Trust of a Non‐Assignable Contractual Benefit: Barbados Trust Company v Bank of Zambia
| DOI | http://doi.org/10.1111/j.1468-2230.2007.00665_1.x |
| Published date | 01 September 2007 |
| Date | 01 September 2007 |
| Author | Alexander Trukhtanov |
Trust of a Non-Assignable Contractual Bene¢t:
BarbadosTrust Company vBank of Zambia
Alexander Trukhtanov
n
The courts continue to be exercised by issues thrown up by contractualprohibitions
on assignment of choses in action. The recent decision of the Court of Appeal in
BarbadosTrust Company vBank of Zambia
1
has contributed to the discussion which
for now leavesthe law in a state of confusion.
THE CASE
The case arose out ofa syndicated letter of credit facility taken outby the Bank of
Zambia (‘BoZ’).The facility agreement contained a provision which allowed any
lending bank to assign the debt owing to it ‘to any one or more banks or other
¢nancial institutions’subject toprior written consent of BoZ.The Bankof Amer-
ica (‘BoA’) tookan assignment of an acknowledged debtowing by BoZunder the
facility agreement and initiated a further chain of assignments of that debt, ulti-
mately in favourof BarbadosTrust Company (‘BTC’).The validity of that chain
of assignments was brought into qu estion (by reason, apparently, of the ass ignees,
including BTC, not being banks or ¢nancial institutions) and BoA executed a
declaration of trust by which it declared itself trustee of its interest in the BoZ’s
obligations under the facility for BTC absolutely. When BTC decided to collect
the debt, BoA refused to start proceedings against BoZ for the recovery of the
debt, and BTC sued BoZ in its own name, joining BoA as co-defendant, in reli-
ance on the rule inVandepitte vPreferred Accid ent Insuran ce Group of NewYork.
2
BoZ’s defence to the recovery action was that the declaration of trust was inef-
fective because it was made in breach of the contractual prohibitionon transfer of
the debt. The defence was successful in the High Court
3
where Langley J dis-
missed the claimby holding that the declaration of trust could notgive BTC title
to sue BoZ for the reason that it was employed to circumvent the contractual
restriction on transferability of the debt. The judge held that BTC’s action
involved an attempt to use the Va n d e p i t t e procedure ‘in a commercial context in
which it has no place because it would achieve a result which would be inconsis-
tent with the terms of the Facility’,
4
ie then a non-bank would have acquired the
right to make a direct claim against BoZ for the recoveryof the d ebt.
n
MJur (Oxon),solicitor.
1[2007]EWCACiv148.
2 (1932) 44 Lloyd’s Law Rep 41.
4ibid at [73].
848 r2007 The Authors.Journal Compilationr2007 The Modern Law ReviewLimited.
(2007) 70(5)MLR 837^856
To continue reading
Request your trial