African Export-Import Bank & Anor v Shebah Exploration & Production Company & Ors

[2016] EWHC 311 (Comm)

Cited by 1 later case1 positiveCites 10 authorities

Summary

For section 3 of the Unfair Contract Terms Act 1977 to apply, the relevant terms must be the contracting party’s written standard terms of business. Use of a neutral industry model form as the starting point for a complex transaction does not, without cogent evidence of habitual use and refusal to negotiate, establish that status. Contractual provisions excluding set-off therefore operated with full force. A contractual acceleration clause permitting loans to be declared immediately due and payable did not authorise a declaration taking effect on a future date. A valid later acceleration could nevertheless be relied on where the defendants had consented to amendments pleading the resulting causes of action.

Factual background

The claimants, syndicated lenders, sought summary judgment for more than US$144 million outstanding under a loan facility, together with management fees and interest, against the borrower, guarantor and personal guarantor. The defendants alleged counterclaims, sought to rely on set-off, asserted an agreement not to commence proceedings during refinancing negotiations, and challenged the effectiveness of the original acceleration notice.

The central issues were whether the Facility Agreement was made on the claimants’ written standard terms of business for the purposes of section 3 of the Unfair Contract Terms Act 1977, whether the alleged refinancing agreement was binding, and whether the acceleration and subsequent amendments enabled judgment on the sums claimed.

Held

  1. Summary judgment granted. The claimants were entitled to judgment against all three defendants for the outstanding principal, management fees and interest calculated on the basis of the valid later acceleration, subject to agreed credits and exclusions.
  2. The defendants had no realistic prospect of establishing that the Facility Agreement was on the claimants’ written standard terms of business. The LMA form was a neutral industry model used as a starting point, there was no evidence that the claimants habitually used it as their own standard form, and the transaction involved substantial negotiation and commercially significant amendments. The contractual exclusions of set-off therefore applied and the counterclaims could not provide an arguable defence.
  3. The discussions concerning a proposed syndicated refinancing were plainly subject to contract and too vague to constitute a binding agreement not to commence proceedings. Zenith had not accepted the alleged amendments, and the parties’ subsequent conduct was inconsistent with any binding agreement.
  4. Clause 24.17 required a declaration that the loans were immediately due and payable when made. It did not permit a declaration conditional on future events and taking effect at a future date. The purported acceleration on 16 October 2013 was therefore ineffective, leaving only accrued instalments properly due under the original claim.
  5. The later acceleration notice validly declared the loans immediately due and payable. Since the defendants had consented to amendments pleading that notice and the subsequent demands, they could not object to judgment being determined on the currently pleaded case.

The court’s approach to earlier authorities

Available to signed-in members.

Appeal route

  1. This judgment [2016] EWHC 311 (Comm) High Court (Commercial Court)
  2. Appealed to[2017] EWCA Civ 845Outcomeappeal dismissed

Key cases cited

10 authorities cited.

  • FG Wilson (Engineering) Ltd v John Holt & Company (Liverpool) Ltd [2012] EWHC 2477 (Comm)
  • Yuanda (UK) Co Ltd v WW Gear Construction Ltd [2010] EWHC 720 (TCC)
  • Hadley Design Associates v City of Westminster [2003] EWHC 1717 (TCC)
  • Newcastle Buildings Society v Mills [2009] 2 BCLC 137
  • Coca-Cola Financial Corp v Finsat International Ltd [1998] QB 43 CA
  • British Fermentation Products Ltd v Compare Reavell Ltd [1998] TCC 577
  • The Salvage Association v. CAP Financial Services Ltd. [1995] FSR 654
  • Hongkong and Shanghai Banking Corpn v Kloeckner & Co A G [1990] 2 QB 514
  • CONTINENTAL ILLINOIS NATIONAL BANK & TRUST COMPANY OF CHICAGO v. JOHN PAUL PAPANICOLAOU SAME v. NICHOLAS FREDERICK PAPANICOLAOU (THE "FEDORA" "TATIANA" AND "ERETREA II") [1986] 2 Lloyd's Rep 441
  • St Albans City Council v ICL Ltd

Sign in to see how the court treated each authority. A free account is enough.

Cases citing this case

1 later case · 1 positive

Most senior citing decisions:

Sign in for the full treatment table. A free account is enough.