Barbados Trust Company Ltd v Bank of Zambia & Anor

A contractual restriction on assignment may prevent a third party from enforcing the contract even where the contractual benefit has been declared to be held on trust for that third party. The court must construe the restriction in its commercial context. Where it protects the obligor from having its obligations enforced by institutions outside an agreed class, a declaration of trust cannot be used to achieve the same legal effect as a prohibited assignment. A deemed-consent provision operates according to its terms and does not create a separate duty to respond. An assignment made before consent may nevertheless become effective when actual or deemed consent is obtained if the contractual documents, properly construed, provide for that result.

The claimant sought to recover outstanding sums under an oil import facility from the Bank of Zambia. It claimed through a declaration of trust made by Bank of America N.A., which had acquired the asset from Masstock. The facility permitted assignments to banks or financial institutions, subject to the Bank of Zambia’s prior written consent, deemed after 15 days without a response.

The assignment to Bank of America was made before deemed consent arose. The subsequent transfer to GMO, which was not a bank or financial institution, was ineffective. The central issues were whether the first assignment later became effective on deemed consent, whether the Bank of Zambia was estopped from disputing the assignment, and whether the declaration of trust enabled the claimant to enforce the debt directly.

1. Assignment. The contractual documents and the EMTA Terms made the assignment between Masstock and Bank of America binding between those parties before the Bank of Zambia’s consent. They nevertheless contemplated that the assignment required consent to become fully effective against the Bank of Zambia. The deemed consent arising on 17 December 1999 could properly be treated as having been obtained before the assignment became fully effective. The assignment therefore passed the right to claim the asset to Bank of America. [2006] EWHC 222 (Comm) [49]–[52].
2. Estoppel. It was unnecessary to decide estoppel. If it had been necessary, the claim would have failed. A contractual provision deeming consent from silence does not ordinarily impose an additional duty to speak or amount to an unequivocal representation that the obligor has no objection. The evidence also did not establish reliance. [2006] EWHC 222 (Comm) [53].
3. Declaration of trust. Article 12.01(A), construed in light of its commercial purpose, restricted the class of institutions entitled to enforce the Bank of Zambia’s obligations. It therefore prevented a transaction designed to have the same legal effect as a legal assignment to a non-bank or non-financial institution. The claimant could not circumvent that restriction by relying on a declaration of trust. [2006] EWHC 222 (Comm) [54]–[56], [73].
4. A declaration of trust may preserve the benefit of contractual rights for a third party, but it does not necessarily entitle that beneficiary to enforce the contract directly. The authorities concerning non-assignable contractual rights supported that distinction. The claim sought direct recovery from the Bank of Zambia and was inconsistent with Article 12.01(A). [2006] EWHC 222 (Comm) [57]–[72].
5. The claim was dismissed. Bank of America retained the relevant right despite the later trades, but the claimant was not entitled to enforce it through the declaration of trust. [2006] EWCH 222 (Comm) [74]–[75].

First-instance decision. No prior appellate decision is stated in the judgment.