Barbados Trust Company v Bank of Zambia
| Jurisdiction | England & Wales |
| Judge | Langley J. |
| Judgment Date | 22 February 2006 |
| Neutral Citation | [2006] EWHC 222 (Comm) |
| Docket Number | Case No: 2004 FOLIO 65 |
| Date | 22 February 2006 |
| Court | Queen's Bench Division (Commercial Court) |
[2006] EWHC 222 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
The Honourable Mr Justice Langley
Case No: 2004 FOLIO 65
Mr A Bueno QC and Mr Y. Kulkarni (instructed by Hamilton Downing Quinn) for the Claimant
Mr R. Handyside (instructed by Lovells) for the First Defendant
Mr B. Pilling (instructed by Linklaters) for the Second Defendant
Hearing dates: 18 th– 19 th January 2006
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.
THE HONORABLE MR JUSTICE LANGLEY
The Hon. Mr Justice Langley :
BARBADOS TRUST
The Claim
The Claimant claims two principal amounts, totalling US$ 809,387.02, from the First Defendant, the Bank of Zambia, in respect of advances outstanding under an Oil Import Facility dated 19 July 1985 (the Facility). Contractual interest is also claimed which, at 17 January 2006, amounted to US$ 2,805,442.63.
The Claimant claims as the beneficiary of the claim under a Declaration of Trust created in its favour by the Second Defendant (Bank of America N.A.) on 30 January 2004, the day the claim form was issued.
No relief is claimed against Bank of America N.A. It was joined as a Defendant because it declined to act as a claimant and to ensure that it was bound by the outcome of the proceedings. The Bank of Zambia is the central bank and monetary authority of the Republic of Zambia.
The Issue
The relevant advances have not been repaid by the Bank of Zambia. Despite the dates of the advances, there are no limitation issues. The debts were acknowledged on 6 February 1998 and these proceedings were commenced on 30 January 200The issue is whether or not the Claimant has established that it is entitled to recover the sums (and interest) to which I shall refer as the Asset. This depends on the validity of the rights to the Asset of Bank of America N.A. at the time of the Declaration of Trust and the effectiveness of the Declaration of Trust in favour of the Claimant.
The Facility
By the Facility various banks and financial institutions agreed to make available to the Bank of Zambia a facility for the issue of letters of credit in the maximum principal amount of US$100m. Bank of America International Limited ("BAIL"), as it was then named, acted as Agent and Manager under the Facility. The relevant advances, the basis of the claim, were made on 16 January 1986 with maturity dates in June and July of that year. The Bank of Zambia committed itself as borrower to repay the Asset.
The Facility is governed by English Law (Article 13.11). The banks and other financial institutions named on the signature page are referred to collectively as "Banks" and individually as "Bank".
Article 12 of the Facility provided for assignments and is central to the issue:
"12.01. Assignment by Banks.
(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). For this purpose any Bank may disclose to a potential or actual Assignee such credit and other information relating to the Borrower and its condition as the Borrower shall have made available to the Agent… or as shall be known to such Bank otherwise howsoever….
12.02. ….
12.03. " Bank(s)" to include successors and assigns
The expression "Bank" wherever used in this Agreement shall include every Assignee of such Bank and every successor in title of any such Assignee or of such Bank, and "Banks" shall be construed accordingly."
Article 13.04 provided for "Enforcement":
"This Agreement may be enforced against the Borrower by the Agent as agent for those of the Banks which have consented to the relevant enforcement proceedings without the necessity of joining any or all of the Banks in such enforcement proceedings, but nothing in this Agreement shall be taken as in any way limiting or restricting the right of any Bank to enforce this Agreement against the Borrower."
Thus, absent an express agreement or, possibly, an express waiver, to be valid an assignment had to be to an assignee which was a "bank or other financial institution". If it was, the "prior written consent" of the Bank of Zambia was also required unless (which is not material) the assignee was a member of "the same group" as the assignor. But such consent could not be unreasonably withheld and was to be deemed to have been given if no reply was received from the Bank of Zambia for 15 days after it had been given a request for consent.
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 2[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.
The Evidence
Oral evidence was given by Graham Radford, an "Assistant Vice President, Bank of America" working principally with BAIL; by Mrs Lesley Matheron a Documentation Clerk at "Bank of America", and by Mathew Chisunka, the Assistant Bank Secretary at Bank of Zambia. Mr Radford and Mrs Matheron gave evidence at the request of the Claimant; Mr Chisunka gave evidence at the request of Bank of Zambia. With the agreement of the Court and the parties, substantial written Closing Submissions were provided after the conclusion of the hearing culminating with response submissions by the Claimant dated 27 January 2006.
The Facts
The title of Masstock
Between February 1992 and December 1999 (and indeed thereafter) a company called Masstock (International) Ltd ("Masstock") was acknowledged by both Bank of Zambia and BAIL to be the creditor of record in respect of the Asset. Although it seems that Masstock was not a bank or financial institution within the meaning of Article 12.01(A) it is accepted by Bank of Zambia that Masstock had a valid legal title to the Asset in November and December 1999.
The Masstock/GMO trades.
In November 1999, Bank of America N.A. bought from Masstock and sold to GMO Emerging Country Debt, LP ("GMO") the Asset. Bank of America N.A. is, and was, of course, a "Bank". The Claimant accepts that GMO was neither a "Bank" nor a "financial institution". The settlement dates for both these transactions were originally 29 November 1999 but, by agreement, became 10 December 1999.
The "Assignment" to Bank of America N.A. from Masstock was the subject of a "Form of Confirmation" dated 22 November, sent by Bank of America N.A. to Masstock. Lesley Matheron signed the Confirmation on behalf of Bank of America. The consideration was 5% of the principal amount of the debt. The Assignment was subject to and incorporated the "Standard Terms for Assignment of Loan Assets … of the Emerging Markets Traders Association" ("The EMTA Terms").
On the same day, a Form of Confirmation of the on-sale to GMO was sent by Bank of America N.A. to GMO. The consideration was 9% of the principal amount. The EMTA Terms also applied to the sale "except as specifically provided below" where reference was made to two "special provisions" of no relevance.
The Consent Requests
By a confirmed fax transmission sent on 2 December, Masstock sent a "Request for Consent" form to Bank of Zambia with copies to BAIL "As Agent" and to Bank of America N.A. The Request referred to the Facility and the Asset, notified Bank of Zambia that Masstock "proposed to assign" their rights and obligations to Bank of America N.A., and continued:
"we request your consent to the foregoing assignment and note that Section 12.01 of the [Facility] states that your consent shall not be unreasonably withheld".
"To facilitate our mutual record keeping" the Request asked that consent be given in a specific form. Mr...
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