Carey Group Plc & Ors v AIB Group (UK) Plc & Anor

This is an application by the second defendant National Asset Management Agency (“NAMA”) to strike out the Claim Form and Particulars of Claim in these proceedings, on the ground that no cause of action or other basis for the relief sought is disclosed. The application is supported by the first defendant AIB Group (UK) Plc (“AIB UK”), although it has issued no application of its own.

The claimants are a group of civil engineering and construction companies of which the first claimant Carey Group Plc is the parent. They are all banking customers of AIB UK, which is a bank incorporated in Northern Ireland and which also carries on business in England, Wales and Scotland. It is a wholly owned subsidiary of Allied Irish Banks Plc, which is incorporated and has its headquarters in the Republic of Ireland (“Ireland”), although it also carries on business in the UK, from a branch in London.

NAMA is an Irish statutory body, established pursuant to the National Asset Management Agency Act 2009 (“the Act”), as part of the Irish Parliament’s efforts to stabilise and rebuild the Irish economy, and in particular its banking sector. The Act established a scheme for the acquisition by NAMA at a valuation of bank assets from participating institutions. AIB UK and its parent company (“AIB”) are both participating institutions within the meaning of the Act.

NAMA proposes to acquire from AIB UK the bank asset constituted by its rights under secured lending facilities (“the Facility”) granted to the claimants pursuant to a facility agreement (“the Facility Agreement”) dated 12^th October 2010, pursuant to the acquisition mechanism set out in the Act.

By these proceedings the claimants seek injunctions to restrain NAMA from instituting and AIB UK from acting pursuant to that acquisition process, on the alternative grounds that:

The strike out application is based upon the corresponding assertions that:

In addition to injunctions, the relief claimed in these proceedings includes five forms of declaration as to the alleged ineffectiveness or unlawfulness of the threatened implementation as against AIB UK of the acquisition procedure in the Act. While acknowledging that the grant of declaratory relief is discretionary, NAMA asserts in support of its strike out application that the Particulars of Claim disclose no basis upon which that discretion could properly be exercised in the claimants’ favour.

NAMA acknowledges that there exist between the parties issues as to the interpretation of the Facility Agreement, but asserts that those issues can be summarily resolved without the need for a trial, and that there are no disputed questions of fact relevant either to the construction of the Facility Agreement or to the question whether, properly construed, any breach of it is threatened by the proposed acquisition.

Application was made on 14^th February 2011 to Peter Smith J for urgent relief for injunctions to restrain the defendants from proceeding with the proposed acquisition. Short term relief until 15^th February was granted by the judge, and extended at a hearing attended by the claimant and by AIB UK, but not by NAMA, until a speedy trial, to be listed as floating in the week commencing 28^th March 2011, for which the judge gave all necessary case management directions. The injunctions restraining implementation of the proposed acquisition were continued in the meantime.

NAMA seeks to justify the earlier hearing of its strike out application on the grounds first, that if successful it will obviate the time and expense which would otherwise be necessary for the preparation and conduct of a five day trial and secondly, that there is a commercial interest within the context of the Irish bank restructuring provided for by the Act in resolving the uncertainties as to its implementation within this jurisdiction thrown up by the claimants’ proceedings, as soon as possible.

There is for the most part no dispute as to the primary facts. The only significant factual dispute appears to relate to the inferences which may be drawn as to AIB UK’s understanding of the effect (if any) upon it of the provisions of the Act, and as to its motivation for cooperating with the acquisition process which NAMA intends to implement in relation to the Facility.

It is common ground that, viewed from the perspective of the courts of England and Wales, the Act is part of the public law of a foreign state, namely Ireland. Its purposes are described in detail in section 2, and include:

Part 4 of the Act provides what is essentially an opt-in process whereby credit institutions (as defined) may apply to be designated by the Minister as participating institutions, that is, participating in the scheme for the acquisition of eligible bank assets prescribed by the Act. It is common ground that AIB is a credit institution within the meaning of the Act. By section 62(1) an application by a credit institution is taken to include an application for participation by all its subsidiaries, unless their exclusion is requested pursuant to section 62(2). Similarly, designation by the Minister under section 67 of an applicant credit institution as a participating institution is deemed to include all its subsidiaries unless excluded by the Minister under section 67(6). Subsidiary is defined by reference to the Irish Companies Act 1963, which (as is common ground) does not limit that classification to companies incorporated in or carrying on business in Ireland.

Section 69 of the Act provides for the Minister to prescribe by regulation classes of bank asset as “eligible bank assets”, that is, eligible for acquisition under the statutory scheme. They may include, by subsection (2), (and I infer have by regulation been prescribed so as to include):

“(a)

Credit facilities issued, created or otherwise provided by a participating institution—

(i)

for the purpose, whether direct or indirect and whether in whole or in part, of purchasing, exploiting or developing development land.

(ii)

where the security connected with the credit facility is or includes development land,

…”

Development land is defined in section 4 as including land wherever situated.

By section 84 NAMA is given the discretion whether to acquire one or more eligible bank assets of a participating institution. Section 84(2) makes clear that the discretion exists in relation both to performing or non-performing eligible bank assets. The statutory scheme is, therefore, not restricted to the acquisition only of what is sometimes called toxic debt. Section 84(3) provides that NAMA may decide to acquire an eligible bank asset in the face of an objection by the participating institution. By section 87, NAMA’s decision is implemented by its service upon the participating institution of an acquisition schedule describing both the asset and NAMA’s determination of its acquisition value.

The effect of the service of an acquisition schedule is prescribed by sections 90 and 91, and differs radically according to whether the eligible bank asset identified in the acquisition schedule is or is not a “foreign bank asset” as defined. If it is not, section 90(1) and (3) provide that (subject to an irrelevant exception) the service of an acquisition schedule on a participating institution operates “by virtue of this Act to effect the acquisition of each bank asset specified in the acquisition schedule … on the date of acquisition specified in the acquisition schedule as the date of acquisition of the bank asset, notwithstanding that the consideration for the acquisition has not been paid”. Section 90(3) provides that upon acquisition, every contract relevant to that asset is deemed to be assigned to NAMA or its group entity specified for the purposes of the acquisition.

Section 91(1) defines a foreign bank asset not by reference to its situs, but by reference to the governing law relating to its transfer or assignment. It provides as follows:

““Foreign bank asset” means a bank asset in which the transfer or assignment of any right, title or interest that NAMA proposes to acquire is governed in whole or in part by the law of a state (including the law of a territorial unit of a state) other than the State;”

So far as relevant section 91 continues as follows:

“(3)

To the extent that a bank asset proposed to be acquired by NAMA is or includes a foreign bank asset—

(a)

if the law governing the transfer or assignment of the foreign bank asset permits the transfer or assignment of that asset, the participating institution shall if NAMA so directs do everything required by law to give effect to the acquisition, or

(b)

if the relevant foreign law does not permit the transfer or assignment of the foreign bank asset, the participating institution shall if NAMA so directs do all that the participating institution is permitted to do under that law to assign to NAMA the greatest interest possible in the foreign bank asset.

(4)

A participating institution, to the extent that a foreign bank asset is one to which subsection (3)(b) applies—

(a)

is subject to duties, obligations and liabilities as nearly as possible corresponding to those of a trustee in relation to that bank asset, and

(b)

shall hold the bank asset for the benefit and to the direction of NAMA,

in each case subject to the nature of, and the terms and conditions of the acquisition of, the foreign bank asset.

(5)

Subsection (3) applies in so far as the service of an acquisition schedule would not, of itself, as a matter of foreign law, operate to give effect to the acquisition of a foreign bank asset or otherwise effect or achieve the result referred to in that subsection in relation to such a bank asset.

(6)

Without prejudice to subsection (4), a participating institution shall immediately upon being so directed by NAMA to do so, execute and deliver to NAMA any contract, document, agreements, deed or other instrument that NAMA considers necessary or desirable to ensure that there is effected a binding acquisition by NAMA or the NAMA group entity concerned, under the applicable law, of the interest specified in the relevant acquisition schedule. NAMA may issue more than one direction under this subsection in connection with a foreign bank asset.

…

(8)

A participating institution shall comply with any direction of NAMA in relation to any duty, obligation or liability under this section.

(9)

A participating institution shall obtain, make, maintain and comply with any authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration that is necessary in the State and in any other place in connection with ensuring the legality and enforceability of any act, matter or thing referred to in this section.”

Throughout section 91 the phrase “the State” means Ireland.

The definitions of “eligible bank assets”, “bank asset” and “foreign bank asset” make no reference to the situs of the asset at all. Mr Hugo Page QC for the claimants submitted that, in accordance with general principles as to territoriality of legislation which he invited me to assume were equally applicable to Irish as to English legislation, I should interpret those phrases as limited to assets with their situs in Ireland. Although it may not be strictly necessary in determining this strike-out application, I make it clear that I disagree. The statutory scheme established by the Act is plainly designed so as to enable an Irish incorporated credit institution to include foreign subsidiaries as participants. Generally, the situs of a bank asset constituted by a debt will be the principal place of business of the bank creditor, unless some other place for payment of the debt is specified in the contract creating it. Thus most of the assets of a foreign subsidiary which is included as a participating institution in the statutory scheme will have their situs outside Ireland. Furthermore, the detailed provisions in section 91 as to the acquisition of foreign bank assets would be of strictly limited application if, by reference to an underlying principle of territoriality which finds no expression in the Act, the entire scheme were limited to bank assets with their situs in Ireland.

AIB applied on behalf of itself and all its subsidiaries to become participating institutions under the terms of the scheme on 1^st February 2010. AIB UK was neither excluded from the application, nor from the subsequent designation by the Minister under section 67 of the Act, so that it became, from the perception of Irish law, a participating institution by virtue of its parent company’s application. There is an issue, which I am prepared to assume cannot be resolved without a trial, as to precisely what AIB UK or (in reality, particular officials within AIB UK) thought was the effect of its inclusion as a participating institution within the scheme. The evidence of Tiana Peck, the Head of legal Services at AIB UK, was that uncertainties as to the extent to which AIB UK could participate in a scheme established by Irish legislation were resolved, in correspondence with NAMA, by an agreement that it would voluntarily participate in return for NAMA’s assurance that it would, in discharging functions in the United Kingdom relating to AIB UK, act in compliance with the law and applicable regulations of the UK, and that it would not require AIB UK or its Board to act in a manner prohibited by that applicable law or regulation. This agreement by correspondence (exhibited to Ms Peck’s witness statement) occurred in April 2010 and was itself expressed to be governed by English law.

The claimants’ case, set out in paragraphs 38 and 39 of the Particulars of Claim, is that officials of AIB UK have informed the claimants that they regard AIB UK as, reluctantly, obliged to comply with any acquisition schedule from NAMA in relation to the Facility, as a result of which:

“It is to be inferred that the basis of AIB’s belief is statements made to it by NAMA. It is implicit in such statements that NAMA has represented that it has enforceable legal powers to acquire the Facility and/or enforceable legal powers to compel AIB to effect a transfer.”

It was common ground before me that NAMA could not take enforcement proceedings against AIB UK within the jurisdiction of the courts of England and Wales for the direct enforcement of statutory duties imposed upon participating institutions under the Act, and in particular the duties in relation to foreign bank assets specified in section 91. Nonetheless it was also common ground that AIB UK regards itself as obliged to comply with the mechanics of the statutory scheme, in relation to the subject matter of any acquisition schedule served upon it by NAMA. The only factual issue separating the parties is whether, as both NAMA and AIB UK allege, that obligation arose by contract, in the form of the exchange of correspondence which I have described or, as alleged by the claimants, because of an illegitimate and mistaken assertion by NAMA that AIB UK was under a direct statutory obligation. It appears not unlikely that different officials within AIB UK may have held different views about that matter from time to time. The practical reality was that, as a wholly owned subsidiary of AIB, there was no realistic prospect that AIB UK would do otherwise than comply with a scheme into which it had been introduced by its parent’s application, always provided that it was not unlawful to do so pursuant to the law in force in any jurisdiction where acts of compliance with the scheme were required.

Companies within the claimants’ group have been customers of AIB UK for some forty years. Facilities have included term loans for the development of particular properties, performance bonds, guarantees, asset finance facilities and overdraft facilities. The claimants have a long record of satisfactory compliance with those facilities. The claimants’ debt to AIB UK is in no sense toxic. For present purposes, the bank assets which NAMA proposes to acquire from AIB UK consist entirely of its rights under the Facility Agreement (and associated securities), which it is necessary now to describe in some detail. The Facility Agreement takes the form of a letter from AIB UK, described as “the Bank” addressed to the directors of all four of the claimants, described collectively as “the Borrower”. Clause 2 headed Facility lists thirteen specific facilities, including five term loans in the aggregate of £7.7 million and €23million odd, five performance bond facilities in the aggregate of approximately £4.5 million, an asset finance facility for £4.5 million, a guarantee facility of £500,000 and an overdraft facility for £8,477,750.00, reducing on 31^st March 2011 to £6,977,750.00.

The detailed terms of all the facilities other than the overdraft are of no particular relevance. The detailed terms of the overdraft facility are as follows. Under clause 3, headed Term/Review, the overdraft is:

“To be reviewed on an annual basis or as required by the Bank. Unless otherwise required by the Bank, the next review date shall be 31^st July 2011. On such review date, the Overdraft shall cease to be available unless the Bank has agreed in writing to its renewal or extension. The Borrower shall deliver such financial or other information as the Bank shall require to be delivered prior to that decision being made.”

Under clause 4 the purpose of the overdraft facility is described as to meet short term capital requirements and general corporate expenditure. Under clause 5 headed Drawdown, it is provided in relation to the overdraft facility as follows:

“Drawdown or utilisation may not take place where such a drawing or utilisation would result in the Overdraft limit being exceeded.

If the Bank, in its discretion, allows a drawing or utilisation of the Overdraft so as to exceed the Overdraft limit, it shall not be construed that the Overdraft limit has changed or that the Bank shall agree to meet any other payment instruction which would have the effect of exceeding the Overdraft limit.”

Under clause 6 headed Repayments, it is provided in relation to the Overdraft facility as follows:

“All outstanding monies drawn under the Overdraft are repayable on demand at all times at the Bank’s discretion. If repayment of the Overdraft is demanded, any other utilisation of the Overdraft shall cease to be available and the Bank shall be entitled to require the Borrower to lodge a sufficient amount for the Bank as security with the exposure of the Bank in respect of any utilisation of the Overdraft.

On 31^st March 2011 the Overdraft limit shall be reduced to £6,977,750.00 and on such date the Borrower shall lodge with the Bank such amount as is required (if any) to ensure that this limit is not exceeded.”

All the facilities, including the overdraft, were secured by cross-guarantees, first mortgage debentures and first legal mortgages over specified properties including, but not limited to, properties from time to time under development by the claimants’ group.

Schedule 9 to the Facility Agreement contains general conditions applicable to all the facilities. Paragraph 12, headed Assignment, provides as follows:

“12.1

This Facility Letter is for the benefit of the Borrower and the Bank and their successors and assignees and transferees of the Bank.

12.2

The Borrower may not assign or transfer all or any of its rights, obligations or benefits under this Facility Letter.

12.3

The Bank may in its absolute discretion transfer assign or charge (either in law or in equity) any Security held by the Bank and/or the benefit of any such Security and all rights claims and entitlements of the Bank against any Group company or Guarantor or Mortgagor and any other person to any other person at any time and from time to time and such transferee assignee or chargee shall be entitled to exercise all of the Bank’s rights discretions and entitlements under such Security.

12.4

The Bank may assign any of its rights or transfer any of its rights or obligations under this Facility Letter to any other bank or financial institution or a trust fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets. The Borrower undertakes and shall procure each Group Company to execute all documents the Bank may reasonably require to give effect to such assignment or transfer.”

Under paragraph 17, the Facility Agreement is expressed to be governed by English law.

Although AIB UK’s participation in the scheme had been arranged some months before the making of the Facility Agreement in October 2010, it appears to have been assumed both within AIB UK and by the claimants that a transfer of AIB UK’s rights under the Facility to NAMA was not threatened. That understanding appears to have changed in December 2010, and it is pleaded by the claimants that they were notified both that AIB UK was a participant in the statutory scheme, and that the Facility was to be the subject of an acquisition by NAMA, in January and February 2011 respectively. The evidence suggests that AIB UK objected to the proposed acquisition as contemplated by section 84(3) of the Act, but that its objection was overruled by NAMA.

During the course of the exchange of evidence in connection with the claimants’ application for interim injunctions and NAMA’s strike-out application it became apparent that there is some considerable uncertainty as to the manner in which it is intended that NAMA’s acquisition of AIB UK’s rights under the Facility Agreement is sought to be achieved. Section 91 of the Act contemplates that the acquisition of a foreign bank asset will be achieved, if permitted by the relevant law, by assignment and, if not, by an assignment of the greatest interest permitted by the applicable law, or alternatively by AIB UK treating itself as “nearly as possible” as a trustee of the benefit of the asset for NAMA, and by holding the asset to the direction of NAMA.

In a witness statement dated 3^rd March 2011 Ms O’Reilly, NAMA’s Head of Legal and Tax said that, in the case of foreign bank assets, NAMA’s practice was not to seek a legal assignment (even if permitted under the applicable foreign law). She continued:

“Instead, NAMA simply assumes economic responsibility for the debt, with the result that it comes off the balance sheet of the participating institution and is replaced on that balance sheet with NAMA’s securities. Thereafter, NAMA bears full economic risk and is responsible for the management of that debt and, in particular, NAMA will determine credit policies in relation to it.”

The Particulars of Claim were originally pleaded in February 2011 in response to an assumed threat that there would be some form of assignment. In response to Ms O’Reilly’s evidence, the claimants applied for permission to amend the Particulars of Claim so as to include, among other amendments, a claim that it would be a breach of the Facility Agreement either to allow NAMA to manage the Facility, or for AIB UK to be dictated to by NAMA as to the management of the Facility, or for AIB UK to pass economic responsibility for the Facility to NAMA. Consistent with settled practice, I have treated those and the other proposed amendments as offered so as to save the proceedings from being struck out. The defendants oppose permission to amend solely on the grounds that the amendments would not, even if permitted, save the proceedings from that fate. I shall therefore address the question whether the claimants have pleaded a sufficient case to avoid being struck out on the basis of the Particulars of Claim as sought to be amended.

The claimants’ pleaded case falls, as I have said, into two main parts. The first is that the proposed acquisition of AIB UK’s rights under the Facility Agreement would, if implemented, constitute a breach of contract. If made out, that would give rise to a sufficient cause of action for a quia timet injunction both against AIB UK, in respect of the threatened breach, and against NAMA for seeking to procure it. The second basis for the claim is that, as persons who would be adversely affected by the conduct complained of, the claimants are entitled to an injunction to restrain NAMA from seeking to enforce within this jurisdiction the provisions of the Act, by serving an acquisition schedule on AIB UK pursuant to section 87. In relation to that second basis of claim, the defendants do not suggest that the claimants have no prospect of demonstrating at trial that the proposed acquisition, if implemented, would cause them prejudice. It is convenient however to address the breach of contract claim first.

Paragraph 11 of the Particulars of Claim asserts that, on the true construction of the Facility Agreement or by way of an implied term, the liberty to assign given to AIB UK by paragraph 12.4 of Schedule 9 is subject to a restriction prohibiting assignment “to an entity which is not able to provide banking services including an overdraft facility”. That restriction is said to arise “in the light of trade practice” or to be implied “by custom of the trade” or because of necessity to give the agreement business efficacy, and/or because it satisfies the officious bystander test.

It is then alleged in paragraph 43 that NAMA is not able to provide banking services to the claimants’ group, and in particular not able to offer an overdraft facility. It is alleged that NAMA could give no reasonable or bona fide consideration to the provision of an overdraft or to the extension of draw-down facilities as contemplated by clause 5 of the Facility Agreement, quoted above. For present purposes I shall assume, despite NAMA’s denial, that the claimants have a real prospect of showing at trial that NAMA could not provide, or give consideration to providing, an overdraft facility after an assignment pursuant to paragraph 12.4 of Schedule 9.

No particulars are given of the trade practice pursuant to which it would be permissible to construe paragraph 12.4 of Schedule 9 as prohibiting an assignment of the rights and obligations under the Facility Agreement to a person unable or unwilling to provide an overdraft facility. Furthermore, it is settled law that neither trade custom nor practice will override the express terms of a contract between traders. As Lord Hoffmann put it in Johnson v. Unisys Ltd [2003] 1 AC 518, at paragraph 37:

“Implied terms may supplement the express terms of the contract but cannot contradict them. Only Parliament may actually override what the parties have agreed.”

In my judgment the alleged prohibition on assignment to a person unable or unwilling to provide an overdraft facility is contrary to the unambiguous meaning of the express terms of the Facility Agreement. Generally speaking, overdraft facilities are provided by banks. Nonetheless paragraph 12.4 of Schedule 9 permits assignment of the rights and obligations under the Facility Agreement not merely to another bank, but to any financial institution, any trust fund or any other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets. That broad class includes types of entity, such as trust funds, which would be most unlikely to be able, or to wish, to offer overdraft facilities. I consider that NAMA falls fairly and squarely within the class constituted by an “entity … established for the purpose of … purchasing or investing in loans, securities or other financial assets”.

The position might have been otherwise if, as Mr Page submitted, the Facility Agreement obliged AIB UK to provide an overdraft facility for the whole of a fixed term. For that purpose he relied upon Paget’s Law of Banking (13^th Ed) at paragraph 13.1, and the citation there from Titford Property Co Ltd v. Cannon Street Acceptances Ltd (22^nd May 1975, unrep), in which Goff J held that a provision for repayment on demand was repugnant to a contract for the grant of a fixed term overdraft for the purpose of financing specific property developments.

The court will not lightly find that an important provision in a banking facility, such as for repayment on demand, is repugnant, although the particular facts of the Titford case afforded a powerful basis for that conclusion. Similar arguments failed in Williams & Glynn’s Bank v. Barnes [1981] Com LR 205 and in Lloyds Bank plc v. Lampert [1999] 1 All ER (Comm) 161, CA, albeit on differently worded agreements.

In the present case, I consider that the Facility Agreement comes nowhere near affording the claimants or, more precisely, the second claimant a fixed term overdraft facility which could not be brought to an end, even in the absence of breach by the Borrower, at an earlier date. Clause 3 of the Facility Agreement entitled AIB UK to review the overdraft facility “as required” and provided in terms that upon any such review, the overdraft should cease to be available until a written agreement for its renewal or extension had been made. Clause 6 provided for repayment of the overdraft on demand, and expressly contemplated that demand might be made prior to the termination of the overdraft facility by review, or by effluxion of time, since it provided that, after demand, any other utilisation of the overdraft should cease to be available.

It follows in my judgment that if for any reason AIB UK wishes to transfer its rights and obligations under the Facility Agreement to a person unable or unwilling to provide an overdraft facility, it is perfectly entitled first to terminate the overdraft facility, either by review or by demand for repayment, so as to avoid transferring to that person any obligation under the Facility Agreement which it would be unable or unwilling to perform. That analysis leaves no room for the implied term, or interpretation, contended for by the claimants.

It follows that the proposed acquisition of AIB UK’s rights under the Facility Agreement by NAMA could, without any breach of the Facility Agreement, be achieved by a transfer under paragraph 12.4 of Schedule 9. If indeed NAMA were either unable or unwilling to provide an overdraft facility after transfer, then the overdraft facility could be terminated by AIB UK without breach of the Facility Agreement, prior to the taking effect of the transfer.

If follows that the claimants’ originally pleaded case based on threatened breach of contract is bound to fail, because there is no basis for the recognition (whether by construction or implication) of the supposed restriction on transfer under paragraph 12.4 of Schedule 9 for which the claimants contend.

The second limb of the claimants’ case for breach of contract is based upon the recently disclosed proposal that the acquisition of AIB UK’s rights under the Facility Agreement by NAMA could be achieved by a process of the assumption of economic risk, responsibility and management, falling short of an assignment. The case sought to be pleaded, reflected by the proposed addition of paragraphs 43A to E of the Particulars of Claim, focuses upon two supposed breaches of the Facility Agreement to which that mode of giving effect to the proposed acquisition would give rise. The first is based upon paragraph 12.1 of Schedule 9, which provides that the Facility Letter is for the benefit of the Borrower and the Bank and their successors and assignees and transferees of the Bank. It is alleged that to confer the economic benefit of the Facility Agreement upon NAMA when it is neither a successor, an assignee or transferee of the Bank is thereby prohibited.

In my judgment, paragraph 12.1 of Schedule 9 imposes no such prohibition. The starting point is that a party is entitled to assign, transfer, share or otherwise confer the economic benefit of a contract as it pleases, unless restrained by the contract itself, or by statute. Far from containing an express or implied restriction, paragraph 12.1 merely emphasises the broad extent of that right, without describing every possible permutation of it. The only words of prohibition in the whole of paragraph 12 affect what the Borrower rather than the Bank may do: see paragraph 12.2.

The more seriously pursued case under this head related not to the conferral of economic benefit, but to the conferral upon NAMA of management of the Facility, in circumstances falling short of an assignment under paragraph 12.3, or a transfer of rights and obligations under paragraph 12.4. The pleaded case, valiantly supported by Mr Page in his submissions, runs as follows. In numerous places the Facility Agreement confers discretions upon AIB UK (described for that purpose as “the Bank”). By analogy with settled principles of public law, such discretions are to be exercised in a manner which is not dishonest, for an improper purpose, capricious, arbitrary, unreasonable, influenced by extraneous considerations, or under dictation from a third party. If AIB UK were, without assignment or transfer under paragraph 12.3 or 12.4, to subject itself to the dictation of NAMA in relation to all discretionary matters arising under the Facility, it would fall foul of the last of that list of prohibitions. Furthermore if it terminated the overdraft facility at the dictation of NAMA it would exercise its discretion for an improper purpose, arbitrarily, unreasonably, and influenced by extraneous considerations.

In support of that submission Mr Page relied mainly upon Paragon Finance plc v. Nash [2002] 1 WLR 685, in its application to a discretion to set interest rates in a secured lending agreement of the general principle set out by Leggatt LJ in Abu Dhabi National Tanker Co v. Product Star Shipping Ltd (No 2) [1993] 1 Lloyd’s Rep 397 at 404:

“Where A and B contract with each other to confer a discretion on A, that does not render B subject to A’s uninhibited whim. In my judgment, the authorities show that not only must the discretion be exercised honestly and in good faith, but, having regard to the provisions of the contract by which it is conferred, it must not be exercised arbitrarily, capriciously or unreasonably.”

In relation to the supposed duty on a contracting party personally to exercise a discretion vested in it by the contract, rather than to delegate it to another, he relied on Tillmanns & Co v. SS Knutsford Ltd [1908] 2 KB 385, at 401 and 406, as recognising that a discretion conferred by a charterparty on the captain of the vessel was to be exercised by him personally, and not at the dictation of the charterers.

For present purposes I am prepared to assume, without deciding, that the various discretions conferred upon the Bank in the Facility Agreement were subject to the pleaded restrictions upon being exercised dishonestly, for improper purposes, capriciously, arbitrarily, wholly unreasonably, or on the basis of extraneous considerations. But in that context I regard it as unarguable that the exercise of a discretion, for example, not to continue with an overdraft facility, in the context of a proposed acquisition of the economic benefit of the Facility by NAMA as part of the scheme for the restructuring of the AIB group requested by AIB UK’s parent company would fall foul of any of those prohibitions.

By contrast I am not persuaded that the Facility Agreement requires the various discretions conferred upon the Bank to be exercised personally by AIB UK, rather than at the direction of a person upon whom AIB UK had lawfully placed the whole economic benefit and risk of the Facility. The question is one of construction and/or implied terms, and no disputed facts are asserted in support of the claimants’ case in this respect which require a trial.

The starting point is exemplified by the following passage from the judgment of Arden LJ in Lymington Marina Ltd v. MacNamara [2007] Bus LR digest, at paragraph 37, in relation to the question of whether a refusal of consent to a proposed sub-licence under a marina licence agreement was subject to a Wednesbury unreasonableness test:

“In my judgment, the judge was in error in using public law principles in this context … The right approach was to ask whether any terms should be implied into clause 3(k)(ii) so that, even if the claimant exercised the power for reasons related to the identity of the proposed sub-licensee, the exercise of the power could still be set aside if the grounds for refusal of approval were, for instance, in bad faith or wholly unreasonable. A term is only to be implied into a contract in this type of situation if it is so obvious that reasonable parties would not have thought it necessary to include it or if the implication of the term is necessary to give the contract business efficacy: see Chitty On Contracts 29^th ed (2004) vol 1, paras 13-004 to 13-007.”

In my judgment the supposed requirement that all discretions conferred on the Bank be exercised personally by AIB UK in circumstances falling short of an assignment or transfer fails that test by a clear margin, for the following reasons. First, it is clear from paragraph 12 of Schedule 9 to the Facility Agreement that the parties contemplated that, during the life of the Facility Agreement, the exercise of discretion under it might, at AIB UK’s choice, devolve upon a wide range of potential persons such as, for example, any equitable assignee or even chargee of the benefit of any security or of entitlements of the Bank, under clause 12.3. In such circumstances the right to exercise the Bank’s discretion could devolve upon “any other person”, without limitation as to class or suitability, and without any contemporaneous transfer to that person of the Bank’s obligations under the Facility Agreement sufficient to confer upon the claimants any rights against that person for any alleged wrongful exercise of those discretions.

The case is therefore far removed from that of the charterparty in Tillmans v. Knutsford, where the parties conferred the relevant discretion upon a third party exercising a special skill, namely the captain of the vessel. It would in my judgment be nothing short of bizarre to import by way of implied term into the Facility Agreement a requirement for the personal exercise by AIB UK of discretions evidently conferred upon it for its own benefit, merely because AIB UK had for particular reasons chosen to transfer the economic risk and benefit of the Facility to a third party in circumstances which might (albeit not necessarily would) fall just short of an equitable assignment.

Furthermore, it is commonplace in the context of facilities granted by a bank which is a company within a modern and sophisticated banking group for some or even all aspects of the management of the bank’s rights (including discretions) to be carried out by another group company, rather than by the directors or full-time employees of that company personally. Indeed, it seems highly improbable that AIB UK’s credit policies are, even in advance of the implementation of the proposed acquisition, administered in a manner which is wholly isolated from the financial policy of its parent company since, no doubt, its ability voluntarily to continue to extend credit where contractually free to terminate or withdraw it will be influenced by the financial circumstances of the whole group, and therefore by policies laid down at group level, and expected to be adhered to by trading subsidiaries.

It follows that the whole of this second limb of the claimants’ case based upon threatened breach of contract has no prospect of success, and ought to be struck out.

This alternative case of the claimants also turned out, upon analysis, to have two limbs. The first was, as I have stated, that the court should restrain by injunction the attempt by NAMA, so it is alleged, to enforce within the jurisdiction of this court the provisions of the Act. The second is that, in any event, it is arguable that the court should as a matter of discretion grant declaratory relief about the non-applicability of the Act in the context of the Facility.

Taking the claim for an injunction first, Mr Page took me to Rule 3 on page 100 of Dicey, Morris & Collins on the Conflict of Laws (14^th Ed), to the commentary on pages 101-102, to Re Lord Cable [1977] 1 WLR 7, and to Pocket Kings Ltd v. Safenames Ltd [2010] Ch 438. The relevant principle is stated in Dicey’s Rule 3 as follows:

“English courts have no jurisdiction to entertain an action:

(1)

for the enforcement, either directly or indirectly of a penal, revenue or other public law of a foreign State; or

(2)

founded upon an act of state.”

In the commentary, and by reference to a dictum of Lord Keith in Government of India v. Taylor [1955] AC 491 at 511, the editors suggest that the best explanation for the Rule is that the enforcement of such claims is because:

“An assertion of sovereign authority by one State within the territory of another, as distinct from a patrimonial claim by a foreign sovereign, is (treaty or convention apart) contrary to all concepts of independent sovereignties.”

At paragraph 5-023, at page 102, the editors continue:

“Direct enforcement occurs where a foreign State or its nominee seeks to obtain money or property, or other relief, in reliance on the foreign rule in question.”

Mr Page suggested by reference to that passage that the Rule therefore applied to prohibit enforcement by the agency of a foreign state, even if that enforcement did not take the form of legal proceedings invoking the jurisdiction of the English courts. I disagree. In my judgment that part of the commentary is directed to the Rule as stated, not to some wider principle which permits legal proceedings for an injunction to restrain direct enforcement by conduct which does not itself involve the invocation of the court’s jurisdiction.

The only authority to which Mr Page could point as justifying that radically wider interpretation of the principle was Pocket Kings v. Safenames, where a domain name for which Safenames was the English registrar was made the subject of a forfeiture and seizure order by a Kentucky court on the application of the Commonwealth of Kentucky which the claimant (which licensed the use of the name for on-line gaming purposes) feared might be complied with by Safenames, and with which Safenames refused to undertake not to comply. Rather than wait for the Commonwealth of Kentucky to seek to enforce the forfeiture order by English proceedings, the claimant sought a declaration of non-enforceability and an injunction restraining compliance by Safenames. At a hearing at which Safenames attended but made no submissions on the law, but at which the Commonwealth of Kentucky did not appear, Michael Furness QC sitting as a Deputy High Court judge granted both the declaration and the injunction sought.

The forfeiture order was, of course, made pursuant to the penal or public law of a foreign state and, at first sight, the decision appears to afford some support for the use of the principle enshrined in Dicey’s Rule 3 as a sword, rather than merely as a shield. On analysis however, the critical distinction with the present case is that it was there common ground that to comply with the forfeiture order would bring Safenames into breach of its contract with the claimant, so that the claimant had a conventional cause of action for an injunction, provided that the Kentucky forfeiture order afforded no defence under English law: see paragraph 43 of the judgment. It is also apparent that Safenames consented to the grant of an injunction if the declaration sought was made. Furthermore, the deputy judge appears to have regarded the claim for a declaration as a legitimate pre-emptive strike against the risk that the Commonwealth of Kentucky might attempt enforcement proceedings against Safenames in England.

In my judgment Pocket Kings v. Safenames affords no basis for extending the principle enshrined in Dicey’s Rule 3 to a case in which, with no cause of action in contract or otherwise based upon a threatened breach of its own rights, a person seeks to restrain the enforcement out of court of the public law of a foreign state, where the person sought to be compelled is prepared to comply voluntarily with the demand or request of the foreign government agency. On the contrary, in Re Lord Cable (supra) at page 23, Slade J drew precisely that distinction, in a case where beneficiaries of a will trust sought to restrain the Indian trustees from removing assets of the estate from England to India in order to comply with an Indian tax liability. In refusing that relief, Slade J said, by reference to the principle stated in Dicey:

“Nevertheless, for the purpose of applying the last mentioned principles it would not, in my judgment, be correct to say that the failure of the English court to intervene in regard to the redemption monies amounted to an enforcement of the exchange control laws of India. It is one thing for the court to intervene by requiring trustees to comply with foreign fiscal legislation; it is quite another thing for it to decline to prevent trustees of a foreign trust from complying with fiscal legislation of the country of the proper law, which under such foreign law they are entitled and indeed obliged to obey.”

Mr Page frankly acknowledged that he could not in the numerous authorities on the principle of non-enforceability of the public law of a foreign state, find any reported case, other than Pocket Kings v. Safenames, which supported his submission. I consider it to be entirely misconceived. In my judgment a person resident or carrying on business in this jurisdiction is at liberty to comply voluntarily with a request or demand of a foreign government agency, based upon foreign public law, without fear of restraint by the English courts, provided only that he thereby commits no wrong actionable under English law. Thus for example, a person with tax liabilities in the USA may, although resident in England, perfectly properly pay his US tax, and the Inland Revenue Service of the USA may perfectly properly demand payment of that tax. The only effect of the non-enforcement principle is that (in the absence of any relevant treaty or convention) the IRS will not be able to bring English proceedings to enforce payment.

In the present case I have concluded that the Particulars of Claim disclose no contractual basis for restraining AIB UK from complying with NAMA’s demand that it transfer its rights under the Facility. Mr Page attempted to deal with this difficulty by aiming his claim for an injunction at NAMA itself, rather than at AIB UK. In my judgment that affords no answer to the claimants’ difficulty. The evidence shows that, for whatever reason, AIB UK has agreed in writing to participate in the scheme created by the Act. In my judgment there is no arguable basis for an assertion that NAMA would be infringing any right of the claimants in demanding or requesting that AIB UK comply with the duties which that statutory scheme imposes upon a participating institution, following the service of an acquisition schedule relating to the Facility.

The claimants seek five alternative or cumulative declarations arising out of the matters alleged in the Particulars of Claim. Treating the proposed amendments as included for present purposes, they are as follows:

“46.1

A declaration that the Act has no effect on or in relation to the Facility.

46.2

A declaration that no acquisition schedule or other notice served by NAMA or any of its agencies purportedly under the Act, or any term or provision of the Act, creates any trust or any other proprietary right in the Facility in favour of NAMA or any of its associate agencies.

46.3

A declaration that no acquisition schedule or other notice served by NAMA or any of its agencies purportedly under the Act, or any term or provision of the Act, places the AIB or any of its officers employees or agents under any legal obligation to co-operate with or take any steps to effect the acquisition or attempted acquisition by NAMA or any of its associate agencies of any right to or interest in the Facility.

46.3A A declaration that no acquisition schedule or other notice or other thing done under the Act establishes any rights in relation to the Facility or permits NAMA to manage the Facility or dictate to AIB how to deal with the Facility in any way whatsoever.

46.4

A declaration that any act taken by NAMA to effect a transfer in title to the Facility whether by purported operation of law or indirectly by compelling AIB to take steps to effect such a transfer, is unlawful.”

I was taken by Mr Page both during, and in written submissions after, the hearing to a number of authorities which serve to record the developing discretionary jurisdiction to grant declaratory relief. For present purposes I am content to treat the summary in Rolls Royce plc v. Unite the Union [2010] 1 WLR 318, at paragraph 120 in the judgment of Aikens LJ, as a sufficient summary of the present scope of the jurisdiction, and of the principles which will generally guide the court in its exercise. Of particular relevance for present purposes are the following:

“(2)

There must, in general, be a real and present dispute between the parties before the court as to the existence or extent of a legal right between them. However, the claimant does not need to have a present cause of action against the defendant.

(3)

Each party must, in general, be affected by the court’s determination of the issues concerning the legal right in question.

(4)

The fact that the claimant is not a party to the relevant contract in respect of which a declaration is sought is not fatal to an application for a declaration, provided that it is directly affected by the issue; (in this respect the cases have undoubtedly “moved on” from Meadows).

(7)

In all cases, assuming that the other tests are satisfied, the court must ask: is this the most effective way of resolving the issues raised? In answering that question it must consider the other options of resolving this issue.”

I have concluded in the present case that the Particulars of Claim, both in their present form and as sought to be amended, disclose no basis for a case that the proposed acquisition by NAMA of AIB UK’s rights under the Facility Agreement would, if implemented, give rise to any breach of that contract. Furthermore, the claimants assert no other basis for the existence of a legal right between them and either AIB UK or, still less, NAMA which could be infringed by the matters alleged. Therefore, to the extent that any of the declaratory relief sought is based upon the existence of a dispute about any legal right as between the claimants and the defendants, there is no basis shown for it.

It may well be that there is a vigorous dispute between the claimants on the one hand and the defendants on the other as to the effect of the Act upon AIB UK’s conduct in relation to the Facility. As matters stand, the submissions of Mr Jonathan Crow QC for NAMA and Mr Sharif Shivji for AIB UK suggest that they are broadly agreed that AIB UK is bound only by contract to adhere to the provisions of the statutory scheme, rather than because the Act itself imposes any obligations on AIB UK with regard to its conduct as a party to a Facility governed by English law. It may be that, from time to time, AIB UK or one or more of its officials have understood the matter differently, and so expressed themselves to one or more of the claimants. The claimants no doubt wish to assert that AIB UK is not even bound by contract to adhere to the statutory scheme.

Nonetheless, apart from the issue of breach of contract which I have resolved, none of these disputes relate to the existence or extent of any legal right between the claimants and either of the defendants. Generally speaking, the court does not inquire as to the motives of or reasoning for the conduct of a party to a commercial contract, unless relevant to the question whether there has been or is threatened a breach of it. For the reasons which I have given, differing attitudes between the parties as to the basis upon which NAMA seeks to require AIB UK to cooperate in the acquisition by NAMA of its rights under the Facility are irrelevant to the question whether any breach of the Facility Agreement is threatened by the proposed acquisition.

It follows in my judgment that the second of the Rolls Royce conditions which I have described above is not satisfied in relation to the present dispute, so that there is no basis shown for granting declaratory relief in relation to it, on the application of the claimants.

Looking in more detail at each of the declarations sought, I am not persuaded that the paragraph 46.1 declaration is framed with sufficient specificity to be of any practicable use. The declaration sought in paragraph 46.2 appears to be common ground and, since there is no dispute about it, I can see no good reason for making a declaration about something as to which the parties are in agreement. As to paragraph 46.3, the declaration as to the absence of legal obligation is concerned entirely with the legal rights existing as between NAMA and AIB UK. For as long as AIB UK is prepared, for whatever reason, to cooperate with NAMA’s intended acquisition of its rights in relation to the Facility, the question whether it is under a legal obligation to do so is not one which I consider that the court ought to address. The same goes for the declaration sought in relation to management of the Facility under paragraph 46.3A. For as long as AIB UK is prepared to allow NAMA to manage the Facility in a way which causes no breach of the Facility Agreement, the question whether it is obliged to do so is, in my judgment, neither here nor there. Finally, the declaration sought by paragraph 46.4 could only be made if the proposed transfer infringed a private right of the claimants. For the reasons which I have given, it would not.

It follows that this is not a case in which the claimants have any prospect of obtaining declaratory relief, so that this final part of the Particulars of Claim should also be struck out.

On the day following the conclusion of the hearing of this matter, and while this judgment was being prepared, there was served a further witness statement from a Mr Dermot Purcell on behalf of the claimants. In one respect it confirmed what I had been told by Mr Page on instructions, about suggestions by officials of AIB UK that they had been threatened with a criminal prosecution if they refused to comply with the directions given to them by NAMA in relation to the proposed acquisition. That evidence formed part of the basis for Mr Page’s submission that there was a triable issue as to the basis upon which AIB UK regarded itself as obliged to comply with NAMA’s directions.

Nonetheless, the witness statement went considerably further in suggesting, for the first time, that the claimants had received what I infer are alleged to have been oral assurances from AIB UK during the negotiation of the Facility Agreement that the overdraft facility would neither be reviewed nor called in prior to 31^st July 2011. No application has been made or intimated to amend the Particulars of Claim, either by the inclusion of a claim for rectification of the Facility Agreement or for some relief based upon estoppel, and on no view could the further evidence be admissible purely in relation to construction (including for that purpose implied terms).

It follows that the additional evidence is of no consequence in relation to the existing application to strike out the Particulars of Claim, either in their present form or as it was sought to be amended during the hearing. Nonetheless, if after the handing down of this judgment any amendment to the claimants’ case is sought to be made on the basis of this further evidence, then it will have to be dealt with as an application for permission to save the claim by further amendment, on its merits. In advance of the making of any such application, still less of hearing submissions about it, I say nothing further about it at this stage.