National Bank of Abu Dhabi PJSC v BP Oil International Ltd

A contractual prohibition on assignment may prevent an assignor from making an equitable assignment of an existing debt. Where a contract expressly provides that the debt has been irrevocably assigned in equity, alternative rights to proceeds, subrogation or sub-participation do not remove the character of that assignment.

A warranty that the assignor is not prohibited by any agreement from disposing of the receivable covers an agreement with the debtor unless the wording clearly excludes it. The existence of alternative methods of recovery does not avoid breach where assignment is a primary method of disposal contemplated by the contract.

National Bank of Abu Dhabi PJSC purchased 95 per cent of a receivable owed to BP Oil International Ltd by Société Anonyme Marocaine de L’Industrie de Raffinage. The Purchase Letter included an irrevocable equitable assignment of the receivable and a warranty that BP was not prohibited by any agreement from disposing of it.

The underlying sale agreement incorporated BP’s General Terms and Conditions. Section 34 prohibited assignment without the debtor’s prior written consent and provided that an unauthorised assignment was void. BP had not obtained SAMIR’s consent.

SAMIR later entered insolvency proceedings and made no payment. The central issue was whether section 34 made BP’s warranty false and thereby engaged its liability under the Purchase Letter.

1. Judgment for NBAD. BP was liable for breach of clause 5(b), and NBAD was entitled to US$68,881,854.62 plus interest.
2. Contractual interpretation required the court to identify the meaning which a reasonable person would give the words in their documentary, factual and commercial context. The natural and ordinary language remained central. Commercial common sense could not be used retrospectively to rescue a party from an imprudent bargain or to rewrite clear wording. The principles in Arnold v Britton [2015] AC 1619 were adopted.
3. The court accepted that a prohibition on assignment of a debt could validly apply to both legal and equitable assignments. An assignment made in breach of such a prohibition was ineffective as against the debtor. A restriction requiring prior consent was not avoided by showing that consent could not reasonably have been withheld.
4. Clause 3(v) of the Purchase Letter was an operative provision recording that BP had irrevocably assigned the Discount Percent of the Receivable in equity. It did not merely create an interest in future proceeds or an expectancy. The references to beneficial ownership of sums and debts reflected the consequences of the equitable assignment and did not alter its nature.
5. Clauses 3(iii), 3(iv) and 3(vii) provided alternative or protective arrangements if certain forms of assignment were impossible or ineffective. They did not qualify or override the clear equitable assignment in clause 3(v). Subrogation, trust arrangements and funded sub-participation were not equivalent to an assignment, which gave NBAD important rights including notice, priority and control of proceedings.
6. The expression “any other agreement” in clause 5(b) was broad enough to include the BP/SAMIR Agreement, notwithstanding that it was defined elsewhere as “the Contract”. Section 34 prohibited BP from making the equitable assignment contemplated by the Purchase Letter, and the sale conflicted with that agreement. The warranty was therefore false at the relevant dates.
7. The parties were invited to agree interest by reference to NBAD’s cost of funds plus 2 per cent and to agree consequential matters, including costs.

Not an appellate decision. The claim proceeded under the Shorter Trials Scheme and was determined at first instance.