Recent Developments in Banking and Finance Law

1. Recent Developments in Banking and Finance Law Professor Richard Hooley King’s College, London; Fitzwilliam College, Cambridge.

2. Saving Gateway Accounts Act 2009 • eligibility • maturity period • maturity payment • qualifying balance

3. Banking and Payment Services Conduct Regime Out go • The Banking Code • The Business Banking Code In come • The Banking Conduct of Business Sourcebook (BCOBS) • The Payment Services Regulations 2009

4. BCOBS It applies to firms with respect to the regulated activity of accepting deposits from banking customers carried on from an establishment in the UK and activities connected with that activity, eg cheques and foreign exchange (BCOBS, 1.1.1R.). ‘Banking customers’: consumers, micro-enterprises, small charities.

5. Companies Act 2006 Most of the Companies Act 2006 that had not already been brought into force came into force on 1 October 2009, including those parts dealing with the acquisition by a limited company of its own shares (Part 18) and company charges (Part 25). See also Part 3 of the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009.

6. Banking Act 2009 (Restriction of Partial Property Transfers) (Amendment) Order 2009

7. Financial Markets and Insolvency Regulations 2009

8. Lehman Bros International (Europe) (in administration) (No 2) Blackburne J had to decide whether a scheme for the distribution of property held by a company on trust fell within Part 26 of the Companies Act 2006. He held that it did not.

9. Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Held that a conditional priority clause of the type commonly found in structured finance transactions was valid.

10. Clause 5.5 ‘The Trustee shall apply all moneys received by it under this Deed in connection with the realisation or enforcement of the Mortgaged Property as follows: Swap Counterparty Priority unless (i) an Event of Default … occurs under the Swap Agreement and the Swap Counterparty is the Defaulting Party … in which case Noteholder Priority shall apply.’

11. Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd ‘there cannot be a valid contract that a man’s property shall remain his until bankruptcy, and on the happening of that event go over to someone else, and be taken from his creditors.’

12. Butters v BBC Worldwide Ltd Peter Smith J rejected the argument that the anti-deprivation principle could not apply because the insolvency event that triggered the loss of the asset was not the insolvency of the company that owned the asset itself but of another company in the group. He declined to follow Perpetual Trustee on this point.

13. Butters Group Media BBCW 2e [Licence] Video

14. Termination clauses The licence automatically terminated if the following two conditions were met: • a shareholder of 2e, or any parent company of any shareholder of 2e suffered an insolvency event (as defined in the JVA); and • the other shareholder in 2e issued a share notice.

15. Re Kaupthing Singer & Friedlander Ltd (In administration) Held: the right of legal set-off can be excluded by agreement.

16. Alfa Telecom Turkey Ltd v Cukurova Finance International Ltd • an equitable mortgage over shares is a security interest in financial collateral for the purpose of the Financial Collateral Arrangements Regs; • an equitable mortgagee can validly appropriate financial collateral without the need to be registered as the legal owner; and • appropriation requires an ‘overt act’ evidencing the intention to exercise the power of appropriation which is communicated to the collateral provider.

17. Classic Maritime Inc v Lion Diversified Holdings • 13 August: COA between Classic and Limbungan under which Limbungan was required to supply a guarantee from Lion Industries. • 28 August: Guarantee given by Lion Diversified Holdings ‘In order to induce Classic to enter into a COA dated 13 August …’

18. Bank of Scotland plc v Makris Where the debtor was a joint venture company in which the surety was one of the ‘partners’, the relationship between surety and debtor was held to be non-commercial and the bank was not put on enquiry as to the possibility of undue influence so as to activate the sanitisation process specified in Royal Bank of Scotland v Etridge (No 2).

19. Chartbrook Ltd v Persimmon Homes Ltd The House of Lords upheld the rule excluding evidence of what was said or done during the course of negotiating the agreement for the purpose of drawing inferences about what the contract meant. But HL stressed that the rule did not exclude the use of such evidence for other purposes: eg, to establish that a fact which might be relevant as background was known to the parties, or to support a claim for rectification or estoppel.

20. Attorney General of Belize v Belize Telecom Ltd Formulations that the implied term must ‘go without saying’ or that it must be ‘necessary to give business efficacy to the contract’ were not to be treated as different or additional tests. ‘There was only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?’ (per Lord Hoffmann at [21]).

21. Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc Court of Appeal considered the test for the implication of terms as recently set out by the Privy Council in Attorney General of Belize v Belize Telecom Ltd and in doing so re-emphasised that a term can only be implied if it is necessary in the business sense to give efficacy to the contract.

22. Parabola Investments Ltd v Browallia Cal Ltd The victim of fraudulent misrepresentations, which had entered into loss making transactions as a result of the fraud, was awarded damages for the loss of profits on alternative trades that it would otherwise have made during the period of the fraud, together with damages for loss of profits from discovery of the fraud until trial.

23. Re Carson Country Homes Ltd The fact that a company director had forged another director’s signature on a debenture did not render the forged signature a nullity for all purposes and so bank, as bona fide purchaser for value, could rely on s 44 of the Companies Act 2009 to render the debenture validly executed where the director who had forged the signature had been vested with apparent authority to warrant that all formalities relating to the approval and execution of the debenture had been duly complied with.

24. SRM Global Master Fund LP and others v Commissioners of Her Majesty’s Treasury The basis of valuation of the shares of former shareholders in Northern Rock plc, following its nationalisation in February 2008, was not incompatible with their rights guaranteed by art 1 of the First Protocol to the European Convention on Human Rights 1950.

25. HSBC Bank plc v 5th Avenue Partners Ltd Court of Appeal held that a bank may owe a duty of care to a third party when representing that it had accepted and intended to carry out its customer’s instructions.

26. Lancore Services Ltd v Barclays Bank plc Court of Appeal held that there was no agency or fiduciary relationship between a merchant and a merchant acquirer who supplied the facilities which enabled the merchant to accept card payments.