Solicitor - Undertaking - Claimant company seeking to finance purchase of ship

Global Marine Drillships Ltd v Landmark Solicitors LLP and others: Chancery Division (Mr Justice Henderson): 24 October 2011

The case ultimately concerned the purchase and finance of a deep water oil drilling and processing vessel by the claimant company. In order to fund the purchase, security was to be provided via standby letters of credit (SBLCs) to be provided by a bank to a marketing company. The raising of the SBLCs was carried out by B, the first defendant. B was a friend of J, a solicitor and third defendant in the action, and a client of L's firm, the second defendant.

Insurance was taken out regarding each SBLC. It was agreed that, to obtain the first policy, the claimant would deposit with L the sum of $32m, that was to become payable to B on issue of the first SBLC. If the SLBC was not arranged within a set time, the agreement would terminate automatically. In the event, the claimant deposited £7m instead, which was to be held under the undertaking. B subsequently failed to procure the SLBC by the agreed date and the agreement terminated automatically in June 2010.

Around £2m was returned to the claimant. Of the remaining £5m, payments totalling £4.5m had been made to C Ltd, a company operating a car dealership. In the course of proceedings, the claimant made two applications for summary judgment against the third defendant, J, and the eighth defendant, M, an individual said to have been linked to the dispersal of the £4.5m.

The claimant contended that none of the £7m had been used for the purchase of the insurance policy, and that the money ought to have been returned forthwith when the policy was not obtained. Consequently, the claimant submitted, both J and L were in flagrant breach of the undertaking. It submitted that £4.5m had been paid to C Ltd and then dispersed at the direction of M. J submitted, inter alia, that she had been put under pressure by the claimant to ensure that the insurance was obtained and paid for as quickly as possible, that she had received assurances from C Ltd that the money would be used for the release of the SBLC, and that the undertaking had been either varied or released by the claimant. The applications would be dismissed.

The instant case was not an ordinary one, and the evidence raised the suspicion that there was more to the matter than was immediately apparent. On the facts, it was at least arguable that if J had been authorised to pay the money to B, even though B was not an insurance company or broker, the terms of the undertaking had to be taken as having been modified, and M could no longer insist on repayment in accordance with the letter of the undertaking.

Had J indeed been authorised to pay £4.5m to a car dealer for the ostensible purpose of purchasing the insurance, the transaction assumed such a strange complexion, and raised so many obvious suspicions, that the ability of the claimant to rely on the terms of the undertaking had to be put in question, and the full facts of the matter would need to be carefully scrutinised at trial. It was perhaps of note that the claimant had evoked the equitable jurisdiction of trust rather than the inherent jurisdiction of the court.

There was arguable reason to doubt the good faith of the claimant and the propriety of its conduct, even though no material had been submitted to support a defence of illegality. It would be a classic example of the kind of case where there was an 'other compelling reason' why it should go to trial, even if the court was not satisfied that the defendants had a real prospect of successfully defending the claim. The transaction cried out for examination in the full forensic light of day, after full disclosure of documents and with oral evidence from the protagonists (see [41], [52]-[56] of the judgment). Bleasdale v Forster [2011] All ER (D) 34 (Mar) applied; Miles v Bull (No 2) [1969] 3 All ER 1585 considered; Udall v Capri Lighting Ltd [1987] 3 All ER 262 considered; Twinsectra Ltd v Yardley [2002] 2 All ER 377 considered.

(2) With regard to M, all the considerations that had convinced the court that the case against L and J should go to trial would apply with equal, if not greater, force to the claim against M. If the claimant was to succeed, it would have to prove its claim against M at trial, and dispel the aura of suspicion surrounding the case (see [58] of the judgment). The claim based on the undertaking against J and L could not be safely viewed in isolation, and would therefore go to trial (see [57] of the judgment).

William Evans (instructed by Bridgehouse Partners LLP) for the claimant; J appeared in person and on behalf of herself and L.