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

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.

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.

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.