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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> African Export-Import Bank & Ors v Shebah Exploration & Production Company Ltd & Ors [2017] EWCA Civ 845 (28 June 2017) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2017/845.html Cite as: [2017] BLR 469, [2017] 2 Lloyd's Rep 111, [2018] 1 WLR 487, [2017] 2 CLC 73, [2018] 2 All ER 144, [2018] 1 All ER (Comm) 535, [2018] WLR 487, [2017] EWCA Civ 845, [2017] WLR(D) 431, 173 Con LR 53 |
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ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE PHILLIPS
Strand, London, WC2A 2LL |
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B e f o r e :
and
THE RIGHT HONOURABLE LORD JUSTICE HENDERSON
____________________
1) AFRICAN EXPORT-IMPORT BANK 2) DIAMOND BANK PLC 3) SKYE BANK PLC |
Respondents/Claimants |
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- and - |
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1) SHEBAH EXPLORATION & PRODUCTION COMPANY LIMITED 2) ALLENNE LIMITED 3) DR AMBROSIE BRYANT CHUKWUELOKA ORJIAKO |
Appellants/Defendants |
____________________
Mr Tom Smith QC & Mr Ryan Perkins (instructed by Baker & McKenzie LLP) for the Respondents/Claimants
Hearing dates: 7th June 2017
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Crown Copyright ©
See Order at bottom of the judgment
Lord Justice Longmore:
Introduction
"(1) This section applies between contracting parties where one of them deals as a consumer or on the other's written standard terms of business.
(2) As against that party, the other cannot by reference to any contract term –
(a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; or
(b) claim to be entitled (i) to render a contractual performance substantially different from that which was reasonably expected of him, or (ii) in respect of the whole or any part of his contractual obligation, to render no performance at all,
except in so far as (in any of the cases mentioned above in this subsection) the contract term satisfies the requirement of reasonableness."
Background Facts
"All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim."
The requirements of the Act
i) the term is written;
ii) the term is a term of business;
iii) the term is part of the other party's standard terms of business; and
iv) that the other is dealing on those written standard terms of business.
"I shall not attempt to lay down any general principle as to when or whether the Unfair Contract Terms Act applies in the generality of cases where use is made of model forms drafted by an outside body. However, if the Act ever does apply to such model forms, it does seem to me that one essential for the application of the Act to such forms would be proof that the model form is invariably or at least usually used by the party in question. It must be shown that either by practice or by express statement a contracting party has adopted a model form as his standard terms of business. For example, an architect might say, "My standard terms of business are on the terms of the RIBA Form of Engagement". Without such proof, it could not be said that the form is, in the words of the Act, "the other's" standard terms of business."
I would respectfully approve that passage.
"It is, in my opinion, wide enough to include any contract, whether wholly written or partly oral, which includes a set of fixed terms or conditions which the proponer applies, without material variation, to contracts of the kind in question."
"The concept underlying the provisions of Unfair Contract Terms Act 1977 s.3, in my judgment, is that there should exist a stock of written, no doubt usually, at any rate, printed, contract conditions which was simply drawn from as a matter of routine and intended to be adopted or imposed without consideration or negotiation specific to the individual case in which they were to be used. That seems to me to be the force of the words "written" and "standard" in the expression "written standard terms of business". In other words, it is not enough to bring a case within Unfair Contract Terms Act 1977 s.3 that a party has established terms of business which it prefers to adopt, as, for example, a form of draft contract maintained on a computer, or established requirements as to what contracts into which it entered should contain, as, for example, provision for arbitration in the event of disputes. Something more is needed, and on principle that something more, in my judgment, is that the relevant terms should exist in written form prior to the possibility of the making of the relevant agreement arising, thus being "written", and they should be intended to be adopted more or less automatically in all transactions of a particular type without any significant opportunity for negotiation, thus being "standard"."
"The conditions have to be standard in that they are terms which the company in question uses for all, or nearly all, of its contracts of a particular type without alteration (apart from blanks which have to be completed showing the price, name of the other contracting party and so on). One encounters such terms on a regular basis-whether when buying goods over the internet or by mail order or when buying a ticket for travel by air or rail."
The judgment
"i) The initial draft was sent by Afrexim to Shebah on 1 April 2011.
ii) On 13 May 2011 Winston & Strawn sent a 'redline' re-draft (heavily marked with their proposed revisions) to Afrexim, copied to their client, Shebah. Winston & Strawn stated that although they had had input from Shebah, the draft remained subject to further comments or amendments from Shebah.
iii) On 16 May 2011 Winston & Strawn referred in an email to the fact that they were discussing the draft with Clifford Chance the following day.
iv) On 24 May 2011 Afrexim sent a revised draft to Shebah and Winston & Strawn, the covering email referring to the fact that one change which was not incorporated in the draft was that a floating rate of interest would be retained, but that there would be a side-letter setting a ceiling at 10% as per the parties' last call.
v) On 25 May 2011 Winston & Strawn referred in an email to the fact that the account structure for the facility (which had been added by them in the 13 May draft) had been "agreed commercially". Winston & Strawn added that a further revised draft of the Facility Agreement would be circulated once they had Shebah's further instructions.
vi) Although the details are not in evidence, there must have been further discussions leading to the final version of the original Facility Agreement, executed on 1 July 2011."
"In his skeleton argument for the previous adjourned hearing of the application, the defendants' counsel asserted that the Facility Agreement constituted the claimants' "written standard terms of business". Based on inquiries I have made of the claimants I can confirm that this assertion is incorrect. The Facility Agreement entered into between the claimants and the first defendant is not a standard form loan agreement and was not on the standard terms of business of any of the claimants. None of the claimants have written standard terms of business for this type of syndicated lending transaction. Since the claimants entered into the Facility Agreement as a syndicate, being a mixture of Nigerian and international banks, they do not have a set of standard terms common to all three banks. The documentation for such transactions is negotiated and agreed on a transaction by transaction basis."
"… I recognise that it might, in theory, be possible to demonstrate that one party to such negotiations has used the industry standard form as the basis for a set of terms it treats as its own and that it will not in reality countenance substantive changes, but that would be an uncommercial and highly unlikely approach. Parties such as the defendants in this case cannot expect to avoid summary enforcement of the terms of the contract they have entered by asserting, on the basis of little more than speculation, that their counterparty was engaged in such conduct."
The submissions
i) adopted the wrong starting point in saying that the question of dealing on standard business terms was straightforward. It was a complex area of law which non-English parties would find difficult to understand and would need to have explained to them;
ii) gave too much credence to Ms Patel's evidence which was of a conclusory nature without providing the detailed factual information from which a judge could decide whether her conclusions were right or wrong; the claimants had held their cards too close to their chest in a case where, at any rate, some disclosure of their previous lending arrangements was required; and
iii) should have held that, if an allegation is made by one party that a contract was in fact on the other's standard business terms and if that other gives no evidence of other similar contracts made in the past, disclosure will be required and the case is unsuitable for summary judgment.
He further submitted that the amendments or variations of the LMA form achieved by the defendants were not of real significance.
Discussion
The Zenith issue
"76. During the meeting Dr Oramah and Dr Orjiako discussed the outstanding issues regarding Zenith's 9 May 2014 proposal. The purpose of the discussion was to determine whether Zenith's 9th May proposal provided an acceptable alternative to litigation. During the meeting, Dr Oramah agreed that Zenith's proposal would be acceptable to the claimants if certain amendments were made to it ("the 16 May Agreement"). Dr Oramah then dictated to Dr Orjiako the amendments that were required.
77. During the meeting Dr Oramah spoke to Dr Otti (at Diamond Bank). Dr Otti confirmed that Diamond Bank agreed with Dr Oramah. Dr Oramah was not able to contact Mr Timothy Oguntayo (the managing director of Skye) during the course of the meeting. Subsequently, however, Dr Otti confirmed to Dr Orjiako that he had spoken to Mr Oguntayo who had agreed that the matter would be resolved if Zenith issued the requested revised offer.
78. It was the clear understanding of the parties, and an implied term of the 16 May Agreement (implied to give effect to the intention of the parties) that the claimants would not commence litigation if Zenith was willing to agree the amendments required by the claimants within a reasonable period."
It is then said (para 82) that even though discussions were ongoing with Zenith the claimants wrongly issued the current proceedings.
Conclusion
Lord Justice Henderson:
UPON READING the Appellants' Notice dated 7 April 2016
AND UPON HEARING Richard Gillis QC (Counsel for the Appellants) and Tom Smith QC and Ryan Perkins (Counsel for the Respondents)
IT IS ORDERED THAT:
1. The appeal is dismissed.2. The Appellants shall pay the Respondents' costs of the appeal on the standard basis, to be assessed by detailed assessment if not agreed.