Cattles Plc v Welcome Financial Services Ltd & Ors

This is an appeal from an order of HHJ Cooke sitting as a judge of the Chancery Division on 14 December 2009 by which he answered questions in a Part 8 claim form concerned with disputes between creditors of the claimant Cattles Plc (“Cattles”). One creditor is the respondent (second defendant to the proceedings) Royal Bank of Scotland Plc (RBS), which has not only a direct liability owed to it by Cattles in respect of substantial bank facilities but also guarantees from many subsidiaries in the Cattles group, including the first defendant to the proceedings, Welcome Financial Services Limited (“Welcome”).

Another class of creditors is the holders of bonds in two series issued by Cattles of whom the appellant, known as Party A, is a representative. The bondholders have direct liabilities from Cattles under the bonds but they do not have guarantees from the subsidiaries. The effect of the first declaration in the judge's order is that Cattles cannot make any claim against Welcome or prove in a liquidation or other insolvency proceedings of Welcome in competition with, or in priority to, RBS until such time as all obligations of Welcome to RBS have been satisfied in full, and the same goes for the other subsidiaries in the group. Party A challenges that conclusion which turns on the true construction of the guarantee given to RBS. If Party A were right on that point, other issues would arise of which the judge said that he would have decided two in favour of RBS and one in favour of Party A. He recorded his conclusions on these contingently, so to speak, in declarations 2 to 4 in his order. The judge gave each of RBS and Party A permission to appeal on the point or points decided against it. The judge's admirably clear judgment is available under the neutral citation [2009] EWCA 3027 Ch and may be referred to for the full details of the case. I will refer only to the most salient features necessary for understanding the points arising on this appeal in relation to declaration 1.

Cattles is a public company listed on the London Stock Exchange, although its listing is currently suspended pending the finalisation of its accounts for the year to 31 December 2008. The group of which it is the parent provided financial services to consumers and businesses. Cattles raised finance for the benefit of the group from a number of sources and lent money on to the various trading subsidiaries, of which Welcome is the main one. Cattles is said in the evidence to have financing liabilities of £2.6 billion. Primarily these fall into three categories. The first is facilities, both syndicated and bilateral, of some £1.625 billion, in relation to which RBS is the lender or the facility agent or both. The judge took as an example of these a syndicated credit facility agreement for £800 million dated 10 July 2006. RBS has a group cross-guarantee dated 3 April 1998 by which Cattles, Welcome and many other subsidiaries - I dare say all other subsidiaries with any trading activity or assets - each guarantee payment of all obligations owed by any of them to RBS. These include all amounts due under the facilities.

Secondly, there are several series of guaranteed senior unsecured notes issued by Cattles. The note holders have not sought to take part in these proceedings; they have guarantees from Welcome and from some other subsidiaries.

Thirdly, there are two sets of bonds issued by Cattles, one of £350 million due in 2014 and the other of £400 million due in 2017. The trustee of those sets of bond issues is HSBC Trustee (C.I.) Limited. Those bonds do not have the benefit of guarantees from Welcome or from any other of the subsidiaries; only Cattles is liable on those bonds for the principal and the interest accruing. Party A holds some of these bonds and represents for the purposes of these proceedings, under a formal representation order, the holders of all such bonds.

Cattles is in default under the facilities, the notes and the bonds. Notice has been served under the £400 million bond issue accelerating the liability to repay the principal due under the bonds. No enforcement action has yet been taken. We were told that a standstill agreement exists for the time being. However, the board of Cattles has to consider whether there is any reasonable prospect of avoiding an insolvent liquidation or administration by an agreed restructuring of the debts owed by Cattles and the group or otherwise.

In the course of negotiations with a view to such a restructuring, RBS has asserted that it has a trump card, namely that it can prevent Cattles from seeking to recover in respect of the inter-company debts owed to it by Welcome and the subsidiaries until Welcome and the other subsidiaries have satisfied all of their obligations to RBS under the guarantee. If this is right it is disastrous for the bondholders because Cattles’ only substantial assets are debts owed to it by Welcome and other subsidiaries by way of the obligation to repay the inter-company loans made by Cattles to Welcome and the other subsidiaries. Instead of those loans being repaid, so far as the assets permit, to Cattles, and then in turn the claims of all Cattles’ creditors being satisfied, so far as the assets suffice, out of those assets, RBS would cause Cattles to be entirely starved of assets and therefore unable to pay anything at all itself to any of its own creditors, in particular the bondholders, while the available assets, in the hands of Welcome and other subsidiaries, would be used, so far as they extend, to satisfy the obligations of Welcome and the other subsidiaries which include their secondary obligations as guarantors to RBS but not any obligation in respect of the two sets of bonds.

The first issue decided by the judge, set out in the first declaration, is as to the effect of a clause in the group guarantee to RBS. If that is decided in favour of RBS no other point arises. Otherwise a number of points would arise on which one issue is whether the Court of Appeal is bound by one aspect of a previous decision of the court on appeal, as it happens, from a decision of mine, Re SSSL Realisations (2002) Ltd [2004] EWHC 1760 (Ch) and [2005] 1 BCLC 1, as regards my decision and [2006] EWCA Civ 7 and [2006] Ch 610 as regards the decision in the Court of Appeal.

A few days after HHJ Cooke gave judgment in the present case Sir Andrew Morritt, Chancellor, sitting in the Chancery Division, decided a different case about similar issues in relation to the insolvency of Kaupthing, Singer & Friedlander, an insolvency which has given rise to a lot of litigation. His decision is at [2009] EWHC 3377 (Ch). HHJ Cooke's judgment had been handed down after conclusion of the argument before the Chancellor and after he had made a draft available to counsel but before the handing down of his judgment. He was shown the judgment. It did not cause him to alter the conclusion expressed in his judgment as originally drafted.

In the light of his decision and in the light of the debate before him, he was persuaded to grant a certificate for a leapfrog appeal to the Supreme Court of the United Kingdom from his own decision, and the Supreme Court has accepted that by giving permission to appeal. That is presumably on the basis that the point at issue was concluded in the High Court, and therefore logically also in the Court of Appeal, by the Court of Appeal's decision in Re SSSL. The point before the Chancellor was the equivalent of that decided by HHJ Cooke contingently in declaration 3 of his order. We were told that the appeal from the Chancellor to the Supreme Court is due to be heard next January.

Since the questions before us turn on the incidents and consequences of the rights and obligations arising under a guarantee, under which any member of the Cattles group may be the principal debtor in respect of particular obligations to the Bank to RBS and all other members are jointly liable as guarantors of that obligation, it is as well to start by noting some of the points that may arise in the ordinary way in respect of guarantees. I do so without intending or purporting to be at all comprehensive or definitive about the law of guarantees. A bank creditor may claim against its debtor in respect of a particular debt and against any or all guarantors of that debt as it chooses. If a guarantor pays in pursuance of such a demand, the guarantor may be subrogated to any rights of the bank against the debtor. It is also entitled to claim against the debtor to be indemnified in respect of its payment under the guarantee, and entitled to claim a contribution from any and all co-guarantors in respect of that payment. Even if it has not yet paid under the guarantee, it is a contingent creditor of the debtor since it may be made so liable. In an insolvency of the debtor the position of a) the bank, and b) other creditors of the debtor is protected against one consequence of this position by what is called the rule against double proof, to which I will come later. Commonly creditors, such as banks, protect themselves against some possible incidents in relation to, in particular, that of subrogation, so that that right does not apply until the creditor has been paid in full. The present guarantee in favour of RBS does that; it also goes further, and the question is how far.

I turn to the point arising on the guarantee. Clause 6 of the guarantee is as follows:

The Bank is RBS. Under the definitions in the guarantee “Debtor” means “Each and any of the Companies”. “Companies” means “The Parent Company and the companies named in the Schedule to this deed and each Additional Company”. The Parent Company is Cattles. “Guarantor” means “Each and any of the Guarantors”. “Guarantors” means “All of the Companies”. “Obligations” means “All liabilities to the Bank of any kind and in any currency (whether present or future actual or contingent and whether incurred alone or jointly with another) together with the Bank's charges and commission Interest and Expenses payable by each Debtor”.

Clause 1 of the guarantee is as follows, headed “Guarantee and Indemnity”:

Towards the end of the guarantee, under the heading “Interpretation”, clause 16.1 is as follows:

The judge said about this drafting, at paragraphs 18 to 19:

The debate between the parties was summarised by the judge in his paragraph 20:

In practice, on behalf of Party A, Mr Knowles QC before us, as before the judge, argued that clause 6.2 only applies to a claim by Cattles against Welcome in respect of Cattles' guarantee of any indebtedness by Welcome to RBS. For RBS Mr Trower QC before us, as before the judge, argued that it extends to any claim that Cattles may have against Welcome and is not limited to a claim for an indemnity for sums for which Cattles is liable as guarantor for Welcome or a claim for contribution in respect of Welcome's position as co-guarantor and that therefore it extends to the inter-company debt owed by Welcome to Cattles.

Mr Knowles set out ten criticisms of the judgment in his grounds of appeal and in his skeleton argument. One of them, the last, I will accept without more, namely that the judge ought not to have obtained even the very limited assistance that he referred to at paragraph 41 of his judgment from the construction placed on a similar clause as construed by myself and the Court of Appeal in Re SSSL. The true construction of the guarantee in this case turns on its own wording and not on that of another document between different parties. This court has been able to ignore such considerations in a way that was not open to the judge, by having the issue of construction of clause 6.2 argued first, and without having Re SSSL cited to us in the course of that argument.

That point, however, does not appear to have been significant in the judge's decision. I turn to the points which, on both sides, were rightly treated as more important. At this stage I would like to record my gratitude for the clear and helpful presentation of the written and oral submissions of Mr Knowles and Mr Trower respectively, including in particular the helpful graphic representation of the position in the skeleton argument for RBS, which we were told was the work of Mr Fisher. I would also express gratitude for the written submissions of Mr Dicker QC for Cattles, neutral on the points at issue but very useful in introducing the court not only to the issues but to the limited amount of important material in the bundles which we needed to read so as to understand the issues.

At paragraph 24 of his judgment the judge said this:

Mr Knowles took issue with this. On its own terms the sentence is surely correct. However, in paragraph 32 of his judgment the judge also said this:

Mr Knowles might not cavil with the word “increase” in paragraph 24, but he did submit that if “increase” means “maximise”, as indicated in paragraph 32, the judge might be guilty of assuming at the outset of his consideration the outcome contended for by Mr Trower. I should also say that he criticised the judge for the last sentence in paragraph 19 of the judgment. He submitted that the judge's hypothetical clause was neither clumsy nor confusing. By itself that is not a significant point but it impinges on his argument that the choice of the phrase "no Guarantor" rather than "no Company" or, strictly, using the definitions used in the guarantee, "none of the Companies", is significant and shows that "any claim" means any claim arising from or in connection with the capacity of the particular body as guarantor. That is one of his principal points and one of the main subjects debated between counsel.

Another is the question whether, on Mr Knowles’ construction, there is any real point to clause 6.2. It is accepted that clause 6.1 is concerned with matters arising out of the guarantee. If RBS obtains money or security for the obligation of any debtor, that is not to be subjected to any claim by a guarantor who has made a payment to RBS under the guarantee to be subrogated to any extent to RBS' recovery or security, until RBS has been paid in full. That is a normal and standard provision in a bank's guarantee form.

It is also accepted that clause 6.2 overlaps in part with the rule against double proof which I have already mentioned. That is the rule under which, where a debtor is subject to insolvency proceedings, if a creditor proves in those proceedings for the debt, a guarantor of the debt, though in principle entitled to a right of contribution against the debtor to the extent that he has paid the creditor, is not allowed to prove against the debtor unless and until he has paid the creditor in full. He cannot do so either in respect of the right of contribution for sums that he has paid to the creditor in part satisfaction of his own liability, nor in respect of his contingent claim for contribution. It is common ground that part of clause 6.2 covers the rule against double proof; it is also common ground that it goes further by including such a claim even before insolvency proceedings are on foot.

Mr Knowles submitted that this is an adequate rationale for the clause, whereas Mr Trower submitted that if the clause were to be limited in this way it would have almost no useful purpose and that objectively it cannot be supposed that that was all that the clause was intended to achieve. Another aspect of the clause on which counsel crossed swords is the significance of the words “in competition with”. Mr Knowles submitted that this referred most naturally to a case where two parties were each claiming against the third in respect of the same debt. Mr Trower argued that at least as naturally, and he said more so, it referred to competition by separate creditors for the available assets of a single debtor in respect of different debts which would only matter, as indeed does all and any part of clause 6, if the assets are insufficient to satisfy both creditors.

Mr Knowles further pointed to paragraph 42 of the judgment. This is as follows:

Mr Knowles argued that the need for a concession of the kind referred to towards the end of that paragraph, in order to make RBS' reading of clause 6.2 compatible with the operation of the business of the Cattles group in ordinary circumstances, revealed the flaw in that reading. Even a formal routine invoice or request by the accounts department of Cattles to the accounts department of Welcome (who I dare say are in practice the same people) for payment of part of the inter-company debt, or interest on it, or for example a normal routine quarterly or monthly management charge, would be a claim which, on RBS' reading of clause 6.2, would be precluded while there is any money owing by Welcome to RBS. That would be so despite the fact that, if there is no suggestion of insolvency, RBS would no doubt be content that the payment should be made without which Cattles would have no assets with which to carry on its own business as parent company of the group, or with which to meet its own primary obligations to the Bank and its ordinary obligations to other creditors such as there may be, including for example staff.

With that, by way of an overview of the main points on which the arguments before us turned, I can now consider clause 6.2 in the context of clause 6 and the guarantee as a whole.

The heading of clause 6 is “Preservation of the Bank's Claims”. This ties in with clause 5 where the heading is “Preservation of the Guarantors’ Liability”, which excludes the operation of certain factors that might otherwise vitiate that liability, and with the heading of clause 8, “Preservation of the Bank's Rights”, which deals with other matters which might otherwise adversely affect the position of RBS vis-a-vis the guarantors.

As Mr Trower pointed out, clause 6 is not concerned to prevent the undermining of the liability of a guarantor as such; that is dealt with by clauses 4, 5 and 8. Nor is it concerned with preventing adverse effects on the claim against, and the liability of, the debtor as such, which is governed by other documents, including in particular the facility agreements. On the contrary, clause 6 is to be understood, he submitted, as aimed at preserving the effective value of the Bank’s claims as regards the assets available to satisfy them, above all and perhaps exclusively in the circumstances in which one or more parties who are liable to RBS may not have enough assets to satisfy those liabilities in full.

The opening words of clause 6 give it a very general and extensive application in terms of time. It applies so long as any obligation of any Debtor is outstanding, not having been discharged in full. Clause 6.1, as already noted, protects any security or any recovery by RBS against dilution by a claim on the part of the guarantor to be subrogated following payment pursuant to the guarantor's obligation to the creditor under the guarantee. As mentioned, this is by its nature limited to matters arising under the guarantee. Clause 6.2, as already noted, covers the ground of the rule against double proof and extends it to a situation existing before insolvency proceedings have commenced. The question is whether it is limited to that; that is to say, whether “any claim” means any claim in the capacity of, or by reason of the position of, a guarantor. Since this is the critical issue we have to decide, I will come back to it after reviewing other aspects of the argument.

Clause 6.3 deals with the case where clause 6.2 has been breached. It is intended to give RBS security, in effect, over any money or security obtained by a Guarantor which ought not to have been obtained by reason of the terms of clause 6.2. I note that clause 6.3 uses the phrase “the liability of the Guarantors to the Bank under this deed”.

In support of his argument that clause 6.2 refers to claims in the company's capacity as Guarantor, Mr Knowles submitted that the use of the label “Guarantor” rather than, for example, the label “Company” or “one of the Companies” is significant. He cited to us, as he had to the judge, paragraph 17 of the speech of Lord Hoffmann in Chartbrook Limited v Persimmon Homes Limited [2009] UKHL 38 and [2009] AC 1101, applying what Lord Hoffmann had earlier said in Birmingham City Council v Walker [2007] UKHL 22 and [2007] 2 AC 262 at 268, where the particular label was "successor".

I accept the relevance of what Lord Hoffmann said in both those speeches and that it is not something to which reference should only be made if the matter is otherwise in doubt. The word used by way of a label may well not be arbitrary or neutral, and here I have no doubt that the labels used were not arbitrary or neutral. The words “Debtor” and “Guarantor” are used, as I shall show, with care. The particular label used may help to elucidate the meaning of the phrase in which it is used. In this respect it seems to me the judge was entirely right in the third sentence of paragraph 23 of his judgment when he said of the approach to the construction of a document:

Mr Knowles' criticism is that the judge did not follow his own guidance correctly. The word “Company” is used in the operative part of the guarantee at clause 1, setting out the consideration for the guarantee, in clause 13, a special provision concerning the release of one or more of the companies as guarantors, and in clause 16.1, which I have already read. Otherwise the word used is either “Debtor” or “Guarantor”. This distinction is made for a reason. I consider that Mr Trower is right to submit that Debtor is used in relation to obligations extrinsic to the deed; that is to say, the principal obligations which are the subject of the guarantees, for example those arising under the facilities. Those are the obligations as security for which the guarantee is given. By contrast, “Guarantor” is used for the purpose of imposing an obligation by the deed on a relevant entity, to use a slightly elaborate but deliberately neutral label, and of restricting the rights otherwise enjoyed by such a relevant entity. The deed does from time to time refer specifically to obligations or liabilities “under this deed”. Examples are clause 3.2.2, clause 4, clause 6.3 which I have already read and noted, clause 8.3, clause 8.5, clause 9.2 and 9.3 and clause 13. So the draftsman can and does refer specifically to matters arising under the deed when he wishes to do so, but there is no such qualification by limitation or phrase applied in relation to the words “any claim” in clause 6.2.

Mr Knowles correctly pointed to the use of both Debtor and Guarantor in, for example, clauses 4.1 to 4.5 inclusive, where the intention must be to refer comprehensively both to primary and to secondary liability; that is to say both to the principal debtor and to the surety, even though the entities comprised in each definition are the same, that is to say all and every one of the Companies. This seems to me show care used by the draftsman in differentiating the position of any one Company as Guarantor from, on the one hand, any or all other Guarantors, and, on the other hand, any other Company in its capacity as Debtor.

I agree that the different labels are used with care in the deed, but that by itself is not enough for Mr Knowles. It shows that it is the position of the relevant Company as Guarantor that is affected by clause 6.2. It does not necessarily show that “any claim” is a claim made under or by virtue of a particular Company's status or capacity as a Guarantor, with its Guarantor hat on, so to speak. The words “any claim” are, as is accepted, entirely general in themselves. They could be qualified by the context so as to mean “any claim in respect of, or by reason of, this guarantee”. It might not be appropriate to qualify them by the words “under this deed” since a contribution or subrogation claim or an indemnity claim would arise because of, but not strictly under, the guarantee itself. Mr Knowles submitted that they are so qualified because of the label, because of the words “in competition with” and also because of the very drastic result that the clause would otherwise have; and he also submits that if there is any ambiguity the phrase should be read as being more limited rather than less so, by virtue of the contra proferentem rule, the document being no doubt an RBS standard form.

I have discussed the relevance of the use of the label “Guarantor”. The words “in competition with or in priority to” the Bank seem to me to support Mr Trower's argument that clause 6 is about preserving RBS' ability to proceed against available assets. The words “in competition with” do seem to me at least as apt to cover competition between different creditors in relation to distinct debts against the same pot of assets held by a particular Debtor or Guarantor. If the assets are enough for all, no issue arises; it is only in the case of the risk or reality of insufficient assets -- in other words insolvency -- that the clause matters. Moreover, the words “in priority” cannot refer to something arising from the position of the relevant entity as Guarantor. Unless it is only referring to timing, i.e. it means “before”, which I would not accept, it must point to priority arising from some other relationship between the Guarantor and the Debtor. That, as it seems to me, also supports a wider rather than a narrower reading of the words “any claim” in clause 6.2.

In the light of those considerations, I would also not accept that the rule against double proof and a limited extension of that to the period before insolvency proceedings provides an adequate objective rationale for the inclusion of clause 6.2 in the guarantee.

As for the judge's point set out at paragraph 42 of the judgment which I have read, even if the rendering of an invoice by Cattles to Welcome would count as the making of a claim, if the business is proceeding in the ordinary way without the intervention of insolvency, there would be no competition between Cattles and the Bank as I see it; so I cannot accept Mr Knowles’ submission that the point made by the judge there reveals an underlying fallacy in RBS' arguments, nor in the judge's reasoning elsewhere in his judgment.

Mr Knowles made another point to us to the effect that clause 6.2 should not be construed in the manner upheld by the judge and argued by Mr Trower because that would not be the best way to maximise the recovery for RBS. He referred to Professor Sir Roy Goode's graphic description in Legal Problems of Credit and Security, second edition (1988), of his realisation that the better course on the part of a creditor such as the Bank is to require a company such as Cattles to claim and prove against its subsidiary and then to impose a trust on the recovery or the dividend for the benefit of the Bank. That recommendation is still there in the fourth edition, though without the description of the circumstances of Professor Goode's discovery of the point. The point may be well made, but the fact is that this is not the approach adopted despite the availability of Professor Goode's advice from 1988, and the question is not what might have been done otherwise, but what was done.

As I mentioned, Mr Knowles also relied on the contra proferentem rule. That rule has a legitimate role in an appropriate case, but it has been held that it only applies if the document, properly construed, admits of doubt: see Arden LJ in Static Control Components (Europe) Limited v. Egan [2004] EWCA Civ 392, [2004] 2 Lloyd’s Rep 429 at paragraph 37. So the court's first task is to construe the document properly on ordinary principles.

The question we have to address is the meaning of "any claim" in the context of clause 6.2, in particular in the phrase “no Guarantor shall in competition with or in priority to the Bank make any claim against any Debtor or any co-guarantor”. That meaning is to be determined by examining the particular words used in the context of clause 6 in particular, as part of the deed as a whole, and more broadly in the commercial context of the relationship between RBS and the Cattles group, informed, among other things, by a knowledge of the law relating to the rights and obligations arising from, and in relation to, the position under a guarantee.

I have referred to the various detailed arguments on aspects of the wording of the clause and of the deed as a whole, and as to the consequences and implications of the rival interpretations. Bearing all those matters in mind, I would also seek to avoid excessive reliance on detailed textual analysis. It is necessary, before coming to a conclusion on any point of this kind, to stand back and consider the matter in the round.

One of Mr Knowles' more general arguments was as to the drastic consequences of RBS' position as upheld by the judge. I have referred to the economic effect of this reading of the clause at the start of this judgment. In addition to that, Mr Knowles pointed out that, because the point stems from a clause in the deed of guarantee, there was no way in which another creditor of Cattles, or a potential creditor, would be likely to be able to become aware of this, unlike, for example, a prior floating charge or debenture which must be registered. He told us that this feature of the bank facilities was not referred to in the prospectus for the bonds; that of course cannot affect the correct interpretation of the guarantee, but it does, he submitted, point up the risks for other creditors.

As Mr Trower pointed out, however, the books on the law of guarantees show that a clause of this kind is quite common, and, in relation to a group whose finances are organised in the way in which those of Cattles were, it might be thought to be a natural precaution for a financing instrument such as the bonds to be made available on terms that the liabilities are guaranteed by at least the principal operating subsidiaries, including Welcome, rather than relying solely on the primary liability of the parent company Cattles.

So, in the end, I come back to clause 6.2. In my judgment the judge was right as to its meaning and scope and he was right for the reasons he gave. The meaning of the clause seems to me to be clear as a matter of the proper construction of the clause and the deed as a whole in this context. It is not a matter in which there is any ambiguity such as to bring into play the contra proferentem rule.

For my part, I would identify the most important features as being four, not in any particular order of importance and without wishing to underestimate the significance of the other points that I have already mentioned, which I will not repeat at this stage. The first is the very generality of the phrase “any claim”. The second is the wide scope of the words “in competition with or in priority to the Bank” and, particularly for the reasons that I have already mentioned, the reference to priority. The third is the references elsewhere in the deed, including as close to clause 6.2 as clause 6.3, to liability “under this deed”, which shows that where the draftsman intended to refer to liabilities arising under the deed he could and did so. By contrast, the generality, or at least the potential generality, of “any claim” is not so limited. Fourthly, on Mr Knowles’ view, as it seems to me clause 6.2 has almost no use for the Bank, since spelling out the law against double proof is not necessary and the extension of that rule as such to the situation before insolvency proceedings have commenced is not of sufficient importance to explain the clause in its context. That context, and the context of clause 6 as a whole, is one of the insolvency of all or any of the Debtor and the Guarantors. In that context I do not see it as a commercially rational objective reading of clause 6.2 to limit the words “any claim” to “any claim in the particular company's capacity as guarantor” rather than any claim of any kind, which is the natural meaning of the words “any claim”, as part of a clause whose avowed purpose is to preserve the position of the Bank in relation to the Guarantors, as I say, in a position where the problem that the Bank faces is the insolvency of one or more of those liable to it and it is seeking to prevent its rights being diluted or otherwise adversely affected by subrogation and by other matters such as are referred to in the clause.

For those reasons I would dismiss the appeal against the judge's first declaration. That renders it unnecessary and, as it seems to me, undesirable to venture into the subject matter of declarations 2 to 4 which do not arise. As Sir Andrew Morritt said in the Kaupthing Singer and Friedlander case, the subject of the rule in Cherry v Boultbee, to which I have referred without naming it, has been fully considered by the Court of Appeal in Re SSSL and in several more recent first instance cases, including the Chancellor’s own decision. He considered that the Court of Appeal decision on this in Re SSSL was binding as a matter of precedent. A debate before us, as we were otherwise to be drawn into, as to whether it is binding would be a remarkably arid exercise given that the point is already on its way towards a decision by the Supreme Court of the United Kingdom. It would also delay significantly the resolution of this appeal, which would be undesirable in proceedings which are of commercial urgency and have been brought on both in the Chancery Division and in this court with some expedition.

For those reasons it seems to me appropriate to decide the case solely on the construction of clause 6.2. On that I would dismiss Party A’s appeal.

I agree.

I agree and have nothing to add to Lloyd LJ's tour de force.