 'Contractual Transfer Right Issue') - and, in the case of Bank Audi, whether a particular exclusion clause is applicable; (ii) further or alternatively, whether an international transfer right exists as a matter of Lebanese law (the 'General Transfer Right Issue') - and, again in the case of Bank Audi, whether a particular exclusion clause is applicable….
….
41…it should be noted that in Khalifeh the claimant accepted that no international transfer right existed under Lebanese law. Foxton J did not, therefore, address either of the first two issues set out above."
"Where any question as to the law of any country or territory outside the United Kingdom, or of any part of the United Kingdom other than England and Wales, with respect to any matter has been determined (whether before or after the passing of this Act) in any such proceedings as are mentioned in subsection (4) below [which includes proceedings in the High Court], then in any civil proceedings (not being proceedings before a court which can take judicial notice of the law of that country, territory or part with respect to that matter)—
(a) any finding made or decision given on that question in the first-mentioned proceedings shall, if reported or recorded in citable form, be admissible in evidence for the purpose of proving the law of that country, territory or part with respect to that matter; and
(b) if that finding or decision, as so reported or recorded, is adduced for that purpose, the law of that country, territory or part with respect to that matter shall be taken to be in accordance with that finding or decision unless the contrary is proved:
Provided that paragraph (b) above shall not apply in the case of a finding or decision which conflicts with another finding or decision on the same question adduced by virtue of this subsection in the same proceedings."
VI The witnesses
(a) The factual witnesses
(1) He had made a number of substantive errors about accounts in previous witness statements which he had to correct.
(2) He said that he never met with the Claimant and the other members of his family who were account holders. He was not involved in the filling in of the forms. He did not speak to the Claimant's wife when she went to the Bank's branch in 2021.
(3) He believed that the Claimant spoke Arabic, but if he had dealt with the Claimant in respect of any documents, he would have known that the Claimant cannot read or write Arabic and therefore was not able to understand the forms of the Bank in Arabic.
(4) His evidence about what non-resident meant to the Bank was confusing in that it appeared to be a reference to having a business address outside Lebanon provided that they paid their tax outside Lebanon.
(5) When asked to explain the numerous inconsistencies in the Bank's documents, it was evident that he had little or no direct knowledge, and generally was not able to explain matters outside the documents.
(6) It followed that insofar as he made criticisms of the Claimant in his witness statement, he had no ability to substantiate them. For example, there was a suggestion that the Claimant had provided an address in Lebanon in order to obtain a "winner" account, but that collapsed in his oral evidence. There was nothing to suggest that the Claimant had ever asked for a winner account as such and in any event, non-residents could have a winner account.
(b) The expert witnesses
a) Professor Marie-Claude Najm, expert witness for the Claimant
b) Dr Fadi Moghaizel, expert witness for the Bank
VII How to deal with foreign law
"25. First, the Court is required to determine the foreign law as a question of fact on the basis of the evidence deployed by the parties, according to the usual civil standard, see for among many examples, Islamic Republic of Iran v. Berend [2007] EWHC 132, Eady J at [50].
26. Secondly, […] it is not the Court's function to interpret the codified provisions. The Court's task is to determine how the [relevant foreign] Courts have (or would) interpret them, see Lazard Brothers & Co v. Midland Bank [1933] AC 289, Lord Wright at 298.
If the law is contained in a code or written form, the question is not as to the language of the written law, but what the law is as shown by its exposition, interpretation and adjudication: so in effect it was laid down by Coleridge J in Baron de Bode's case (1845) 8 QB 208, 266; in the Sussex Peerage case (1844) 11 Cl. & F. 85, 116, Lord Denman stated his opinion to the same effect as he had done in Baron de Bode's case. He said that if there be a conflict of evidence of the experts, 'you (the judge) must decide as well as you can on the conflicting testimony, but you must take the evidence from the witnesses.' Hence the Court is not entitled to construe a foreign code itself: it has not 'organs to known [sic] and to deal with the text of that law' (as was said by Lord Brougham in the Sussex Peerage case). The text of the foreign law if put in evidence by the experts may be considered, if at all, only as part of the evidence and as a help to decide between conflicting expert testimony.
27. In A/S Tallinna Laevauhisus and others v. Estonian State SS Line and another (1947) 80 Lloyd's Rep 104, at pp.107l-109r Scott LJ set out four further points. (1) The burden of proving the foreign law rests on the party seeking to establish that law. (2) The task of the expert evidence is,
... to interpret its legal effect, in order to convey to the English Court the meaning and effect which a Court of the foreign country would attribute to it, if it applied correctly the law of that country to the questions under investigation by the English Court.
(3) The degree to which the English Court can put its own construction on the foreign code arises out of and is measured by its right to criticise the oral (or written evidence) of the expert witness; and once the foreign law is before the Court, the Court is free to scrutinise the witness and what he says as it can on any other issue of fact. (4) If there is a clear decision of the highest foreign court on the issue of foreign law other evidence will carry little weight against it, see also Lord Sumner in Bankers and Shippers Ins Co of New York v. Liverpool Marine & General Ins Co (1926 24 Ll. Rep 85 (HL) at p.93.
28. Thirdly, in determining the question of foreign law the Court is entitled, and may be bound, to look at the source material on which the experts express their opinion. This is true of any expert evidence which comes before the Court, and if authority were required for the proposition in relation to foreign law it can be found in Dicey(see above) at 9-017 and the cases at footnote 91.
29. Fourthly, the Claimant…submitted that the relevant issue would have to be resolved in the 'Supreme Court' of the foreign jurisdiction; and that therefore the relevant question is: what would the 'Supreme Court' decide if the matter were before it?... I accept that this may be the right approach in some circumstances, but it will not be the right approach in every case. The legal issue may, for example, have been plainly decided by a court which is inferior in jurisdiction to the 'Supreme Court'. I have concluded that the law is correctly stated in Dicey at 9-020.
Considerable weight is usually given to the decisions of foreign courts as evidence of foreign law ... But the court is not bound to apply a foreign decision if it is satisfied, as a result of all the evidence, that the decision does not accurately represent the foreign law. Where foreign decisions conflict, the court may be asked to decide between them, even though in the foreign country the question still remains to be authoritatively decided."
VIII Sources of Lebanese law
(a) The relevant codes
"124. Lebanon has a civilian legal system. The main instrument of Lebanese private law is the Code of Obligations and Contracts ("the [L]COC"), derived from the French Code Civil and adopted in 1932. Like the Code Civil, the [L]COC is supplemented by a number of specialist laws including, for present purposes:
i) The Lebanese Code of Commerce ("LCC").
ii) The Lebanese Code of Money and Credit ("CMC").
The procedural rules which apply in civil actions are set out in the Lebanese Code of Civil Procedure ("LCCP")…"
(b) Case law
"125. Lebanon has no doctrine of precedent as such, but the jurisprudence of the Lebanese courts is capable of establishing (as well as evidencing) legal principles, particularly when a particular principle is endorsed by a number of cases, so as to give rise to a jurisprudence constante . The civil courts operate in a triarchy of courts of first instance, the Court of Appeal and the Cassation Court. In addition to what might be termed the ordinary courts, Lebanon also has courts of summary jurisdiction in which a single judge (sometimes referred to as the "Urgent Matters Judge" but who I shall refer to as "the Summary Procedure Judge") presides. The jurisdiction of these courts is concerned with granting urgent relief in cases in which this can be done without determining the merits of the rights and obligations of the parties (Articles 579 to 588 of the LCCP). When an issue that is seriously disputed is submitted to the Summary Procedure Judge, the Judge is required to rule that they have no jurisdiction.
126. Thus Article 579 of the LCCP provides:
"The Sole Judge may look, in his capacity as an urgent matters judge, into applications to take urgent measures in civil and commercial matters without addressing the basis of the right, and without prejudice to the special jurisdiction of the President of the Enforcement Court. He may, in the same capacity, take measures aiming at removing manifest assaults on rights or on lawful situations. In situations where the debt's existence cannot be the subject of a serious dispute, the Urgent Matters Judge may grant the creditor a provisional advance on account of his right."
127. Article 583 of the LCCP provides:
"The Urgent Matters Judge gives his decision in the lawsuit submitted to him without delay".
128. Article 584 of the LCCP provides:
"The decision of the Urgent Matters Judge does not have the force of res judicata in relation to the basis of the right. However, he may not amend or cancel it except if new circumstances arise that justify it".
129. Decisions of Summary Procedure Judges can be appealed. I accept Dr Moghaizel's evidence that when such appeals are brought, it is very rare for a stay of the decision of the Summary Procedure Judge to be ordered (not least because that would be inconsistent with the urgent and essentially interim nature of the jurisdiction). A stay is only to be granted when it appears clear to the relevant court (the Court of Appeal, or if that court has refused a stay and a further appeal is brought, the Cassation Court) that the consequences resulting from enforcement would be unreasonable or if there is a likelihood that the appealed decision will be overturned."
(c) Status of Urgent Matters Decisions
(1) they are a summary procedure and therefore carry no weight unlike a case of the Court of Cassation.
(2) they are generally not relied upon as a source of law and are therefore not cited by higher courts;
(3) on the subject of whether or not there is a right to have an international transfer and/or whether such right has come to an end in view of the banking crisis in Lebanon, the cases do not speak as one, and it largely depends which judge is hearing the matter.
(1) the decisions do not carry the same weight of the Court of Cassation, but they are nevertheless decisions which inform as to the relevant law and as to the existence of custom;
(2) there are so many cases in point that it would be wrong to ignore them, particularly absent a case of the Court of Cassation;
(3) although some decisions have been stayed pending appeal to the Court of Appeal or the Court of Cassation, the last five cases have not been stayed. Those which are stayed may indicate not that the law supports the Bank's case, but that the courts of summary procedure have no jurisdiction because the matter cannot be decided without getting into the merits.
(1) In Manoukian, Dr Moghaizel's evidence started by saying that Urgent Matters Decisions could not be cited, and indeed not even in the Court of Appeal. Picken J in Manoukian rejected this submission in that a body of decisions pointing in the same direction must serve as some sort of indication as to what Lebanese law should be taken to be.
(2) In Manoukian, Dr Moghaizel himself cited a decision of an Urgent Matters Judge. He also modified his position in respect of a Court of Appeal decision by saying that it carried "less weight" rather than "no weight". In the end, Counsel for the Bank in Manoukian did not adopt the evidence of Dr Moghaizel: see the judgment of Picken J at [86-106] and [115].
(3) It is consistent with the decision of Simon J in Yukos above and the extract from Dicey in the above quotation that decisions which provide evidence as to Lebanese law may carry at least some weight, particularly in an area where there is no Court of Cassation authority.
(4) According to Article 3 of the LCC, "In the absence of any applicable legal provision, the judge can draw upon previous test cases for guidance as much as he may let himself inspired by the strictures of commercial equity and loyalty."
(5) I am fortified by Picken J's conclusion in Manoukian at para. 115 that decisions including Urgent Matters Decisions are appropriately taken into account when seeking to derive assistance as to what Lebanese law is. I The decisions of the lower courts, absent evidence from the Court of Cassation, provide evidence for the English court as to the content of Lebanese law on the issues which they cover.
(1) The cases are all concerned with depositors who have been trying to withdraw their money from Lebanese banks by way of transfers to other countries.
(2) None of them support either the proposition that the custom was or is subject to an "acceptable reasons" exception, or that the custom has changed so as to release banks from their transfer obligations.
(3) No decision has been found that holds that banks are not under transfer obligations. Where the application failed, this was because the point in dispute was not so obvious and thus the jurisdiction requirements for urgent matters were met.
(4) Of the substantive decisions in evidence, 27 out of 37 of them are to the effect that the claimants were clearly right that there was an obligation to effect transfers.
(5) In at least 22 of those cases, the banks were ordered to carry out the transfer requested.
(6) Of the 10 decisions holding that the court had no jurisdiction, at least 5 are partially helpful to the Claimant in that 3 recognise a customary transfer right, and 2 say that a transfer right arises under the contract (by implication or the Lebanese-law equivalent).
(7) 7 of the 13 sole judges whose decisions were surveyed have decided in favour of claimants on the basis that the transfer obligation exists, and only 2 of them have expressly held that the customary transfer right is seriously disputed. Some of the judges in the minority have expressed sympathy with aspects of the majority reasoning.
There is in the cases a significant trend in the Lebanese cases towards recognising a transfer right and granting customers specific performance of that right. The cases are inconsistent with the "acceptable reason" exception and do not suggest the existence of a relevant new custom under which the transfer obligation no longer exists.
(d) Construction of contracts under Lebanese law
"[…] as to the principles concerning the construction of contracts, these were also largely (if not entirely) common ground between [the experts]. They are also, it may be noted, in many respects similar to the applicable principles under English law. Accordingly:
(i) contracts are to be construed and implemented in good faith, in accordance with the principles of fairness, and consistently with prevailing customary practices: Article 221 of the Lebanese Code of Obligations and Contracts (the 'LCOC');
(ii) Lebanese law requires the ascertaining and giving effect to the parties' joint intention, and not just the words used by the parties in the written contract interpreted literally: Article 366 of the LCOC;
(iii) contractual provisions that are ambiguous and require interpretation are to be interpreted in light of other contractual provisions, the general organisation of the document, its coherence and its purpose: Article 367 of the LCOC;
(iv) Lebanese law requires the taking into account of the meaning of the contract as a whole and the other provisions in the contract in interpreting each provision: Article 368 of the LCOC;
(v) a judge must apply established 'customary provisions' into the contract, even if these are not expressly incorporated into the contract, unless they are contradicted by the terms of the contract: Article 371 of the LCOC;
(vi) furthermore, in the case of ambiguity in certain contracts involving consumers, Article 18 of the Lebanese Consumer Protection Law (the 'Consumer Law') provides those ambiguous clauses are construed in favour of the consumer."
IX Construction of the Account Agreements
(a) The express terms
(1) Article 4(c) of the fourth part of the General Terms provides as follows (emphasis added):
The Second Party agrees that withdrawals from these accounts shall be made by virtue of cheques, bonds, or transfer orders issued by the Bank in the currency of the account."
Claimant's submission
This expressly entitles (and indeed, requires) the Claimant to make withdrawals by one of three means, one of which is transfers in the currency of the account. This gives rise to a contractual right to withdraw by way of transfer.
The Bank's submission
That provision does not concern the obligations of the Bank, but rather the agreement of the Claimant to the forms of withdrawals available to him. Moreover, the clause does not impose any obligation on the Bank to perform the particular mode of withdrawal requested by the Claimant.
(2) Article 4(c) of the fourth part of the General Terms goes on to state as follows:
"The Second Party declares that the Bank shall be discharged, in the event of closing and liquidating the account, upon delivering [to the Second Party] a cheque or a bond or a transfer order drawn by the Bank [on a correspondent] in the country of the account currency and in the same currency."
The Claimant's submission
This sets out the means by which the Bank is entitled to repay the Claimant upon closing and liquidating the account, namely by providing a cheque, bond or transfer in USD drawn by it on a correspondent bank in the USA. The term "transfer order" therefore refers to or includes an international transfer.
The Bank's submission
The clause concerns when the Bank is discharged, not whether or not it is obliged to execute a transfer order made by the Claimant. This does not confer any right of the Claimant to elect between the different modes of discharge identified. In any event, if it were definitive of the ways in which the Bank could be discharged, then that would only be in relation to a US dollar account by a payment through a correspondent bank in the United States.
Article 2 of the fourth part of the General Terms also provides as follows (emphasis added):
"In regards to payment orders, foreign exchange transactions, the purchase of stocks and bonds and other values, whether in Lebanon or abroad, the Bank shall perform such transactions in favour of the Second Party and at the expense, liability, and responsibility of the Second Party, and the Bank shall not be liable in this regard for any reason whatsoever."
Claimant's submission
A "payment order" is a payment to a third party. This provision states that the Bank is required to perform payment orders, including abroad. If the Bank is required to make international payments to third parties abroad, the Bank must be under an obligation to effect international transfers abroad on instruction.
The Bank's submission
The words " the Bank shall perform such transactions" cannot be construed in isolation. The Clause is not imposing a liability, but saying that if there is a transfer, it is at the risk of the customer. The clause is in the context of limitations of the Bank's liability. The Clause is not defining the scope of services that the Bank is obliged to execute.
(3) Article 2 of the fourth part of the General Terms also provides as follows (emphasis added):
"The Second Party exempts the Bank from any liability in the event of delay in executing any transfer, or the freezing of the transferred amounts or their return by the Bank or the correspondent bank. The Second Party authorises the debiting of any additional expenses in relation to the transfer from its account at the Bank."
Claimant's submission
This provision seeks to exempt the Bank from liability in the event of delay in executing a transfer. The fact that there is an exception in respect of delayed performance shows that there is an obligation to perform.
The Bank's submission
Such a wide exculpation clause for delay would, on its face, deprive an obligation to execute transfers of any content. The inclusion of this clause therefore suggests that the parties' intention was that there was no obligation upon the Bank to execute transfers.
(4) The seventh part of the General Terms deals with instructions given by telephone, telex, fax or email. Article 1 of the seventh part of the General Terms provides as follows:
"The Second Party confirms its explicit request to the Bank to carry out all instructions it may issue to the Bank by phone, unconfirmed telex, unconfirmed fax, or email, which may include any banking transaction of any kind, including but not limited to: transfer orders, foreign exchange in any currency, the sale and purchase of stocks, bonds, etc."
(5) Article 6 of the seventh part of the General Terms then provides as follows:
"The Second Party confirms that the Bank may refuse to execute such instructions and that this refusal shall not, in any case, bind the Bank. The Bank shall also have the right to refuse to execute some instructions and not others and shall have the right to assess the status of each transaction separately."
Claimant's submission
Taking these provisions together, they confer upon the Bank a discretion to refuse instructions to transfer given by certain specific means (i.e., "phone, unconfirmed telex, unconfirmed fax, or email"). They do not allow the Bank to refuse instructions by other more secure means e.g. a signed letter. Absent an unfettered right to refuse instructions, the ability to refuse in limited circumstances suggests that there is an obligation in other circumstances.
The Bank's submission
It is not an answer to say that the rights of the Bank under that provision should be limited to refusals when instructions were "not properly or authoritatively confirmed": there is nothing within the provision to support such a limitation.
(6) Article 2 of the And/Or Terms provides as follows (emphasis added):
"Each member of the Second Party, as a joint creditor, shall have the absolute authority to operate the account through his sole signature without any limitation or reservation, including but not limited to, the right to deposit or withdraw any amount in or from the account, to dispose of the balance, to request closing the account, and to discharge the Bank in a comprehensive and final manner. The right to operate and dispose of the account shall also include the right to give the Bank all instructions related to payment, transfer, and investment.
[…]"
Claimant's submission
This provision is primarily aimed at giving each account holder individually the powers of the account holders as a party to the contract. Those powers are said to "include" the right to give instructions related to "payment" and "transfer". The right to give an instruction to transfer implies a corresponding obligation on the part of the Bank to comply with the instruction.
(7) Article 3 of the And/Or Terms provides as follows (emphasis added):
"Each member of the Second Party shall be entitled to issue a power of attorney or as per the form approved by the Bank in favour of any third party enabling it [the third party] to access the joint account which is the subject of this contract, as well as operate it, deposit, withdraw, and transfer funds from it […] provided that all other members who are holders of the joint account grant their prior written approval which is considered effective upon their signature of the mentioned power of attorney. […]"
Claimant's submission
This provision allows account-holders to give powers to attorneys to (inter alia) transfer funds from the accounts. If the account-holders can confer such powers on attorneys, then logically they must have those powers themselves. It follows that this provision once again demonstrates that the Claimant has a right to transfer funds from his accounts.
The Bank's submission
The and/or terms allow any member of the Second Party to give the Bank instructions for payments, transfers or investments, but does not provide that the Bank is obliged to make transfers. The reference to the 'right' is the right to give instructions, not a right to transfers. The provisions speak to whether or not one joint accountholder can exercise rights on behalf of all other accountholders – it does not define the scope of those underlying rights.
(8) Paragraph 1 of article 1 of the "General Conditions and Provisions Relating to Banking Services through Electronic Means" provides as follows (emphasis added):
"[…] the Applicant has fully acknowledged the risks that result from the use of the banking services through electronic means, such as:
- Impersonation of the electronic ID resulting from the hacking of the Applicant's computer system or from its Personal mobile theft for the purpose of effecting transfers or banking operations and/or acquiring information or accounts' balance(s) of the Applicant, through the violation of the latter's password and its use for fraudulent purposes […]"
Claimant's submission
The premise behind this provision is that a hacker or thief might assume the customer's identity in order to effect transfers. The bank would not cater for such a risk in its contractual terms if the customer had no right to effect transfers.
The Bank's submission
This article is in a part of the contract concerned with the authorisation of the Bank to act upon electronic instructions. In this context, it is not intended to make a general provision as to the obligation of the Bank to execute transfer requests generally, but simply to provide authorization to act upon instructions made in those forms. This construction is supported by Art. 6 of the same Seventh Part (above, confirming the Bank's right to refuse the execution of "such instructions").
(b) Discussion
"…even were the Court to conclude that SGBL's and Bank Audi's respective terms and conditions do not contain express wording providing for the existence of an international transfer right, if nonetheless a relevant custom is made out, then, the Court would nonetheless still conclude that there is such a right as a matter of contract. Secondly, because if a relevant custom is made out, then, it becomes unnecessary to have resort to the general law and so to determine the General Transfer Right Issue. I propose nonetheless, in the first instance, to put the issue of custom to one side and instead to seek to construe the respective terms and conditions by applying the other principles of construction identified at [43] above. I will subsequently (and separately) turn to the issue of custom."
(1) When opening both of the Accounts, the Claimant marked the boxes on the "KYC" forms indicating that the "Type[s] of Transaction" for he would use included "Outgoing Transfer".431 Therefore it was at least envisaged in relation to each Account Agreement that the Claimant would be using the accounts for outgoing transfers and that the Bank would perform "Outgoing Transfer" services;
(2) The Bank entered into the Account Agreements in the knowledge that its customers party to those agreements lived or worked abroad and would therefore expect to be able to perform international transfers;
(3) The Bank performed international transfers in respects of account previously operated by the Claimant since 2006. The Claimant's "clear understanding and expectation" (no doubt informed by experience of being a Bank customer since 2006) on opening the Account was that he "would be entitled to access and us [his] funds in whatever was [he] saw fit, including by effecting international transfers to [himself] in England" (the Claimant's third statement at [37])
(4) In the "Welcome Note" from Mr Chidiac dated 23 July 2015, the Bank provided an international telephone number, account numbers, and IBAN and SWIFT details, thus showing an expectation that the account holders would make international transfers.
(5) On its 2015 website, the Bank:
(a) advertised customers' ability to use the "iMobile - Mobile Banking Application" to "perform various operations […] such as […] transfer of funds" and to "Conduct personal and third party local and international account to account transfers" (indicating a fortiori that such operations could be completed by non-mobile banking as well);
(b) advertised its correspondent bank network for various currencies, including EUR, GBP, and USD;
(c) expressly stated that time deposit accounts were available to non-residents, and assumed that holders of time deposit accounts would also hold current accounts too;
(d) advertised itself as providing "Banking Beyond Borders".
X Custom
(a) Custom as a source of the law
(1) Article 221 LCOC provides as follows:
"Agreements that are validly formed bind the parties. They must be understood, interpreted and performed in accordance with good faith, [fairness / equity] and customs."
(2) Article 371 LCOC provides as follows:
"The judge must also rely on customary clauses even when they are not expressly included in the content of the deed."
(3) Article 4 LCC provides as follows:
"When determining the effects of a commercial operation, the judge must apply well established custom, unless it appears that the contracting parties intended to derogate from such custom, or that the custom conflicts with the mandatory legal provisions. Special and local custom prevail over general custom."
(4) Article 4 LCCP provides as follows:
"In the absence of statutory provisions, the judge shall rely on general principles, custom, and [fairness/equity]."
(b) Admission about custom
"16A.2 "It is further admitted that a Lebanese Court must (or alternatively may) adhere (or alternatively have regard) to Custom when applying Lebanese law, interpreting a provision of Lebanese law, and/or construing a contract governed by Lebanese law."
16D.1 "It is admitted that, as a matter of fact, there existed the time of entry into the Agreements (and until 4 November 2019) a Custom among banks in Lebanon under which they made international transfers of funds (including in non-Lebanese currencies to non-Lebanese bank accounts) upon their customers' instructions to do so, subject to an acceptable reason not to do so."
(1) It was up to 4 November 2019 (temporal limit);
(2) It was subject to an acceptable reason not to do so (exception).
XI Related Issues
(1) Whether a change of a custom after the time of the contract may excuse a bank from following a custom in existence at the time of the contract (change of custom);
(2) Whether there was an acceptable reason exception to the obligation to provide an international transfer, and if so, what was its scope? If so, did such exception extend to a refusal to honour an instruction to avoid a rush on the banks (acceptable reason exception);
(3) Other reasons excusing the Bank for refusing to perform an international transfer (other reasons).
XII Change of custom
"…the suggestion made by Dr Moghaizel that a particular custom (as will appear, custom is important in this case) was a custom which had come into being since November 2019 (and so, again as will appear, after Mr Manoukian had made his first transfer requests). As Mr Toledano QC rightly submitted, that simply cannot be relevant as a matter of Lebanese law (and, indeed, common sense) since what matters is the custom which existed at the time that Mr Manoukian first entered into a contractual relationship with the Banks. Notwithstanding this, it was only with a marked reluctance that Dr Moghaizel ultimately accepted that the alleged new custom which he had identified was of no relevance at all."
(1) contractual interpretation looks to the intention of the parties at the time of the contract. Professor Najm referred to the writings of Terre, Simlar and Lequette who wrote " this common intent [of the parties] can only be determined through placing oneself in the circumstances in which the parties were at the time when they have entered into the contract. This intent is the one that the parties actually had at the time when they entered into the contract." This is a scholarly writing in respect of French law, but in respect of provisions which have been adopted into Lebanese law (e.g. LCOC Article 366 which is taken from the French Code Article 1156 as set out below).
(2) There was also evidence of a Belgian scholar Frankignoul that the rationale for the incorporation of custom is assumed knowledge of the custom and intention to incorporate it at the time of contracting. Frankignoul was commenting on Articles 1135 and 1160 of the Belgian Civil Code. which corresponded with the French code pre-2016 which in turn corresponded with Article 221 of the LCOC and Article 371 of the LCOC. Dr Moghaizel, after at first refusing to engage with a Belgian commentary, then was driven to concede that the Belgian provisions were comparable to the Lebanese equivalents. Frankignoul's analysis is that "the Civil Code assumes that the persons who enter into an agreement are aware of the customs, and that by not excluding them from their contract - even if only implicitly - they demonstrate their intent to incorporate them."
(3) This is supported by Dr Nammour since he says that customs are binding between professionals, but only binding against the customer to the extent he was aware (or can be assumed to be aware) of the custom at the time of contracting. The focus on the time of contracting shows that this is the relevant date for assessing custom. As Nammour wrote: "custom is opposable to the customer only to the extent that he was aware of it at the time of the conclusion of the contract. Otherwise, custom will be unenforceable."
(4) The prevalence of Lebanese sources is that a bank's obligation to perform transfers arises at the time of contracting, and by virtue of the express or implied contract, according to 12 urgent matter decisions and three Court of Appeal decisions identified at footnotes 207 and 208 and beneath [80.2] of the Claimant's opening skeleton argument[1].
"In legal deeds, the judge must inquire about the true intention of the person who made a commitment (unilateral deed) or of the common intention of the parties. (agreement) rather than stopping at the literal meaning of the terms."
XIII Acceptable reason exception
"86. Mr Wilson QC, for his part, clarified in closing that the Banks accept that incorporated into their terms and conditions is a custom or practice whereby (like other banks) they would routinely offer transfer services to their clients. However, and importantly, he explained, the Banks do not accept that they were under (or are under) an absolute obligation to perform transfer services. He observed that the practice that banks will provide international transfer services is (and always has been) subject to well-known limitations, such as insufficiency of funds, insufficient information to identify the beneficiary, anti-money laundering and counter-terrorism funding regulations and policies, suspicions of fraud (whether fraud on the client or a third party) and sanctions or restrictions on the transfer of sums to particular countries.
87. It follows, Mr Wilson QC submitted, that any custom concerning international transfers is at least subject to similar limitations. Mr Toledano QC did not quibble with this. Mr Wilson QC went further, however, submitting that Mr Najjar had himself acknowledged in cross-examination (not that the Banks' own expert, Dr Moghaizel, put things this way) that the circumstances which may constitute a legitimate or valid reason for refusing to perform transfers are not defined or closed. Accordingly, he suggested, the right way to view the custom which exists is as one which entails banks complying with transfer requests save where they have valid or 'legitimate reason' not to do so. What will constitute a valid or 'legitimate reason', he submitted, is an elastic concept which falls to be determined at the time of the refusal since the factual scenarios that might permit refusal cannot sensibly be said to have been fixed for all time at the point of entry into the banking contract since a banking contract may last for many years, even decades. The custom is, therefore, inherently flexible, allowing a bank to refuse to effect a transfer when, taking account of the circumstances at the time of the request, it is legitimate to do so.
87 I cannot agree with Mr Wilson QC about this. There is nothing in the Lebanese doctrinal writings which supports his submission. On the contrary, as previously explained, even Nammour, on analysis, does not support the submission which was made. Nor, to repeat, did Dr Moghaizel put matters in the way which by the time of closing Mr Wilson QC did. Nor is it right to characterise Mr Najjar as having agreed that it is legitimate, in principle, for a bank to refuse a transfer request on some looser concept of 'legitimate reason' which would embrace, as matters have turned out, a concern that complying with a transfer request would risk a run on the banks, the collapse of the Lebanese banking sector and losses to all depositors.
…
92. I conclude, therefore, in line with Mr Najjar's evidence and rejecting Mr Wilson QC's submission (and so also Dr Moghaizel's more extreme evidence) that, as a matter of Lebanese banking custom, a bank's obligation to effect a transfer pursuant to a client's request is not subject to some looser concept of 'legitimate reason' which would embrace a concern on the part of a bank that complying with a transfer request which would risk a run on that bank and other banks. I agree in this context with Mr Toledano QC when he submitted that not only is there no support for the type of custom described by Mr Wilson QC, but furthermore that, if there were a 'legitimate reason' exception, there would be a real risk that the custom would find itself so watered down as to mean that there was, in effect, no obligation at all. This would run counter to Article 221 of the LCOC and the good faith requirement that there be balance, fairness and equity as between banks and their clients.
93. It follows... that the conclusions which I have reached concerning the construction to be afforded to [the banks'] respective terms and conditions are further underlined by the custom which I have found exists (emphasis added)."
"It follows, for this and the other reasons which I have given, that I am strengthened in my conclusion that, as a matter of Lebanese banking custom, a bank's obligation to effect a transfer pursuant to a client's request is not subject to a loose concept of 'legitimate reason' which would entitle a bank to refuse to comply with a transfer request which would risk a run on that bank and other banks. I am clear, on the contrary, that the custom is as asserted by Mr Toledano QC on Mr Manoukian's behalf. Accordingly, in line with the construction principle described at [43(v)] above and the concession made by Mr Wilson QC, even had I decided that the Banks' respective terms and conditions do not give Mr Manoukian an entitlement to have international transfers effected by the Banks without taking account of custom, nonetheless that is how the terms and conditions should be understood given my conclusion that there is such a custom (and not the custom for which Mr Wilson QC and the Banks have contended)."
"Whereas the Appellant Bank refused to make the required transfer from the Appellee based on the exceptional circumstances the country is going through and its need to maintain a reserve of foreign currency, not to lose liquidity, and the duty to ensure equality between all depositors, in addition to securing the interest of the appellate and third parties[.]
In view of the exceptional circumstances, the circumstances do not constitute a justification for the Contractor's abstention from the enforcement of the contractual obligations, unless the evidence is submitted that it collects force majeure requirements as expressly indicated in the provisions of article 342.
Whereas it has been agreed that the situation of force majeure assumed for the contractual obligations arises from an unexpected external event that cannot be paid or avoided, provided that it has a foreign nature, meaning that its source is not linked to the contractor's person or conditions[.]
Whereas there is no evidence in the present file of an emergency event that prevented the Appellant from making the transfer for reasons beyond its scope.
In fact, the statements made by the latter in relation to the value of his deposits of foreign currency and his desire to preserve them indicate that the factors invoked or not of a foreign nature but are linked to the person of the Appellant and to his personal conditions, which negates the realization of the force majeure as a reason for dropping the contractual obligations and failing to comply with them.
Whereas the Appellant's argument about the economic crisis and the exceptional circumstances accompanying it does not, therefore, constitute a justification for his refusal to complete the required transfer, especially since no legislative provision was issued to that date to prevent the transfer of funds abroad or limit the possibility of transfer.
Whereas the conclusion reached in the appealed decision to oblige the Appellant Bank to complete the required transfer in favour of the Appellee is legally valid and proper[.]" (emphasis added)
"In principle, the addressee of an offer is free to decline it. By refusing to contract, he shall not be liable. The position is different if he had himself created a situation that causes offers (merchant vis-à-vis the public, hotel owner, restaurant owner, employer vis-a-vis the workers); in such a case, his refusal to contract must be based on legitimate reasons, otherwise it would have an abusive character and may as such make him liable."
XIV The Bank's submission that no international transfer obligation exists due to the Lebanese law of agency
"The mandate is a contract whereby the principal entrusts the agent, who agrees, with the task to manage one or more matters or to perform one or more actions or facts. The mandate's acceptance, can be implied and result from its performance by the agent."
"Transfer instructions are a mandate given by the client to his bank to debit his account by a specific amount and to credit another account with the same amount. The ordering client may not validly claim his 'right to transfer' except after the bank's acceptance of the order so given. Such contract is governed by the principle of mutual consent."
(1) the practical requirement for the bank to comply with its instructions, having made the necessary compliance checks; and/or
(2) the need for certain limited additional criteria or pre-conditions (i.e., that the instruction must be properly given, that the transfer must be lawful, and that the customer must have sufficient funds) to be met and/or verified.
"[…] describing the transfer petition as a proxy granted to the Bank for completing the funds transfer operation does not deny that this operation is an integral part of the main contractual relationship between the Bank and its customer, which is represented by the account opening contract and as such, there is no possibility for the bank's withdrawal individually from the commitment to request the transfer without the other party's approval as long as the existing contractual relationship between the two parties did not end consensually or judicially,
[…] the appellant's uphold of the provisions of article 808 Obligations and Contracts which authorize the agent to withdraw from the proxy does not constitute in itself a justification for its abstention to make the transfer which the appellee requests, because withdrawal from the proxy as per the foregoing article entails the termination of the contractual relationship […]"
(a) the bank is obliged to carry out the customers local or international transfer orders unless that obligation is explicitly excluded in the contractual documentation;
(b) the bank's consent is not required or needed prior to the issuance of each transfer order;
(c) an alternative way of saying the same thing is that a consent must be provided to the bank transfer by the Bank, but it is obliged to provide that consent because of the banking contract, unless it comes within the cases where it is excused from the transfer such as want of funds in the account of the customer or facilitation of fraud, money laundering or other illegality. Put this way, there may be consent to the bank transfer, but that does not mean that the Bank is able to refuse the transfer. This is because of its prior obligation in the banking contract;
(d) the obligation to perform the transfer is an obligation of result and must be discharged without delay: see Professor Najm's report at 107-124;
(e) the Bank could not unilaterally refuse to make a transfer, whilst retaining the money deposited by the client As she said in the joint report in her column in point 2 of areas of disagreement in respect of question 8: "Under Lebanese law, and as a matter of good sense, the bank is not allowed to keep the contractual relationship, while derogating from its main obligations (cashier services). Terminating one of the bank's main casher services, while maintaining the bank deposit contract […], would deprive the customer of part of what he had contracted for."
(1) Ali Addine Awedh, an Egyptian scholar, but whose writings have been cited in the Lebanese Court of Appeal, including his publication "Banking Operations from a legal perspective 1993 no. 158 pp.202-203 who said:
"Undertaking to execute cashier services: It has been an established banking custom that the bank undertakes implicitly to execute all cashier services at the same time upon opening a bank account for a client. These services are made through different operations such as the settlement of cheques that the client has drawn on the bank, the collection of his cheques and the execution of the client's transfer orders if the client has an account in another bank. The bank must be considered as an agent for the client in these cases.
The consent of the bank during the execution of an order is required. Such consent is understood through its execution of the order i.e. affecting the necessary records in its books.
It is noticeable that the consent of the bank is not usually free because, when the bank accepts to open a bank account, it undertakes implicitly to execute cashier services including the acceptance of the execution of cheques and transfer requests addressed to the bank, as long as there is a remuneration for such transfer request and its other conditions for execution exist. (emphasis added)"
The above was quoted by the Lebanese Court of Appeal decision no.685/2021 of 16 December 2021 in Traboulsi v Fransabank (not published), stating (and albeit a decision against the customer in that case):
"the Appellee Bank's opening the accounts with it in the interest of the Appellant creates between the two parties a contractual relationship which grants the Appellant the role of client with regard to the Appellee along with all the rights and obligations necessary for this role, including in principle the right to request a bank transfer, beginning with the Bank's obligation to carry out counter services for clients, including accepting cheques and transfer orders."
(2) Salman Bou Ziab Bank Transfer, Operations of Local and International Transfers, Comparative Study for Lebanese and French law, 1985 p.88:
"The issuance of a transfer order is not an offer to contract in itself; it is the implementation of a previous commitment towards the beneficiary. The execution of a bank transfer does not mean that the bank has consented to contract the object of the execution of the transfer. It is just the execution of the previous contractual commitment towards the ordering client resulting from the opening of the account."
(3) Cabrillac in 'Le cheque et le virement' (5th Ed.) said:
"… the transfer order is a mandate … [which] is part of the cash service that the banker tacitly undertook to provide when the account was opened",
Adding later that :
"Each order constitutes a special mandate which the banker must accept. However, because of the tacit commitment he has made by opening the account he cannot, under penalty of incurring liability, refuse or omit to execute an offer without valid reason; it is admitted that he could be forced to do so by legal proceedings." [This was cited by Picken J in Manoukian at [79])
(4) Encyclopedie Dalloz, another French work, states that it has "always" been the case "that the banker who has accepted to open an account has therefore undertaken towards the client to effect the transfers that the latter asks him to operate; he cannot therefore refuse to make a transfer". [This too was cited by Picken J in Manoukian [82] who pointed out that this passage has been applied in recent decisions in Lebanon, including, for example, the 'Enforcement Judge' decision in Bank of Beirut SAL v Hasan Makki, Decision no. 54/2021 dated 30 November 2021.
(5) Lebanese jurists have relied upon the Encyclopedie Dalloz. It was cited by Thus, Fabia and Safa said the following:
"In accordance with the agreement or established practice, the banker in charge of the deposit account shall provide the depositor with a cash service by paying, up to the amount deposited, the amounts set out in summonses, cheques, requests for transfer or any other acts of disposal."
(1) Nammour's Instruments de Paiement et de Crédit (from 2008)197 says "the bank is not required to execute a transfer order […] unless at the date of the order, the funds are available" and "The transfer order is part of a general mandate related to the collection to which the bank committed".198 Picken J relied on this passage in Manoukian, but, despite that, Dr Moghaizel did not provide a translation of it for these proceedings. (There are further examples of Dr Moghaizel's selective translations of Nammour's works.)199
(2) Nammour's Droit Bancaire (from 2012)200 contains no suggestion that the bank's consent is required, but on the contrary says, "The banker shall execute the transfer as soon as he has received the order".[3]
(1) Lebanese court decisions over the last two years including numerous Urgent Matter Decisions of which the preponderance support the Claimant's right to an international transfer. There was no decision denying the bank's obligation to perform the transfer. The "widespread majority" of the decisions of the Urgent Matter Decisions that they have jurisdiction because the customers right to obtain the execution of the transfer is not seriously disputable. The same conclusion has also been reached by enforcement courts. Three decisions issued by urgent matter courts have simply considered that the issue is disputed and should be addressed by the Court's ruling on the merits. These decisions have not taken a position on whether there is a banking transfer obligation or not.
(2) Decisions of the Lebanese Court of Appeal from the Urgent Matters Decisions. In Traboulsi v Fransabank SAL, the Court of Appeal decided that the depositor's claim was one of serious dispute going to the jurisdiction of the Urgent Matters Judge. In the following cases, it was found that the bank had an obligation to provide transfers in Blom Bank SAL v Khalil Nakad and others 26 April 2021 Court of Appeal in Mount Lebanon; Byblos Bank v Marie Rizk, 11 February 2021 Court of Appeal in Beirut; and Chucri Kurban and Randa Chahine v Bank of Beirut, SAL. 31 March 2022 Court of Appeal in Beirut. In the last case of Kurban and Chahine, the bank in that case had accepted the mandate to transfer, which is a distinguishing feature. Nevertheless, the Court of Appeal stated the following in general terms and germane to the instant case:
"Whereas the Appellee's [Bank] allegation that it cannot be bound to perform a banking service without its consent does not stand, because the bank's consent to open the account for his customer tacitly implies its obligation to provide the cashier services, including accepting the cheques and transfer orders;
(…) Whereas it can be concluded that all the defences presented by the Appellee do not raise any serious dispute on the right of the Appellant to request the transfer, and do not revoke the clearness and legitimacy of such right, hence the refusal of the bank to execute constitutes an obvious and illegitimate infringement on the right and justifies the interference of the urgent matters courts to cease this infringement pursuant to the provisions of Article 579, paragraph 2, LCCP (…)".
There are quotations of parts of the other Court of Appeal decisions at [145-151] of Professor Najm's report. She also cited to like effect the case of BankAudi SAL v Abdelkader 31 March 2022 Court of Appeal in Beirut.
(3) In Byblos Bank v Marie Rizk (referred to above), the Court of Appeal in Beirut said the following:
"Whereas the appellant's allegations that it is not permissible to oblige it to provide any banking service to its customers without its consent are not legally established, because the bank's acceptance of opening the account for its customer implies its obligation to perform the service of the customer's service fund (service de ca[is]se), including acceptance of checks and transfer orders[.]
Whereas it is known that the banking services provided by the banks to their customers include, for example, without limitation, withdrawals and deposits of funds and collection of checks in addition to the bank transfer[.]
The banker is the cashier of his client; he receives his funds in deposit, makes payments, makes collections; he can also make remote transfers of funds.
For a bank, cash transactions include transactions carried out by its customers, in physical or automatic counters. This includes cheque remittances, cheque book or bank card withdrawals, cash payments and withdrawals, transfers, and currency exchange transactions." (emphasis added)
The Court of Appeal went on, however, to acknowledge that, in principle, there are circumstances where a bank is entitled to "refuse to perform the requested services", as follows:
"Whereas the banks acceptance of opening the account for the benefit of his customer does not substitute for its satisfaction with respect to each individual transaction, including the transfer transaction, However, the consent required in this case is limited to the mechanism of conducting the required transaction and not to the principle of its completion, The bank's consent to contract with its customer and accept its deposit gives the latter the right to benefit from the banking services provided by the bank in general, and the latter is right to refuse to perform the requested service is limited to the absence of the objective conditions of this service, which were excluded from the terms of the contract, or its value was inconsistent with the condition of the customer's account or any other reasons not arising from the arbitrary will of the bank[.]
Whereas in this respect, it is noted that the bank may not ask about the reason for the customer's desire to request a transfer, as he may not originally interfere in the affairs of his customer or inquiry [sic] about the reasons for his actions, especially when he is not asked about the safety of these actions or their results[.]
Whereas, on the other hand, it is evident that the Appellant – the Plaintiff at the beginning – has clearly identified the number of the account to which the transfer is requested, and there is no legal obstacle that prevents the transfer of the funds to the mentioned account. The account of the transfer applicant is full, and the Appellant does not deny the legitimacy of this account and does not express any doubt about the source of the funds deposited therein.
Whereas the Lebanese law does not, on its side, include any provision prohibiting the required transfer or giving the Appellant Bank the right to participate in fulfilling or not meeting the request of its client to this entity[.]
Based on the foregoing, it follows that the right of the Appellee to request a bank transfer exists and exists and that the Appellant's statements of the violation are refutable." (emphasis added)
(4) Three of the academic commentaries cited by Professor Najm concern Lebanese law (Awad, Bou Ziab and Gannage) and Awad has been relied upon in a Court of Appeal decision on the question of transfer rights: see Traboulsi v Fransabank (16.12.21), albeit one which decided that the depositor's claim was the subject matter of a serious dispute and therefore excluding the conditions for the intervention of the judge for Urgent Matters;
(5) There was also a French work of Hamel (Banques et operations de banque, Avant-propos) from 1943 which states the law as at the spring of 1939, which proves that the transfer right existed before the 1941 codification. It was therefore about a practice which was part of the jurisprudence incorporated into Lebanon at the point of it becoming an independent state: see the joint of the experts report at page 35.
(6) A large part of Professor Najm's sources (decisions of the Court of Appeal, Urgent Matter Decisions and various commentaries) were referred to in the Claimant's opening at [86] and at footnotes [231-241].
(1) The custom, insofar as it is relied on, against which the contract is to be interpreted, must be determined at the time of the contract and it does not suffice if there was a different custom at the time of the instruction to transfer.
(2) There is no acceptable reason in a loose sense on which a bank can rely. There are acknowledged and limited reasons for a bank not to act on the instructions of its customer comprising reasons such as lack of funds or involvement in an illegal transaction (referred to more fully above), but a desire to avoid a run on the banks is not a reason not to make an international transfer pursuant to a contractual obligation. Nor is any other characterisation of the desire of the Bank to refuse to make an international transfer in response to the current banking crisis.
(3) There is no reduced concept of force majeure capable of application to the concern about a run on the banks.
(4) Nor is there any analogous loose concept of acceptable reason capable of justifying the refusal to provide a bank transfer for reasons such as avoiding a run on the banks or to avert insolvency or to distribute money between customers in a way that it would regard as fairer.
(5) The Bank is unable to refuse to execute the instruction on the mandate by reference to being an agent because the pre-existing contractual obligation took priority.
XIV Is there a new custom?
(1) repetitio – it must have been repeated over a reasonable period of time: it requires a general and longstanding and constant action, practice or other behaviour; and
(2) opinio necessitatis – it must be subjectively regarded as a binding norm: it a psychological element referring to a general acquiescence to the factual element in that it must be followed: see the Bank's opening skeleton at [58]..
131. Finally, it is important to note that, at least on the evidence before me, the restrictions imposed on banks in relation to payments out of foreign currency accounts have not taken the form of legislative provisions which directly affected the contractual relationships between banks and their customers. Rather, banks have been subject to informal regulatory pressure in the form of circulars addressed to them by the BdL or the Association of Banks. The position is, in my view, well-summarised by a decision of the Judge of Summary Procedure sitting in Zahle (Decision no 5 dated 13 January 2020, Mohammad Ismail Abdelrahman v Banque Credit Libanais SAL ) where the judge noted:
"The aforementioned circulars do not have any binding capacity towards the clients and it is not possible in any way to limit their right to carry out any banking operation that meets the accepted banking conditions within the laws and regulations …Any Capital Control by the Association of Banks needs legislation and this is not the case in Lebanon to date, noting that no circular was issued by the Central Bank of Lebanon represented by its Governor aiming to impose such restrictions … Such measures require exceptional powers to be granted to the [BdL] pursuant to a specific regulation".
(1) the Bank has failed to show and/or it has not been demonstrated how or when the custom which it acknowledged to exist before the banking crisis came to an end;
(2) The evidence does not satisfy the twin requirements of repetitio and opinio necessitatis;
(3) the desire to avoid a run on the banks was not an acceptable reason insofar as this was an exception to the pre-existing custom;
(4) A custom incorporated into a contract could not be replaced by a different custom without the assent of the parties to the contract;
(5) The Bank was unable to avoid the obligation to transfer by relying upon a right not to accept the request because it was acting as agent or to terminate the mandate as agent because the obligation to transfer was pursuant to the contract itself.
XV The effect of the tender and deposit procedure
"It is obvious that any tender and deposit would need to match the object of the debtor's obligation. If that obligation is (as I have determined) to effect an international transfer as requested by the client, then, tendering and making a deposit in Lebanon, rather than internationally, entails a mismatch. This means that the tender and deposit made by the Banks in Mr Manoukian's case has to be ineffective".
XVI Specific performance
(1) three scholarly commentaries: see Bou Ziab, Bou Nassif and Eid: see footnote 376 to the Claimant's opening skeleton argument at [120]. (The fact that this was not mentioned by other scholars does not affect the overall position, as explained by Professor Najm);
(2) at least 22 urgent matter cases referred to in the expert evidence;
(3) a very recent decision of the CFI (i.e. a full merits decision), namely Traboulsi v Fransabank (of 21 June 2022).
(1) his original report at [173] seemed to agree, but he then said that there was missing word "not" such as to express the opposite view;
(2) he did not cite any case or doctrine in support of his position, and as regards the case law, his case must therefore be premised either on the fact that case law is irrelevant or inadmissible or in the instant case wrong, neither of which is satisfactory;
(3) the bank cannot be compelled to act as an agent for the customer. This is not accepted generally. More particularly, when the court makes an order for specific performance the action is being done to fulfil an order of the court and not to act pursuant to the agency.
XVII Damages
XVIII Interest
XIX Conclusions
(1) the Bank had a contractual obligation to make international transfers as sought by the Claimant and which it failed or refused to make;
(2) The contractual obligation is established from the combination of the words used and the intention of the parties having regard to the context of the agreement of the parties.
(3) It is not necessary to consider custom as part of that context, and so the construction would be arrived at without reference to custom.
(4) The contractual construction is reinforced by reference to the custom which existed at the time.
(5) It therefore follows that it is not necessary to consider whether there would have been an international transfer obligation if the matter had depended entirely on custom.
(6) The transfer obligation is not absolute, but it is not so loose as to incorporate what was described as an acceptable reason beyond inadequate funds and established reasons such as not assisting fraud, money laundering or illegality.
(7) In coming to these conclusions, I have considered all of the evidence before the Court. That includes (without limitation) especially the following:
(i) The expert evidence and my findings which are to accept the evidence of Professor Najm and, where there has been conflict, to prefer the evidence of Professor Najm to the evidence of Dr Moghaizel.
(ii) I have found the evidence of the Claimant to be honest and reliable and have referred to a number of deficiencies in the factual evidence on behalf of the Bank. All of this is relevant to the context within which the contract is to be construed and in assessing the joint intention of the parties.
(iii) I have been assisted by the decision of Picken J in Manoukian. However, I have been careful to avoid simply following Manoukian, mindful that the contractual terms are not identical and that the evidence was different in the two cases.
(8) I am satisfied that the current crisis in Lebanon and/or a desire to follow any advice of the ABL and/or a desire to avoid a rush on the banks or to treat depositors according to some notion of fairness of the banks does not provide a legitimate reason or an acceptable reason (if there is such an exception to the obligation on the part of the bank to transfer money to the order of the Claimant) for not acceding to the requests for the international transfers in this case.
(9) The Bank is liable to the Claimant for not acceding to his requests for transfers.
(10) The appropriate remedy is specific performance.
(11) If the remedy had been to pay damages, it would have been to pay the full
sum requested to be paid by way of damages without deduction.
(12) In either event, interest is payable at the rate of 9% per annum from the
date when each transfer ought to have been made.
Question 1: Do the terms of the Account Agreements on their proper construction (leaving aside custom) require the Bank to comply with the instructions in this case?
Yes. There is no need to elaborate.
Question 2: What is the relevant custom/practice for the purposes of assessment the Bank's obligations: (a) that prevailing at the time when the contracts were entered into, or (b) that prevailing when the instructions were given?
The Court is entitled to use custom as an aid to construction. The contract is to be construed by reference to the custom or practice prevailing at the time when the contracts were entered into rather than that prevailing when the instructions were given.
Question 3: If the answer to question 2 is (a) (i.e., the custom prevailing at the time of contracting), is/was the custom/practice subject to an "acceptable reason" exception?
(It will not be strictly necessary to answer questions 2 and 3 if the answer to question 1 is "yes".)
The obligation was not absolute. Insofar as there was an acceptable reason exception, it was not one which allowed the latitude sought in this case.
Question 4: If the answer to question 2 is (a) (i.e., the custom prevailing at the time of contracting) and the custom/practice is or was subject to an "acceptable reason" exception, did such an "acceptable reason" exist at the time when the instructions were given?
No.
Question 5: If the answer to question 2 is (b) (i.e., the custom prevailing at the time of the instructions), has the custom existing at the time of contracting been replaced, by the time when the instructions were given, with a new custom under which banks were not required to effect transfers on instruction?
It has not been established that a new custom had replaced the custom at the time of the contracting. In my judgment, having regard to the admissions in this case, it was for the Bank to establish that there was a new custom prevailing at the time of the transfer instructions. The Bank has failed to establish the same. Even if that were not the case, there was no change of custom in this case. The requirements for a new custom of repetitio and opinio necessitatis are not present for the reasons set out above.
Question 6: If there is no obligation to transfer, can a BdL cheque give good discharge of the Bank's debt to the Claimant?
Not applicable
Question 7: Is specific performance available to the Claimant? If not, what damages is the Claimant entitled to?
Yes. If there is no entitlement to specific performance, then damages are payable in the same amount as the international transfers not made together with interest at the rate of 9% per annum.
Question 8: Is the Claimant entitled to interest at 9% per annum?
See the answer to question 7.
XX Disposal
Note 1 The cases are with reference to their item number in the Schedule of Lebanese decisions attached to the Claimant’s skeleton opening:
3 Court of Appeal decisions
Byblos Bank v Rizk [C/21] (item 18 in the Schedule);Traboulsi v Fransabank (item 24); and Bank Audi v Abdelkader (item 30).
12 Urgent Matters Decisions
Abou Zeid v Bank Byblos (item 2); Rahman v Crédit Lib (item 4); Makhlouf v Bank Audi (item 11);BLOM Bank v Antonios (item 13); Traboulsi v Fransabank [C/256] (item 14 in the Schedule); S&C Khalifeh v Bank Audi (item 16); Mahfoud v Bank Audi (item 17); Gougassian v Bank Audi (item 19); E Khalifeh v Byblos Bank (item 27); Bank Audi v Abdelkader (item 30);Farjane v Bank Audi (item 31 ); and Akl v Bankmed (item 34 ). The significance of, and weight to be afforded to, urgent matters decisions has been discussed above.
[Back] Note 2 Article 822 LCOC provides, “When the principal or the agent terminates the contract abruptly, untimely, and without acceptable reason, he may be held liable for damages to the other contracting party, due to the abusive use of his right”.
[Back] Note 3 As Prof Najm explained in oral evidence, (i) the partial quotation from Nammour 2012 that Dr Moghaizel has provided is incomplete, because Nammour goes on to say “very clearly […]that the bank cannot refuse to perform a transfer order” [T2/87:24]–[T2/89:4]; and (ii) the partial quotation from Nammour 2008 that Dr Moghaizel has provided is incomplete, because Nammour goes on to say that the bank’s ability to decline the transfer are limited to factual or legal impossibility [T2/90:10]–[T2/91:18].
[Back]