Barclays Bank Ltd v T.O.S.G. Trust Fund Ltd

JurisdictionEngland & Wales
JudgeLORD JUSTICE OLIVER,LORD JUSTICE KERR,LORD JUSTICE SLADE
Judgment Date12 July 1983
Judgment citation (vLex)[1983] EWCA Civ J0712-2
Docket Number83/0314
CourtCourt of Appeal (Civil Division)
Date12 July 1983

[1983] EWCA Civ J0712-2

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION (GROUP B)

(MR. JUSTICE NOURSE

Royal Courts of Justice.

Before:

Lord Justice Oliver

Lord Justice Kerr

and

Lord Justice Slade

83/0314

1978 B. No. 515

(1) Barclays Bank Limited
(2) Lloyds Bank Limited
(3) National Westminster Bank Limited
(4) Wintrust Securities Limited
Appellants (Plaintiffs)
and
(1) T.O.S.G. Trust Fund Limited
(2) Gerald Godfrey Carroll
(3) Harvey Michael Crush
(4) Ernest Maxwell Welsman
(5) Harry William Chandler
(6) Robin Girvan Cattermole
(7) Norman Stevenson Pugh
(8) Bruce Winton Tanner
(9) Norman Corkhill
(10) Julian Ronald Haylock
(11) Lawrence John Holding
(12) Air Travel Reserve Fund Agency
Respondents
(13) Clarksons Holidays Limited
(Defendants)

MR. PETER MILLETT, Q.C. and MR. JOHN MACDONNELL (instructed by Messrs. Wilde Sapte & Co.) appeared on behalf of the (Plaintiffs) Appellants.

MR. WILLIAM STUBBS, Q.C. and MR. LESLIE KOSMIN (instructed by Messrs. Norton Rose Botterell & Roche) appeared on behalf of the (12th Defendants) Respondents.

MR. DAVID OLIVER (instructed by Messrs. Stephenson Harwood) appeared on behalf of the Liquidators (13th Defendants).

LORD JUSTICE OLIVER
1

This is an appeal by the plaintiffs against an order of Mr. Justice Nourse made on the 26th June, 1981 dismissing their action against the 1st, 12th and 13th defendants, the respondents to this, appeal and declaring on the 12th defendants' counterclaim that the joint liquidators of the 13th defendant, Clarksons Holdings Limited, were entitled and bound to admit in full the proof of debt lodged with them by the 12th defendant.

2

The appeal raises an interesting and unusual question with regard to the applicability and the manner of application of what is known as the Rule against Double Proof in the liquidation of an insolvent estate. The facts are fully set out in the careful judgment of the learned judge and need only to be summarised here. The 13th defendants, to which I will refer as "Clarksons", were a wholly owned subsidiary of Court Line Ltd., which, together with its constituent companies, collapsed during the height of the holiday season of the year 1974. Clarksons was one of Court Line's more prominent tour-operating subsidiaries and was at the material time among the market leaders in the package holiday field. For some years prior to the collapse anxiety had been expressed among tour operators about the effect on the public image of the industry of the failure of operators to provide holidays for which members of the public had made bookings and paid in advance and in 1969 a group of the more prominent operators (including Clarksons) formed what was known as the Tour Operators Study Group to consider problems confronting the industry, one of which was the absence at that time of any central organisation which could provide guarantees against failure or cessation of business of tour operators. As a result of that group's deliberations, a company limited by guarantee was formed in 1970 and that is the 1st defendant, T.O.S.G. Trust Fund Ltd., to which I will refer as "T.O.S.G." The purpose of this company was to be the recipient of moneys contemplated as becoming payable under bonds or similar provision made by the members in the event of the member becoming unable to fulfil its obligations to its customers and to dispense those moneys in such way as might be most expedient to meet the emergency thus created. The principal object of T.O.S.G. in clause 3(A) of its Memorandum of Association was as follows:

"To manage, utilise, employ and expend funds and moneys paid and/or to be paid to the Company under or by virtue of Bonds, Letters of Credit, Policies of Insurance or similar arrangements obtained by members of the Tour Operators Study Group and issued in favour of the Company each being in respect of a Tour Operator Study Group member and/or its tour operator subsidiaries ('the member Group') or otherwise paid to the Company by such members, in generally alleviating the consequences to such member Group's customers of the business failure of the Tour Operators Study Group member or any other member Group Company in respect of whom such funds or moneys are received by the Company and in particular (but without prejudice to the generality of the foregoing) in making arrangements to procure the expeditious return by an appropriate means of transport to their departure point from the United Kingdom or Ireland of persons stranded abroad as a result of such member Group's business failure, in procuring that persons in the course of holidays abroad at the date of such member Group's business failure are enabled to complete their holidays in suitable accommodation and to return to their departure point from the United Kingdom or Ireland by an appropriate means of transport, in making all necessary travel and accommodation arrangements for persons who have purchased from such member Group and paid in full, for holidays abroad which, as at the date of the member Group's business failure, had not been commenced and in making such payments as the Company may in its absolute discretion think fit to persons who had paid deposits to such member Group in respect of future holidays abroad and who (being customers of the member Group) otherwise suffer financial loss by reason of the member Group's business failure."

3

The members of the study group then established a bonding scheme under which they mutually agreed to provide bonds in favour of T.O.S.G. in a form acceptable to that company and they entered into an agreement with T.O.S.G. regulating the manner in which T.O.S.G. could call up the bonds. The bonds were renewed annually and their amount was to be reviewed in each year but in fact remained from 1971 onwards at a figure equivalent to 5 per cent of the relevant tour operator's turnover for the previous year, that figure being assumed (erroneously as it turned out) to be adequate to cover any failure on the worst possible basis.

4

Pursuant to these arrangements Clarksons, in October 1973, arranged for bonds to a total value of £2,226,000 to be issued by five banks, the four appellants and Williams & Glyn's Bank Limited, which was the plaintiff in a separate action heard at the same time as the action in which this appeal arises.

5

Those bonds were for the following amounts:

Williams & Glyn

873,000

Lloyds Bank

93,000

Wintrust Securities

260,000

National Westminster Bank

500,000

Barclays Bank

500,000

6

They were all in the. same form, were issued to T.O.S.G. and provided that the bank concerned undertook to pay the specified sum but subject to a condition that the bond should be void unless during the period of 12 calendar months commencing on the 1st October, 1973 any one or more of six specified events should occur. I need not enumerate those in detail. They included the event of T.O.S.G. notifying the issuing bank that any company in the Clarkson group could not carry out its obligations, the presentation of a winding-up petition, and cessation of payment of debts.

7

I ought, however, to read the final provision of the document which is in these terms:

"And in consideration of the issue of this Bond the Fund hereby covenants with the Obligor that upon payment of the said sum of £specified above by the Obligor to the Fund the Fund will undertake in writing with the Obligor that the Fund will repay to the Obligor on demand such part of the said sum as shall not be expended or required by the Fund in the performance and execution of its rights, duties, powers and discretions as set out in the Fund's Memorandum and Articles of Association, and that such Memorandum and Articles will not be altered during the currency of this Bond without the prior written consent of the Obligor (which shall not be unreasonably withheld) first obtained."

8

At the same time each of the issuing banks obtained from Clarksons a counter-indemnity. The form of each indemnity was that normally used by the bank concerned. They are not identical and their precise terms do not matter, for it is not in issue that they created an obligation upon Clarksons, in the event of the bond being called up, to indemnify the bank against any loss which it might sustain as a result of having executed the bond.

9

In August 1974 it became plain that the Court Line Group in general and Clarksons in particular were in such severe difficulties that operations could not continue, and on the 15th August the Civil Aviation Authority withdrew Clarkson's Civil Aviation Licence. At the same time Clarkson notified T.O.S.G. that it had ceased to trade and could no longer carry out its obligations to its customers. On the following day T.O.S.G. notified the banks in writing of the fulfilment of the pre-condition to the operation of the bond and called up the bond moneys immediately. These sums were paid to T.O.S.G. and Clarksons were notified by the paying banks. On the same day, the 16th August, Clarksons presented its own petition for compulsory winding up and on the 21st August Clarksons passed a special resolution to wind up voluntarily.

10

There then followed a hastily mounted rescue operation, the purpose of which was to enable those customers of Clarksons who were already abroad on holiday to complete their holidays and return to the United Kingdom, an operation which involved, of course, payment for hotel bills and for arrangements with air carriers. In this connection T.O.S.G. expended in round terms a sum of £956,000, as to which no question arises on this appeal. The question with which the court is now concerned relates to the...

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