Barbados Trust Company Ltd v Bank of Zambia & Anor

The Claimant claims two principal amounts, totalling US$ 809,387.02, from the First Defendant, the Bank of Zambia, in respect of advances outstanding under an Oil Import Facility dated 19 July 1985 (the Facility). Contractual interest is also claimed which, at 17 January 2006, amounted to US$ 2,805,442.63.

The Claimant claims as the beneficiary of the claim under a Declaration of Trust created in its favour by the Second Defendant (Bank of America N.A.) on 30 January 2004, the day the claim form was issued.

No relief is claimed against Bank of America N.A. It was joined as a Defendant because it declined to act as a claimant and to ensure that it was bound by the outcome of the proceedings. The Bank of Zambia is the central bank and monetary authority of the Republic of Zambia.

The relevant advances have not been repaid by the Bank of Zambia. Despite the dates of the advances, there are no limitation issues. The debts were acknowledged on 6 February 1998 and these proceedings were commenced on 30 January 2004. The issue is whether or not the Claimant has established that it is entitled to recover the sums (and interest) to which I shall refer as the Asset. This depends on the validity of the rights to the Asset of Bank of America N.A. at the time of the Declaration of Trust and the effectiveness of the Declaration of Trust in favour of the Claimant.

By the Facility various banks and financial institutions agreed to make available to the Bank of Zambia a facility for the issue of letters of credit in the maximum principal amount of US$100m. Bank of America International Limited (“BAIL”), as it was then named, acted as Agent and Manager under the Facility. The relevant advances, the basis of the claim, were made on 16 January 1986 with maturity dates in June and July of that year. The Bank of Zambia committed itself as borrower to repay the Asset.

The Facility is governed by English Law (Article 13.11). The banks and other financial institutions named on the signature page are referred to collectively as “Banks” and individually as “Bank”.

Article 12 of the Facility provided for assignments and is central to the issue:

Article 13.04 provided for “Enforcement”:

Thus, absent an express agreement or, possibly, an express waiver, to be valid an assignment had to be to an assignee which was a “bank or other financial institution”. If it was, the “prior written consent” of the Bank of Zambia was also required unless (which is not material) the assignee was a member of “the same group” as the assignor. But such consent could not be unreasonably withheld and was to be deemed to have been given if no reply was received from the Bank of Zambia for 15 days after it had been given a request for consent.

The commercial purpose of these provisions has been the subject of some debate. But I do not think it is hard to fathom. Any covenant against or restrictive of assignment is intended to ensure that the original parties to the contract are not brought into direct contractual relations with third parties save to any extent expressly permitted by the covenant. Any borrower, but particularly a central bank, may be concerned to ensure that its affairs and obligations are known and owed to and only enforceable by established and authorised institutions. Mr Antonio Bueno, QC, for the Claimant, referred the Court to the judgments of David Steel J and Aikens J in The Argo Fund v Essar Steel Limited [2004] EWHC 128 (Comm) and [2005] EWHC 600 (Comm) at paragraphs 19 (Steel J) and 28 and 29 (Aikens J). No doubt, prior to drawdown, a commercial purpose of Article 12.01 was also to ensure that any assignee was able both to provide its share of the funds and to act in co-operation with the other syndicate banks. Article 12.01(A), however, applies both before and after drawdown; is restricted, even in the case of a “Bank”, where consent to an assignment could reasonably be refused, and plainly encompasses and so regulates assignments when all that may remain to be performed is payment by Bank of Zambia. I reject Mr Bueno’s submission that the Article was not intended to protect Bank of Zambia “from being pursued for what it owes under the Facility” at least in the sense relevant to the issues, namely that any third party could claim payment of the debt directly from Bank of Zambia.

Oral evidence was given by Graham Radford, an “Assistant Vice President, Bank of America” working principally with BAIL; by Mrs Lesley Matheron a Documentation Clerk at “Bank of America”, and by Mathew Chisunka, the Assistant Bank Secretary at Bank of Zambia. Mr Radford and Mrs Matheron gave evidence at the request of the Claimant; Mr Chisunka gave evidence at the request of Bank of Zambia. With the agreement of the Court and the parties, substantial written Closing Submissions were provided after the conclusion of the hearing culminating with response submissions by the Claimant dated 27 January 2006.

Between February 1992 and December 1999 (and indeed thereafter) a company called Masstock (International) Ltd (“Masstock”) was acknowledged by both Bank of Zambia and BAIL to be the creditor of record in respect of the Asset. Although it seems that Masstock was not a bank or financial institution within the meaning of Article 12.01(A) it is accepted by Bank of Zambia that Masstock had a valid legal title to the Asset in November and December 1999.

In November 1999, Bank of America N.A. bought from Masstock and sold to GMO Emerging Country Debt, LP (“GMO”) the Asset. Bank of America N.A. is, and was, of course, a “Bank”. The Claimant accepts that GMO was neither a “Bank” nor a “financial institution”. The settlement dates for both these transactions were originally 29 November 1999 but, by agreement, became 10 December 1999.

The “Assignment” to Bank of America N.A. from Masstock was the subject of a “Form of Confirmation” dated 22 November, sent by Bank of America N.A. to Masstock. Lesley Matheron signed the Confirmation on behalf of Bank of America. The consideration was 5% of the principal amount of the debt. The Assignment was subject to and incorporated the “Standard Terms for Assignment of Loan Assets … of the Emerging Markets Traders Association” (“The EMTA Terms”).

On the same day, a Form of Confirmation of the on-sale to GMO was sent by Bank of America N.A. to GMO. The consideration was 9% of the principal amount. The EMTA Terms also applied to the sale “except as specifically provided below” where reference was made to two “special provisions” of no relevance.

By a confirmed fax transmission sent on 2 December, Masstock sent a “Request for Consent” form to Bank of Zambia with copies to BAIL “As Agent” and to Bank of America N.A. The Request referred to the Facility and the Asset, notified Bank of Zambia that Masstock “proposed to assign” their rights and obligations to Bank of America N.A., and continued:

“To facilitate our mutual record keeping” the Request asked that consent be given in a specific form. Mr Chisunka was on study leave at the time the fax Request for Consent was received at Bank of Zambia and was unable to say what became of the Request. An internal memorandum of Bank of Zambia records that the Request was intended to be forwarded to the Bank Secretary. Bank of Zambia also disclosed a copy of the fax as received by the Bank. Thus there is no doubt (or dispute) that the Request for Consent was received at Bank of Zambia on 2 December.

There was no response at all from Bank of Zambia to the Request. Mr Chisunka said, and I accept, that at this time Bank of Zambia was cautious about responding because there was some considerable activity on the remaining outstanding sums under the Facility, including requests designed to provide for further acknowledgements of the debt for limitation purposes, and despite international initiatives aimed at granting debt relief up to 90% of eligible debts of certain countries including the Republic of Zambia.

Although Mr Chisunka also suggested that Bank of Zambia would have wanted assurance that Bank of America N.A. was a “bank” (because of name changes and, as he put it, the change of attitude of Bank of America) it is not in issue that there could have been no valid or reasonable objection to Bank of America N.A. as an Assignee. Therefore under Article 12.01(A) Bank of Zambia would have been deemed to have consented to this Assignment on 17 December 1999.

A “Consent Request” was also prepared (dated 9 December) to be sent to Bank of Zambia by Bank of America N.A. in the same terms relating to the proposed Assignment to GMO. It seems this was not sent, but a Request in the same terms was sent on 10 December. The Request, the Claimant accepts, was erroneous in its reference to “consent shall not be unreasonably withheld” because GMO was not a Bank or financial institution. Without express agreement or waiver there could not be a valid Assignment to GMO whether (as happened) Bank of Zambia did not respond within 15 days or at all. Again, there is no doubt (or dispute) that this Request was received at Bank of Zambia.

On 10 December 1999 Bank of America N.A. prepared and initialled (by Mrs Matheron) a “Closing Certificate” for the Masstock transaction. The Certificate was later signed on behalf of Masstock and faxed back to Bank of America N.A. The Certificate was also expressed to be subject to the EMTA Terms except for the two special provisions referred to in the GMO Confirmation. One of these provided for the Assignment to be governed by the law of New York but it is not suggested that is of any relevance. The Settlement and Effective Dates were both stated to be 10 December. The “Description of Asset” in “Exhibit A-1” referred to the principal amounts and added in typescript prepared by Mrs Matheron:

On returning the Certificate, a Mr Boylan, on behalf of Masstock, added in manuscript to this typescript:

The Closing Certificate for the GMO sale was also dated 10 December and initialled by Mrs Matheron that day. It was in substantially the same terms but without any manuscript additions.

The final document in the sale process was entitled “Assignor Notice of Assignment Assignee Agreement to be Bound”. In the case of the Masstock trade the document was addressed by Masstock to Bank of Zambia “as Borrower” and BAIL “as Agent”. It is also dated 10 December but, as will be seen, (paragraph 28), could not have been despatched on that date. It is signed by Masstock (as Assignor) and Bank of America N.A. (as Assignee). So far as material, the document reads:

A similar document, also dated 10 December, relates to the GMO trade addressed by Bank of America N.A. to Bank of Zambia as Borrower and BAIL as Agent.

Mrs Matheron’s evidence was that she, as the Documentation Clerk acting on the trades, prepared these documents and that, because they were originals, she would have instructed that they be sent by courier to Bank of Zambia. Mr Chisunka’s evidence was that neither Notice had been found at Bank of Zambia and there was nothing to indicate that they had been received. Mr Chisunka was not in Zambia at the time. It is documented that the records of Bank of Zambia continued to show Masstock to be entitled to the Asset. That lends some support to the evidence that the Notices were not received. On the other hand, I do not doubt that as part of Mrs Matheron’s routine she would have requested that the document be sent by courier. Unsurprisingly, any record of delivery or otherwise that may have existed is no longer available. There is evidence that documents sent to Bank of Zambia were received but did not reach the person able to deal with them and that the Bank was cautious about making any response to communications about the remaining outstanding debts under the Facility for the reasons given by Mr Chisunka. I do think and find that the probability is that the documents were delivered to Bank of Zambia.

On 14 December, Mrs Matheron sent Masstock 2 original copies of the Closing Certificate and 5 original copies of the Notice of Assignment/Agreement to be Bound. It was her evidence, supported by the covering letter, that it was these copies of the Notice that, when signed by Masstock, she arranged to be distributed by courier to, amongst others, Bank of Zambia. Her covering letter to Masstock referred to “our transaction with yourselves effective on December 10, 1999” and stated:

The Notices of Assignment enclosed were in the same terms as those to which I have referred above. The Closing Certificates enclosed were also in the same terms except that the reference to the requirement for the prior written consent of Bank of Zambia recorded only Mrs Matheron’s typescript and not Mr Boylan’s handwritten addition (paragraphs 21and 22). The original copy of the Notice of Assignment/Agreement to be bound could not have been sent to Bank of Zambia before it was returned signed by Masstock at some date after 14 December.

The (applicable) EMTA Terms assist in explaining the paperwork employed for the trade. They provided that “Seller and Buyer shall be considered to have entered into a binding oral agreement regarding an Assignment on the Trade Date”. As between Bank of America N.A. and Masstock the Trade Date was 3 November 1999.

The EMTA Terms required a Written Confirmation to be sent and returned by the recipient. If the recipient does not agree the terms shown he must notify the sender in writing “in which case the parties shall determine the correct terms and the party sending the Confirmation will send the recipient a corrected Confirmation”. That was done by the “Form of Confirmation” sent by Bank of America N.A. to Masstock dated 22 November (paragraph 13). It appears, however, that it was not returned by Masstock.

The EMTA Terms provided that:

Section 1(c) provided:

Section 1(d)(C) provided that the Seller would send a Request for Consent to the Obligor as soon as practicable “after Buyer notifies Seller of Buyer’s agreement to the draft Closing Certificate (but in any event no later than the Effective Date) ….”

Section 2 provided, in effect, for completion of the sale between Buyer and Seller on the Effective Date or the Settlement Date, as the case might be. Both dates were, in this case, 10 December, 1999.

Section 3 addressed “Consents; Substitute Assignments; Unwinds”. So far as material, it provided:

In the event consent was denied, the parties could agree on a substitute asset or substitute seller or buyer and if that was not possible they were to agree either that the Buyer was to have a 100% beneficial interest with the Asset “automatically deemed reassigned” subject to that interest to the Seller as of the Effective Date or that the Buyer would pay the Seller the “Unwind Market Price” upon which the Asset “shall be automatically deemed reassigned by Buyer to Seller”.

Section 5(b)(C) provided (with my emphasis) that the Seller “represents and warrants as of the Trade Date and the Effective Date that”

In my judgment, the effect of these provisions, read with the contractual documentation, is that:

The originals of the Closing Certificate constitute the final agreement between Masstock and Bank of America N.A. The Certificate provided expressly that the prior written consent of Bank of Zambia was required to assign the Asset.

The requirement for the consent of Bank of Zambia to the Assignment was not a condition precedent to the agreement between Masstock and Bank of America N.A. which was effective according to its terms on 10 December 1999.

The 15 day period for a deemed consent from Bank of Zambia to the Masstock trade would have expired on 17 December and therefore had not expired on either the Settlement Date or the Effective Date (both 10 December), when the agreement became effective between Masstock and Bank of America N.A.

Neither the EMTA Terms nor the Assignment made any express provision for a “deemed” consent but it is not open to any party to contend that consent was “denied” within Section 3 of the EMTA Terms.

The EMTA Terms expressly contemplate the conclusion of the trade in advance of obtaining the consent of the debtor/obligor whilst also recognising the need to obtain consent to make an assignment effective between assignee and obligor. They do not, at least with clarity, address an Asset which can only be assigned with prior written consent nor deemed consents. But the EMTA Terms do, in Sections 1(d)(C), 3 and 5(b)(C) plainly contemplate and provide both for consent to be obtained after completion of the trade and for the consequences if it is refused.

The trade between Bank of America N.A. and GMO was wholly ineffective for want of the consent of Bank of Zambia. In the event that seems not to have been appreciated. Section 3 was not employed. Indeed GMO subsequently traded the Asset on as did others (also not Banks or financial institutions).

The ultimate “assignee” under the trades subsequent to the purchase of the Asset by GMO from Bank of America N.A. was the Claimant. The original claim sought to rely on a title so derived but also on the Declaration of Trust executed on 30 January 2004 by Bank of America N.A. in favour of the Claimant in respect of the Asset. In the event, the claim has been pursued only on the basis of the Declaration of Trust and not on the basis of the successive assignments in recognition that the intervening assignors and assignees, like the Claimant, were not banks or financial institutions.

The Declaration of Trust recited the (ineffective) chain of assignments from Bank of America N.A. to GMO and then from GMO to an assignee shortly described as “FHI” and then from FHI to the Claimant. The Declaration of Trust, made by the Bank of America N.A., as Trustee, provided in respect of the Asset that:

The Declaration of Trust depended on Bank of America N.A. having acquired the whole interest of Masstock in the Asset by the Assignment and (as is not in issue) not having effectively divested itself of the legal interest in the Asset thereafter. It is also (and rightly in my judgment) agreed that the beneficial interest in the Asset did pass along the chain of Assignments but no more. The Bank of Zambia’s consent to the Declaration of Trust was neither sought nor given.

The Claimant must establish both that the Assignment from Masstock to Bank of America N.A. was effective to pass the legal and beneficial interest of Masstock in the Asset and that the Declaration of Trust entitles the Claimant to bring and pursue this claim to judgment.

The Claimant submits that the Assignment from Masstock was the subject of a deemed consent on 17 December 1999. It is accepted (as it must be) that the Assignment was effected in advance of any consent, deemed or otherwise, of Bank of Zambia under Article 12.01(A). It is also accepted (as it must be) that a legal assignment could only be achieved in accordance with the provisions of that Article, which required the express or deemed prior (my emphasis) consent of Bank of Zambia.

The first submission is, to quote the Claimant’s Opening Skeleton, that:

In the alternative, the Claimant submitted that Bank of Zambia was estopped from disputing the title of Bank of America N.A. to the Asset. The plea of estoppel was the subject of a late amendment (paragraph 9A) to the claim. Essentially it depends on the submission that because Article 12.01(A) provided for a deemed consent by a want of response for 15 days, if Bank of Zambia “wished to refuse its consent to any proposed assignment, it was under a duty to communicate its refusal to the prospective assignor and/or assignee within 15 days of the request having been made”. The submission (and claim) continues that by failing to respond Bank of Zambia represented by conduct that it consented to the assignment. Reliance is placed on the request for consent to the GMO Assignment and the Notices of Assignment for both the Masstock and GMO trades, and the want of any challenge to them. Reliance by Bank of America N.A. is alleged “in treating the assignment as effective and as regarding itself as the lawful assignee”.

The Claimant relies on the Declaration of Trust to put it, in effect, in the position of Bank of America N.A. as the party entitled to claim the Asset. Although it is not a “Bank or other financial institution” the Claimant submits the want of consent by Bank of Zambia to the Declaration of Trust is not relevant.

Bank of Zambia submits that the Assignment was effected on 10 December 1999 and so without its prior written consent. That was in breach of Article 12.01(A) and so the Assignment was ineffective to transfer the debt to Bank of America N.A. There was no “condition precedent” to the Assignment; Section 3 of the EMTA Terms precludes it. Nor was the Assignment held in escrow; it purported to be effective on 10 December 1999. The stringent requirements for an “estoppel by silence” have not been made out.

There could be no assignment to the Claimant without express written consent. To permit a Declaration of Trust without consent to have the same effect as an assignment would be inconsistent with and so is precluded by Article 12.01(A).

Mr Bueno did not press the submission that the Assignment between Masstock and Bank of America N.A. was held “in escrow or suspense”. Such a submission would have been inconsistent with the immediate binding effect of the Assignment provided for expressly by its terms. So, too, I think it cannot be said that the Assignment was subject to a condition precedent in the strict (indeed usual) sense of a condition which, if it is not fulfilled, no binding agreement ever comes into effect. Mr Bueno relied upon a condition which “does not prevent the existence of a binding contract but which suspends immediate performance of it until fulfilment of the condition”. He cited Lewison on The Interpretation of Contracts (2004) para 15.02 in support of such a condition.

I do not find this analysis particularly helpful. Mr Handyside for Bank of Zambia criticised it forcefully. The Assignment was binding in accordance with its terms on the Trade Date and thereafter in accordance with the Written Confirmation and Closing Certificate. That was expressly provided for by the EMTA Terms and I see nothing inconsistent with them in the documents themselves. Had the consent of Bank of Zambia been “denied”, the “Substitute” and “Unwind” provisions would have been binding and operable. But the EMTA Terms, and the documents, do expressly contemplate the continuing need for consent despite the binding nature of the agreement and, I think, provide that, or at least predicate that, if consent is obtained the Assignment is then to come fully into effect. In particular I think that can be derived from Sections 1(d)(C), 3, and 5(b)(C) of the EMTA Terms and the reference to the need for “the prior written consent of Bank of Zambia” in the Closing Certificate. It would be remarkable if, after 17 December, it was open to either Masstock or Bank of America N.A. to contend that there had not been a valid and fully effective assignment between them.

The issue is whether or not, granted that when the original Closing Certificate was completed no consent had been obtained and the Notice of Assignment purported to give notice of an assignment effective on December 10 and so also before any consent had been obtained, nonetheless when consent would have been deemed to have been given on 17 December it was effective to complete the acquisition of the Asset by Bank of America N.A. There is an artificiality in treating such a deemed consent as a “prior” consent; but there is, to my mind, a greater artificiality in ignoring the deemed consent when the Assignment plainly addressed the need for it and can, and I think should, be read commercially as providing for it to be effective when given or deemed to be given.

In my judgment, the proper construction of the Assignment is that it took effect to complete the transfer of the Asset to Bank of America N.A. upon receipt of actual or deemed consent such that the consent can properly be treated as given “prior” to the assignment.

In view of my conclusion on the “condition precedent” it is not necessary to address estoppel. If it had been necessary, I would have rejected the case of the Claimant. I do not think it is possible to spell a duty to speak out of a provision providing for a deemed consent from a want of response for 15 days. The provision expressly addresses and provides for the consequence of “silence”. Provided the request for consent is given on behalf of a “Bank” or some “other financial institution”, there is a deemed consent. No more is provided for; no other obligation can, I think, be implied: see Spencer Bower, The Law Relating to Estoppel by Representation, 4^th Edn at III.4.10 and Chitty on Contracts, 29^th Edn, paragraph 3-092. Nor do I think it possible to identify an unequivocal representation from silence that Bank of Zambia had no objection to a proposed assignee; nor indeed is there evidence on which the court could conclude that Bank of America N.A. believed any such representation had been made or that the Bank relied upon it. There was no reason to conclude more than was provided for by Article 12.01(A). In fact Bank of America N.A. traded the Asset to GMO before any deemed consent or “representation” was made and was well aware of the difficulties of getting any meaningful response from Bank of Zambia.

The Claimant was (and is) not a bank or a “financial institution”. It was therefore expressly excluded from taking a valid assignment of the Asset and acquiring a right to claim to recover it from Bank of Zambia by Article 12.01(A) of the Facility. As I have said (paragraph 10) this provision restricted the type of institution which would be entitled to enforce the obligations of Bank of Zambia. If it were the case that such a provision could be circumvented by the use of a Declaration of Trust it would be a matter of some concern. If the Claimant is right, the express restriction in Article 12.01(A) would achieve very little. Any Bank could declare itself to be a trustee of the Asset for any third party which could then claim the Asset in, in substance, the same way as if it were an assignee. Contracts outlawing or limiting assignment would have to be drafted so as also to outlaw declarations of trust or at least such declarations giving a direct right of action against the obligor.

Mr Bueno QC submits, however, that just such a result is permitted and indeed supported by authority.

He submits, first, that there is no express or implied prohibition in the Facility against a declaration of trust or against the beneficiary of such a trust bringing a claim to the Asset. Certainly there is no express prohibition in the sense of a reference to a declaration of trust as such. Equally, there is not necessarily any legal magic in the effective prohibition on a Bank agreeing to “assign” the Asset to a non-bank. In my judgment, whether as a matter of construction or by implication, the prohibition can and in this case, subject to authority, should be read as precluding a transaction designed to have and relied on as having the same effect in law as a legal assignment. If it were otherwise the prohibition would fail in its purpose. It is a feature of the present proceedings that whilst assisting the Claimant, both by agreeing to the Declaration of Trust and in the provision of evidence, Bank of America N.A. itself has not been willing to bring a claim to the Asset and has recognised that it could not validly assign it to the Claimant.

It is well established that a person entitled to the benefit of contractual rights can establish a trust of that benefit for a third party by a declaration of trust to that effect: Snell’s Equity (31 ^st Edn) paragraph 19-21; Underhill and Hayton, Law Relating to Trusts and Trustees (16 ^th Edn) at page 170. But such a trust does not make the beneficiary a party to the contract nor necessarily entitle him to claim the benefit from the obligor in his own name.

In Vandepitte v Preferred Accident Insurance Corp. of New York [1933] AC 70 (PC) a claimant injured in a motor accident failed in a direct claim against the insurers of the negligent defendant driver. The insurance was effected by the father (Mr Berry) of the negligent driver and provided that an indemnity would be available to an authorised driver. The Privy Council rejected the claim as there was no evidence that the father had contracted on behalf of anybody but himself nor that he intended to create a beneficial interest for his daughter. In the course of the judgment, at page 79, Lord Wright said:

The Court was addressing a contract (the policy) which expressly provided that it should benefit a third party (the daughter) and, in effect, a person injured by her negligent driving. The context was, of course, privity of contract in days when that principle was more “fundamental” than it is perhaps today. I do not think the Court had in mind or was addressing at all a case where the third party could not take the benefit of the particular contract because an assignment to him was prohibited.

Mr Bueno referred me to a number of text books and authorities which, he submitted, established that “in the absence of the clearest words” no limitation could be placed on the freedom of parties to declare trusts of their rights and interests. Halsbury’s Laws of England, Butterworths Direct, “Choses in Action”, at paragraph 91-100, states that:

The authorities cited for this proposition are Re Turcan (1888) 40 Ch D 5; Linden Gardens Trust v Lenesta Sludge Disposals Ltd [1994] 1AC 85 at 104 per Lord Browne-Wilkinson; and Don King Productions Inc v Warren [1998] 2 Lloyd’s Rep 176 and [2000] Ch 291. Snell’s Equity at paragraph 3-47 states, citing the same and other authority:

Re Turcan was the case which decided that the trustees under a marriage settlement were entitled to the benefit of a life insurance policy which the terms of the policy provided was unassignable by the policyholder but which he had covenanted to convey to the trustees. The decision of the Court of Appeal, as the headnote states, was that “the condition against assignment was merely to make the policy non-assignable at law … and did not prevent the settlor from dealing with the beneficial interest in it in accordance with his covenant.” The assured had died and the proceeds of the policy had been paid to his estate. The decision is, however, no authority for the proposition that in such a case the assured can pass to the trustees the right to claim the proceeds direct from the insurer. The basis for the decision is to be found in the judgment of Cotton LJ, at pages 10 and 11, with which Lindley and Bowen L.JJ agreed:

The emphasis is mine. Whilst Re Turcan, applied to the present facts, is authority that Bank of America N.A. could create itself a trustee to pay over the Asset once recovered to the Claimant it is not authority that the Claimant itself could recover the Asset; indeed the reasoning is to the contrary.

In Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd the House of Lords considered the effect of a standard clause in a construction contract which provided that “the employer shall not without written consent of the contractor assign this contract”. The House decided that the clause prohibited both the assignment of rights to the future performance of the contract and assignment of the “fruits” of the contract, that is the right to receive payment under it or to enforce accrued rights of action. The consequence was that the claim by the assignee failed. Lord Browne-Wilkinson, at pages 103 to 105, accepted that it was “at least hypothetically possible” that a clause might prohibit one but not the other. Again, I think this authority assists Bank of Zambia rather than the Claimant. Article 12.01(A) is unqualified in its prohibition and cannot in my judgment be construed as permitting an assignment of the “fruits” of the Facility.

The Don King Productions case concerned a dispute between the boxing promoters, Don King and Frank Warren. Mr Warren, or companies in which he was interested, had a number of promotion and management agreements with boxers. Mr King (or his company) and Mr Warren entered into two successive partnership agreements. The first was drafted on the basis that Mr Warren could and would transfer to the partnership his existing interests including the promotion and management agreements he had made with boxers. It purported to provide for the assignment to the partnership by Mr Warren of the full benefit and burden of those agreements.

The second partnership agreement superseded and replaced the first. It had come to be appreciated that the agreements with boxers were personal to Mr Warren and could not be assigned to the partnership. The second agreement provided that Mr Warren would hold all the promotion and management agreements to the benefit of the partnership absolutely and that upon dissolution of the partnership all assets of the partnership not otherwise realised should be purchased by Mr Warren at a valuation. The partnership was dissolved. Mr King claimed that Mr Warren should pay the value of the promotion and management agreements on the basis that they were held on trust for the benefit of the partnership and so were partnership assets. Mr Warren claimed that he was entitled to retain the agreements for his own benefit and without compensating Mr King.

The claim was tried by Lightman J. He held that whilst neither partnership agreement could effectively vest the agreements in or assign the benefits of them to the partnership none of the agreements prohibited the partners from declaring themselves to be trustees of the agreements for the partnership. Leading counsel for Mr Warren submitted that where a contract prohibited assignment a party could not by a declaration of trust make himself the trustee of the benefit of that contract, because to do so would be to defeat the whole purpose of the non-assignment obligation, which:

Lightman J rejected this submission. At pages 195-6 he gave his reasons for doing so; the emphasis is mine:

I also do not read this decision as taking the Claimant in this case where it seeks to go. Far from deciding that the partnership could itself have directly enforced the unassignable rights under the promotion and management agreements between boxers and Mr Warren, the decision acknowledges Mr Warren’s personal obligation to do so. Lightman J held that this obligation was not in conflict with an obligation also to hold it as trustee for a third party. Further, Lightman J expressly disavows the use of Vandepitte “in a commercial context where it has no proper place”.

In the Court of Appeal, the decision of Lightman J was upheld. So, too, was his reasoning. To quote part of the headnote:

In the course of his judgment, with which Aldous and Hutchinson LJJ agreed, at paragraph 26, Morritt LJ said:

Once again, the distinction between a third party being entitled to enforce the contract (not permissible) and entitlement to the benefits of the contract (properly the subject of a trust) is recognised.

As the submissions developed, I think (unsurprisingly) they demonstrated a measure of agreement that the real key to this claim was the construction and effect of Article 12.01(A). I agree. I have stated what I think to be the commercial rationale of that Article (paragraph 10). By its terms, and whatever the status of the Facility, it decrees that, at least absent express consent, a claimant such as the present Claimant shall not be entitled to claim payment from Bank of Zambia as an assignee of the Asset. To permit such a claim to be made as the beneficiary of a declaration of trust of the Asset would in my judgment be to permit the use of the decision in Vandepitte in a commercial context in which it has no place because it would achieve a result which would be inconsistent with the terms of the Facility.

I have concluded that:

The assignment from Masstock to Bank of America N.A. was fully effective to pass the right to claim the Asset under the Facility to Bank of America N.A.;

(as is not in issue) the right of Bank of America N.A. remained with it despite the further trades of the Asset made subsequently; but

It was not open to Bank of America N.A. and the Claimant for the former to declare itself trustee for the latter such as to entitle the Claimant to make the claim it does in these proceedings.

The claim therefore fails and must be dismissed.