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Welsh Development Agency v Export Finance Co Ltd
Welsh Development Agency v Export Finance Co Ltd [1992] BCLC 148 (often abbreviated to WDA v Exfinco) is a judicial decision of the English Court of Appeal. The decision related to a number of aspects relating to complex financing arrangement, but is most often cited for the decision in relation to recharacterisation.
The decision is now probably the leading English law case in relation to recharacterisation risk in financial transactions.
The Parrot Corporation was a company which manufactured and exported floppy disks. The company was a start-up venture funded by the Welsh Development Agency (WDA). As part of the financing provided to the company by the WDA, the WDA took security by means of an all-assets floating charge over the company's assets and undertaking.
The company then sought to raise further finance from the Export Finance Co Ltd (Exfinco). That financing was documented principally under a master agreement which Staughton LJ referred to in the judgment as "a document of remarkable complexity". Under that agreement, broadly, every time the company agreed an overseas sale, it triggered a mandatory offer from Exfinco to buy the goods from the company, and then promptly resell the goods to the overseas purchaser. In relation to the resale the company would act as agent for Exfinco and Exfinco would be the undisclosed principal. Accordingly, the only person whom the overseas buyers ever dealt with was the company - they were unaware of the role played by Exfinco in each and every sale. The company would then also receive the purchase price from the overseas buyer as agent for Exfinco, and those sums would be paid into a segregated account which was completely under the control of Exfinco. The goods sold overseas would be subject to a title retention clause in favour of Exfinco.
The Parrot Corporation began to encounter severe financial difficulties, partly because of the collapse in the price of floppy disks, but also allegations of financial irregularities swirled around the company. On 16 May 1989 the company ceased trading, and a dispute arose between WDA and Exfinco as to whether the arrangements under the master agreement were effective, and accordingly who had the better claim to moneys paid (and still payable) by overseas buyers to the company.
At first instance the matter came before Sir Nicolas Browne-Wilkinson VC. The Vice-Chancellor ruled in favour of WDA on two alternative grounds.
Exfinco appealed against the Vice Chancellor's decision, and also lodged counterclaims against the receivers appointed by the WDA for tortious interference with their property.
All three judges of the Court of Appeal gave reasoned judgments, but the first and longest judgment was given by Dillon LJ.
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Welsh Development Agency v Export Finance Co Ltd
Welsh Development Agency v Export Finance Co Ltd [1992] BCLC 148 (often abbreviated to WDA v Exfinco) is a judicial decision of the English Court of Appeal. The decision related to a number of aspects relating to complex financing arrangement, but is most often cited for the decision in relation to recharacterisation.
The decision is now probably the leading English law case in relation to recharacterisation risk in financial transactions.
The Parrot Corporation was a company which manufactured and exported floppy disks. The company was a start-up venture funded by the Welsh Development Agency (WDA). As part of the financing provided to the company by the WDA, the WDA took security by means of an all-assets floating charge over the company's assets and undertaking.
The company then sought to raise further finance from the Export Finance Co Ltd (Exfinco). That financing was documented principally under a master agreement which Staughton LJ referred to in the judgment as "a document of remarkable complexity". Under that agreement, broadly, every time the company agreed an overseas sale, it triggered a mandatory offer from Exfinco to buy the goods from the company, and then promptly resell the goods to the overseas purchaser. In relation to the resale the company would act as agent for Exfinco and Exfinco would be the undisclosed principal. Accordingly, the only person whom the overseas buyers ever dealt with was the company - they were unaware of the role played by Exfinco in each and every sale. The company would then also receive the purchase price from the overseas buyer as agent for Exfinco, and those sums would be paid into a segregated account which was completely under the control of Exfinco. The goods sold overseas would be subject to a title retention clause in favour of Exfinco.
The Parrot Corporation began to encounter severe financial difficulties, partly because of the collapse in the price of floppy disks, but also allegations of financial irregularities swirled around the company. On 16 May 1989 the company ceased trading, and a dispute arose between WDA and Exfinco as to whether the arrangements under the master agreement were effective, and accordingly who had the better claim to moneys paid (and still payable) by overseas buyers to the company.
At first instance the matter came before Sir Nicolas Browne-Wilkinson VC. The Vice-Chancellor ruled in favour of WDA on two alternative grounds.
Exfinco appealed against the Vice Chancellor's decision, and also lodged counterclaims against the receivers appointed by the WDA for tortious interference with their property.
All three judges of the Court of Appeal gave reasoned judgments, but the first and longest judgment was given by Dillon LJ.