National Stadium Project (Grenada) Corporation v NH International (Caribbean) Ltd

Citation: UKPC 6 (successful appeal from the decision of the Court of Appeal of Trinidad & Tobago on the power of the Court to strike out appeals based on the decision in Credit Foncier of Mauritius Ltd v Paturau & Co (1876) 35 LT 869).

A dispute arose between the Employer (“NS”) and one of the Major Contractors (“NH”) involved in a construction project for the development of a national stadium and sporting complex for the Government of Grenada, with the primary issue relating to who was entitled to a “frozen fund,” held on trust by the bank (“CIB”) responsible for facilitating the financing of the project.

NS had been set up as a special purpose vehicle by ICS to administer the project. Pursuant to two separate agreements, a facility agreement and development agreement (“the agreements”), CIB had agreed to raise the debt finance required for the project and had undertaken “to pay or cause to be paid through NS all monies due to ICS, consultants, suppliers, and other providers of goods and services”.

Following the termination of NH’s contract in October 1999, and prior to completion in June 2000, NH had succeeded in obtaining an ex parte injunction restraining CIB from paying out money raised under the facility agreement beyond a certain limit (“the frozen fund”) and, in March 2002, NH obtained an arbitral award for just over that amount (approximately EC$7.6million).

In the interval, NS had advanced funds to ICS to enable it to see the project through to completion and NS subsequently obtained judgment against the indebted ICS for approximately EC$13.5million.

What then followed were consolidated proceedings in the Trinidad and Tobago Courts, in which the parties each sought declarations that they owned the frozen fund, with the Judge finding in favour of NH. The judge held that the primary purpose of the trust, in which the frozen fund was held, had been to benefit suppliers and providers to the construction project, and not, as NS had argued, to benefit and protect the investors and bondholders. Given that the bondholders had been fully repaid, the judge declared that the frozen fund be held on trust for NH and directed an assignment by ICS to NH of its legal chose in action to recover any payments due to it from NS.

In an application to the Court of Appeal, NS sought to challenge the judge’s findings (i) that there existed no Quistclose trust in its favour (in particular the finding that NS’s case was based on a “conceptual misunderstanding” as to the effect of repayment of the bondholders); and (ii) that there should be an equitable assignment to NH. The appeal was however rejected without a hearing on the merits, with the court doubting that entitlement of the NS to the fund even if the judge’s principal findings were reversed on appeal.

The Privy Council allowed NS’s appeal, finding that the Appellant had provided arguable grounds at least for reversing the judge’s conclusion that NS had no basis for claiming an interest in the frozen fund. It found the Court of Appeal had been wrong to regard itself as bound by the principles set out in Credit Foncier Mauritious Ltd v Paturau & Co (1876) 35 LT 869 applying to applications to strike out notices of appeal, and should have recognised the exercise of discretion required by later authorities, such as Elders Pastoral Ltd v Bank of New Zealand [1990] 1 WLR. This finding alone was sufficient to justify reversing the order of the Court of Appeal.

The case was remitted to the Court of Appeal for full hearing.

Link to Judgment

Counsel: Simon Hughes QC appeared on behalf of the Appellant, National Stadium.

Counsel

Simon Hughes QC

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