Jersey Unreported Judgments

Security interest - application for orders

[2020]JRC147A

Royal Court

(Samedi)

30 July 2020

Before     :

J. A. Clyde-Smith O.B.E., Commissioner, and Jurats Blampied and Thomas

 

IN THE MATTER OF THE REPRESENTATION OF ALBION ENERGY LIMITED

AND IN THE MATTER OF HERITAGE OIL LIMITED

AND IN THE MATTER OF AN APPLICATION UNDER ARTICLE 52 OF THE SECURITY INTERESTS (JERSEY) LAW 2012

Advocate A. D. Hoy for the Representor.

Advocate D. M. Cadin for the First and Second Respondent.

judgment

the COMMISSIONER:

1.        Albion Energy Limited ("Albion") applies for orders under the Security Interests (Jersey) Law 1991 ("the Security Interests Law") against Energy Investments Global Limited ("EIGL") to enable it to enforce its security over shares in Heritage Oil Limited ("Heritage Oil").

2.        The background to this case is succinctly contained in the judgment of Foxton J in Albion v Energy [2020] EWHC 301 (Comm), whose wording we adopt.

3.        Heritage Oil was founded by Mr Anthony L. R. Buckingham and is an oil production and exploration company incorporated in Jersey.  It was listed on the London Stock Exchange.  In 2014, EIGL, a BVI incorporated company beneficially owned by Sheikh Hamad, the former prime minister of Qatar, acquired 80% of the share capital of Heritage Oil and took the company private.  The other 20% remained owned by Albion, a Guernsey incorporated company, beneficially owned by Mr Buckingham.

4.        On 31^st January 2018, Albion sold its remaining 20% interest in Heritage Oil to EIGL on the terms of a share purchase agreement ("the SPA") governed by English law, for the sum of $100 million payable in three instalments.  There were six parties to the SPA, which contained other provisions beyond the sale transaction.  In addition to Albion and EIGL, the other parties were Heritage Oil, Mr Buckingham, a company called Albion Resources Limited and a company called Sundance Investments Limited.

5.        The first two instalments under the SPA were paid by EIGL.  However, shortly before the final instalment became due on 20^th December 2018, Macfarlanes LLP, on behalf of Heritage Oil, wrote to Albion on 14^th December 2018 asserting claims against Mr Buckingham.  By a second letter of the same date, Macfarlanes LLP wrote to Albion on behalf of EIGL, saying that in view of Heritage Oil's claims against Mr Buckingham, EIGL intended to withhold payment of the outstanding amount payable under the SPA.  There was no suggestion at that stage that the matters raised in Macfarlanes LLP's correspondence gave EIGL its own claim against Albion.

6.        On 15^th December 2018, Charles Fussell & Co LLP, the English solicitors acting for Albion, pointed out that any claims which Heritage Oil might claim to have could not provide a legitimate reason for EIGL to withhold the final instalment of the purchase price due to Albion.  In response, on 17^th December 2018 Macfarlanes LLP suggested for the first time that the matters raised were capable of supporting a petition for unfair prejudice which could give EIGL a claim against Albion. 

7.        Solicitors' correspondence followed in which EIGL agreed to pay US$20 million of the outstanding instalment unconditionally, with the remaining US$13.3 million to be held by Charles Fussell & Co LLP on the terms of an escrow agreement dated 22^nd January 2019 ("the Escrow Agreement"). 

8.        Albion subsequently brought proceedings in the High Court against EIGL and sought summary judgment for the outstanding amount of US$13.3 million.  In response, EIGL sought a stay of proceedings, relying for this purpose on the arbitration clause in the Escrow Agreement.  Alternatively, EIGL contended that Albion was not entitled to summary judgment, because it had a defence with a realistic prospect of success, namely an equitable set-off arising from EIGL's claim for relief for unfair prejudice against Albion.  EIGL also contended that the proceedings should be stayed under the inherent jurisdiction of the English Court, pending the determination of EIGL's unfair prejudice claim proceedings to be commenced in Jersey.

9.        Advocate Cadin, for EIGL and Heritage Oil, referred us to Macfarlanes LLP's letter of 21^st November 2018 to Mr Buckingham which he says encapsulates the issues at the heart of this matter, namely a number of historic payments made by Heritage Oil to third parties when Mr Buckingham was a director of Heritage Oil ("the Disputed Payments").  The Disputed Payments are substantial and according to the letter appear to have been made for unspecified consultancy services or for services generally described as "community relations", but there was an absence of documentation which sets up the precise nature of the services which were to be provided, the rationale for such payments or the services which were ultimately provided.

10.      In the proceedings before the High Court, Foxton J reached the following conclusion:

"95.    While I have addressed the various issues raised by EIGL's proposed set-off separately, in the final analysis they are all different manifestations of the same fundamental point.  Heritage Oil (for the benefit of EIGL, as its 100% shareholder) had a perfectly conventional legal claim for any loss caused by the Disputed Payments.  That was the claim which EIGL's solicitors, Macfarlanes LLP, originally referred to when responding to Albion's demand for payment of the outstanding balance.  However, to overcome the difficulties that a claim by Heritage Oil is incapable of providing a defence to Albion's claim against EIGL for the balance of the purchase price, EIGL sought to re-package that claim in a form which would allow it, rather than Heritage Oil, to assert it.  Ingenious as Mr Morpass QC's submissions were, I have concluded that that attempt is fundamentally flawed, and does not disclose an arguable defence to Albion's claim."

11.      For these reasons, on the 14^th February 2020 Foxton J refused EIGL's application for a stay and granted Albion's application for summary judgment on its claim for the balance of the purchase consideration in the sum of $13.3 million.  An application by EIGL to appeal the decision of Foxton J was refused and his decision is therefore final.

Security

12.      The purchase consideration of $100 million was secured over the 20% of the shares in Heritage Oil, namely 57, 748,991 ordinary shares of no par value, that were sold to EIGL and this pursuant to a Security Interest Agreement dated 31^st January 2018 ("the SIA"), which is governed by Jersey law.

13.      The security interest was created by Albion taking possession of the three share certificates of the shares sold as issued in the name of EIGL and undated and signed stock transfer forms relating to each certificate, and this pursuant to Article 22(3) of the Security Interests Law, which provides:

"22     Perfection by possession, control or registration

(1)       ....

(2)       ...

(3)       Control of collateral by the secured party, or on the secured party's behalf by a person other than the grantor or obligator, perfects a security interest in collateral of any of the kinds referred to in paragraphs (3) to (6) of Article 3."

14.      The relevant part of Article 3 provides as follows:-

"3.      Meaning of "control"

(1)       A secured party has control of collateral in any of the circumstances set out in paragraphs (3) to (6).

(2)       ...

(3)       ...

(4)       ...

(5)       A secured party has control of an investment security (being an investment security that is represented by a certificate and is not a bearer security) if he or she is registered with the issuer of the security as holder of the security or is in possession of the certificate."

15.      "Investment security" is defined under Article 1 as meaning an investment specified in any of the paragraphs 1 to 8 and 10 of Schedule 1 to the Financial Services (Jersey) Law 1998, Article 1 of that Schedule specifying shares and stock in the share capital of a company.

16.      The liabilities secured by the SIA are defined under clause 1(r) as meaning EIGL's obligation to pay any unpaid portion of the consideration pursuant to the SPA.  Clause 3 of the SPA is in these terms:-

3         Consideration

3.1      The aggregate consideration payable for the purchase of the Shares shall be the sum of $100,000,000 (one hundred million US Dollars) payable to the Seller in the following instalments:

3.1.1   within 10 days following the Completion Date, the sum of $33,333,333;

3.1.2   on 20 June 2018 (or if that date is not a Business Day, on the first Business Day thereafter) the sum of $33,333,333; and

3.1.3   on 28 December 23018 (or if that date is not a Business Day, on the first Business Day thereafter) the sum of $33,333,334.

3.2      The Buyer irrevocably undertakes to pay each instalment of the Consideration set out in clause 3.1 in cash by way of electronic transfer of immediately available funds for value on the relevant date for payment specified in clause 3.1 to the Seller's Account (or to such account as the Seller shall have notified the Buyer not less than five Business Days prior to the relevant date for any payment.)"

17.      Clause 4.2 of the SPA provides that on completion:

"4.2     the Buyer shall deliver or procure to be delivered to the Seller the Share Security interest Agreement, duly executed by the Buyer and the Seller."

18.      Under the SIA, "Shares" is defined as meaning "the number of ordinary no par value shares in the share capital of the Company over which a security interest has been created pursuant to this Agreement, during the Security Period, as set out in the Schedule to this Agreement" and the schedule is in this form:

	Security Period	Shares
1.	From the date of this Agreement to the First Release Date	19'249'663
2.	From the first Release Date to the Second Release Date	19'264'664
3.	From the Second Release Date to the Final Release Date	19'249'664

19.      "Event of Default" is defined under clause 1(1)(h) of the SIA as meaning EIGL's "failure to pay any instalment of the Consideration when due and payable under the SPA."

20.      The "Security Period" is defined under clause 1(1)(u) of the SIA as meaning "the period beginning on the date of this Agreement and ending on the date on which the Grantor has paid the Consideration to Albion in full, in accordance with the SPA."

21.      The release dates of the security are defined in the SIA as the dates upon which each of the three instalments is paid by EIGL, pursuant to the SPA, and Clause 11 of the SIA (in which Albion is defined as "the Secured Party" and EIGL as "the Grantor") provides for the release of that security as follows:

"11      RELEASE OF SECURITY

The Secured Party agrees and covenants in favour of the Grantor that:

On the First Release Date, any security interest created pursuant to this Agreement over any amount of shares in the share capital of the Company which no longer constitute Shares (with reference to the Schedule to the Agreement) will be automatically, irrevocably and unconditionally extinguished with immediate effect and the Secured Party will forthwith return to the Grantor any Share Certificate it holds in respect of such released shares PROVIDED ALWAYS this shall be without prejudice or effect to the security interest over the remaining Shares which are not released on the First Release Date;

On the Second Release Date, any security interest created pursuant to this Agreement over any amount of shares in the share capital of the Company which no longer constitute Shares (with reference to the Schedule to this Agreement) will be automatically, irrevocably and unconditionally extinguished and the Secured Party will forthwith return to the Grantor any Share Certificate it holds in respect of such released shares PROVIDED ALWAYS this shall be without prejudice or effect to the security interest over the remaining shares which are not released on the Second Release Date; and

On the Final Release Date, any security interest created pursuant to this Agreement over any amount of shares in the share capital of the Company which no longer constitute Shares (with reference to the Schedule to this Agreement) will be automatically, irrevocably and unconditionally extinguished with immediate effect and the Secured Party will forthwith return to the Grantor any Share certificate it holds in respect of such released shares.

Following a Release, the Secured Party shall, on the written request of the Grantor and at the cost of the Grantor, execute a partial or final (as the case may be) release of the security interest constituted by or pursuant to this Agreement on such terms as the Secured Party may determine."

22.      On or shortly following completion of the sale of the shares on 31^st January 2018, three certificates were issued in the name of EIGL and delivered to Albion (with stock transfer forms) pursuant to the SIA as follows:

(i)        Certificate 00001770 for 19,249,663 fully paid up ordinary shares of no par value,

(ii)       Certificate 00001772 for 19,249,664 fully paid up ordinary shares of no par value.

(iii)      Certificate 00001771 for 19,249,664 fully paid up ordinary shares of no par value.

23.      In addition to the provision of this security, the articles of EIGL were amended on the completion date by way of special resolution by adding a new Article 50A, under which, by way of summary, in the case of any transfer pursuant to any security interest agreement "the directors shall not decline and must recognise and immediately register any transfer of Shares, nor may they suspend registration thereof, where the directors have received an instrument of transfer accompanied by the certificate for such share, or where the certificate is not available, an indemnity in respect thereof in a form reasonably acceptable to the Company ..."

24.      The special resolution has not been forwarded to the Registrar as required by Article 100(1) of the Companies (Jersey) Law 1991 and failure to comply with that requirement is an offence, pursuant to Article 100(5).  However, the special resolution remains effective notwithstanding that a copy has not been delivered to the Registrar, and this pursuant to Article 100(6).

Loss of possession

25.      The chronology shows that the first instalment of $33.3 million was paid by EIGL within ten days of completion as required under the SPA.  However, on 13^th March 2018, Bedell Cristin, acting for EIGL and Heritage Oil, wrote to Charles Fussell & Co LLP, asking for the original stock transfer forms and corresponding share certificates to be provided in connection with the sale, as required by Computershare.  In what is accepted by the parties as an error, Albion's solicitors not only sent the original share certificates and transfer forms in relation to the sale by Albion to EIGL, but also the original share certificates issued in the name of EIGL and associated stock transfer forms possession of which constituted the security interest.  The significance of this is made clear by Article 22(5) of the Security Interests Law which provides:

"Perfection by possession, control or registration

(5)       ..... perfection by possession, control or registration continues only while the possession, control or registration (respectively) is maintained."

26.      The second tranche of the consideration was paid by EIGL on 20^th June 2018.  Of the third tranche due on 20^th December 2018, $20 million was paid on 24^th December 2018 and on 18^th January 2019, the balance of $13.3 million was paid to Charles Fussell & Co LLP to be held on the terms of the Escrow Agreement.

27.      Despite numerous requests, EIGL have not agreed to the return of the share certificate and stock transfer form in relation to the third tranche and this despite its obligations under Clause 4(1) of the SIA, in which it covenanted as follows:

"GENERAL COVENANTS

The Grantor agrees and covenants with the Secured Party until the end of the Security Period:

(1)       Contemporaneously with the execution and delivery of this Agreement, to deliver to the Secured Party (or to such person that the Secured Party may direct) all of its share certificates in respect of the Shares (each a "Share Certificate") together with updated and signed duly completed stock transfer forms in respect of the Shares relating to each such share certificate (each a "Stock Transfer Form"")

(2)       ...

(3)       To procure that the Secured Party's security interest in the shares is noted on the register of Members of the Company;

(4)       Without prejudice to any other provision of this Agreement and after any request is made by the Secured Party, to do all things necessary (subject at all times to Clause 14) to ensure that the Secured Party has control for the purposes of Article 3 of the Security Law in respect of any investment securities that constitute Collateral (including, without limitation, following the occurrence of an Event of Default, by the Secured Party becoming the registered holder of such investment securities);"

The Escrow Agreement

28.      The parties to the Escrow Agreement are Albion, Mr Buckingham and EIGL, and under it, in summary:

(i)        Charles Fussell & Co LLP gave an undertaking that they will hold these funds strictly to the joint order of EIGL and Albion and will not instruct their bank to transfer the funds to any person other than on the joint instruction of EIGL and Albion, or pursuant to an order of a Court with competent jurisdiction.

(ii)       EIGL will procure Heritage Oil to provide Mr Buckingham with all the necessary documentation and information to enable him to respond to the queries set out in Macfarlanes LLP's letter of 21^st November 2018.

(iii)      If they remained in dispute after 1^st March 2019, they would use reasonable endeavours properly to agree an appropriate dispute resolution process to resolve the dispute and will not commence any proceedings in relation to the matters in dispute prior to 1^st April 2019.

(iv)      The transfer of the funds to Albion's solicitors was entirely without prejudice to the legal rights and obligations of the parties.

(v)       Any dispute or difference arising out of or in connection with the Escrow Agreement would be referred to and finally settled by arbitration in England.

Albion's application

29.      On 23^rd March 2020, Albion exercised its powers under the power of attorney in the SIA to execute a stock transfer form on behalf of EIGL in favour of Albion which was delivered to Heritage Oil with an instruction that Albion's name be entered into the register of members as the holder of the shares constituting the final tranche, but that transfer has not been registered.

30.      Albion therefore applies for the assistance of the Court in the enforcement of its security pursuant to Article 52 of the Security Interests Law, which is in the following terms:

"52     Court may facilitate realization of collateral

The Royal Court may, on application by the secured party, when an event of default occurs in relation to a security agreement, make any of the following orders if it appears to the Court reasonably necessary to do so in order to make it possible or practicable for the secured party to exercise his or her rights under this Part -

(a)       an order for delivery of collateral to the secured party;

(b)       an order transferring collateral into the name of the secured party;

(c)       an order vesting title to the collateral in the secured party free of the right of redemption or reinstatement under Article 54;

(d)       an order enforcing an instruction given under Article 43(2)(c)(iii);

(d)       any other order."

31.      Pursuant to Article 25, Albion seeks the following relief:

"(3)      that [EIGL] shall deliver the Original Share Certificates and stock transfer form relating to the Original Share Certificates to [Albion] in accordance with clause 4.1 of the Security Interest Agreement;

(4)       ...

(5)       That for the purposes of ensuring that [Albion] has control for the purposes of Article 3 of the Law and perfection for the purposes of Article 22 of the Law in respect of 19,249,664 shares constituting the Final Tranche:

i.         [EIGL] shall transfer the 19,249,664 shares constituting the Final Tranche into the name of [Albion]; and

ii.        [Heritage Oil] shall register the transfer of the 19,249,664 shares constituting the Final Tranche from [EIGL] to [Albion] in its register of members and shall issue a certificate of title to reflect such entry in the register of members and deliver the same to [Albion];

(6)       [Albion] shall further be permitted to exercise all its powers of enforcement under the Law and the Security Interest Agreement including its powers to appropriate, sell or take any other ancillary action at such times and at such intervals as [Albion] shall deem appropriate in relation to the 19,249,664 shares constituting the Final Tranche:

(7)       [EIGL] and/or [Heritage Oil] shall take any reasonable action or steps to enable [Albion] to carry out its powers of enforcement under the Security Interest Agreement and the Law;"

Position of EIGL and Heritage Oil

32.      The position of EIGL and Heritage Oil is, in summary:

(i)        The security is unperfected as Albion does not have possession or control of the relevant share certificate.  Pursuant to Clause 14 of the SIA, the parties had agreed not to perfect the security by registration, pursuant to Article 22(4) of the Security Interests Law on the register maintained by the Registrar of Companies, pursuant to Part 8 of the Security Interests Law, so that perfection was reliant entirely on possession and control. 

(ii)       The shares subject to the SIA are neither identified nor identifiable from among the amorphous mass of 323,347,397 issued shares in Heritage Oil.  In the premises, the SIA does not meet the requirements of Article 18(1) of the Security Interests Law and as a consequence, the security interest is not enforceable against the EIGL.  Article 18(1) and (2) provide as follows:

"18     Attachment: general rule

(1)       Except as provided in Article 19 and 20, a security interest attaches to collateral under a security agreement at the time when the following 3 conditions are satisfied -

(a)       Value has been given in respect of the security agreement;

(b)       The grantor has rights in the collateral, or the power to grant rights in the collateral to a secured party;

(c)       One or both of the following clauses are satisfied -

(i)         There is possession or control of the collateral by the secured party or on the secured party's behalf by a person other than the grantor or obligor;

(ii)        The security agreement is in writing signed by or on behalf of the grantor and contains a description of the collateral that is sufficient to enable the collateral to be identified,

or instead at a later time that the parties to the security agreement have determined by that or another agreement.

(2)       For the purposes of this Article, a description of collateral is sufficient to enable the collateral to be identified if the description is -

(a)       a description of the collateral by item;

(b)       A description of the collateral by type;

(c)       a statement that the security agreement covers all present and future collateral; or

(d)       a statement that the security agreement covers all present and future collateral except for specified items or types, and the collateral is not within those exceptions."

(iii)      The SPA is governed by English law, and under the English law doctrine of merger, the cause of action (i.e. the unpaid monies due under the SPA) has been extinguished by the judgment of Foxton J, so that:

(a)       There is no longer any contractual sum to be paid;

(b)       Albion's right to payment is a right to payment under the judgment only;

(c)       Albion does not have any right to payments under the SPA or to security under the SIA, which is ancillary to the SPA and which has now terminated by operation of law.

(iv)      The judgment of Foxton J is a judgment capable of reciprocal enforcement under the Judgments (Reciprocal Enforcement) (Jersey) Law 1960 ("the Reciprocal Enforcement Law"), Article 8 of which gives effect to the doctrine of merger in relation to foreign judgments by providing:

"8       Judgments which can be registered not to be enforceable otherwise

No proceedings for the recovery of a sum payable under a judgment to which this Part of this Law applies, other than proceedings by way of registration of the judgment, shall be entertained by any court in Jersey."

For the Royal Court to proceed to adjudicate under the SIA, it would have to hold that the current proceedings are not "for the recovery of a sum payable under a judgment", thereby going contrary to the English law position that the obligation to pay under the SPA has been extinguished by the judgment and condemning EIGL to the possibility of losing its shares and still having to meet the judgment of Foxton J in full.

(v)       In terms of the relief sought by Albion, it was entirely unclear against what collateral Albion seeks to enforce and it was never envisaged that Albion would have shares transferred into its own name.  Furthermore, it was not "reasonably necessary" for the Court to exercise its powers under Article 52 of the Security Interests Law. Albion was not acting in a commercially reasonable way, as the enforcement provisions under the Security Interests Law require.

Decision

33.      The Court was satisfied that Albion was entitled to the relief it sought, essentially for the reasons put forward by Advocate Hoy for Albion. 

34.      We take first the issue of whether the collateral has been sufficiently identified for the security interest to attach to it, pursuant to Article 18 of the Security Interests Law.

35.      Under clause 1(1)(c) of the SIA, "Collateral" is defined as meaning "the Shares" (and "Related Property", namely monies paid or payable in respect of the Shares).  As set out above, the Shares are defined as the number of no par ordinary shares in Heritage Oil set out in the Schedule.

36.      Advocate Cadin described the Schedule as listing non overlapping, sequential security periods under columns which provide figures for shares, but do not contain or recite any method or way in which the respective blocks of shares are to be identified from the other shares in Heritage Oil.  On the face of the SIA, he said it could not and did not create a single security over the total of 57,748,991 shares, and at its highest, it purported to create three separate sequential security interests, namely one from the date of the SIA over 19,249,663 shares, one from the First Release Date to the Second Release Date over 19,249,664 shares and one from the Second Release Date to the Final Release Date over 19,249,664 shares.

37.      As Mark Dunlop says in Security Interests (Jersey) Law 2012, at page 21, a security interest may describe collateral in wide terms.  Under Article 18(2) a description is sufficient if it is a description by item or type.  The annual returns of Heritage Oil show that it has only one class of shares, namely ordinary shares of no par value.  At the time of the SPA, EIGL already owned 80% of the issued share capital and under its terms, it agreed to purchase the 20% owned by Albion, namely 57,748,991 ordinary shares of no par value over which the security interest was to be created as security for the payment of the consideration over the three instalments.

38.      Under the provisions of the contemporaneously executed SIA, EIGL delivered into the possession of Albion three numbered share certificates in the amounts set out in the schedule, which total the number of shares sold.  It is correct that the three share certificates did not attribute numbers to the shares certified to be held, but in the context of the share capital of Heritage Oil, this makes no difference.  Each certificate certified that EIGL was the registered holder of the total number of shares specified in that certificate and on presentation of that certificate to the company with a duly executed stock transfer form, no difficulty arises in that number of shares being registered into the name of Albion.

39.      In our view, the collateral has been identified by item and type sufficient for a security interest to attach to it.  The security interest attached to the shares covered in all three certificates from the outset of the SIA and logically it would be the first numbered certificate in the amount of 19,249,663 shares that would be released on the payment of the first instalment, the second certificate released on the payment of the second instalment and the third certificate released on the payment of the third instalment.  The payment of the first and second instalments having now been made, the shares covered by certificates numbered 00001770 and 00001771 are released, with the security over the shares covered by certificate 00001772 remaining in place.

40.      It is the case that Albion lost possession of the certificates and stock transfer forms when they were sent in error to Bedell Cristin.  In his second affidavit, Mr Iain Mackie of Macfarlanes LLP acknowledges in paragraph 32 that they were sent in error.  The obligation on EIGL to deliver the certificates and stock transfer forms to Albion and to keep it in control of the same under the provisions of clause 4(1) of the SIA are clear and that obligation endures for the duration of the Security Period, i.e. until the last instalment has been paid in full under the SPA.  Advocate Cadin did not seek to argue that under the terms of the SIA, EIGL is no longer obliged to return the third certificate and related stock transfer form to Albion.  His argument is that EIGL's obligations under the SPA have now terminated, and the SIA with it.  EIGL's obligation is now under the judgment. We therefore turn to the issue of merger.

41.      Advocate Cadin pointed to the requirement for questions of foreign law to be determined as matters of fact on the basis of evidence (Rule 25 of Dicey, Morris & Collins 15^th edition and Doraville Properties Corporation v AG [2016] (1) JLR Note 9).   He relies on the first affidavit of Mr Mackie as constituting expert evidence on the English law of merger.  Advocate Cadin accepts that Mr Mackie is not independent, his firm acting for EIGL and Heritage Oil and his evidence as to English law is short and couched in terms of belief and being subject to submissions.  However, that does not give rise to any difficulties for the Court in the light of the authorities cited by both counsel.

42.      The doctrine of merger was considered by the English Court of Appeal in Clark v In Focus Asset Management [2014] 1 WLR 2502.  The claim concerned an award by the Financial Ombudsman Service which had been accepted by the complainant.  The principal issue before the Court of Appeal was whether the award was a judicial decision capable of giving rise to res judicata.  At paragraphs 3 - 5 of the judgment, Arden LJ explains the doctrine of merger:

"3.      Common law doctrines preclude a person who has obtained a decision from one court or tribunal from bringing a claim before another court or tribunal for the same compliant.  These rules are referred to as res judicata and merger.  The parties have argues this case on the basis of both principles.  The judge dealt solely with merger.

4.        To understand merger, it is necessary to understand the meaning of 'a cause of action'.  It is not a legal construct.  The term 'cause of action' is used to 'describe the various categories of factual situations which entitle[d] one person to obtain from the court a remedy against another' (per Diplock LJ in Letang v Cooper [1965] 1 QB 232,243).  A complaint to the ombudsman need not be a cause of action but (as further discussed below) it may involve consideration of an underlying cause of action and the facts on which a complaint is based may be or include facts constituting a cause of action.

5.        Merger explains what happens to a cause of action when a court or tribunal gives judgment.  If a court or tribunal gives judgment on a cause of action, it is extinguished.  The claimant, if successful, is then able to enforce the judgment, but only the judgment.  The effect of merger is that a claimant cannot bring a second set of proceedings to enforce his cause of action even if the first tribunal awarded him less than he was entitled to (see, for example, Wright v London General Omnibus Co (1877) 2 QBD 271 and Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878). As Mummery LJ held in Fraser v HLMAD Ltd [2006] ICR 1395, para 29, a single cause of action cannot be split into two causes of action."

43.      At paragraphs 11 and 12, he explained the rationale for the doctrines of both merger and res judicata:

"11.    There is a powerful twofold rationale for the doctrines of merger and res judicata.  The first rationale is 'the public interest in finality of litigation rather than the achievement of justice as between the individual litigants' (see per Lord Goff of Chieveley in Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878, 903).  Mr Clive Wolman, for the claimants, suggests that the public interest in finality arises out of a concern that the public courts and tribunals should not be clogged by repetitious rehearings and redeterminations of the same disputes.  This is clearly a powerful consideration.

12.      Second there is the private interest.  As Sir Nicholas Browne-Wilkinson V-C put it in Arnold v National Westminster Bank plc [1989] Ch 63, 69, 'it is unjust for a man to be vexed twice with litigation on the same subject matter.'"

44.      In Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd (formerly Contour Aerospace Ltd [2013] UKSC 46, a decision of the Supreme Court, Lord Sumption provided a summary of the general principles of res judicata:

"17.    Res judicata is a portmanteau term which is used to describe a number of different legal principles with different juridical origins.  As with other such expressions, the label tends to distract attention from the contents of the bottle.  The first principle is that once a cause of action has been held to exist or not to exist, that outcome may not be challenged by either party in subsequent proceedings.  This is 'cause of action estoppel'.  It is properly described as a form of estoppel precluding a party from challenging the same cause of action in subsequent proceedings.  Secondly, there is the principle, which is not easily described as a species of estoppel, that where the claimant succeeded in the first action and does not challenge the outcome, he may not bring a second action on the same cause of action, for example to recover further damages: see Conquer v Boot [1928] 2 KB 336.  Third, there is the doctrine of merger, which treats a cause of action as extinguished once judgment has been given on it, and the claimant's sole right as being a right on the judgment.  Although this produces the same effect as the second principle, it is in reality a substantive rule about the legal effect of an English judgment, which is regarded as 'of a higher nature' and therefore as superseding the underlying cause of action: see King v Hoare (1844) 13 M & W 494,504 (Parke B).  At common law, it did not apply to foreign judgments, although every other principle of res judicata does.  However, a corresponding rule has applied by statute to foreign judgments since 1982: see section 34 of the Civil Jurisdiction and Judgments Act 1982.  Fourth, there is the principle that even where the cause of action is not the same in the later action as it was in the earlier one, some issue which is necessarily common to both was decided on the earlier occasion and is binding on the parties:  Duchess of Kingston's Case (1776) 20 State Tr 355.  'Issue estoppel' was the expression devised to describe this principle by Higgins J in Hoysted v Federal Commissioner of Taxation (1921) 29 CLR 537,561 and adopted by Diplock LJ in Thoday v Thoday (1984) P181, 197-198.  Fifth, there is the principle first formulated by Wigram V-C in Henderson v Henderson (1843) 3 Hare 100, 115, which precludes a party from raising in subsequent proceedings matters which were not, but could and should have been raised in the earlier ones.  Finally, there is the more general procedural rule against abusive proceedings, which may be regarded as the policy underlying all of the above principles with the possible exception of the doctrine of merger." (our emphasis)

45.      These principles have been adopted as part of the law of Jersey in Dubai Islamic Bank v Ridley [2016] JRC 102 (at paragraphs 108 - 109) and on appeal in Dubai Islamic Bank v Ridley [2017] JRC 204 and in Brakspear v Nedgroup Trust (Jersey) Limited [2018] JRC 121 at paragraphs 64-6, although in these cases, the Court was not expressly concerned with the doctrine of merger.  Even so, we agree with both counsel that the doctrine applies in this jurisdiction, the issue being whether, properly understood, it applies on the facts of this case.

46.      The doctrine has been considered more recently in Zavarco PLC v Tan Sri Sayed Mohd Yusof Bin Tun Syed [2020] EWHC 629 (Ch) which was concerned with whether the doctrine applied to a declaratory judgment.  Birss J gave this explanation as to the doctrine:

"12     Before getting into the legal theory, it is worth setting out the easy example which illustrates merger.  If a claimant has a cause of action which gives them a legal right to a sum of money from a defendant (e.g. a claim for breach of contract), then before judgment is given, the claimant's legal right is that which the law provides for as arising from the cause of action.  The parties may disagree about the merits of the claimant's right and go to trial.  Assuming the claimant wins the trial, they will obtain a judgment ordering the defendant to pay them that sum of money.  The claimant now has a legal right to the money from the defendant, based on the judgment itself.  This new legal right is different from the old one.  For example the way the limitation rules apply differs and the accrual of interest may well be different too.  If you think about it, the claimant cannot still have their old legal right to the sum of money for breach of contract, otherwise they would now have two rights and might end up with a right to double recovery.  So the idea is that the old right, or cause of action, has merged into the new right, the judgment.  Whether 'merge' is the best metaphorical description of this idea does not matter.  It makes sense."

47.      Having referred to the judgment of Lord Sumption set out above, he continued at paragraphs 14-16:

"14     In the final sentence, in relation to the policy justification, Lord Sumption singles out the doctrine of merger as a possible exception.  The others, like res judicata, issue estoppel and Henderson v Henderson all have a similar policy justification which is procedural in nature and is concerned with abusive proceedings.  Whereas merger is distinct, it is  a substantive rule of law, not a procedural discretion.

15.      The textbook heavily relied on by the appellant (Spencer Bower and Handley) refers to a 'plea of former recovery' (paragraph 19.01) in a chapter entitled 'Merger in judgment'.  As I read the textbook the authors regard merger as an explanation for a doctrine of former recovery.  However that distinction does not matter for present purposes.  What matters is that the textbook explains the rationale for the concept itself on three grounds (paragraph 189.02).  The first is a public interest in the termination of disputes between litigants, the second is a private interest in an individual litigant not to be sued twice for the same thing, and the third is the idea that the cause of action must cease to exist once judgment had been given on it.

16.      While these are indeed justifications which were used in the past, I believe Lord Sumption's approach may help to understand the doctrine as it applies in the modern context.  The second justification for merger given in the textbook (a litigant not being sued twice) is the procedural abuse point which Lord Sumption doubted was a basis for merger.  The first justification (the public interest in finality) is similar.  Those two policies support a broad procedural doctrine which may involve an exercise of discretion.  They are consistent with merger but they are not focused on supporting the automatic and technical nature of the doctrine as it is today."

48.      Having regard to the terms of the declaratory judgment, the Court found that the cause of action had not been merged into it, given its terms and Zavarco PLC still had a right to €36 million in cash from Mr Nasir, reversing the earlier decision of Chief Master Marsh Zavarco PLC v Tan Sri Sayed Mohd Yusof Bin Tun Syed (2019) EWHC 1837 (Ch).

49.      Advocate Cadin argued that as the SIA is drafted to be subservient and inextricably linked to the SPA and to the extent that obligations under the SPA are varied or extinguished so too are the corresponding obligations under the SIA.  As a matter of its proper law, he said the obligations under the SPA had been extinguished, and there could be no payment "pursuant to the SPA" nor can there be any secured liabilities as defined.  He said it was never intended by the parties that Albion would seek judgment before seeking to enforce the SIA, as evidenced by clause 15(7) of the SIA, which is in these terms:

"(7)      The Secured Party is not obliged to marshal, enforce, apply, appropriate, recover or exercise any security, guarantee or other right held at any time by it, or any amounts or other property that it holds or is entitled to receive, or have recourse to any other remedy, before enforcing the security interest constituted by or pursuant to this Agreement."

50.      We do not accept that on a proper construction of the SIA, it can be said that the parties intended Albion to seek to enforce its security before seeking any judgment. Clause 15(7) gives no support to that proposition and clause 18 dealing with the governing law and jurisdiction expressly contemplates proceedings.  There are many circumstances in which a secured party may need to take judgment before having recourse to any security it may hold and there is nothing in the SIA, in our view, that seeks to dictate the order in which Albion may have recourse to its remedies.  It would be unusual for a secured party to be restricted in that way.

51.      Having elected to pursue a judgment in England, rather than the security in Jersey, Advocate Cadin submitted that Albion had brought the SIA to an end, terminating the secured liabilities, making the performance of the SIA impossible and rendering the SIA unintelligible and thereby terminating it by operation of law.

52.      The Court found this a somewhat startling proposition.  There is nothing particularly unusual in the security provided under the SIA, with the delayed purchase consideration for shares being secured by a security interest over those shares by possession of the certificates.  If Advocate Cadin was correct that, by the doctrine of merger, a judgment extinguishes the underlying contract, and security provided under it, leaving the lender with an unsecured judgment only to enforce, it would mean that secured parties generally would have to enforce their security in full before proceeding to take judgment, because the taking of that judgment would extinguish the security in its entirety.

53.      We observe that whilst none of the cases referred to above dealt with the issue of security, in none of them is there any suggestion that where the doctrine of merger applies, the judgment taken extinguishes not only the cause of action, but any collateral security taken for it. We venture to suggest that this is because the position in relation to collateral security had been settled under English law in a number of 19^th century cases.

54.      Advocate Hoy referred the Court to this passage from Halsbury's Laws of England¸ Volume 22 (Contract) at paragraphs 416:

"416    Merger in judgment

The commencement of one action upon a contract is no bar to the commencement of another upon the same contract; but the two actions may be consolidated, or the second struck out as vexatious.  However when the former action has been pursued to judgment in a court of record the original cause of action is merged in the judgment so that a second action cannot be brought in respect of the same cause of action, because the inferior remedy is merged in the higher, the court of record.  So long as the judgment remains unsatisfied, however, it does not extinguish any remedy except the particular cause of action in respect of which it was recovered, and the creditor is not precluded by it from enforcing any collateral security which he may have taken."

55.      Halsbury cites inter alia the case of Drake v Mitchell [1803] 3 East 251 as authority for the proposition that the creditor is not precluded by the judgment from enforcing any collateral security which he may have taken.  In that case three lessees had promised to pay the claimant rent on a mine.  One had subsequently provided a promissory note for part of the rent and the claimant had then obtained judgment on the promissory note.  But the judgment was not paid.  The question was whether the giving of the promissory note or the judgment obtained on it discharged the original promise to pay rent.  The Court of King's Bench held it did not. Quoting from the judgment of Lord Ellenborough CJ, in case of Drake v Mitchell at page 596:

"I have always understood the principle of transit in res judicata to relate only to the particular cause of action in which the judgment is recovered operating as a change of remedy from its being of a higher nature then before.   But a judgment recovered in any form of action is still but a security for the original cause of action, until it be made productive in satisfaction to the party; and therefore till then it cannot operate to change any other collateral concurrent remedy which the party may have."

56.      Similarly, Grose J said at page 597:

"The [promissory note], not having been accepted as satisfaction for the debt, could only operate as a collateral security; and no judgment had been recovered on the [promissory note] yet not having produced satisfaction in fact, the plaintiff may still resort to his original remedy on the covenant [i.e. the promise to pay rent]."

57.      Foxton J considered Albion's remedies at paragraph 25 of his judgment:

"Further, while the amount paid into the Escrow Account is clearly the most obvious means of enforcing any judgment which Albion might obtain, it is far from Albion's only option. In particular, Albion has security for the outstanding instalment in the form of a charge over 20% of the shares in Heritage."

Whilst these comments are obiter, Foxton J clearly did not consider that granting judgment would have the significant consequence of extinguishing any security held by Albion.

58.      The point was referred to in the judgment of Chief Master Marsh in Zavarko v Nasir where he said at paragraph 40:-

"40     It is also right that there are examples of causes of action, in the sense of sets of facts that constitute a cause of action, being cumulative.  The same set of facts may entitle the claimant to bring different claims for different causes of action.  Spencer Bower & Handley instances a beneficiary with a claim in personam against a defaulting trustee being entitled to bring a later claim for a proprietary tracing remedy.  Another example is a beneficiary applying to remove a trustee of a trust on the basis that there has been a breach of trust and later bringing a separate claim for relief arising from the breach of trust.  These examples suggest that the doctrine of merger is not quite as absolute as might appear from the judgments I have cited."

59.      As Arden LJ said in Clark v In Focus Asset Management, the term "cause of action" is used to describe the various categories of factual situations which entitle one person to obtain from the Court a remedy against another.  The SPA entitled Albion to seek judgment for the unpaid balance of the third instalment and that entitlement is now merged into the judgment.  That merger does not extend to or affect the underlying contractual rights and obligations of the parties under the SPA and SIA, in particular in relation to security.  In this respect, it is relevant to note that there were six parties to the SPA, with contractual rights and obligations as between them clearly intended to endure beyond any merger by judgment.

60.      The SPA and SIA constitute a set of facts that entitle different claims for different causes of action, namely in this context a right for Albion to seek judgment for the amount owed and a separate right for Albian to enforce its security. The purpose in Albion bringing these proceedings is for assistance in the enforcement of its security and not to obtain a further summary judgment against EIGL for the amount unpaid.  These proceedings are therefore not in breach of Article 8 of the Reciprocal Enforcement Law.

61.      Advocate Hoy also prayed in aid the following provisions of the SIA:-

"10      No impairment

The obligations of the Grantor under this Agreement, and the security interest constituted by or pursuant to this Agreement, shall not be discharged, released, impaired, prejudiced or otherwise affected in any way by

(1)       ...

(2)       Any act or omission by the Secured Party in taking up, perfecting or enforcing any security, indemnity, guarantee or other claim from or against the Grantor.

15.      Miscellaneous

(1)       The security interest constituted by or pursuant to this Agreement shall be independent of and in addition to and shall not merge with or be prejudiced or affected by or otherwise prejudice or affect any contractual or other right or remedy ... or other security or other right now or hereafter held by or available to the Secured Party." (His emphasis)

62.      Advocate Cadin responded that Clause 15(1) is unclear and properly interpreted provides that "security interest constituted by or pursuant to this Agreement .... shall not merge with or be prejudiced or affected by or otherwise prejudice or affect the existence of any contractual or other right or remedy". (underlined words added).  As on his case all of Albion's contractual rights had now been extinguished, he submitted that clause 15 is rendered irrelevant.

63.      We accept Advocate Cadin's submission that the SIA is linked to the SPA in that it provides security for EIGL's obligations under the SPA and if he is right that as a matter of law, and notwithstanding the contractual intentions of the parties to the contrary, all of Albion's rights and obligations under the SPA have merged with the judgment, thus extinguishing the SPA, then it must follow that the SIA would fall with it. 

64.      We have found, however, that merger by judgment does not extinguish the rights and obligations of the parties under the SPA and SIA and reliance therefore upon clauses 10 and 15(1) is rendered otiose.

65.      Advocate Cadin argued that the judgment debt could not be secured by the SIA because the Secured Liabilities as defined, would be susceptible to being increased in scope and amount otherwise than in accordance with the terms of the SIA.  For example, he said, a money judgment might also include declaratory orders, orders for specific performance, costs and interest.

66.      In our view, what is secured under the SIA is a matter of the construction of that agreement in the light of the provisions of the Security Interests Law.  The Secured Liabilities are defined under Clause 1(1)(r) as EIGL's obligation to pay any unpaid portion of the consideration under the SPA and it is not in dispute that the sum of US$13.3 million remains unpaid in respect of the final instalment due under the SPA.  Under the SPA there is no provision for the payment of interest on any outstanding instalments.  It would follow that the SIA does not purport, therefore, to secure anything other than this outstanding amount; in particular it does not secure the costs or interest ordered by Foxton J.

67.      To summarise the position we have reached so far:

(i)        The collateral under the SIA has been sufficiently identified for the purposes of Article 18 of the Security Interests Law.

(ii)       Albion lost possession of the third share certificate and associated stock transfer form in error and EIGL is obliged under the SIA to return them.

(iii)      The doctrine of merger and Article 8 of the Reciprocal Enforcement Law does not prevent Albion from seeking to enforce its security over the shares in Heritage Oil in Jersey.

Relief sought by Albion

68.      Advocate Cadin submitted that it was not "reasonably necessary" for the Court to exercise its powers under Article 52 of the Security Interests Law.  The enforcement provisions under Part 7 of the Security Interests Law required Albion to act in a "commercially reasonable manner" and to the extent the Court was being invited to exercise its powers under Article 52 "to make it possible or practicable for the secured party to exercise his or her rights under this Part", it must be satisfied that Albion is acting in a commercially reasonable manner and that  what it was being asked to do is reasonably necessary.

69.      In his view, Albion was adopting a wholly unreasonable approach in that:

(i)        EIGL had paid the consideration monies due under the SPA in full, albeit that the balance is held by Albion's English solicitors subject to the Escrow Agreement.

(ii)       The reason that the monies cannot be released from escrow is because Albion has refused to engage in the arbitration process envisaged. Instead, Albion has embarked upon multitude of proceedings, both in this jurisdiction and in the United Kingdom.

(iii)      Albion is seeking to avoid resolution of the issues between the parties and thereby to perpetuate conflict and litigation and accrue unnecessary costs.

(iv)      The purpose of the SIA was to secure performance of EIGL's obligations under the SPA and to the extent it failed to do so to provide a simple route to enforcement, which Albion has chosen not to pursue.

(v)       The issues between the parties will have to be resolved at some stage and it is unreasonable to ignore them, in the hope that they will simply go away.

(vi)      At its highest, the representation brought by Albion is unnecessary satellite litigation.

70.      Against this background, he said it was not reasonably necessary for the Court to exercise any of its powers and the parties should be encouraged to resolve the actual dispute between them in accordance with the provisions they have agreed under the Escrow Agreement i.e. arbitration.

71.      Further and/or alternatively to the extent that the Court regards it as necessary to exercise its powers, it would not be reasonable to do so in circumstances where there is an ongoing dispute and monies have been paid into escrow, so that the effect of making any of the orders sought would be to deprive EIGL and Heritage Oil of the shares in circumstances where they have paid over US$33.3 million to Albion's solicitors, are subject to a judgment for a similar amount plus interests and costs and will not, under the terms of the SPA, the SIA or otherwise get any credit for the application of the said security.

Decision

72.      The Court inquired in discussion why EIGL had not agreed to the release of the monies held by Albion's solicitors under the Escrow Agreement to meet the judgment debt or why Albion had not sought to enforce the judgment against those monies.  We were simply told that neither had taken place. Dispute resolution had clearly not been successful and the parties remained in dispute.

73.      It is notable that Heritage Oil is not a party to the Escrow Agreement, when it is Heritage Oil that has the Disputed Claims against Mr Buckingham.  The fundamental point made by Foxton J at paragraph 95 of his judgment (set out above) is that such claims cannot provide a defence to Albion's claims against EIGL under the SPA for the balance of the purchase consideration.  Hence the granting to Albion of summary judgment in the amount of the balance due.

74.      Without Heritage Oil being a party to the Escrow Agreement, it is unclear to the Court what issues would now be subject to arbitration under its provisions, but what is clear to the Court is that:

(i)        The payment of the balance into escrow was expressed as being without prejudice to the rights of the parties and on EIGL's part, expressly to the legal rights and position of Albion in respect of any and all claims arising as a result of EIGL's alleged failure to comply with the terms of the SPA or any rights which Albion has under the SPA or otherwise.

(ii)       EIGL has not agreed to the release of the monies held in escrow to meet the judgment debt.

75.      In the circumstances, Albion has not received the full amount of the final instalment due under the SPA.  It follows that there is an event of default under the SIA which is continuing and that accordingly Albion is entitled to enforce its security.

76.      The requirement for Albion to act in a commercially reasonable manner arises under Article 46 of the Security Interests Law in the exercise of its duty to obtain a fair valuation or fair price for the collateral.  That requirement does not apply to its decision to enforce the security it holds.  The fact of the matter is that the final balance has not been paid in full and Albion is now entitled to enforce its security.  It is not for the Court to decide whether it is commercially reasonable for it to decide to do so.  When Albion does enforce its security, it will, of course, have to comply with the requirements of Part 7 of the Security Interests Law and in particular, to act in a commercially reasonable manner in exercising its duty to obtain a fair valuation or fair price for the collateral.

77.      The Court does have to decide whether it is reasonably necessary to facilitate realisation of the collateral under Article 52 of the Security Interests Law, in order to make it possible or practicable for Albion to exercise its rights under the Security Interests Law.  In the view of the Court, it is reasonably necessary for the following reasons:

(i)        Pursuant to Article 43 of the Security Interests Law, an event of default has occurred and is continuing and written notice of that default has been served on EIGL on the 8^th and 9^th March 2020, specifying the event of default, stating that Albion may exercise its powers of enforcement and formally requesting the return of the share certificate and stock transfer form.

(ii)       Albion has lost possession of the share certificate and stock transfer form in what is acknowledged to be a mistake on the part of its English solicitors, which EIGL and/or Heritage Oil have declined and still decline to return.

(iii)      Heritage Oil has declined to act on the stock transfer form executed pursuant to the power of attorney granted under Clause 8 of the SIA notwithstanding the amendment to the Articles of Heritage Oil.

78.      With reference to the issue of policy, and noting that as per Lord Sumption in Virgin Atlantic Airways v Zodiac, the policy underlying the principles he described under the portmanteau term of res judicata may not apply to the doctrine of merger, we make the following observations:

(i)        EIGL is not being pursued twice for the same thing.  In England, Albion has obtained summary judgment for the balance due under the SPA, which judgment remains unsatisfied.  In Jersey, Albion seeks the assistance of the Court in the enforcement of its security.

(ii)       Advocate Cadin suggested that if we gave assistance to Albion under Article 52, EIGL would potentially have to pay the balance outstanding under the SPA three times, firstly, through the amount held in escrow, secondly under the summary judgment of Foxton J and thirdly through the enforcement of Albion's security here.  We do not accept that potential.  There is one sum outstanding and Albion would have to give credit in the usual way for any recovery it makes through whatever means.

(iii)      If an issue of policy arises, it is that judgment debts should be discharged.

79.      Albion seeks an order under Article 52(a) of the Security Interests Law for the delivery of the certificate and stock transfer form to it and an order under Article 52(b) for the transfer of the 19,249,664 shares subject to that certificate into the name of Albion for the purpose of ensuring that it has control, for the purposes of Article 3 of the Security Interests Law, and perfection, for the purposes of Article 22 of the Security Interests Law.

80.      Whilst the security interest under the SIA was to be perfected by possession and control of the certificate, we refer again to Clause 4(4) of the SIA which provides as follows:

"(4) without prejudice to any other provision of this Agreement and after any request is made by the Secured Party, to do all things necessary ... to ensure that the secured Party has control for the purposes of Article 3 of the Security Law in respect of any investment securities that constitute Collateral (including, without limitation, following the occurrence of any Event of Default, by the Secured Party becoming the registered holder of such investment securities).(our emphasis)

81.      It is, therefore, incorrect for EIGL to maintain that it was never envisaged that Albion would have shares transferred into its name; it was expressly provided that this could occur after an Event of Default.  An Event of Default has occurred and Albion is now entitled to enforce its security, but is unable to do so because EIGL and/or Heritage Oil refuse to return the share certificate and stock transfer form. We agree that in these circumstances Albion should now become the registered holder of the shares.

82.       The Court can achieve this by the making of the two orders sought in prayer (5) of the representation, which will involve the Court policing both.  As Heritage Oil is a party to these proceedings, and as we are satisfied that the third certificate and duly signed stock transfer form exist in the hands of EIGL and/or Heritage Oil, we think it is preferable simply to order Heritage Oil to register the transfer 19,249,664 shares from EIGL to Albion.

83.      Those shares will be held by Albion as security under the terms of the SIA and in exercising its right of enforcement, Albion will be subject to, and EIGL will have the protection of, the provisions of Part 7 of the Security Interests Law.

84.      When this judgment is handed down, we therefore propose to make the following orders:

(i)        EIGL shall transfer 19,249,664 shares constituting the final tranche into the name of Albion.

(ii)       Heritage Oil shall register the transfer of the 19,249,664 shares constituting the final tranche from EIGL to Albion in its register of members and shall issue a certificate of title to reflect such entry in the register of members and deliver the same to Albion.

85.      Subject to any further input from counsel, we are not minded to grant relief in the form of prayer (6) as Albion does not need the permission of the Court to enforce its security.  Albion also sought an order under prayer (7) that EIGL and/or Heritage Oil shall take any reasonable action or steps to enable Albion to carry out its powers of enforcement, but we think this proposed order is too widely framed to form the subject matter of a mandatory injunction.

Authorities

Security Interests (Jersey) Law 1991.

Albion v Energy [2020] EWHC 301 (Comm)

Financial Services (Jersey) Law 1998. 

Companies (Jersey) Law 1991. 

Judgments (Reciprocal Enforcement) (Jersey) Law 1960. 

Dicey, Morris & Collins 15th edition. 

Doraville Properties Corporation v AG [2016] (1) JLR Note 9. 

Clark v In Focus Asset Management [2014] 1 WLR 2502. 

Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd (formerly Contour Aerospace Ltd [2013] UKSC 46. 

Dubai Islamic Bank v Ridley [2016] JRC 102. 

Dubai Islamic Bank v Ridley [2017] JRC 204. 

Brakspear v Nedgroup Trust (Jersey) Limited [2018] JRC 121. 

Zavarco PLC v Tan Sri Sayed Mohd Yusof Bin Tun Syed [2020] EWHC 629 (Ch). 

Zavarco PLC v Tan Sri Sayed Mohd Yusof Bin Tun Syed (2019) EWHC 1837 (Ch). 

Halsbury's Laws of England¸ Volume 22 (Contract). 

Drake v Mitchell [1803] 3 East 251