National Westminster Bank v Utrecht-America Finance Company

A contractual promise not to bring proceedings concerning non-disclosure may justify a permanent injunction restraining foreign proceedings brought in breach of that promise. Once the contractual breach has been established on the merits, considerations of comity and natural forum differ materially from those governing an interlocutory anti-suit injunction.

Contractual construction rules concerning exclusions of negligence are aids to identifying the parties’ objective intention. They do not override clear language by which sophisticated commercial parties allocate the risk of non-disclosure and agree that no duty to disclose exists. Such an agreement does not, without more, exclude liability for an affirmative misrepresentation.

National Westminster Bank sold its interest in lending facilities to Utrecht-America Finance Company under a take-out agreement governed by English law. The agreement stated that neither bank was obliged to disclose material non-public information relating to the transferred assets, and that neither would bring an action concerning such non-disclosure.

Utrecht subsequently brought proceedings in California alleging fraudulent concealment, negligent non-disclosure and breach of duties of good faith or fair dealing. National Westminster Bank obtained summary judgment in the Commercial Court, declarations that the Californian claims breached the agreement, damages and a permanent injunction restraining their pursuit.

Utrecht appealed. The central issues were whether the English proceedings should have been stayed, whether the Californian claims fell within the contractual prohibition, whether the prohibition was reasonable and whether a permanent anti-suit injunction was appropriate.

1. Appeal dismissed unanimously. Lord Justice Clarke delivered the judgment, with which Lord Justice Laws and Lord Justice Aldous agreed. The judge properly granted summary judgment, declarations and a permanent injunction restraining Utrecht from pursuing the relevant Californian causes of action.

2. The English action should not be stayed. Utrecht had submitted to English jurisdiction and had waived objections founded on forum non conveniens or otherwise. A case-management stay giving practical precedence to the Californian proceedings would conflict with that contractual bargain.

3. The principles governing an interlocutory anti-suit injunction based on vexation, oppression and natural forum required modification after judgment on the merits. Once the court had determined that the foreign proceedings constituted a continuing breach of contract, their continuation was vexatious and oppressive. Damages would not adequately protect the contractual right, and comity supplied no reason to withhold a permanent injunction.

4. Clause 8.2(d) objectively meant that neither sophisticated bank owed the other a duty to disclose the specified information, regardless of its motive for withholding it. Each also promised not to sue concerning such non-disclosure. The construction principles associated with Canada Steamship were valuable aids, but they did not compel a meaning inconsistent with the clear language, commercial context and risk allocation of the agreement.

5. The clause concerned non-disclosure only. It would not prevent a claim based on an affirmative material misrepresentation, whether innocent, negligent or fraudulent. Utrecht's Californian claims, however, all depended on an alleged duty to disclose and therefore breached the agreement.

6. Assuming that the clause had to satisfy section 3 of the Misrepresentation Act 1967 or section 2(2) of the Unfair Contract Terms Act 1977, it satisfied the reasonableness requirement in section 11(1). The parties were sophisticated, equally placed and professionally advised. The reciprocal provisions were tailored to the transaction, promoted commercial certainty and reflected a discounted price and an agreed allocation of risk.

7. Information bearing on the borrowers’ prospects of repayment and hence on the value of the transferred lending rights was information “relating to the Transfer Assets” which might affect the purchase price. The Californian allegations accordingly fell within the contractual prohibition. Utrecht had no realistic prospect of successfully defending the claim at trial.

1. Court of Appeal (Civil Division): The appeal was dismissed. The summary judgment, declarations, damages and permanent injunction granted below were upheld. Permission to appeal to the House of Lords was refused, with a stay pending determination of any petition.

2. Commercial Court: Peter Gross QC, sitting as a deputy High Court judge, refused Utrecht's stay application, gave summary judgment for National Westminster Bank and restrained Utrecht from pursuing the relevant Californian causes of action. No citation is stated in the judgment.