Bank of Tokyo-Mitsubishi Ltd and Another v Baskan Gida Sanayi Ve Pazarlama and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lawrence Collins |
| Judgment Date | 29 April 2004 |
| Neutral Citation | [2004] EWHC 945 (Ch) |
| Date | 29 April 2004 |
| Docket Number | Case No: HC 03 C02596 |
| Court | Chancery Division |
[2004] EWHC 945 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice Lawrence Collins
Case No: HC 03 C02596
Mr John Wardell QC and Mr Thomas Grant (instructed by Forsters) for the Claimants
Mr. Nicholas Strauss QC (instructed by Barlow Lyde & Gilbert) for the 8th, 9th, 10th and 11th Defendants
Hearing dates : 25 th and 26 th February 2004
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr. Justice Lawrence Collins
I The parties
The claimants are The Bank of Tokyo-Mitsubishi, Ltd. ("BTM") and KBC Bank NV ("KBC"). BTM is a Japanese bank, and KBC is a Belgian bank. They have branches in the City of London.
The first defendant ("Baskan Gida") is a Turkish company which was incorporated on December 7, 1990. Baskan Gida was at the relevant times owned and controlled by the second to fifth defendants, Ahmet Baskan, Cevat Baskan, Ismet Baskan and Melih Baskan, and other members of the Baskan family. By 2001 Baskan Gida was the world's largest exporter of hazelnuts.
The sixth defendant ("Aksu Gida") is a Turkish company which was incorporated in August 1999. Its chairman and 90% shareholder was Latif Aksu, who had been employed by Baskan Gida as a sales manager with responsibility for domestic sales.
The seventh defendant, Indo Mediterranean Commodities Ltd ("Indo-Med"), was incorporated under the Companies Act 1948 on September 27, 1982. Indo-Med carries on business as a trader of food products. It, and its associated companies, have made purchases of hazelnuts from Baskan Gida on behalf of established clients such as Nestlé and Kraft.
The Ferrero group is one of the world's leading confectionery companies. It has its headquarters in Alba, Italy. The eighth defendant, Ferrero Industrial Services Ltd ("Ferrero Industrial"), whose registered office is in Alba, was incorporated as a European Economic Interest Grouping on June 16, 2000 by the Ferrero group in Europe with a view to centralising the purchasing of hazelnuts and other commodities.
Mr Alessio Casale ("Mr Casale") was at all material times the Deputy Purchasing Manager of Ferrero Industrial. Mr Alberto Rosa Brunet ("Mr Rosa Brunet") was at all material times the managing director of Ferrero Industrial.
The ninth defendant, Ferrero SpA ("Ferrero Italy"), is an Italian company with its registered office in Alba. The tenth defendant, Ferrero OHGmbH ("Ferrero Germany"), is a German company. The eleventh defendant, Ferrero France SA ("Ferrero France"), is a French company. I shall refer to the eighth to eleventh defendants collectively as "the Ferrero Companies."
II Baskan Gida's business with Ferrero and the Loan Facility from the Banks
By 1999 Baskan Gida had become the biggest supplier of hazelnuts to the Ferrero group and was responsible for 25% of Turkey's exports of hazelnuts. The Banks' evidence is that approximately two thirds of its exports went to the Ferrero group, with sales in excess of $100 million annually for 1999, 2000 and 2001. Baskan Gida's only other customer of any significance, Storck (a major German confectionery company), made purchases of some $10–15 million p.a. between 1997 and 2001.
In May 2001, PRI Financial Management ("PRI"), a financial institution based in New York, approached the Banks on behalf of Baskan Gida with a view to obtaining for Baskan Gida a loan facility to enable it to fund the purchase of hazelnuts from growers and other suppliers.
Between July 11 and 13, 2001 there were meetings at Baskan Gida's main plant attended by representatives of the Banks and of PRI, and by Cevat Baskan and Ahmet Baskan and Mr Casale. The Banks' case is that, during these meetings, the Banks informed Mr Casale that they required the active co-operation of the Ferrero group before they were prepared to contemplate granting a facility to Baskan Gida; that it was essential that the trading relationship between the Ferrero group and Baskan Gida be reduced into writing in a Framework Contract; and that Baskan Gida would have to provide security for the repayment of any loan made by the Banks.
On July 31, 2001 Mr Casale sent an e-mail to Melih Baskan, which consisted of a letter or e-mail to Mr Byles of BTM. Since a letter in identical terms was sent to Mr Byles on December 13, 2001, it is likely that the communication to Mr Byles in the e-mail to Melih Baskan is a draft which was not sent until December. The full terms of the letter are set out below (para 30). It confirmed that Ferrero had a very close working relationship with Baskan Gida, and that Ferrero relied on Baskan Gida's ability to provide consistent shipments of the highest standard on a timely basis.
On October 15, 2001, Baskan Gida and Ferrero Industrial ("for itself and on behalf of each of Ferrero Companies") entered into what was described as a "Framework of General Terms and Conditions" ("the Framework Contract").
Under the contract the Ferrero Companies did not have any obligation to purchase. Clause 2 stated that since the centralisation of its purchasing department in 1999, Ferrero had purchased over 30,000 tons of hazelnuts from Baskan Gida annually, and expected those trends to continue.
Clause 3 provided for a method of supply, under which Baskan Gida would report to Ferrero on a daily basis the amount and price of the different quality hazelnuts which had been purchased by Baskan Gida, and every 2 or 3 days Ferrero would inform Baskan Gida about the amount and specification of hazelnuts which each Ferrero Company required, and Baskan Gida would indicate the prices, and send invoices. By clause 3.3, "Subject to terms of the contracts" Baskan Gida would deliver the hazelnuts to Ferrero on FOT and/or CPT terms at Baskan Gida's facilities, i.e. in Turkey, when property and risk would pass (clause 5.1).
By clause 6 payment for each order was to be made by the relevant Ferrero company in euros to a bank account in Baskan Gida's name or to such other bank account as might be advised by Baskan Gida to Ferrero from time to time on the date after delivery against presentation of documents.
By clause 8: "The governing law of the contracts signed between Ferrero and Baskan are determined on each of the contract [sic] signed, which is generally the governing law of the country the Ferrero Company signing the contract is located."
By clause 9 either party could assign its rights under the contract by way of security or otherwise, without having to obtain the approval of the other party. By clause 9(2) any such assignment would be effected by notice in writing from the assignor, countersigned by the assignee to signify its acceptance of the obligations under the Framework Contract.
On December 14, 2001 the Banks entered into a $35 million pre-export financing facility agreement with Baskan Gida ("the facility agreement"), the purpose of which was to provide Baskan Gida with finance to purchase hazelnuts up to a maximum of the lesser of 90% of sales contract value and 100% of the purchase price paid by Baskan Gida to cover the gap between purchase of the hazelnuts from local farmers until payment was received from buyers. The facility agreement was subject to English law and English jurisdiction (but the Banks retained the right to sue elsewhere).
The conditions precedent to utilisation of the facility included execution of Security Documents, and the provision of notices of assignment to Baskan Gida's customers (including, of course, Ferrero) and acknowledgements of such notices: clause 4 and Schedule 2.
The mechanics for use of the facility were, in summary, as follows: (a) Baskan Gida would make a utilisation request (which was a request to BTM to issue a letter of credit: see Schedule 3), accompanied by a copy of the relevant Ferrero purchase order; (b) BTM would issue a letter of credit (clause 5.1); (c) Akbank TAS, a Turkish bank ("Akbank"), would act as advising and negotiating bank (clause 5.1(h)); (d) each payment made by BTM under a letter of credit would be deemed to be an advance (clause 5.4); (e) BTM would reimburse Akbank for payments made under the letter of credit pursuant to UCP 500 (Schedule 6).
The Security Documents comprised what were described as: Account Charge, Master Assignment Agreement, Master Pledge Agreement and Master Trust Receipt. The effect of the Security Documents was to give the Banks the following security:
(a) under the Account Charge, all monies standing to the credit of the Collection Account (two accounts in the name Akbank as collecting agent for Baskan Gida, one for dollars and the other for euros, held at KBC's London branch) were to be charged to KBC (which was Agent for the Banks);
(b) under the Master Assignment Agreement, Baskan Gida charged to KBC the entirety of its rights benefit and interest in each sale contract (and related document of title) it entered into in relation to the supply of hazelnuts;
(c) under the Master Pledge Agreement, Baskan Gida agreed that: as security for payment or discharge of monies due to the Banks under the loan facility, KBC would have a first ranking pledge over hazelnuts acquired with monies advanced by the Banks under the loan facility; it would transfer possession of each delivery of hazelnuts to KBC or SGS Société Générale de...
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