England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		22nd February 2006

The Hon. Mr Justice Langley :

BARBADOS TRUST The Claim
1. 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.
2. 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.
3. 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 Issue
4. 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.
The Facility
5. 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.
6. 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".
7. Article 12 of the Facility provided for assignments and is central to the issue:

"12.01. Assignment by Banks.

(A) Each Bank may at any time and from time to time assign all or any part of its rights and benefits in respect of the Facility to any one or more banks or other financial institutions (an "Assignee"), provided that any such assignment may only be effected if (save in the case where the Assignee is a member of the same group as the assignor, no such consent then being required) the prior written consent thereto of the Borrower shall have been obtained (such consent not to be unreasonably withheld and to be deemed to have been given if no reply is received from the Borrower within fifteen days after the giving of a request for consent by a Bank). For this purpose any Bank may disclose to a potential or actual Assignee such credit and other information relating to the Borrower and its condition as the Borrower shall have made available to the Agent… or as shall be known to such Bank otherwise howsoever….

12.02. ….

12.03. "Bank(s)" to include successors and assigns

The expression "Bank" wherever used in this Agreement shall include every Assignee of such Bank and every successor in title of any such Assignee or of such Bank, and "Banks" shall be construed accordingly."

8. Article 13.04 provided for "Enforcement":

"This Agreement may be enforced against the Borrower by the Agent as agent for those of the Banks which have consented to the relevant enforcement proceedings without the necessity of joining any or all of the Banks in such enforcement proceedings, but nothing in this Agreement shall be taken as in any way limiting or restricting the right of any Bank to enforce this Agreement against the Borrower."

9. 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.
10. 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.

The Evidence

11. 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.
The Facts

The title of Masstock

12. 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.

The Masstock/GMO trades.

13. 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.
14. 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").
15. 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.

The Consent Requests

16. 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:

"we request your consent to the foregoing assignment and note that Section 12.01 of the [Facility] states that your consent shall not be unreasonably withheld".

17. "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.
18. 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.
19. 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.
20. 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.

The first Closing Certificates

21. 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:

"Consent: The prior written consent of Bank of Zambia is required to transfer the Assigned Credits."

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

"As per Article 12.01(A). Such consent shall be deemed to have been given if no reply is received from Bank of Zambia (…) after the giving of a request for consent."

23. 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.

Notice of Assignment/Agreement to be Bound

24. 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:

"This constitutes notice to you pursuant to Article 12 of the Agreement of the assignment by Masstock … to Bank of America N.A. … of all the Assignor's rights, title, interests, benefits and obligations in the advances [described].

….

As between the undersigned, the assignment is effective from December 10, 1999. As of such date, the Assignee shall succeed to all the Assignor's rights, title, and interests in and to the Assigned Advances and in, to and under the Agreement in respect of the Assigned Advances."

25. 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.
26. 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.

The original Masstock paperwork

27. 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:

"Please arrange for the documents to be countersigned, retain one copy each for your records and return the remainder to the undersigned for distribution."

28. 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 EMTA Terms

29. 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.
30. 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.
31. The EMTA Terms provided that:

"When executed and returned by the recipient (or if not objected to by the recipient within two Business days after receipt) a written Confirmation will constitute a binding Agreement between Buyer and Seller."

32. Section 1(c) provided:

"Closing Certificates. On or before the Settlement Date, Buyer and Seller will each execute and deliver a Closing Certificate for such Assignment. A Closing Certificate, when executed by both Buyer and Seller, shall, together with these Standard Terms … constitute a final and binding agreement between Buyer and Seller and shall supersede all prior oral or written agreements or statements by the parties with respect to the related Assignment."

33. 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) …."
34. 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.
35. Section 3 addressed "Consents; Substitute Assignments; Unwinds". So far as material, it provided:

"(a) It is not a condition precedent to performance by the parties of their obligations in respect of any Assignment that all Consents be obtained on or before the Effective Date.

(b) Seller and Buyer shall use all reasonable efforts to obtain any Consent required for each Assignment as soon as possible after the Effective Date.

(c) If any such Consent is denied, any party with notice of such denial shall promptly give notice thereof to the other, and Seller and Buyer shall use all reasonable efforts to remedy the cause of such denial within 30 days after each has received notice of such denial (such 30^th day being the "Unwind Date")…."

36. 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".
37. Section 5(b)(C) provided (with my emphasis) that the Seller "represents and warrants as of the Trade Date and the Effective Date that"

"on the Effective Date, (i) Buyer will receive marketable title to such Asset free and clear of all Liens and other claims; (ii) Buyer will be the beneficial owner of the Asset; (iii) subject to any consent or eligibility requirement contained in any Debt Agreement, (1) Buyer will be entitled to be the record owner of the Asset …."

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

i) 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.

ii) 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.

iii) 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.

iv) 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.

v) 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.

vi) 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 Declaration of Trust

39. 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.
40. 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:

"1. The Trustee hereby irrevocably declares that as from the date of this Declaration of Trust it will hold all of its rights, title, interest and benefits (if any) as it may have in respect of Bank of Zambia's obligations to it under the Facility in respect of the Letter of Credit on trust for the Beneficiary absolutely.

2. The Trustee acknowledges that the Beneficiary shall have the right to take all such lawful steps in its own name as it may consider necessary in any jurisdiction (whether by legal action or otherwise) against Bank of Zambia (or any assignee or successor in title) to recover the outstanding principal amounts (US$405,290.35 and US$404,096.67) due under the Letter of Credit, together with all interest, costs or other expenses payable thereunder in connection with such liabilities.

3. The Trustee shall forthwith execute all such further documents and do all such other things as the Beneficiary may reasonably require to enable the Beneficiary to secure payment by Bank of Zambia of the aforesaid sums due under the Letter of Credit."

41. 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's Submissions
42. 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 Assignment

43. 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.
44. The first submission is, to quote the Claimant's Opening Skeleton, that:

"between 10 and 17 December 1999, the assignment between Masstock and Bank of America N.A. was held by or on behalf of Bank of America N.A. in escrow or suspense i.e. that its operation so far as the assignment of this indebtedness was concerned was subject to a condition precedent that Bank of Zambia's consent would be given in accordance with Article 12.01(A) and that it became effective on 17 December 1999 when such consent was deemed to have been given."

45. 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 Declaration of Trust

46. 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.
The Submissions of Bank of Zambia

The Assignment

47. 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.

The Declaration of Trust

48. 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).
The Assignment

Condition Precedent

49. 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.
50. 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.
51. 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.
52. 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.

Estoppel

53. 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 Declaration of Trust
54. 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.
55. Mr Bueno QC submits, however, that just such a result is permitted and indeed supported by authority.
56. 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.
57. 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.
58. 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:

"No doubt at common law no one can sue on a contract except those who are contracting parties … the rule is stated by Lord Haldane in Dunlop Pneumatic Tyre Co. v. Selfridge & Co.: "My Lords, in the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quaesitum tertio arising by way of contract. Such a right may be conferred by way of property, as, for example, under a trust, but it cannot be conferred on a stranger to a contract as a right to enforce the contract in personam." In that case, as in Tweddle v Atkinson, only questions of direct contractual rights in law were in issue, but Lord Haldane states the equitable principle which qualifies the legal rule, and which has received effect in many cases, as, for instance, Robertson v. Wait; Affrétéurs Réunis Société Anonyme v. Leopold Walford (London), Ld.; Lloyd's v. Harper – namely, that a party to a contract can constitute himself a trustee for a third party of a right under the contract and thus confer such rights enforceable in equity on the third party. The trustee then can take steps to enforce performance to the beneficiary by the other contracting party as in the case of other equitable rights. The action should be in the name of the trustee; if, however, he refuses to sue, the beneficiary can sue, joining the trustee as a defendant. But, though the general rule is clear, the present question is whether R.E. Berry can be held in this case to have constituted such a trust. But here again the intention to constitute the trust must be affirmatively proved: the intention cannot necessarily be inferred from the mere general words of the policy."

59. 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.
60. 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:

"there is no objection to a party to a contract containing non-assignment provisions becoming trustee of the benefit of being the contracting party as well as the benefit of the rights conferred, unless this is also prohibited on the construction of the contract".

61. 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:

"A provision in a contract against assignment renders such an assignment ineffective as against the other party to the contract. Thus the assignee of a hire purchase agreement could not enforce it against the owner where the assignment was in breach of such a prohibition.

However, in the absence of the clearest words, it appears that such an assignment is nevertheless effective as between assignor and assignee and may take effect as a declaration of trust. Thus the trustees under a marriage settlement were entitled to the benefit of certain insurance policies which were expressed to be unassignable and which the settlor had covenanted to convey to them."

62. 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:

"There was another point argued about which we had some doubt, arising out of the condition annexed to the policy for £1000 that it should not be in any case assignable. But the policy contains another condition, shewing that the insurance office recognised the right of the insured to part with his interest, for it provided that the company should not be bound by notice of liens and charges on the policy. Would a Court of Equity in the lifetime of the covenantor have enforced the covenant to settle this policy notwithstanding the condition against assignment? I think it would. Before the Act of 1867 (30 & 31 Vict. c. 144) a policy could not be assigned at law, but now it can: and I think the condition was inserted in order to prevent the insured from availing himself of his power to assign the policy and to give the assignee a right to receive the money from the office. But though he could not assign the policy, I think it would have been a sufficient compliance with the covenant if he had executed a declaration of trust for the trustees of the settlement, just as he might have done before the passing of the Act of 1867. Then he could not have assigned the policy or given the trustees the power to receive the money, but he might have given them all the benefit of the money when it was received. And I think he could have given them the same benefit in the present case by executing a declaration of trust."

63. 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.
64. 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.
65. 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.
66. 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.
67. 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:

"is to ensure that the other contracting party alone, and no-one else, can enforce the obligations contained in the contract against him, and that if a trust is created and if the trustee refuses to enforce an obligation, the beneficiary may sue for enforcement, joining the trustee as defendant" citing the Vandepitte case.

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

"(a) if one party wishes to protect himself against the other declaring himself a trustee, and not merely against an assignment, he should expressly so provide. That has not been done in this case;

(b) the applicable principles of trust law in this situation are the basic principles and those (and only those) whose rationale have application in this commercial context (see Target Holdings Ltd. v. Redferns [1996] 1 A.C 421 at p. 436). The Courts will accordingly be astute to disallow use of the procedural short-cut sanctioned in Vandepitte in a commercial context where it has no proper place. A beneficiary cannot be allowed to abrogate the fullest protection that the parties to the contract have secured for themselves under the terms of the contract from intrusion into their contractual relations by third parties;

(c) a declaration of trust cannot prejudice the rights of the obligor. If the contract requires any judgment to be exercised whether by the obligor or the obligee, an assignment cannot alter who is to exercise it or how that judgment is to be exercised or vest the right to make that judgment in the Court;

(d) the rule in Saunders v. Vautier (which enables the sole beneficiary or beneficiaries to give directions to the trustee) only applies if the beneficiary is entitled to wind up the trust and require the trustee to assign to him the subject matter of the trust. If the trust cannot be determined because the trustee has under the contract held as a trust asset outstanding obligations and has no power to transfer the trust asset to the beneficiary or his order, the rule does not apply: see Re Brockbank, [1948] Ch. 206. Accordingly in a case where the subject matter of the trust is a non-assignable contract and there are outstanding obligations to be performed by the trustee, the beneficiary under the trust cannot interfere.

Accordingly in principle I can see no objection to a party to contracts involving skill and confidence or containing non-assignment provisions from becoming trustee of the benefit of being the contracting party as well as the benefit of the rights conferred. I can see no reason why the law should limit the parties' freedom of contract to creating trusts of the fruits of such contracts received by the assignor or to creating an accounting relationship between the parties in respect of the fruits. The broader approach which I favour appears to be in accord with the authorities, so far as they go. The leading authority is Re Turcan, [1888] 40 Ch.D. 5. The Vice-Chancellor in that case held that an agreement to assign a non-assignable policy constituted the assignor a trustee of the policy for the assignee. The Court of Appeal dismissed the appeal. At the date of the hearing of the appeal the proceeds of the policy were represented by certain assets and the Court of Appeal upheld the validity of the trusteeship of these assets, and Lord Browne-Wilkinson in Linden Gardens (at p.104) referred to Re Turcan as authority for the proposition that a party to a contract may agree with a third party to account for him for the fruits he receives from the other contracting party. No doubt was cast by the Court of Appeal in Re Turcan or by the House of Lords in Linden Gardens on the decision of the Vice-Chancellor. As Lord Browne-Wilkinson said in Linden Gardens (at p. 107) the House of Lords only had to consider the validity of the restriction of an assignment which would have the effect of bringing the assignee into direct contractual relations with the other party to the contract."

69. 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".
70. In the Court of Appeal, the decision of Lightman J was upheld. So, too, was his reasoning. To quote part of the headnote:

"On a true construction of the first and second partnership agreements, each partner held the benefit of a management or promotion agreement entered into by him with a European registered boxer between the date of the first partnership agreement and the dissolution of the partnership and which was still in operation at the time of such dissolution on trust for the partnership; that the benefit to which the partnership was entitled did not terminate on the dissolution of the partnership but continued until the promotion or management agreement expired or was disposed of in the winding up of the partnership; that the benefit of all promotion or management agreements concluded by a partner after the date of the dissolution but before the winding up of the partnership was also held on trust for the partnership; and that, accordingly, the judge's declaration would be affirmed."

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

"Of course, if one partner seeks to avoid the agreement he has made with his partners then questions may arise as to how the interests of the other partners are to be protected. But there are many ways in which that may be done without the need to interfere in the performance of the contract. I agree with the judge that In re Turcan, 40 Ch.D. 5, 10 shows clearly that the court will protect the interests of those contractually entitled to have the benefit of an inalienable asset before the fruits of the asset have been realised. In that case, as the House of Lords considered in Linden Gardens Trust, v. Lenesta Sludge Disposals Ltd. [1994] 1 AC 85, 106, the court gave effect to the intention of the parties by means of a declaration of trust. But, it is objected, the existence of such a trust would enable one partner to interfere in the management of the personal contract made by a third party with the other partner. I do not agree. The other partner cannot insist on rendering vicarious performance of the personal obligations arising under the contract. Rules and procedures designed to enable a beneficiary to sue in respect of a contract held in trust for him would not be applied so as to jeopardise the trust property."

72. 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.
73. 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.
CONCLUSION
74. I have concluded that:

i) 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.;

ii) (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

iii) 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.

75. The claim therefore fails and must be dismissed.