Deutsche Bank AG & Ors v Unitech Global Ltd & Ors [2016] EWCA Civ 119

Case No A3/2013/3094[2016] EWCA Civ 119
IN THE COURT OF APPEAL (CIVIL DIVISION)
[2013] EWHC 2793 (Comm)
ON APPEAL FROM THE HIGH COURT
QUEEN’S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE TEARE
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 03/03/2016
Before
THE RIGHT HONOURABLE LORD JUSTICE LONGMORETHE RIGHT HONOURABLE LORD JUSTICE CHRISTOPHER CLARKETHE RIGHT HONOURABLE LORD JUSTICE SALES
Between
DEUTSCHE BANK AGClaimantUNITECH GLOBAL LIMITEDDefendant1) DEUTSCHE BANK AG 2) DBS BANK LIMITED 3) BBK B.S.C.4) SHINHAN BANK 5) LIREF (SINGAPORE) PTE LTD 6) PT. BANK NEGARA INDONESIA (PERSERO) TBK, TOKYO BRANCH 7) BMI BANK BSC (C) 8) DB INTERNATIONAL (ASIA) LIMITED 9) AXIS SPECIALITY LIMITED 10) DB TRUSTEES (HONG KONG) LIMTED Claimants (Lenders Action)/Respondents and Cross-Appellants- and -1) UNITECH GLOBAL LIMITED 2) UNITECH LIMITED DEUTSCHE BANK AG-and-DEUTSCHE BANK AG-and-UNITECH LIMITED Defendants (Lenders Actions)/Appellants and Cross-Respondents Claimant (Swap Action) Defendant (Swap Action)
Mr Thomas Sharpe QC, Mr John Brisby QC, Mr Alastair Tomson & Mr Michael d’Arcy (instructed by Stephenson Harwood LLP) for Defendants in Lenders and Swap ActionsMr Richard Handyside QC & Mr Adam Zellick (instructed by Allen & Overy LLP) for Claimants in Lenders ActionMr Adam Sher (instructed by Freshfields Bruckhaus Deringer LLP) for Claimant in Swap ActionHearing Hearing dates: 2 nd, 3 rd& 4 th February 2016
JudgmentLord Justice Longmore delivering the judgment of the court:Introduction
[1]This is the second interlocutory appeal in the battle between Deutsche Bank and other creditors who have brought two actions in the Commercial Court to recover amounts due under loan or swap agreements which used LIBOR as a reference rate in the calculation of interest. Those conversant in these matters will recall that the last appeal decided that the defendants could make amendments to their defence which (inter alia) alleged misrepresentation about the accuracy of LIBOR and the Deutsche Bank’s alleged part in undermining its integrity. Those misrepresentations are said by the defendant borrower and its guarantor to entitle them to rescind the agreements.[2]The first Deutsche Bank action has been called “the Lenders’ Action”. In it Deutsche Bank (“the Bank”) and eight other Lenders claim under a credit facility agreement made with Unitech Global Ltd (“UGL”) on 24th September 2007 as amended by a term sheet dated 22nd October 2010 and against Unitech Ltd (“Unitech”) as UGL’s parent company guarantor. The agreement is governed by English law and confers exclusive jurisdiction on the English courts. US$150 million was advanced and, as a result of various failures to pay instalments due, or other events of default, repayment was accelerated so that the total is allegedly due to the Lenders. The second to ninth claimants (together with the Bank “the Lenders”) are said to have acceded to the credit facility agreement by virtue of an assignment or transfer of rights or novation pursuant to clause 29 of that agreement.[3]In the second action which has been called “the Swap action” the Bank claims US$11 million, approximately, from Unitech under the same guarantee of UGL’s obligations in respect of an interest rate swap agreement, which incorporated the terms of an ISDA 2002 Master Agreement. The defendants’ case is that this swap agreement was proposed by the Bank as a hedge for UGL against interest rate fluctuations and that the credit facility agreement and the swap agreement were part of a single package deal. Unitech and UGL contend that the swap agreement was represented and recommended as suitable for UGL when it was not, particularly by reference to the terms of the credit facility agreement itself. It is alleged that misrepresentations induced the two agreements and were, in any event, made in breach of a duty of care owed by the Bank.[4]The credit facility agreement provided for payment of interest by reference to LIBOR, which was defined in the definitions section by reference to the applicable screen rate as displayed for the relevant currency and term, or overdue amount, on the appropriate page of the screens of Reuters or Telerate.[5]Under the interest rate swap agreement, the obligations related to six month US dollar LIBOR, as set out in the annex to the ISDA 2002 Master Agreement:- “The rate for a Reset Date will be the rate for deposits in US Dollars for a period of the Designated Maturity, which appears on the Telerate, page 3750, as of 11.00 a.m., London time on the day that is two London Banking Days preceding that Reset Date. If such rate does not appear on the Telerate Page 3750, the rate for that Reset Date will be determined as if the parties had specified US LIBOR Reference Banks as the applicable Floating Rate Option.”[6]It is probably relevant to know that at the relevant time there were LIBOR reference rates for ten different currencies. For each currency there was a rate for each of 15 different maturity periods (or “tenors”) ranging from overnight to one year. There were, therefore, 150 different LIBOR rates in total.[7]Prior to February 2011, the USD LIBOR panel consisted of 16 contributor banks (of whom the Bank was one) and the USD LIBOR rates were calculated in the following manner:- “(1) Each contributor bank would submit its USD LIBOR submissions to Thomson Reuters based on the following question:
“at what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 a.m?” (2) Upon receiving submissions from the contributor banks, Thomson Reuters would exclude the four highest and the four lowest rates. The remaining (eight) rates were arithmetically averaged to produce the USD LIBOR rates. (3) Accordingly, high and low “outlying” submissions were excluded from the published LIBOR rates.”
[8]In both Deutsche Bank actions, the borrowers were, on 8th November 2013, given permission by this court, reversing Cooke J, to plead implied representations as set out in paragraph 5GC of a proposed amended pleading in the Lenders’ Action and paragraph 36C of a proposed amended pleading in the Swap Action, which were for convenience of the argument labelled (A)-(D), albeit numbered (1)-(4) in the pleading itself. They were that:- “(A) LIBOR was a genuine average of the estimated rate at which members of the Panel could borrow from each other in a reasonable market size just prior to 11.00 a.m. London time on any given day, as set out in the last sentence of paragraph 5GA above. (B) The LIBOR rate itself was a rate based on the respective Panel member banks’ submissions to Thomson Reuters which were good faith accurate estimates of the rate at which they could actually borrow from each other in a reasonable market size just prior to 11.00 a.m. London time on any given day, as set out in the last sentence of paragraph 5GA above. (C) The first claimant had not itself acted, was not acting, and had no intention of acting, in a way which would, or would be likely to, undermine the integrity of LIBOR. (D) The first claimant was not aware of any conduct (either its own, or of other banks on the Panel) which would, or would be likely to, undermine the integrity of LIBOR.”[9]Cooke J had also held that, because the 3rd and 7th claimants in the Lenders’ Action had apparently acceded to the credit facility agreement by novation, the original credit facility agreement had been extinguished and that any right on the part of UGL to rescind that agreement had therefore been lost. That led to a complicated interlocutory hearing before Teare J in which he was invited to decide no fewer than 23 issues including an application for summary judgment by the Lenders and further applications by the Unitech parties to yet further amend their pleadings.[10]On 20th September 2013 Teare J handed down a judgment dealing with all these issues, [2013] EWHC 2793 (Comm). He permitted the defendants to plead an implied term of both contracts to the effect that the Bank would not seek to manipulate the setting of LIBOR but held that any damage resulting from any breach of such an implied term could only be claimed by way of counterclaim rather than set-off. He refused the defendants permission to make other amendments and, in the light of Cooke J’s decision that the defendants were not entitled to rescission of the novated credit facility agreement, gave the Lenders summary judgment for a very large sum in the Lenders’ Action.[11]This court’s decision of 8th November 2013, however, held that Cooke J had been wrong to decide, on a summary judgment basis, that the credit facility agreement had been novated since it was arguable either that it had not been novated at all (but had merely been assigned to the new Lenders) or that it had only been partially novated. There would therefore have to be a trial of those issues. In those circumstances Teare J’s summary judgment could not stand and on 3rd October 2014 he sensibly set it aside. The Lenders’ however submitted that that order should be conditional on payment of the principal sum (and non-contractual interest) into court or alternatively that there should be an order for interim payment of that sum.[12]There are now appeals by the Unitech parties against Teare J’s refusal to allow amendments on his granting of summary judgment in relation to 5 intended defences alleging in broad outline:- i) that the Bank failed to disclose to Unitech as guarantor unusual features of the credit facility agreement with UGL and the guarantee was therefore discharged; ii) that the Bank’s breaches of the agreements (e.g. by manipulating LIBOR) discharged Unitech from liability under the guarantee; iii) that the agreements constituted exchange contracts and were thus unenforceable under Article VIII section 2 of the IMF Agreement (formerly the Bretton Woods Agreement 1944); iv) that the contracts were illegal because they required the defendants to perform their contracts in a place where it would be illegal to do so; and v) that the credit facility agreement and guarantee were void as a result of the Bank’s breach of the anti-competition provisions of the Treaty on the Functioning of the European Union (“TFEU”) and section 2 of the Competition Act 1998.[13]There is also an appeal by the Lenders against Teare J’s refusal to order a payment into court or an interim payment.

(A) Proposed amendments

[14]We proceed on the basis that, while recognising that a decision about amendments is primarily one for the judge’s discretion, if an amendment is properly arguable, it should normally be allowed unless there is prejudice to the other party which cannot be compensated by an order for costs. (1). Non-Disclosure of Unusual Features[15]Relying on Royal Bank of Scotland v Etridge (No. 2) [2002] 2 A.C. 773 paras 81 and 188 and on North Shore Ventures Ltd v Anstead Holdings [2011] EWCA Civ 230, [2012] Ch. 31, Unitech submitted that there were unusual features of the credit agreement or the relationship between the Bank and UGL which were not disclosed and that it should therefore be discharged from any liability under the guarantee. The alleged unusual features relied on were:- i) the unsuitability of the swap agreement for UGL, as the Bank knew; ii) the fact that the US Dollar LIBOR rate, by reference to which UGL’s liabilities to the Bank were set, was not a genuinely determined rate; and iii) the Bank’s own participation in the setting of a false LIBOR rate.[16]The Lenders submitted that the principle by which a guarantor was discharged by reason of non-disclosure of unusual features was limited to unusual features of the agreement itself and did not extend to the wider contractual relationship (whatever that might precisely mean). In any event the features relied on were extraneous even to the contractual relationship and could not, therefore, be relied on.[17]The Lenders also submitted that, since Unitech was a primary obligor as well as a guarantor, it was irrelevant to consider the doctrine of non-disclosure of unusual features at all. The credit facility agreement of 24th September 2007 to which Unitech was a party provided as follows:- “15 GUARANTEE AND INDEMNITY15.1 Guarantee and indemnity The Guarantor irrevocably and unconditionally:(a) guarantees to each Finance Party punctual performance by the Company of all its obligations under the Finance Documents;(b) undertakes with each Finance Party that, whenever the Company does not pay any amount when due under or in connection with any Finance Document, the Guarantor must immediately on demand by the Facility Agent (acting on the instructions of the Majority Lenders) pay that amount as if it were the principal obligor in respect of that amount; and(c) agrees with each Finance Party that if, for any reason, any amount claimed by a Finance Party under this Clause is not recoverable from the Guarantor on the basis of a guarantee, then the Guarantor will be liable as a principal debtor and primary obligor to indemnify that Finance Party in respect of any loss it incurs as a result of the Company failing to pay any amount expressed to be payable by it under a Finance Document on the date when it ought to have been paid. The amount payable by the Guarantor under this indemnity will not exceed the amount it would have had to pay under this Clause had the amount claimed been recoverable on the basis of a guarantee.15.2 Continuing guarantee This guarantee is a continuing guarantee and will extend to the ultimate balance of all sums payable by the Company under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part. … 15.4 Waiver of defences The obligations of the Guarantor under this Clause will not be affected by any act, omission or thing (whether or not known to it or any Finance Party) which, but for this provision, would reduce, release or prejudice any of its obligations under this Clause. This includes: (a) any time or waiver granted to, or composition with, any person; (b) any release of any person under the terms of any composition or arrangement; (c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any person;(d) any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;(e) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of any person;(f) any amendment (however fundamental) of a Finance Document or any other document or security;(g) any unenforceability, illegality, invalidity or non-provability of any obligation of any person under any Finance Document or any other document or security; or(h) any insolvency or similar proceedings.” Clause 15.1 (c) is, said the Lenders, a clear agreement to indemnify the creditor to which the legal rules about guarantees did not apply. (a) guarantees to each Finance Party punctual performance by the Company of all its obligations under the Finance Documents; (b) undertakes with each Finance Party that, whenever the Company does not pay any amount when due under or in connection with any Finance Document, the Guarantor must immediately on demand by the Facility Agent (acting on the instructions of the Majority Lenders) pay that amount as if it were the principal obligor in respect of that amount; and (c) agrees with each Finance Party that if, for any reason, any amount claimed by a Finance Party under this Clause is not recoverable from the Guarantor on the basis of a guarantee, then the Guarantor will be liable as a principal debtor and primary obligor to indemnify that Finance Party in respect of any loss it incurs as a result of the Company failing to pay any amount expressed to be payable by it under a Finance Document on the date when it ought to have been paid. The amount payable by the Guarantor under this indemnity will not exceed the amount it would have had to pay under this Clause had the amount claimed been recoverable on the basis of a guarantee. (a) any time or waiver granted to, or composition with, any person; (b) any release of any person under the terms of any composition or arrangement; (c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any person; (d) any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security; (e) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of any person; (f) any amendment (however fundamental) of a Finance Document or any other document or security; (g) any unenforceability, illegality, invalidity or non-provability of any obligation of any person under any Finance Document or any other document or security; or (h) any insolvency or similar proceedings.”[18]Unitech’s response to this last argument was to proceed on the footing that it would afford an answer to Unitech’s case if clause 15.1(c) is truly an indemnity, but to submit that overall the agreement was only intended to operate as a secondary liability in the event that UGL defaulted in its obligations (Day 1 pp. 57-68). Clause 15.4 would be quite unnecessary if clause 15 were intended to be a true indemnity.[19]The doctrine of unusual features is something of a developing doctrine whose ambit is perhaps not entirely clear from the authorities. It can be said with considerable force that Unitech knew the terms of the credit agreement with UGL perfectly well since it was a party to the agreement. Both UGL and Unitech were able to take a view about the suitability of the agreement for UGL. But, if the doctrine extends to the contractual relationship rather than just the terms of the contract itself (as North Shore Venture Ltd at para 31 might suggest), it is arguable that manipulation by the Bank of a rate by reference to which interest was calculated would be a most unusual feature. It is therefore necessary to consider whether clause 15.1(c) precludes the application of the doctrine.[20]We consider that it does. A mere statement in what would otherwise be a guarantee that the guarantor will be liable as primary obligor and not merely as a surety will not convert a guarantee into an indemnity, see Heald v O’Connor [1971] 1 WLR 497, 503 per Fisher J. But clause 15.1 in the present case goes much further. It is in three parts; the first two sub-clauses are guarantee obligations but the third sub-clause is on its face (and pursuant to the title of the clause) an obligation to indemnify if any amount is not recoverable on the basis of a guarantee “for any reason”. The wide words “for any reason” must encompass any irrecoverability by reason of non-disclosure of features which ought to have been disclosed.[21]Mr John Brisby QC for Unitech relied on the shortly reported case of Stadium Finance Co. Ltd v Helm (1965) 109 Sol. Jo 471 in which a mother had signed an “indemnity form” in support of a hire purchase agreement made by her infant son. This court held that “the whole burden of this document was that it was a guarantee, to come into force if the principal debtor defaulted and to the extent of his default”. Since the contract with the infant was void, there could be no default. The complex document signed by Unitech in the present case cannot, in our view, be construed in a similar way. It is much closer to the document construed as an indemnity by Lewison J in Sofaer v Anglo Irish Asset Finance Plc [2011] EWHC 1480 (Ch) cited in the illuminating discussion contained in Andrews and Millett, Law of Guarantees 7th ed. (2015) pages 10-14.[22]Mr Brisby also relied on Vossloh AG v Alpha Trains (UK) Ltd [2010] ewhc 2443 (Ch) [2011] 2 All E.R. (Comm) 307 which also considered a complex document but it is clear from para 45 of Sir William Blackburne’s judgment that he considered all the relevant sub-clauses in what was called the “Guarantee and Indemnity Clause” as showing “all the signs of an intention to subject VAG to an obligation to answer for every kind of default that could arise under or in connection with what is referred to in the definition of secured obligations as a “Relevant Document”.” It is not possible to construe clause 15.1(c) in this case in a similar way.[23]We would therefore uphold the judge’s refusal of permission to amend to allege discharge by the doctrine of unusual features, albeit for the third rather than the first or second of his reasons. (2). Discharge by reason of the Bank’s breach of contract[24]The judge decided that if a breach of contract by the Bank was proved by Unitech (e.g. a breach of the implied term that it would not be a party to manipulating LIBOR) such breach would be repudiatory and, not having been accepted by UGL or Unitech, would not discharge the guarantee or indemnity.[25]The law in this area is also somewhat uncertain since it seems to be accepted that discharge would occur if there was a “not insubstantial” (but not repudiatory) breach, see the cases cited in para 123 of Teare J’s judgment. But it is unnecessary to take a final view on that interesting question since, as Mr Brisby accepted, if he lost his argument on the indemnity point (Day 1 page 76) clause 15.1(c) must operate to make any such argument irrelevant on this point just as much as in relation to the principle of non-disclosure of unusual features. (3). “Exchange Contract”?[26]Article VIII s. (2)(b) of the IMF Agreement (which was incorporated into English law by the Bretton Woods Agreement Order in Council 1946) provides as follows:- “Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement shall be unenforceable in the territories of any member.”[27]Unitech submitted that the credit agreement was an exchange contract because, although the loan was made in US dollars and was due to be repaid in US dollars, it was anticipated or contemplated by all parties that the dollars would have to be exchanged into Indian rupees for use in projects in India and that rupees would have to be exchanged into US dollars when the loan was repaid.[28]This is a hopeless argument since it has been held by high authority that an exchange contract is a contract to exchange the currency of one country for the currency of another.[29]In Wilson Smithett & Cope Ltd v Terruzzi [1976] QB 683, Kerr J followed obiter remarks of Lord Radcliffe in Re United Railways of Havana [1961] AC 1009 at page 1059 to the effect that an exchange contract was a contract to exchange the currency of one country for the currency of another. He was upheld by the Court of Appeal, Lord Denning MR saying (page 714A):- “The words “which involve the currency of any member” fit in well with this meaning: but it is difficult to give them any sensible meaning in regard to other contracts.” He had already referred (page 713H) to other articles of the Bretton Woods Agreement providing that members were not to impose restrictions on payments due in connection with (inter alia) normal short term banking and credit facilities. Ormrod LJ said (page 719B) that it would be absurd that the question of enforceability should depend on whether the defendant had available resources in currencies other than the lire (the relevant currency in that case).[30]This authority was approved in United City Merchants v Royal Bank of Canada [1983] 1 A.C. 168. Lord Diplock (with whom the other members of the House of Lords agreed) said (page 188G) that the phrase “exchange contracts” did not include contracts made for sales of goods “which require the conversion by the buyer of one currency into another in order to enable him to pay the purchase price”. Nor do they include, therefore, contracts to repay money lent which require the conversion by the borrower (or its guarantor) of one currency into another to enable it to repay the loan.[31]These authorities show that Mr Brisby’s reference to terms of the credit agreement (such as clause 4 with its reference to documents itemised in Schedule 2) which recorded the knowledge of the parties that UGL needed the loan for the purpose of investing in projects in India and needed the consent of the Indian authorities to enter into the contract (and indeed warranted that necessary consents had been given and that there was no legal impediment to the contract being made) was beside the point and irrelevant.[32]We therefore agree with the judge that permission for this amendment should not be granted. (4). Illegality by place of performance?[33]Unitech submits that it cannot perform its obligation to repay the loan and interest without the permission of the Reserve Bank of India to convert rupees into dollars which has not and will not be given, that it would therefore be illegal by the law of India for it to repay the loan and that the courts of New York would not compel Unitech to make payment in New York because that would require Unitech to commit an illegal act in the place of its incorporation. It relies on the principle of English law that the court will not enforce a contract the performance of which would be illegal in the place of performance as set out in Ralli Brothers v Compania Naviera Sota Y Aznar [1920] 1 KB 614.[34]This proposed amendment is no more hopeful than the last and for similar reason. Clause 14.1 provides for the place where payment (and thus performance) is to be made:- “Unless a Finance Document specifies that payments under it are to be made in another manner, all payments by a Party … under the Finance Documents must be made to the Facility Agent to its account at such office or bank in New York, as it may notify to that Party for this purpose…”[35]New York is therefore the place of performance. Unitech has served expert evidence of New York law stating that the New York courts, applying their own conflicts of law rules, would not give judgment against Unitech if Unitech was in breach of Indian law, but that evidence does not state that any performance by Unitech would be illegal by the law of New York.[36]In Kleinwort Sons & Co. v Ungarische Baumwolle Industrie A.G. [1939] 2 K.B. 678 acceptors sued Hungarian drawers of bills of exchange payable in London who denied liability because Hungarian law made it illegal for Hungarians to pay money outside Hungary without the consent of the Hungarian National Bank, which had not been obtained. Sir Patrick Hastings KC submitted that the English court would not compel a foreigner to perform a contract the performance of which necessitated the doing of something in his own country which would be a breach of that country’s law. This court roundly rejected that proposition because payment of the bills was to be made in London in England which was the place of performance. As Mackinnon LJ said (page 694):- “the exception where the performance is unlawful by the law of the country where the contract is to be performed does not arise, and the defendants can base no defence on that principle.” Both du Parcq LJ and Atkinson J agreed, the latter saying (page 700) that the contract was not concerned with the steps which the debtors may have to take to put themselves in a position to pay. Mr Brisby sought to rely on Atkinson J’s further comment that there was nothing to negative the possibility of the judgment being enforced in this country without involving any act of the defendants contrary to Hungarian decrees as meaning that, if performance did involve such an act, no judgment should be given. But the learned judge was not saying that; he was only saying that once judgment had been given it could be enforced against any of the defendant’s assets which could be found.[37]This authority was followed in Toprak v Finagrain [1979] 2 Lloyds Rep 98 where Turkish buyers of wheat failed to open the letter of credit required by the contract because the contract contemplated that the letter of credit would be opened in Turkey and it was illegal by Turkish law to procure the opening of a letter of credit without the consent of the Ministry of Finance, which was never forthcoming. Robert Goff J held that the contract did not contemplate performance in Turkey but, even if it had, it was only if the contract “requires performance” in a country where performance is illegal that performance is excused. In other words contemplation is not enough. Mr Brisby submitted that this part of Robert Goff J’s judgment was obiter but that is not so. It was a second ground of decision and he was, in any event, upheld by this court who followed Kleinwort. Lord Denning MR said (page 114):- “The sellers were not concerned with the machinery by which the Turkish state enterprise provided that letter of credit at all. The place of performance was not Turkey.” Roskill LJ added for good measure that that was also the law in New York as well as other European countries.[38]The judge correctly decided that Unitech’s argument under this head was no bar to his giving summary judgment. Now that (for other reasons) that judgment has been set aside, the question is whether this argument constitutes an arguable defence. The answer is that it does not. (5). Breach of anti-competition provisions?[39]It is sufficient to set out section 2 of the Competition Act 1998:- “2 Agreements etc. preventing, restricting or distorting competition.(1) Subject to section 3, agreements between undertakings, decisions by associations of undertakings or concerted practices which- (a) may affect trade within the United Kingdom, and (b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom, are prohibited unless they are exempt in accordance with the provisions of this Part.(2) Subsection (1) applies, in particular, to agreements, decisions or practices which- (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. … (4) Any agreement or decision which is prohibited by subsection (1) is void. (5) A provision of this Part which is expressed to apply to, or in relation to, an agreement is to be read as applying equally to, or in relation to, a decision by an association of undertakings or a concerted practice (but with any necessary modifications). (6) Subsection (5) does not apply where the context otherwise requires …” (a) may affect trade within the United Kingdom, and (b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom, (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.[40]The Unitech parties’ primary case under this head is that there was an unlawful information exchange by a number of banks which led to the setting of the LIBOR rate on any particular day by the British Bankers’ Association (“the BBA”). The exchange of information and the BBA decision to publish distorted competition because each of the Panel Banks’ submissions of its rates was published in a manner which identified which bank had submitted which rate. The rate at which any bank can borrow is said to be a key piece of information which is of use in understanding the commercial strength and effectiveness of any competitor. This is said to be anti-competitive and thus illegal quite regardless of any manipulation or falsification of the submitted rates and LIBOR itself is thus void, with the result that any contracts setting interest by reference to LIBOR are also void.[41]The secondary case is that the manipulation of LIBOR by the Bank (among other banks) constituted a concerted arrangement which distorted competition and was thus in breach of both Article 101 of TFEU and the provisions of the Competition Act 1998 (“the 1998 Act”). Any horizontal agreement or arrangement to participate in such manipulation was therefore void and cannot be enforced by the banks against each other. This, the Unitech parties says, likewise infected the credit agreement and the swap with which this appeal is concerned.[42]On the assumption that it is arguable either that the decision by the BBA or that the manipulation of LIBOR is anti-competitive, the question then arises whether it is arguable that the resulting credit and associated vertical agreements are also void. It is common ground that the consequences of breach of Article 101 are for the national court to decide subject to the principle of effectiveness. This principle has been held for example to disentitle a litigant from relying on the English principle ex turpi causa non oritur actio to the extent that an innocent party may be deprived of an appropriate remedy: see Bellamy and Child, European Law of Competition, 7th ed. (2013) paras 16-010 to 16-011.[43]No authority to which the court was referred has held that vertical agreements are void as a result of a horizontal agreement infringing Article 101 or the provisions of the 1998 Act.[44]The issue was considered in Courage Ltd v Crehan [1999] ECC 455 in which tied house agreements between landlords and tenants or public houses were being considered. This court held that it was arguable that such an agreement was prohibited (and therefore void) under what was then Article 85 of the EC Treaty because of what the court held to be “its foreclosing effect in combination with other similar agreements upon third party competitors.” The question then arose whether a tenant could argue that his individual contract for the supply of beer entered into pursuant to the tied agreement was likewise illegal and void. This court held (para 60) first that, even if the rights conferred by Article 85 were of direct effect and had to be protected by national courts, the consequences of nullity of a horizontal agreement or practice were a matter for national law not community law and that English law would not regard the individual contracts as void; and secondly that since it was the cumulative effect of all the ties in foreclosing the relevant market that made the agreement a prohibited agreement, “individual contracts for the supply of beer pursuant to a single tie cannot be illegal and void in their own right. Nor can such a contract be considered to be so closely connected with the breach of Article 85 that it should be regarded as springing from or founded on the agreement rendered illegal by Article 85.”[45]Obiter dicta of Morgan J in Bookmakers Afternoon Greyhound Services Ltd v Amalgamated Racing UK Ltd [2008] EWHC 1978 Ch at paras 399, 400 and 410 are to the same effect.[46]The parallel between Courage and the present facts is instructive. On both the primary case and secondary case of Unitech, if there was an agreement or concerted practice or a decision which is to be regarded as anti-competitive and therefore illegal, the illegality arises from the cumulative effect of the individual LIBOR submissions (whether or not there was also deliberate manipulation on the part of Deutsche Bank). Just as the individual (and subsequent) contracts for the supply of beer were held not to be illegal and void in Courage Ltd v Crehan, so likewise individual (and subsequent) credit and swap agreements entered into by Deutsche Bank cannot be illegal or void either.[47]There is in this case the further important consideration that, unlike in Courage Ltd v Crehan, other banks have become parties to the credit agreement after it was made. Any decision that the agreement was void would be highly prejudicial to them.[48]It is, moreover, worthy of note that, when the court asked Mr Sharpe QC, who assumed the burden of arguing this aspect of the case for the Unitech parties, whether he submitted that the Lenders could not even recover the principal amount of the loan, he said that he had no submissions to make on that aspect of the matter. That was not surprising since it would be absurd to maintain that the consequences of invalidity of any horizontal agreement or practice (or resulting decision of the BBA) was that none of the money lent by banks with LIBOR provisions was recoverable. Once that is plain, there can be no question that the credit agreement and swap agreement in this case are wholly illegal and void. Mr Sharpe was reduced to arguing that only parts of the agreements relating to interest and swaps were void but such a pick and mix approach cannot be acceptable.[49]Mr Sharpe submitted that it was acceptable because the principle of effectiveness required not merely that a litigant should not be defeated in a legitimate claim by such principles as ex turpi causa but that there should be an effective remedy. That remedy has, however, been granted in the present case by granting the Unitech parties permission to rely on the implied term that LIBOR would not be manipulated, and also by the fact that at any trial the judge might grant rescission of the credit agreement and the swap. It was said that calculation of damages would be either impossible or very difficult because it would be necessary to discover at the time of each interest payment, or accounting under the swap agreement, the difference between the amount for which Unitech was in fact liable and the amount for which they would have been liable if LIBOR had not been manipulated. That may well mean that a number of calculations has to be made but we do not see that as being impossible. It is, in any event, a novel position that difficulty in calculating damages makes a contract void.[50]For all these reasons we agree with the judge that there is no real prospect that the Credit Agreement or the Swap Agreement would be held to be void on account of any alleged breach of competition law and that permission to amend the points of defence and counterclaim in this respect should also be refused.[51]It follows that the appeal should be dismissed; it is now necessary to consider Lenders cross-appeal. (B). Payment into court or interim payment?[52]There is common ground as to the possible forms of ruling by the court as between the Lenders and UGL after trial. If UGL succeeds in its misrepresentation defence, it will be entitled to rescind the loan agreement on condition that it makes restitution of the outstanding amount of the principal sum which it has received, which is agreed to be a sum of about $120m.[53]The court’s recognition of the effectiveness of UGL’s rescission defence against liability under the loan agreement in the sum of about $177m will be conditional on it paying the Lenders $120m by way of restitution. If UGL’s misrepresentation defence is unsuccessful, it will be liable under the loan agreement in the sum of $177m. On any view, after trial UGL will have to pay the Lenders a minimum of $120m.[54]The outcome that UGL will be required to pay the Lenders a minimum of $120m at trial is unaffected by UGL’s distinct defence (even if it had been permitted) based on Article 101 TFEU. As we have said in para 48 above, in the course of his submissions Mr Sharpe for UGL was pressed by the court to clarify the ambit of his submissions in relation to the proposed Article 101 defence. He explained that it was focused on providing a defence to any claim to contractual interest, rather than a defence to the claim that UGL should repay the principal sum lent to UGL, and he had no submission to make to the effect that it could provide any defence to the Lenders’ claim for repayment of principal in the sum of $120m.[55]The judge held that the Civil Procedure Rules (“CPR”), on their proper construction, did not permit the award of an interim payment or the imposition of a condition upon the right to be able to defend the claim. He granted permission to appeal on these points and expressed disquiet about the result. In our view, his disquiet was not misplaced. In fact, the justice of the position is clear, and the proper interpretation of the relevant provisions in the CPR reflects this.

Interim payment

[56]Section 32 of the Senior Courts Act 1981 provides in the relevant the part as follows:
“32. Orders for interim payment. (1) As regards proceedings pending in the High Court, provision may be made by rules of court for enabling the court, in such circumstances as may be prescribed, to make an order requiring a party to the proceedings to make an interim payment of such amount as may be specified in the order, with provision for the payment to be made to such other party to the proceedings as may be so specified or, if the order so provides, by paying it into court. … (5) In this section “interim payment”, in relation to a party to any proceedings, means a payment on account of any damages, debt or other sum (excluding any costs) which that party may be held liable to pay to or for the benefit of another party to the proceedings if a final judgment or order of the court in the proceedings is given or made in favour of that other party.”
[57]In our view, on its proper interpretation the definition of an interim payment in section 32(5) is sufficiently wide to cover a situation such as the present in which a claimant claims to enforce a contract according to its terms and the defendant responds by saying he is entitled to rescind the contract on grounds of misrepresentation, but would only be held to be able to rescind on condition that he gives restitution of sums received from the claimant. The words “other sum” are very wide, and plainly cover a requirement that UGL should pay a sum by way of restitution. Here, if UGL succeeds in its misrepresentation and rescission defence, the “final judgment” of the court will be to the effect that UGL must pay $120m if it is to escape full liability of $177m under the loan agreement. The concept of a “final judgment” is wider than that of an “order of the court”: it connotes the full working out of the respective rights and liabilities of the parties according to the justice of the case as reflected in what the court decides in its judgment should happen. The final judgment of the court in the present case, if the misrepresentation and rescission defence succeeds, will be that UGL must pay the Lenders at least $120m. This aspect of the outcome will be a final judgment in the Lenders’ favour. The Lenders had to commence proceedings to recover anything at all, and the court will give a judgment to the effect that UGL must pay them at least $120m.[58]We would add, however, that even if one takes the narrower concept of a “final … order of the court”, that is to say the specific order that the court will make at the end of the day requiring a party to do something, we think that it would cover the final order which the court would make in this case if the misrepresentation and rescission defence succeeds. The relevant order sought by UGL in the prayer in its re-amended defence is “A declaration that the Credit Agreement is rescinded, subject to repayment by UGL of the outstanding principal amount of the Loan”, which properly recognises the legal requirement that UGL give restitution of the principal it has received if its purported rescission of the loan agreement is to be recognised by the court as effective. The actual order which would be made by the court would take a form along these lines, that provided UGL pays the Lenders $120m by a certain date it may treat the loan agreement as rescinded, alternatively that UGL must pay the Lenders $120m by a certain date failing which it must pay them $177m in accordance with the terms of the loan agreement. Either way, it seems to us that the court would have made “a final order” holding that UGL is liable to pay the Lenders a minimum of $120m (i.e. as an “other sum”, in the words of section 32(5)).[59]Accordingly, in our judgment section 32 is a provision which allows the making of rules which would permit the court to order an interim payment in the circumstances of a case like this one. However, since section 32 only sets out a rule-making power in respect of interim payments, it is under the terms of the Civil Procedure Rules that jurisdiction to order the making of an interim payment must be found.[60]The CPR contain a mandatory interpretive rule set out in CPR Part 1.2, which provides in relevant part as follows:
“The court must seek to give effect to the overriding objective when it – (a) exercises any power given to it by the Rules; or (b) interprets any rule …”
[61]The overriding objective is set out in CPR Part 1.1. It is to enable the court “to deal with cases justly and at proportionate cost” (Part 1.1(1)).

(c) and (d), as follows:

“(c) dealing with the case in ways which are proportionate – (i) to the amount of money involved; (ii) to the importance of the case; (iii) to the complexity of the issues; and (iv) to the financial position of each party; (d) ensuring that it is dealt with expeditiously and fairly …”
[62]The judge did not refer to these provisions when interpreting the CPR provisions which he had to apply. It is not evident that he had his attention drawn to them.[63]CPR Part 25.1(1)(k) states: “The court may grant the following interim remedies – … (k) an order (referred to as an order for interim payment) under rule 25.6 for payment by a defendant on account of any damages, debt or other sum (except costs) which the court may hold the defendant liable to pay”.[64]It is this rule which provides the jurisdiction for the court to order an interim payment to be made, subject to qualifications elsewhere in Part 25. As with section 32(5), the term “other sum” is capable of covering a payment by way of restitution as a condition for rescinding an agreement. In our view, the phrase “which the court may hold the defendant liable to pay” is sufficiently wide to cover the situation like that in contemplation in the present case, where a court rules that a defendant’s purported rescission of a contract will only be recognised if the defendant makes appropriate restitution by paying a sum to the claimant. According to the natural meaning of this phrase, if the misrepresentation defence succeeds in the present case the court will hold that UGL is liable to pay the Lenders a minimum of $120m as the condition for escaping a more extensive liability of $177m under the loan agreement.[65]We arrive at this interpretation of Part 25.1(1)(k) without any need to resort to the interpretive provision in CPR Part 1.2. However, the correctness of the interpretation is powerfully reinforced when Part 25.1(1)(k) is read in the light of that provision and the overriding objective.[66]Since it is obvious now, in advance of trial, that UGL must pay the Lenders a minimum of $120m, it is not just that the Lenders should be kept out of their money to that extent until after a trial. Putting it positively, dealing with the case justly requires that an interim payment should be made, since otherwise the substantive result is that UGL benefits from an uncovenanted and unmerited forced loan of $120m by the Lenders, where the absence of UGL’s entitlement to retain and have the benefit of that sum is already clear. We know that if there were a trial tomorrow, the court would require UGL (i.e. hold UGL liable) to pay that amount, as a minimum, to the Lenders. Further, the expeditious and fair disposal of the case in relation to the $120m which is known at this stage to be the minimum due to the Lenders, is that UGL should be required to make an interim payment in that amount.[67]CPR Part 25.6 sets out the procedure to be followed when applying for an interim payment. CPR Part 25.7 is headed, “Interim payments – conditions to be satisfied and matters to be taken into account”. It provides at Part 25.7(1), so far as material: “The court may only make an order for an interim payment where any of the following conditions are satisfied … (c) it is satisfied that, if the claim went to trial, the claimant would obtain judgment for a substantial amount of money (other than costs) against the defendant from whom he is seeking an order for an interim payment whether or not that defendant is the only defendant or one of a number of defendants to the claim”.[68]Mr Brisby emphasised the use of the word “only” in the introduction to this provision and submitted that this indicated that the drafter intended that the relevant condition in sub-paragraph (c) should be read narrowly, so that it could not authorise the making of an order for an interim payment in the circumstances of this case.[69]We do not accept this, for three reasons. First, the phrase “would obtain judgment” is in our view wide enough as a matter of ordinary language to cover the situation in which, after trial, UGL is required by the court to pay $120m as the price for escaping from a higher liability of $177m: see above. Secondly, there is no discernible rational reason why, even though the rule-authorising provision in section 32 of the 1981 Act and the jurisdiction conferring rule in CPR Part 25.1(1)(k) are both expressed in terms wide enough to cover that scenario, the drafter would have chosen to exclude it from the operation of the condition in Part 25.7. Thirdly, the mandatory interpretive obligation in CPR Part 1.2(b) applies to the condition in Part 25.7 in just the same way as it applies to any other part of the CPR, and as explained above it points unambiguously in favour of the court having power to order an interim payment in a case of this kind.[70]For these reasons, we respectfully consider that the judge was wrong to hold that the court had no power to order an interim payment in the sum of $120m.[71]The question whether an interim payment should now be ordered depends upon three further points raised by UGL in its respondent’s notice. It also depends on the further discussion below of whether a payment into court should be imposed as a condition of UGL being permitted to maintain its defences, because at the close of the hearing before us Mr Handyside QC for the Lenders indicated that their preference now is for an order making UGL’s defence conditional on payment of $120m into court, instead of an interim payment. We turn to address the payment into court issue next, before reverting to the respondent’s notice.

Defence conditional on payment into court

[72]CPR Part 24 (summary judgment) does not include provision itself for imposing a condition on being granted leave to defend a claim in the form of a requirement for the defendant to make a payment into court. In this respect it differs from the position under the old summary judgment provision in RSC Order 14. Accordingly, Practice Direction 24, entitled “The Summary Disposal of Claims”, includes a note at para. 5 stating, “the court will not follow its former practice of granting leave to a defendant to defend a claim, whether conditionally or unconditionally”. Instead, after the text of CPR Part 24.6 (setting out the court’s powers when it determines a summary judgment application) there is a cross-referring reminder that CPR Part 3.1(3) provides that the court may attach conditions when it makes an order. Under the CPR, therefore, the power to impose a condition such as making a payment into court is the general power in Part 3.1(3).[73]Moreover, CPR Part 24 does not provide for a defendant to be granted leave to defend a claim. Instead, Part 24.6 provides that where the court determines an application under Part 24 it may give directions as to the filing and service of a defence and give further directions about the management of the case.[74]Paragraph 4 of Practice Direction 24 provides:
“The court’s approach 4. Where it appears to the court possible that a claim or defence may succeed but improbable that it will do so, the court may make a conditional order, as described below.”
[75]Paragraph 5 of Practice Direction 24 states that on an application under CPR Part 24 a court may make a conditional order requiring a party to pay money into court and providing that “that party’s claim will be dismissed or his statement of case will be struck out if he does not comply”.[76]Paragraphs 4 and 5 of Practice Direction 24 do not purport to be exhaustive of the court’s options as to the orders it may make on an application for summary judgment, and nor could they be. In fact, since the relevant power to impose a condition requiring a party to make a payment into court is that contained in CPR Part 3.1(3), the court may make any form of conditional order it thinks appropriate under that provision.[77]CPR Part 3.1 sets out the court’s general powers of case management. Part 3.1(3) provides:
“When the court makes an order, it may – (a) make it subject to conditions, including a condition to pay a sum of money into court; and (b) specify the consequence of failure to comply with the order or a condition.”
[78]A condition under this provision has to attach to an order which the court is proposing to make. Here, the Lenders submit that the judge should have imposed a condition upon his order setting aside summary judgment in the sum of $177m against UGL in these terms:
“The orders made [to set aside the summary judgment order of 1 October 2013] be subject to a condition that the First Defendant [UGL] pay the sum of US$120,877,193.76 into court within 21 days (to remain there until further order), in default of which the [summary judgment order] shall not be set aside or varied as regards the First Defendant.”
It appears that at first instance the Lenders presented their argument in favour of the court making what is described in paras. 4 and 5 of Practice Direction 24 as a “conditional order” first in reliance on CPR Part 24 and then separately under CPR Part 3. The judge rejected the first argument at [7]-[10] and then rejected the argument based on Part 3 at [11]-[14]. As we have sought to explain above, this way of presenting and analysing the application for a conditional order is incorrect and rather confusing. There is in fact only one relevant power which could be exercised to make a conditional order requiring a payment into court, namely that in Part 3.1(3).[79]The confusing way in which the application was presented led the judge into error in the part of his judgment dealing with CPR Part 3. He reasoned by analogy with the decision of this court in Huscroft v P&O Ferries Ltd[2010] EWCA Civ 1481; [2011] 1 WLR 939, that since there was no foundation under CPR Part 24 to allow the Lenders’ application for a conditional order it would be wrong in principle to accede to it under Part 3.1: [12]-[13].[80]In Huscroft this court explained that where there is a specific rule in the CPR which deals with a particular type of application, CPR Part 3.1(3) cannot be relied upon as a means of circumventing the requirements of that specific rule: see para. [14] per Moore-Bick LJ. This is a form of lex specialis reasoning: as a matter of principle the requirements of a rule specifically crafted to deal with a particular type of application cannot be bypassed by recourse to the wide general case management powers in CPR Part 3 which have not been so crafted. In Huscroft this court held that CPR Part 3.1(3) did not allow a party to circumvent the requirements in the special rules in CPR Part 25.12 and 25.13 governing the making of orders for provision of security for costs.[81]However, in our view the reliance the judge placed on Huscroft to answer the Lenders’ application for a conditional order requiring payment into court of $120m in this case was misplaced. Unlike CPR Part 25 in relation to security for costs, CPR Part 24 contains no special rules dealing with such a case. The drafter of the CPR has deliberately left the making of conditional orders in the context of applications for summary judgment to be governed by the general provision in CPR Part 3.1(3). Since there is no special rule applicable in the context of this case and the judge has exercised his discretion under Part 3.1(3) on an incorrect basis, this court has to address the proper application of that rule, guided by the overriding objective in accordance with CPR Part 1.1 and 1.2(a).[82]In our opinion, the judge’s instinctive reaction that it could be said to be unsatisfactory not to require a payment into court because the truth is that UGL will have to pay $120m even if its defence succeeds (see [10] and [14]) cannot be gainsaid. We agree that this would be a highly unsatisfactory result which would clearly be contrary to the overriding objective.[83]In our judgment, the court should exercise its discretion under CPR Part 3.1(3) to make the conditional order sought by the Lenders. The arguments in favour of this course are similar to those in favour of making an order for an interim payment. Since it is clear at this stage that UGL must in any event pay $120m against the claim and has no good arguable basis for saying that it has any entitlement to have the benefit of keeping that money in its pocket, it is just that it should be required to pay that sum into court now as security for the Lenders claim against it, and so that they can have assurance that they are not litigating in vain. Making a conditional order is also the fair way to ensure the litigation is conducted at proportionate cost, since if it transpires that UGL is unable to pay even $120m then there is no point in proceeding to a full trial, with all the effort and expense that would involve.

The respondent’s notice

[84]In the respondent’s notice, UGL sets out three further reasons, not accepted by the judge, why it says it would be wrong for it to be ordered to make a payment into court or an interim payment. (In addition, it set out a further reason why Unitech should not be ordered to make a payment into court or an interim payment; but it is not necessary to address this because at the hearing before us Mr Handyside explained that the Lenders now only seek orders as against UGL, not Unitech.)[85]First, Mr Brisby contends that it would be unjust to require a payment into court or an interim payment where such a condition had not been required by this court in its judgment ([2013] EWCA Civ 1372) allowing UGL and Unitech to plead their defence based on misrepresentation, by which judgment this court accepted that they have a real prospect of making out this defence at trial. We do not think there is anything in this point. On the previous occasion, this court was not concerned with any application for an order for an interim payment or making the defence conditional on payment into court. Nothing the court said or did precluded such applications being made after delivery of its judgment. This was the view of the judge (see [20]) and we agree with him.[86]Secondly, Mr Brisby says that it would be wrong in principle to make an order for payment into court or an interim payment, because where a contract is voidable in equity there is no need for the party wishing to rescind the contract to tender or to return benefits received in advance of trial on the question of their entitlement to rescind. We acknowledge that may be so, but it misses the point. When there is a trial in this case, the court will recognise that (absent some earlier order of the court) there was no necessity in law for UGL to have tendered or paid a sum of $120m by way of restitution before trial as a foundation for being able to assert at trial its right to rescind on the basis of its misrepresentation defence. But we know now, in advance of trial, that at trial the court in its judgment will require UGL to pay the Lenders a minimum of $120m. An order for an interim payment or an order requiring UGL to pay money into court would be in recognition of this reality and the present justice of the case founded on the prediction as to its eventual outcome. The decision that it is just in these circumstances to order a payment into court or an interim payment as bespoke measures crafted to promote the overriding objective in this specific context is not undermined by the fact that there is a rule that a party who purports to rescind a contract is not required under the general law to make restitution prior to trial as a condition of being able to advance that case. Again, our view accords with that of the judge: see [21].[87]Finally, Mr Brisby says that it would be wrong to order UGL to make a payment into court or an interim payment in circumstances where there is evidence that UGL is presently unable to make the requested payment, so that its defence and counter-claim would be stifled. He relied upon two witness statements in very general terms from Mr Malhotra of Unitech.

The judge dismissed this contention at paras. [22]-[26], as follows:

“22. Finally, Mr. Brisby submitted that it would be wrong to make the order sought by the bank in circumstances where there is evidence that the borrowers are (presently) unable to make the requested payment with the result that the effect of the order would be to "stifle" the borrower's rescission defence. This submission is based upon a short statement served just before the hearing (notwithstanding that the borrowers had known since January 2014 that payment into court would be sought) and a further short statement served immediately after the hearing to explain what the first statement meant. 23. Mr. Malhotra, an additional general manager of the legal and compliance team of the guarantor, has stated that the borrowers no longer have the US$150m. loaned by the bank because it has been invested in "equity shares of associated companies which in turn hold investments in project-holding entities in India." He further states that "those projects have not yet been fully developed and so the holding companies have not yet received any, or any significant, returns. The relevant companies are not listed and the shares in them are not freely tradeable." The shares are "illiquid and difficult to market". The projects "are not yet capable of generating immediate returns. They are expected to start to generate returns in about 2 years." Although it was expected that repayment of the loan would be possible by selling the shares in those companies the relevant projects have been delayed and so the borrower "has not yet received the necessary return on its investments from which the facility under the Credit Agreement would be repaid." The borrower has assets in the form of receivables, primarily loans to the investment vehicles, but those companies cannot repay the loans made to them "until the projects have been developed". Finally, the borrower cannot obtain credit facilities, first, because it is barred by clause 19.7 of the Credit Agreement and, second, because "minority shareholdings in uncompleted development projects which are still some way from reaching substantial completion are not an attractive proposition." However, if rescission is obtained at trial (which he understands to be at least two years away) it may be possible to sell the investments or raise significant finance secured upon them "because the relevant projects are likely to have been further developed". 24. This evidence is of a wholly general nature. No particulars are given of the investments or of the underlying projects or of the revenues so far generated by the investments or projects. No accounts have been disclosed in support of the generalised statements. Given that a large sum, some US$120m., will have to be paid to the bank even if the rescission defence succeeds one would expect that a responsible borrower would already have taken steps to realise assets or, at least, investigated the extent to which that is presently possible. Yet no particulars of such steps or enquires have been given. 25. When it is said that the need to make a payment in would stifle a defence the defendant has a heavy evidential burden. In Yorke Motors v Edwards [1982] 1 WLR 444 it was accepted by Lord Diplock at p.449 D that the defendant must put sufficient and proper evidence before the court to show that the suggested condition is impossible for him to fulfil. I do not consider that the evidence relied upon by the borrower, which is of a general nature and wholly unparticularised, is sufficient to discharge the evidential burden upon it. 26. It follows that if I had concluded that there was power to order payment in, or an interim payment, I would not have been persuaded that sufficient evidence had been adduced to show that such an order would stifle the defence.”
[88]We completely agree with the judge’s reasons for rejecting this argument of UGL.

Conclusion

[89]As we have mentioned, at the hearing before us the Lenders said that the order they would like would be an order making UGL’s defence conditional upon payment of $120m into court, in preference to an order for an interim payment. In our judgment, the court has power to make either order and each one could be justified as a proper exercise of discretion by the court in light of the overriding objective. It is appropriate in these circumstances to make an order in line with the Lenders’ preference for a requirement for a payment into court: see para. 78 above.

Overall conclusion

[90]We therefore dismiss the appeal of the Unitech parties and allow the cross-appeal. We ask that counsel kindly draw up an order to reflect our conclusions.

Cited in 9 later judgments