The Argo Fund Ltd. v Essar Steel Ltd.

The court construed clause 27 of the facility agreement as permitting transfer only to a bank or to an institution of a similar kind. Applying ejusdem generis and the agreement's commercial context, the judge rejected a wide construction that would allow any entity trading in financial instruments to qualify as a transferee.

The claimant failed on its application for summary judgment because it did not establish that it was a qualifying transferee under clause 27; documentary and prospectus material pointed to Argo being a listed offshore mutual fund that principally traded in emerging market credit and distressed situations rather than operating as a bank-like lending institution. The court therefore declined summary judgment under CPR Part 24.

The defendant had acknowledged service but did not challenge jurisdiction within the prescribed time; the court refused to extend time to challenge jurisdiction under CPR Part 3.1(2)(a) and Part 3.9. An application to stay the English proceedings pending related proceedings in Singapore was also refused. The judge gave permission for the legitimacy of the transfers to be determined as a preliminary issue at trial rather than granting immediate summary relief for either party.

The Argo Fund Ltd. sued to recover the principal and interest of participations acquired from several banks under a US$40m syndicated loan facility to Essar Steel Ltd. The banks had relied on clause 27 of the facility agreement to transfer participations to Argo (and via intermediaries). Essar resisted, contending that clause 27 permitted transfer only to a "bank or other financial institution" of a similar kind and that Argo did not fall within that category.

Nature of the application:

• The claimant applied for summary judgment under CPR Part 24 for the sum due under the participations.
• The defendant applied to set aside service or obtain a stay and sought to challenge jurisdiction, contending the purported transferees were not qualifying transferees under clause 27 and therefore had not submitted to the English court's jurisdiction.

Issues framed:

• How should the phrase "bank or other financial institution" in clause 27 be construed?
• Was Argo a qualifying transferee under clause 27?
• Should Essar be allowed an extension of time to challenge jurisdiction despite having acknowledged service without timely challenge?
• Should the English proceedings be stayed pending Singapore proceedings?

Reasoning and findings:

• The court held that, when read in the agreement's context (definition of "Banks", use of lending offices, the Transfer Certificate form in Schedule 2 and the commercial need to preserve performability), "other financial institution" must be read as institutions akin to banks rather than as an open-ended reference to any entity trading in financial instruments. The ejusdem generis rule also supported this restricted construction.
• Evidence from Argo's prospectus and website indicated it was a Cayman-registered, Irish-listed offshore mutual fund focused on trading and investing in emerging markets credit and distressed situations and that it was an "unrecognised collective investment scheme" under the Financial Services and Markets Act 2000. That material was inconsistent with Argo being a bank-like lender. Although Argo later filed a statement suggesting it sometimes made loans or participated in syndicated loans, the court found the evidence insufficiently persuasive on the available material.
• Accordingly the claimant did not satisfy the test for summary judgment; the defendant had a good arguable case that Argo was not a qualifying transferee and so summary judgment was refused.
• Although Essar initially raised jurisdictional objections in correspondence, it acknowledged service and did not challenge jurisdiction within 28 days. The court refused to extend time to challenge jurisdiction (applying CPR Part 11(5) and the criteria in CPR Part 3) because the application was not prompt, the explanation was unsatisfactory and allowing the extension would cause additional delay and cost.
• The court also refused to stay the English proceedings pending Singapore proceedings: the Singapore action was tactical and later in time, Argo was not a party to it, and the legitimacy question could be determined as a preliminary issue in England.

Disposition: summary judgment refused; application to set aside service or stay refused; extension of time to challenge jurisdiction refused; the legitimacy of Argo as transferee left to be determined as a preliminary issue at trial.

This was a first instance decision. The court refused the claimant's application for summary judgment under CPR Part 24 because the claimant failed to establish that it was a qualifying transferee under clause 27. The court construed "bank or other financial institution" as limited to banks or institutions of like kind and found that the available evidence supported the defendant's contention that Argo did not fall within that category. The defendant's application to set aside service or obtain a stay was dismissed; an extension of time to challenge jurisdiction was refused and a stay pending Singapore proceedings was refused. The legitimacy of the transfers is to be determined as a preliminary issue in the proceedings.