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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Kaupthing Singer and Friedlander Ltd, Re [2009] EWHC 740 (Ch) (08 April 2009) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2009/740.html Cite as: [2009] EWHC 740 (Ch), [2009] 2 Lloyd s Rep 154, [2009] 2 BCLC 137 |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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In the matter of Kaupthing Singer and Friedlander Ltd (In administration) and In the matter of the Insolvency Act 1986 Newcastle Building Society |
Applicant |
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- and - |
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Mill and others |
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Kaupthing Singer and Friedlander Ltd (Isle of Man) Ltd |
Respondents |
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MR R DICKER QC & MR T SMITH (instructed by Freshfields Bruckhaus Deringer LLP) for the 1st to 4th Respondents
MR L TAMLYN (instructed by Nabarro LLP) for the 5th Respondent
Hearing date: 26 March 2009
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Crown Copyright ©
The Chancellor :
"...so far as possible the sum shall represent [the NBS CD] without prejudice to (a) the rights (if any) that KSF would have had to recover payment from [NBS] under the NBS CD and (b) the rights (if any) that [NBS] would have had to refuse to make any payment to KSF under the NBS CD."
"....must be transferable free from any equity, set-off or counterclaim between the issuer and the original or any intermediate holder of the security." (rule 7 para 3.2)
and that
"Any provisions in....any agreement, instrument, deed or record relating to payments to be made to or by an issuer...must be compatible with the CREST payment mechanisms set out in the agreements entered into by CREST users and participants and in the CREST Manual." (rule 7 para 5)
"..judgment shall be entered for no more than shall appear to be truly and justly due to the plaintiff after one debt being set against the other as aforesaid."
It is common ground that the rights originally conferred by those provisions have been continued in subsequent statutes and are now enshrined in s.49(2) Supreme Court Act 1981 and CPR Rule 16.6.
"Manifestly, as [counsel for Kloeckner] recognised, the Halesowen case makes at the very least a major inroad into the suggested general principle stated by Halsbury's Laws of England in reliance on the two old cases. However he seeks to distinguish [Halesowen] on the footing that it enshrines some special rule relating to bank accounts. I am unable to see any sound foundation for this distinction. Nor was [counsel for Kloeckner] able to suggest any rational basis for such a rule. In my judgment the Halesowen case gives me very ample grounds for departing from the two old cases. In consequence I hold that as a matter of law the Bank are entitled to rely on the clause excluding any right of set-off against the letter of undertaking, and that this effectively debars the set-off which Kloeckner seek to maintain."
Hirst J dealt with the second issue on pages 521-526. He concluded that there was no principle that debars a bank setting off against a beneficiary under a letter of credit a claim by the bank themselves against that beneficiary.
"I have come to the clear conclusion that the right of set-off can be excluded by agreement. In general English law permits the parties to a contract to include in it such terms as they consider to be appropriate. This freedom of contract is subject to a measure of control based on grounds of public policy and to some statutory restrictions such as those contained in the Unfair Contract Terms Act 1977. But I am unable to accept that a party is prevented from excluding the right of set-off by s.49(2) of the Supreme Court Act 1981 or by any ground of public policy. There are many circumstances in which the general admonition in section 49(2) cannot be observed. The court itself can order separate trials of different parts of an action where it is convenient to do so: see, for example, RSC Ord.15,r.5. Moreover I can see no reason in principle why parties who are in a general contractual relationship cannot isolate one contract or one aspect of their dealing and provide that their rights in relation thereto are to be treated separately from their other dealings. Furthermore this conclusion is supported by dicta in at least three cases decided in the House of Lords."
Neill LJ then referred to relevant passages in Halesowen Presswork & Assemblies Ltd v Westminster Bank Ltd [1971] 1 QB 1, Modern Engineering (Bristol) Ltd v Gilbert-Ash (Northern) Ltd [1974] AC 689 and Mottram Consultants Ltd v Bernard Sunley Sons Ltd [1975] 2 Ll.Rep.197.
"the natural meaning of the words is that all set-offs and counterclaims are excluded...not that all set-offs and counterclaims "other than set-offs and counterclaims for negligence or breach of the bank's duties as mortgagee"..."