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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> National Bank of Abu Dhabi PJSC v BP Oil International Ltd [2016] EWHC 2892 (Comm) (18 November 2016) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2016/2892.html Cite as: [2016] EWHC 2892 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
NATIONAL BANK OF ABU DHABI PJSC |
Claimant |
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- and - |
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BP OIL INTERNATIONAL LIMITED |
Defendant |
____________________
Mr Bankim Thanki QC and Mr Christopher Lewis (instructed by Addleshaw Goddard LLP) for the Defendant
Hearing date: 7th November 2016
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Crown Copyright ©
Mrs Justice Carr:
Introduction
"…not prohibited by any security, loan, or other agreement... from disposing of the Receivable evidenced by the Invoice as contemplated herein and such sale does not conflict with any agreement binding on [BP]."
Background
"Section 34 – Limitation on Assignment
Neither of the parties to the Agreement shall without the previous consent in writing of the other party (which shall not be unreasonably withheld or delayed) assign the Agreement or any rights or obligations hereunder. In the event of an assignment in accordance with the terms of this Section, the assignor shall nevertheless remain responsible for the proper performance of the Agreement. Any assignment not made in accordance with the terms of this Section shall be void."
"(a) to promptly pay to [NBAD] a proportion of any amounts subsequently recovered from [SAMIR] under the Contract which proportion shall be equal to the proportion of the Payment as against the Shortfall;
(b) to promptly pay to [NBAD], a proportion of any interest for late payment recovered from [SAMIR] which proportion shall be equal to the proportion of the Payment as against the Shortfall;
(c) where possible under any applicable laws and the Contract, to promptly assign (at its own expense) to [NBAD], following a request from [NBAD], all [BP]'s rights under the Contract to the extent of any payment made by [NBAD] to [BP] under Clause 5 and not subsequently paid under Clause 6.1(a) or Clause 6.1(b) and to do all things reasonably necessary to achieve such assignment; and
(d) if assignment under Clause 6.1(c) is not possible or effective for any reason, that [NBAD] shall be subrogated to [BP]'s rights in respect of the Delivery under the Contract and [BP]'s rights in respect to the payment undertaking up to the amount paid by [NBAD] and to take legal proceedings against [SAMIR] under the Contract/payment undertaking to the extent of any such payment made by [NBAD] under Clause 3 [sic] and not subsequently paid under Clause 6.1(a) or Clause 6.1(b), upon [NBAD] agreeing to meet its proportionate share of [BP]'s reasonable instructions received by [BP] from [NBAD]."
"In consideration of you [NBAD] agreeing to pay the amount demanded to us [BP] in accordance with the Agreement, and to the extent legally possible, including for the avoidance of doubt any contractual restriction on assignment in the Contract, we hereby assign to you up to an amount equal to [NBAD's] Share of our rights and interest in relation to the Delivery under:
(i) the Contract;
(ii) our invoice to [SAMIR] in respect of the Delivery under the Contract;
(iii) the bill of lading or the inspector's report or the vessel nomination or a letter of indemnity to [SAMIR] under [the] Contract; and
(iv) if a Verdict has been issued and a copy is available, the Verdict in our favour."
The Purchase Letter
"We, [BP], hereby request [NBAD] (the 'Bank') to purchase from [BP] on a non-recourse basis, a proportion of a receivable evidenced by [BP]'s commercial invoice (the 'Invoice') addressed to [SAMIR] (the 'Buyer'), in a form satisfactory to the Bank. The Invoice relates to a sale and delivery by [BP] of Goods as defined below (the 'Delivery') under a contract dated 16 January 2014 and entered into between the Buyer and [BP] (the 'contract'), and represents a legally valid and binding obligation on the Buyer to pay USD72,507,215.39 (the 'Invoice Value') to [BP] on the Repayment Date as defined below (the 'Receivable').
Subject to the terms of this Purchase Letter (including, without limitation, the conditions set out in Clause 1 below), the Bank hereby agrees to purchase the Receivable up to an amount of and thereafter to pay to [BP] the Discounted Value as calculated in accordance with Clause 1 below. The Discount Percent of the Invoice shall not exceed 95% of the Invoice Value. The obligations of the Bank under [the Guarantee] shall be terminated and reduced to zero on the Discount Date following the Bank's payment of the Discounted Value (as defined below)."
US$ | |
Invoice value from [BP] to SAMIR: | 72,507,215.39 |
Discount Percent (95%) purchased by NBAD: | 68,881,854.62 |
Discounted Value paid by NBAD to [BP]: | 67,662,173.54 |
Margin between the Discount Percent and the Discounted Value: | 1,219,681.08 |
a) Clause 1 provided:
"[NBAD] hereby agrees that provided that [NBAD] has received (in satisfactory form to it) a copy of this Purchase Letter duly signed by [BP]… a certified true copy of the Invoice and a certified true copy of the Contract, in each case no later than one business day prior to the Discount Date….it will purchase the Discount Percent of the Receivable…, on a without recourse basis, by paying to [BP] the Discounted Value …on the Discount Date…."
It then set out the detail of the calculation of the Discounted Value. As indicated above, this was 95% of the Invoice Value (US$72,507,215.39), discounted in turn by NBAD's cost of funds (the Rate) plus the Margin of 4.6% p.a., applied over the period (N days) between the date on which NBAD made payment (the Discount Date of 4 September 2014) and the Repayment Date plus 2 Business Days (assumed in the Purchase Letter to be 15th January 2015). Thus the amount paid by NBAD to BP was US$67,662,173.54, NBAD's premium of US$1,219,681.08 being deducted from 95% of the Invoice Value (which came to US$68,881,854.62);
b) Clause 3 needs to be set out in full and provided:
"[BP] shall, within two business days, pay to [NBAD] all payments received from the Buyer in connection with the Invoice up to the maximum amount of the Discount Percent of the Invoice Value. In case of partial payment from the Buyer under the Invoice, [BP] shall pass onto [NBAD] within two Business Days of receipt the Discount Percent of such partial payment. In the event that payment from the Buyer is not received on the Repayment Date, [BP] shall, for a maximum of 5 business days, reimburse to [NBAD] on demand [NBAD]'s cost of funds on the unpaid amount for the period between the Repayment Date and the date of receipt of payment at [NBAD]'s counter of the full amount of the Discount Percent of the Invoice Value. [BP] furthermore undertakes to make all reasonable efforts to support the settlement of [NBAD]'s debt by the Buyer and to pass to [NBAD] the Discount Percent of any amounts recovered by [BP], net of reasonably incurred costs, and in particular agrees:
(i) to pass onto [NBAD] within two Business Days of receipt the Discount Percent of any amounts subsequently recovered by it from the Buyer, which sums shall be received and held by [BP] as trustee on behalf of [NBAD];
(ii) to pass onto [NBAD] within two Business Days of receipt the Discount Percent of any interest on any late payment recovered by it from the Buyer, which sums shall be received and held by [BP] as trustee on behalf of [NBAD];
(iii) where an assignment under sub-clause 3(iv) below is not able to take place, that [NBAD] will be subrogated as at the date of receipt of payment from [NBAD], if legally possible, to [BP]'s rights, title, interest and claims against the Buyer under the Invoice to the extent of any payment made by [NBAD] and not paid under (i) and (ii) above;
(iv) that [BP] will assign as at the date of receipt of payment from [NBAD] under paragraph 2 above, if legally possible under applicable laws and the Contract, to [NBAD], its rights, title, interest and claims against the Buyer in respect of the Discount Percent of the Receivable and the rights and benefits of the relevant transaction arising from the Contract to the extent of any payment made by [NBAD] and not paid under (i) and (ii) above, or, where, if not legally possible or effective for any reason, to take legal proceedings against the Buyer under the Contract to the extent of any payment made by [NBAD] and not paid under (i) and (ii) above. The Discount Percent of any reasonable costs, or out of pocket expenses incurred by [BP] in these proceedings shall at [BP]'s request be promptly reimbursed by [NBAD] and the Discount Percent of any amounts recovered by [BP] shall be passed promptly to [NBAD] (except in so far as the same are damages accruing to [BP]) in addition to the amount due plus interest and in addition to any recovery of costs incurred in connection with the proceedings;
(v) that by selling the Receivable hereunder it has assigned the Discount Percent of the Receivable in equity irrevocably to [NBAD] subject to the terms hereof (such assignment shall be deemed to take effect immediately following payment by [NBAD] of the Discounted Value), and that [NBAD] has beneficial ownership of any such amounts paid by the Buyer and of the debts in respect of which such amounts are paid, and accordingly [NBAD] shall have a right of recourse to [BP] to the extent of the Discount Percent of any amount received (whether in respect of principal, interest, fees or otherwise) by [BP] from the Buyer relating to the Receivable sold and purchased hereunder and not paid by it to [NBAD];
(vi) to hold on trust for [NBAD] the proceeds of the Discount Percent of the Receivable; and
(vii) if any assignment in connection with this Purchase Letter is invalid or unenforceable for any reason, [NBAD] shall instead be entitled to a funded sub-participation in the rights to receive payment in respect of the Discount Percent of the Invoice on terms equivalent to those of this Purchase Letter."
c) Clause 4 provided:
"If any default or failure in the payment of all or part of the Discount Percent of the Invoice Value occurs as a result of any justified deduction or withholding by the Buyer from such discounted Receivable by reason of a valid claim against [BP], [BP] shall promptly pay to [NBAD] an amount equal to the Discount Percentage of the amount deducted [or] against an assignment by [NBAD] to [BP] of all the right, title and interest of [NBAD] in a corresponding amount of the Discount Percent of the Invoice Value."
There is a dispute between the parties as to whether the word "or" which I have placed in square brackets is unnecessary surplusage. Nothing significant however appears to turn on this: the point is that as against any set-off asserted by SAMIR, clause 4 insulated NBAD as a matter of contract;
d) Clause 5 set out a series of warranties and representations by BP. By clause 5(b) BP represented and warranted to NBAD that at the date of the Purchase Letter (3rd September 2014) and at the Discount Date (4th September 2014):
"b) [BP] is not prohibited by any security, loan or other agreement, to which it is a party, from disposing of the Receivable evidenced by the Invoice as contemplated herein and such sale does not conflict with any agreement binding on [BP];…";
e) Clause 7 provided:
"It is hereby agreed that [NBAD] shall have no recourse to [BP] in connection with the purchase of the Discount Percent of the Receivable save in the following situations, in which [BP] will reimburse [NBAD] in an amount up to the unpaid amount of the Discount Percent of the Invoice Value together with interests thereon for the period from the Repayment Date to the date of repurchase by [BP] at a rate (based on a year of 360 days for the actual number of days elapsed) equal to [NBAD]'s cost of funds plus a margin of 4.6%:
(a) [BP] breaches the representations made in Clause 5 of this Purchase Letter or any material representation or warranty under the Contract;
(b) [BP] breaches its undertakings under Clause 6 of this Purchase Letter;
(c) [BP] fails to perform any of its material obligations under the Contract and such breach by [BP] is not legally justified and the Buyer's failure to pay is legally justified, or
In any event where non-payment of the Receivable occurs and [NBAD] has no recourse to [BP] under the terms of this Purchase Letter, [BP] will use all reasonable endeavours to help [NBAD] to recover its claim against the Buyer."
f) Clause 17 provided for the Purchase Letter to be governed by English Law and for the English Courts to have exclusive jurisdiction.
The Law
Contractual interpretation
"[15]When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101, para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn [1971] I WLR 1381, 1384-1386; Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE Hansen-Tangen) [1976] I WLR 989, 995-997, per Lord Wilberforce; Bank of Credit and Commerce International SA v Ali [2002] I AC 251, para 8, per Lord Bingham of Cornhill; and the survey of more recent authorities in Rainy Sky [2011] I WLR 2900, paras 21-30, per Lord Clarke of Stone-cum-Ebony JSC.
[16] For present purposes, I think it is important to emphasise seven factors.
[17] First, the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook [2009] AC 1101 , paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision.
[18] Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning. That is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve.
[19] The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made. Judicial observations such as those of Lord Reid in Wickman Machine Tools Sales Ltd v L Schuler AG [1974] AC 235, 251 and Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB (The Antaios) [1985] AC 191 , 201, quoted by Lord Carnwath JSC at para 110, have to be read and applied bearing that important point in mind.
[20] Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party…"
Assignment
a) A contractual term limiting or prohibiting assignment of a debt is valid and not contrary to public policy (see Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85);
b) An assignment of contractual rights in breach of a prohibition against such assignment is ineffective to vest the contractual rights in the assignee (see Linden Gardens, per Lord Browne-Wilkinson at 109C-D);
c) Where assignment is prohibited without the prior consent of the debtor which is not to be unreasonably withheld, an assignment made before the debtor's consent is sought is ineffective as regards the debtor and it is irrelevant whether or not the debtor could have reasonably withheld its consent if asked in time (see Hendry v Chartsearch Ltd [1998] CLC 1382 per Henry and Millett LJJ at 1393-4);
d) Part of a debt cannot be the subject of a legal assignment but can be the subject of a valid equitable assignment (see Chitty at [19-015] and Williams v Atlantic Assurance Company Ltd [1933] 1 KB 81 at 100). Thus it is common ground that there could not have been a legal assignment of the Discount Percent of the Receivable;
e) An equitable assignee may (i) give notice to the debtor and such notice gives priority over subsequent assignees (whether legal or equitable) and over set-offs arising from other subsequent dealings between the debtor and the assignor; (ii) bring proceedings against the debtor in his own name. In the case of subject matter such as an existing debt, the only significant difference between the position of an equitable assignee and a legal assignee is that the equitable assignee may be required to join the assignor to the action (see Chitty, 32nd Ed, at [19-039] - [19-040], [19-069], [19-071]).
"…a prohibition on assignment normally only invalidates the assignment as against the other party to the contract so as to prevent a transfer of the chose in action; in the absence of the clearest words it cannot operate to invalidate the contract as between the assignor and assignee and even then it may be ineffective on the grounds of public policy."
The Issue: in light of section 34, was the representation made by BP to NBAD at clause 5(b) of the Purchase Letter false as at 3rd and 4th September 2014?
The parties' respective positions
Discussion
"(v) that by selling the Receivable hereunder it has assigned the Discount Percent of the Receivable in equity irrevocably to [NBAD] subject to the terms hereof (such assignment shall be deemed to take effect immediately following payment by the Bank of the Discounted Value), and that [NBAD] has beneficial ownership of any such amounts paid by the Buyer and of the debts in respect of which such amounts are paid, and accordingly [NBAD] shall have a right of recourse to [BP] to the extent of the Discount Percent of any amount received (whether in respect of principal, interest, fees or otherwise) by [BP] from the Buyer relating to the Receivable sold and purchased hereunder and not paid by it to [NBAD];"
and clause 5(b):
"b) [BP] is not prohibited by any security, loan or other agreement, to which it is a party, from disposing of the Receivable evidenced by the Invoice as contemplated herein and such sale does not conflict with any agreement binding on [BP];…"
Quantum
Conclusion