Barbados Trust Company v Bank of Zambia

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Waller,Lord Justice Rix,Lord Justice Hooper
Judgment Date27 February 2007
Neutral Citation[2007] EWCA Civ 148
Date27 February 2007
Docket NumberCase No: A3/2006/0634 AND 0634(Y)

[2007] EWCA Civ 148

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM QUEENS BENCH DIVISION

Commercial Court

Mr Justice Langley

2004 FOLIO 65

Before

Lord Justice Waller

Vice-President of the Court of Appeal, Civil Division

Lord Justice Rix and

Lord Justice Hooper

Case No: A3/2006/0634 AND 0634(Y)

Between
Barbados Trust Company Ltd (formerly known as CI Trustees (Asia Pacific) Ltd)
Appellant
and
Bank of Zambia and Anr
Respondents

Stanley Brodie QC and Yash Kulkarni (instructed by Hamilton Downing Quinn, Solicitors) for the Appellant

Richard Handyside (instructed by Lovells, Solicitors for the First Respondent

Benjamin Pilling (instructed by Linklaters, Solicitors) for the Second Respondent

Hearing dates: 6 th and 7 th December 2006

Lord Justice Waller
1

This is an appeal from the judgment of Langley J handed down on 22 nd February 2006. The appeal is concerned with an admitted debt due from Bank of Zambia [BoZ] under a Facility entered into on 19 th July 1985 which has been traded on the distressed debt market. The Facility contained a clause allowing for the lending banks to assign “all or any part of [their] rights and benefits …to any one or more banks or other financial institutions …provided that any such assignment may only be effected if …the prior written consent of [BoZ] shall have been obtained (such consent thereto….to be deemed to have been given if no reply is received within 15 days..).” The debt had been assigned ultimately to the Bank of America [BoA] who declared a trust in respect of the same in favour of the appellants [BT]. BoZ defended the claim on the following bases:—

(1) That the assignment to BoA was invalid – this on the basis that, although BoZ must accept that deemed consent had been given, they not having responded to BoA's request, since the fifteenth day was after the effective date of the assignment, prior consent had not been given; and/or

(2) Even if BoA might have sued (which is not necessarily admitted as we shall see), BT was not entitled to sue as beneficiary under the declaration of trust naming BoA as defendant (i.e. to use the route normally available to a beneficiary where a trustee will not bring a claim in its own name) – this all on the basis that an assignment in their favour could not have been valid (they not being a bank or other financial institution and/or they not having obtained prior written consent).The submission before us ultimately was that this followed from the fact that either (i) the non-assignment clause prevented it or (ii) the terms of the declaration of trust would preclude it or (iii) equity would not allow BT to sue as beneficiary when to allow it to do so would be to side step the effect of the non-assignability clause.

2

The judge decided issue (1) the prior written consent point in favour of BT, but issue (2) the declaration of trust point in favour of BoZ. BT appeal issue (2), and BoZ have put in a respondents' notice appealing issue (1). Both appeals raise difficult and important questions; issue (2) the declaration of trust point raises issues which are far reaching and of considerable difficulty.

The background and relevant facts

3

BT has brought the action claiming from BoZ the first defendant two principal sums totalling US$ 809,387.02. BT has done so as a beneficiary under a declaration of trust created in its favour by the BoA on 30 January 2004 the day the claim was issued. It has joined BoA as second defendant relying on the procedure which has been recognised in many cases of suing in their own name naming the trustee as a defendant where the trustee refuses to sue in his own name. [see Vandepitte v Preferred Accident Insurance Corp. of New York [1933] AC 70 at page 79]

4

The sums have been an admitted debt as far as BoZ is concerned for many years. The debts arose under an Oil Import facility dated 19 July 1985 (the Facility). By that Facility various banks and financial institutions agreed to make available to BoZ a facility for the issue of letters of credit in the maximum principal amount of $100 million. Bank of America International Limited (“BAIL”) was the agent and manager under the facility. The relevant advances, the basis of the acknowledged debt, were made on 16 th January 1986 with maturity dates in June and July of that year. The debts have been reasonably recently acknowledged so as to preclude any limitation problems by an acknowledgement dated 6 February 1998.

5

The debts have been sold in the distressed debt market, assignors and assignees seeking the consent to assignment from BoZ pursuant to Article 12 of the Facility which is in the following terms:—

“12.01 (A) Each Bank may at any time and from time to time assign all or any part of its rights and benefits in respect of the Facility to any one or more banks or other financial institutions (an “Assignee”), provided that any such assignment may only be effected if (save in the case where the assignee is a member of the same group as the assignor, no such consent then being required) the prior written consent thereto of the Borrower shall have been obtained (such consent not to be unreasonably withheld and to be deemed to have been given if no reply is received from the Borrower within fifteen days after the giving of a request for consent by a Bank) …

(B) If any Bank assigns any part of its rights and benefits in respect of the Facility in consideration of the agreement of the Assignee with such Bank to perform that percentage of such Bank's obligations in respect of the Facility as corresponds with that percentage of its rights and benefits so assigned to the Assignee, then all references in this Agreement to such Bank shall thereafter be construed as references to such Bank and its Assignee to the extent of their respective participations. The Borrower shall thereafter be entitled to look only to the Assignee (to the exclusion of the assignor) in respect of those proportions of the assignor's obligations in respect of the Facility as correspond to the Assignee's participation (and accordingly the assignor's Commitment shall be proportionately reduced and the Assignee shall proportionately assume a Commitment equivalent to such reduction), provided that the Borrower shall not by reason of any such assignment be obliged to make any payment otherwise than to the Agent.

(C) Unless and until an Assignee has agreed with the Agent that it shall be under the same obligations to the Agent, the Manager, the Issuer and the Banks as it would have been under if it had been a party to this Agreement, the Agent, the Manager, the Issuer and the Banks shall be entitled to continue to look to the assignor for the performance of all its obligations in respect of the Facility as if no assignment had taken place and the Agent shall not be obliged to make payment of any sum to which that Assignee may become entitled in respect of the Facility other than to the relevant assignor.”

6

The judge said this of Article 12:—

“10. The commercial purpose of these provisions has been the subject of some debate. But I do not think it is hard to fathom. Any covenant against or restrictive of assignment is intended to ensure that the original parties to the contract are not brought into direct contractual relations with third parties save to any extent expressly permitted by the covenant. Any borrower, but particularly a central bank, may be concerned to ensure that its affairs and obligations are known and owed to and only enforceable by established and authorised institutions. Mr Antonio Bueno, QC, for the Claimant, referred the Court to the judgments of David Steel J and Aikens J in The Argo Fund v Essar Steel Limited [2004] EWHC 128 (Comm) and [2005] EWHC 600 (Comm) at paragraphs 19 (Steel J) and 28 and 29 (Aikens J). No doubt, prior to drawdown, a commercial purpose of Article 12.01 was also to ensure that any assignee was able both to provide its share of the funds and to act in co-operation with the other syndicate banks. Article 12.01(A), however, applies both before and after drawdown; is restricted, even in the case of a “Bank”, where consent to an assignment could reasonably be refused, and plainly encompasses and so regulates assignments when all that may remain to be performed is payment by Bank of Zambia. I reject Mr Bueno's submission that the Article was not intended to protect Bank of Zambia “from being pursued for what it owes under the Facility” at least in the sense relevant to the issues, namely that any third party could claim payment of the debt directly from Bank of Zambia.”

7

It is not suggested there was not evidence to support the finding as to the purpose of Article 12, but raised before us though not at the forefront of any submissions was a public policy issue relating to the approach of the law to an attempt to place fetters on the unencumbered property of an individual. It was not I hasten to make clear sought to suggest that Article 12 was in any way invalid or unenforceable but the extent to which Article 12 might or might not be construed as including a fetter on declaring a trust relating to an acknowledged debt might be affected by such a public policy point.

Issue (1)

8

It is convenient to deal with this issue the subject of the respondents' notice first, as did the judge. It is unnecessary to go into every detail of how the relevant assignment came to be made all of which is clearly set out in the judge's judgment from paras 12–28. All that is important is to be clear about the dates when as between the assignor Masstock (International) Ltd (Masstock) (accepted as...

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