MWB: Modifications, Wrangles, and Bypassing by Robert Harris

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MODIFICATIONS, WRANGLES, AND BYPASSING Rock v MWB The Supreme Court recently handed down judgment in Rock Advertising Ltd v MWB Business Exchange Centres Ltd.1 The judgment is notable for three things: the Supreme Court’s “clean break with something approaching an international common law consensus”2 on the issue of the effect of “No Oral Modification” (“NOM”) clauses, thus overturning the unanimous judgment of the Court of Appeal;3 the wrangles between Lord Sumption4 and Lord Briggs on the means by which NOM clauses may themselves be modified; and the Supreme Court’s bypassing of the issue of consideration, despite the widespread hope that the case might provide an opportunity for some consistency to be restored to this muddled area of English law. This note will argue: that the Supreme Court’s recognition of the effect of NOM clauses is to be welcomed; but that the reasoning in Lord Briggs’ minority judgment is to be preferred to that of Lord Sumption’s leading judgment; and that it is deeply regrettable that the Supreme Court declined to deal with the issue of consideration. Lord Sumption observed that “Modern litigation rarely raises truly fundamental issues in the law of contract”.5 He is undoubtedly correct, and that is why the Supreme Court should have taken advantage of this rare opportunity when such an “exceptional”6 appeal finally reached our highest court for deliberation. The facts and issues

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The facts are straightforward. For seven or eight years, Rock had occupied as licensee premises managed by MWB. In August 2011, Rock agreed in writing to occupy larger premises for 12 months commencing 1 November 2011; the licence fee agreed was £3,500 per month for the first three months, then £4,433.34 per month from February 2012. Rock was unable to meet its financial commitment and, by late February 2012, had accumulated arrears of over £12,000. On 27 February 2012, an oral agreement was made between Ms Evans (MWB’s credit controller, who, on the trial judge’s findings, had “at least ostensible authority”7 to make such an agreement) and Mr Idehen (Rock’s sole director) to reschedule the licence fee payments from February to October 2012; Rock would pay less than the amount originally agreed for the first few months, but more thereafter, such that the arrears would be cleared by the end of the year. On the same day, Rock paid £3,500 to MWB, this being the first instalment due in accordance with the revised payment schedule. On 29 February 2012, having spoken to her finance director, Ms Evans emailed Mr Idehen to say that MWB wished payments to be made as per the original payment schedule, not 1. [2018] UKSC 24; [2018] BLR 479; [2018] 2 WLR 1603 (Lady Hale, Lords Wilson, Sumption, Lloyd-Jones and Briggs) (hereafter “Rock v MWB”). 2. At [32] (Lord Briggs). 3. [2016] EWCA Civ 553; [2016] 2 Lloyd’s Rep 391; [2017] QB 604 (Arden, Kitchin and McCombe LJJ). 4. With whom Lady Hale, Lord Wilson and Lord Lloyd-Jones agreed. 5. At [1]. 6. Ibid. 7. [2016] EWCA Civ 553; [2016] 2 Lloyd’s Rep 391; [2017] QB 604, [8] (Kitchin LJ).

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the revised one proposed by Rock. On 30 March 2012, MWB exercised its right under the licence agreement to lock Rock out of the premises, and it terminated the agreement with effect from 4 May 2012. MWB sued for the arrears, and Rock counterclaimed damages for (what it claimed was) wrongful exclusion from the premises. “The fate of the counterclaim, and therefore of the claim, turned on whether the variation agreement was effective in law.”8 MWB argued that it was not, for two reasons. First, the variation agreement had been made orally, but there was a NOM provision contained in cl.7.69 of the licence agreement: “All variations to this Licence must be agreed, set out in writing and signed on behalf of both parties before they take effect.” Second, MWB claimed that the variation agreement was not supported by consideration. The effect of NOM clauses The Supreme Court’s discussion of NOM clauses can be broken down into three questions. First, should the courts generally give effect to NOM clauses? Second, if so, does the effect of a NOM clause extend to modifications of that clause itself, or can a NOM clause be modified by “other means” (ie means which are not in accordance with its own terms)? Third, if a NOM clause can be modified by other means, can such a modification be implied where the parties have agreed a modification, by these other means, of the substance of their relationship? (i) Should the courts generally give effect to NOM clauses?

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NOM clauses are frequently included in standard commercial contracts, but Rock v MWB was the first time our highest court has been called upon to consider their effect. The English case law up to this point had been “equivocal”.10 On the one hand, in United Bank Ltd v Asif,11 Sedley LJ held that it was “incontestably right” that, in the face of a NOM clause, “no oral variation of the written terms could have any legal effect”. On the other hand, in Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd,12 Beatson LJ drew on various authorities13 to argue (obiter) that “a contract containing a clause that any variation of it be in writing can be varied by an oral agreement or by conduct”,14 with Moore-Bick LJ analogising this conclusion to “the principle that Parliament cannot bind its successors”.15 8. At [3] (Lord Sumption). 9. The first two sentences of this clause additionally contained a version of an “entire agreement” provision, but that was not relevant to the instant case. 10. At [9] (Lord Sumption). 11. (11 February 2000) [2000] EWCA Civ 465; Unreported (Sedley LJ). 12. [2016] EWCA Civ 396; [2016] 1 CLC 712 (Beatson LJ, with whom Moore-Bick and Underhill LJJ agreed). 13. World Online Telecom Ltd v I-Way Ltd [2002] EWCA Civ 413 (Sedley LJ’s dictum at [12] that, despite his own earlier judgment in United Bank Ltd v Asif, “the law on the topic is not settled”); Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2013] EWHC 2118 (Comm) (Gloster LJ’s dictum at [273] that she “incline[d] to the view” that NOM clauses were ineffective); and Virulite LLC v Virulite Distribution [2014] EWHC 366 (QB) (Stuart-Smith J’s dictum at [55] that a NOM clause “does not preclude any variation … from taking effect”). 14. [2016] EWCA Civ 396, [113]. 15. Ibid, [119].

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The trial judge in Rock v MWB had held that the NOM clause was effective, such that the variation agreement was invalid by virtue of its not complying with the requirements of writing and signatures, but the Court of Appeal adopted the Globe Motors reasoning and reversed this decision. Kitchin LJ held that “the most powerful consideration is that of party autonomy”,16 and cited the pithy words of Cardozo J in Alfred C Beatty v Guggenheim Exploration Co:17 “Those who make a contract, may unmake it. The clause which forbids a change, may be changed like any other. The prohibition of oral waiver, may itself be waived … Whenever two men contract, no limitation self-imposed can destroy their power to contract again.”

The core argument seems to be that, since a variation of a contract is itself a contract, and since the common law imposes no requirements of form on the making of contracts, the parties must be taken to have dispensed with the NOM clause by the mere act of agreeing a variation in a manner which is not in accordance with the terms of that NOM clause. The Supreme Court’s judgment that NOM clauses are generally effective, about which both Lord Sumption and Lord Briggs were agreed, thus marks a drastic change from the developing line of authority in the courts below. Lord Sumption correctly observed that all contracts restrict the parties’ autonomy to some extent, so “The real offence against party autonomy is the suggestion that they cannot bind themselves as to the form of any variation, even if that is what they have agreed”.18 Recent academic literature19 has noted that there are many commercial advantages of giving effect to NOM clauses: they promote certainty by preventing “attempts to undermine written agreements by informal means”;20 they avoid disputes “not just about whether a variation was intended but also about its exact terms”;21 and they make it “easier for corporations to police internal rules restricting the authority to agree” variations.22 There are no public policy reasons for denying effect to NOM clauses, so the objections to them are “entirely conceptual”.23 However, there is, in fact, no conceptual inconsistency between the general rule that the common law imposes no requirements of form on the making of contracts and a specific rule that effect will be given to a NOM clause. As Lord Sumption put it:24

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“What the parties to such a clause have agreed is not that oral variations are forbidden, but that they will be invalid. The mere fact of agreeing to an oral variation is not therefore a contravention of the clause. It is simply the situation to which the clause applies.”

16. [2016] EWCA Civ 553; [2016] 2 Lloyd’s Rep 391; [2017] QB 604, [34] (Kitchin LJ). 17. (1919) 225 NY 380, 387–388. 18. At [11]. 19. See eg J Morgan, “Contracting for Self-Denial: On Enforcing ‘No Oral Modification’ Clauses” (2017) 76 CLJ 589; E McKendrick, “The Legal Effect of an Anti-Oral Variation Clause” (2017) 32 Journal of International Banking Law and Regulation 439; J O’Sullivan, “Unconsidered Modifications” (2017) 133 LQR 191. 20. Rock v MWB, [12] (Lord Sumption). 21. Ibid. 22. Ibid. 23. Ibid, [13] (Lord Sumption). Lord Briggs echoed this point, arguing at [22] that the objections were “mainly conceptual”; though, as will be seen, he found that the conceptual concerns mandated a more cautious approach. 24. Ibid, [15].

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In reaching the conclusion that effect should generally be given to NOM clauses, their Lordships proposed analogies with other form-related provisions: Lord Sumption claimed that there is an analogy between NOM clauses and “entire agreement” clauses,25 to which the courts will give effect as long as the collateral agreement is not “capable of operating as an independent agreement”;26 whilst Lord Briggs preferred the analogy with “negotiations subject to contract”.27 These analogies were not central to the reasoning in either judgment, their purpose being merely illustrative, but it is respectfully submitted that Lord Briggs’ analogy is more suitable. Lord Sumption is right that, like NOM clauses, entire agreement clauses “are intended to achieve contractual certainty about the terms agreed”;28 but, as Lord Briggs pointed out, unlike NOM clauses, entire agreement clauses “do not purport to bind the parties as to their future conduct … They therefore give rise to no conceptual difficulty of the type which affects a NOM clause”.29 Whereas NOM clauses seek to prevent the parties from varying their agreement in the future, thus ensuring the continued effect of their earlier intentions, entire agreement clauses seek to nullify representations which the parties have made in the past, thus giving effect to their latest intentions. Instead, the analogy with negotiations subject to contract is much more apt because, even where the substantive terms have been agreed (of the original agreement or, in the case of NOM clauses, of the variation agreement) in a manner which would ordinarily be recognised as sufficient by the common law, there is nonetheless no binding effect given to these substantive terms until the parties have satisfied the procedural requirements by which they have agreed to be bound; the parties’ intentions with respect to their future relationship are effectively held in abeyance until such a time as they have been formalised in the required manner. (ii) Does the effect of a NOM clause extend to modifications of that clause itself?

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If effect is generally to be given to a NOM clause according to its terms, the question which naturally follows is whether this effect extends to modifications of that clause itself. For Lord Sumption, parties are free to modify the contract “only to the extent that the contract allows”,30 which seems to entail that any provision of the contract (whether substantive or procedural) may be modified only in accordance with any procedural restraints imposed by that contract, including the restraints imposed by a NOM clause. That is to say, a NOM clause can be modified (or removed) only by following the procedure as laid down by that NOM clause itself; after all, “It is not difficult to record a variation in writing, except perhaps in cases where the variation is so complex that no sensible businessman would do anything else”.31 If this leads to injustice where one party has relied on an oral variation agreement which is invalid by virtue of the NOM clause, then the solution lies not in limiting the effect of the NOM clause but “in the various doctrines of estoppel”.32 25. 26. 27. 28. 29. 30. 31. 32.

Ibid, [14]. Ibid. Ibid, [29]. Ibid, [14]. Ibid, [28]. Ibid, [11]. Ibid, [15]. Ibid, [16].

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Lord Sumption declined to stipulate what the effect would be of such an estoppel, but presumably it could operate only to remedy the extent of the representee’s reliance on the representation, not to prevent the representor from invoking the existence of the NOM clause at all; it cannot be the latter, since that would entail exactly the same result as simply giving effect to the variation in the first place. Lord Briggs was “more cautious”33 about the extent of a NOM clause’s effect, arguing that a balance needs to be struck between the parties’ autonomy (at the time of entering into the agreement) to bind their future conduct, and their autonomy (at some future time) to unbind themselves from this course of conduct. To this end, a NOM clause should remain in effect “for as long as one of [the parties] desires that this regime should remain in place”,34 enabling variations only if they are in accordance with its terms; but this should not preclude the parties from being able to remove the NOM clause itself “in some [other] form recognised by the law”,35 including by spoken words or by conduct. If Ms Evans and Mr Idehen had explicitly agreed (orally) to do away with the NOM clause in the licence agreement, then they should have been allowed to do so, notwithstanding the fact that such an oral variation would not have been in the form prescribed by the NOM clause. It is submitted that, again, Lord Briggs’ reasoning is to be preferred. The starting point is Lord Briggs’ recognition that the more cautious approach “fully reflects the autonomy of parties to bind themselves as to their future conduct, while preserving their autonomy to agree to release themselves from that inhibition”.36 But, whilst he suggests that it is unlikely that “our differences in reasoning would have any significant consequences for the application of the common law”,37 we can drive a larger wedge between the two approaches. What would the courts do when faced with a NOM-style clause imposing far more stringent variation requirements than mere writing and signatures? Admittedly, public policy considerations would militate against a clause requiring that “any variation must be signed in blood”.38 What about a clause providing simply that “this contract may not be varied by any means”? The courts may find little trouble in distinguishing the effect of such a “No Modification” clause from that of a “No Oral Modification” clause. But what about where a clause makes modification not impossible but just extremely difficult, such as requiring that “any variation must be signed on the top of Mount Snowdon” or that “any variation must be approved by 95% of both parties’ shareholders at their respective annual general meetings”? Or what about where a clause has requirements which are less extreme, but which are nonetheless difficult to satisfy, such as requiring that “any variation must be signed on goatskin vellum”? It is hard to see what public policy objections there could be to such clauses. On Lord Sumption’s view, it seems to follow that such a clause could be modified (or removed) only in accordance with its own terms, but that would amount to an absurd restriction on party autonomy, especially given the commercial reality that the directors of the contracting parties often change between the time a contract 33. Ibid, [31]. 34. Ibid, [22]. 35. Ibid. 36. Ibid, [25]. 37. Ibid, [20]. 38. This example was suggested by counsel for Rock, seemingly without any awareness that public policy considerations may enable its effect to be distinguished from more standard NOM clauses such as cl.7.6.

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is made and the time a variation of that contract is sought. Lord Sumption’s reasoning is persuasive only when considering the archetypal NOM clause, such as that in cl.7.6 requiring writing and signatures; but, with respect, it is shown to be defective as soon as we consider some slightly quirkier procedural restraints. There needs to be either some limit on the procedural restraints to which the courts will give effect, or an ability for the parties to remove a procedural restraint in a manner which is not strictly in accordance with the terms of that restraint. The former solution is undesirable, for all the reasons given above of the commercial benefits of NOM clauses (which apply equally to other procedural restraints), so the latter solution, of which Lord Briggs’ approach is a variety, should be adopted. Therefore, the NOM clause (or other procedural restraint) should continue to have effect for as long as one of the parties wishes it to do so, but what is “conceptually impossible is for the parties … not to be free, by unanimous further agreement, to vary or abandon it by any method, whether writing, spoken words or conduct, permitted by the general law”.39

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(iii) Can the modification of a NOM clause be implied? Given his answer to question (ii), this question did not arise for Lord Sumption since, for him, a NOM clause can be modified only in accordance with its own terms. But if, as has been submitted, Lord Briggs’ approach is preferable, can a modification of a NOM clause be implied where the parties have agreed a modification, by other means, of the substance of their relationship? On this question, Lord Briggs agreed with Lord Sumption’s proposition that “The natural inference from the parties’ failure to observe the formal requirements of a No Oral Modification clause is not that they intended to dispense with it but that they overlooked it”.40 Drawing further on the analogy with negotiations subject to contract, Lord Briggs argued that a modification of a NOM clause should be implied only “by strictly necessary implication”,41 such as where the subject matter of the variation calls for “immediately different performance from that originally contracted for, before any written record of the variation could be made and signed”.42 This leads to the conclusion that, in the instant case, Rock and MWB had not impliedly agreed to remove the NOM clause simply by virtue of having orally agreed to alter the payment schedule. This is undoubtedly the correct conclusion. If it has been established that effect should generally be given to NOM clauses, this effect should not be overridden unless the parties have manifested their intention, either expressly or by necessary implication, that their relationship should no longer be restrained by it. It seems most likely that Ms Evans and Mr Idehen were simply unaware of the existence of the NOM clause, so this case illustrates precisely the kind of situation where such a clause matters. Moreover, another reason for preferring Lord Briggs’ reasoning (including his allowing the ability for a NOM clause to be varied by necessary implication) becomes clear when considering the unsatisfactory nature of the alternative, namely Lord Sumption’s use of 39. 40. 41. 42.

At [26] (Lord Briggs). Ibid, [15] (Lord Sumption). Ibid, [31]. Ibid, [30].

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estoppel as a safety valve. Lord Sumption recognised that “the scope of estoppel cannot be so broad as to destroy the whole advantage of certainty”43 for which a NOM clause was agreed in the first place, so:44 “At the very least, (i) there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality; and (ii) something more would be required for this purpose than the informal promise itself.”

This requirement of “something more” is borrowed from the reasoning in Actionstrength Ltd v International Glass Engineering In Gl En SpA.45 However, as Peel points out in relation to that case, “it is a little difficult to see what might suffice”46 as “something more”, and the same point can be made here. If, for example, MWB had been required to represent expressly that it would not invoke the NOM clause, then the parties must surely have been sufficiently aware of its requirements as to ensure that they were met. Indeed, the same point can be made again with respect to Lord Briggs’ suggestion of an express oral agreement to abandon the NOM clause. But it cannot be made with respect to his suggestion that the NOM clause could be abandoned by strictly necessary implication; it is the fact that Lord Briggs would allow for the latter which is the crucial difference and which, it is submitted, makes his approach correct (although unfortunately not now the law). In need of further consideration

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The other ground of appeal asked the Supreme Court to decide whether Rock had provided consideration for the variation agreement. The problem for Rock was that, due to the time value of money (what Lord Sumption called “the implicit interest cost”47), Mr Idehen’s proposal to defer the payments effectively amounted to a proposal to pay only part of the debt owed to MWB; but the 1884 House of Lords decision in Foakes v Beer,48 which confirmed the principle in Pinnel’s Case,49 held that part-payment of a debt cannot constitute good consideration. This is not the place to assess the merits and demerits of the rule in Foakes v Beer, but simply to note that its scope of application has been chipped away over the years, resulting in an incoherent set of consideration rules. In Williams v Roffey Bros & Nicholls (Contractors) Ltd,50 the Court of Appeal accepted that the “practical benefit” of an expectation of commercial advantage (or at least an expectation of the avoidance of commercial disadvantage) was good consideration for a promise to pay more in exchange 43. Ibid, [16]. 44. Ibid. 45. [2003] UKHL 17; [2003] BLR 207; [2003] 2 AC 541 (eg Lord Bingham at [9], Lord Clyde at [35], and Lord Walker at [51]). 46. E Peel (ed), Treitel on the Law of Contract, 14th edn (Sweet & Maxwell, London, 2015), [5.027]. 47. At [3]. 48. (1884) 9 App Cas 605 (UKHL) (Earl of Selborne LC, Lords Blackburn, Watson and FitzGerald). 49. (1602) 5 Co Rep 117a (CP), which established the principle that “payment of a lesser sum on the day in satisfaction of a greater, cannot be any satisfaction for the whole … but the gift of a horse, hawk, or robe, etc in satisfaction is good”. 50. [1991] 1 QB 1 (CA: Glidewell, Purchas and Russell LJJ).

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for substantively the same provision of services.51 Although the “practical benefit” concept in Williams v Roffey was adopted in relation to a promise to pay more, it left open the possibility that there could be such practical benefit in relation to a promise to accept less in satisfaction of an existing debt. That possibility was rejected in In re Selectmove Ltd,52 with Peter Gibson LJ correctly holding that such an extension would “leave the principle in Foakes v Beer[53] without any application”,54 especially since the practical benefits of accepting part-payment of a debt, outlined eloquently by Lord Blackburn,55 were precisely what was rejected as being sufficient consideration in Foakes v Beer. But the Court of Appeal in Rock v MWB found themselves able to make this extension of the concept of “practical benefit”, holding that MWB received consideration in the form of (i) a greater likelihood of payments being made if they were deferred, and (ii) the fact that MWB was less likely to be left with vacant premises whilst it sought a new licensee, thus, in Arden LJ’s words, “avoiding a void”.56 This decision was not only factually spurious (if these really had been practical benefits to MWB, then it seems unlikely they would have exercised their right to lock Rock out of the premises), but also completely undermined the principle in Foakes v Beer. Having decided the case on the basis of the effectiveness of the NOM clause (and thus having reached the conclusion that the variation agreement was invalid), the Supreme Court declined to deal with the issue of consideration, asserting that any re-examination of Foakes v Beer “should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum”.57 It is respectfully submitted that, in bypassing the consideration question, the Supreme Court has shirked its responsibility and left this area of English law in a confused and muddled state. The distinctions between different types of case have been sliced finer and finer: we have “pay more” cases in which the Foakes v Beer principle does not apply (eg Williams v Roffey); we have “pure debt” cases in which the Foakes v Beer principle does apply (eg Foakes v Beer itself and In re Selectmove); and, depending on how much weight is put on the Court of Appeal’s dicta in Rock v MWB, which remain untouched by the Supreme Court’s judgment, we now also seem to have a category of “debt plus something more than simply accommodating the debtor” cases in which the Foakes v Beer principle does not apply, even where the “plus” is largely a fiction. Counsel for Rock attempted to slice the distinctions even finer, suggesting a further division between debt cases where the obligation to pay money is voluntarily assumed (such as where the debt derives from a contract, as in Rock v MWB) and debt cases where the obligation to pay money is 51. It was subsequently held in Adam Opel GmbH v Mitras Automotive (UK) Ltd [2008] EWHC 3205 (QB); [2008] CILL 2561 that a supplier’s promise to continue supplying a part that it was already contractually obliged to supply amounted to good consideration. 52. [1995] 1 WLR 474 (Peter Gibson LJ, with whom Stuart-Smith and Balcombe LJJ agreed). 53. In fact, Foakes v Beer was not even mentioned in Williams v Roffey. 54. [1995] 1 WLR 474, 481. 55. In particular, Lord Blackburn argued at 622 that, for businessmen, “prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole”, most obviously in a case where the debtor’s solvency is doubtful, but even where the debtor is perfectly solvent. This principle was illustrated by Arden LJ by the metaphor that, for the creditor, it may be more valuable to have “a bird in the hand rather than two in the bush”: Rock v MWB [2016] EWCA Civ 553, [83]. 56. Ibid, [72]. 57. At [18] (Lord Sumption).

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externally imposed (such as where the debt derives from a court judgment, as in Foakes v Beer, or from the statutory obligation to pay tax, as in In re Selectmove). And, within the category of “pure debt” cases, which seems to be the one category in which the Foakes v Beer principle still applies, its effect at common law has been undercut by the recognition, in Collier v P & MJ Wright (Holdings) Ltd,58 that the equitable doctrine of promissory estoppel may apply not just to suspend creditors’ rights to recover debts but to extinguish them entirely. It is clear that there needs to be some consistency and coherence restored to our rules on consideration; indeed, Lord Sumption himself accepted that the area “is probably ripe for re-examination”.59 Since Foakes v Beer is a House of Lords decision, this re-examination can be performed only by the Supreme Court;60 but, with its having taken 134 years for this issue finally to reach our highest court, it is unclear when it will have another opportunity to do so. Admittedly, the fact that such a re-examination would have been obiter is not ideal, but this does not normally prevent the courts from undertaking obiter examinations where they feel that it is necessary to develop the law. For example, the Court of Appeal in Rock v MWB had a fairly lengthy discussion of the doctrine of promissory estoppel,61 despite the fact that the case had already been decided on a prior question; and, only last year, having decided a case on two other grounds, the Supreme Court itself consciously delivered careful, indeed divided, obiter opinions on a third.62 The Supreme Court has an important duty within our legal system not just to adjudicate on the specific cases which come before it, but also to clarify and elucidate the law in order to promote certainty and to encourage consistency in the courts below. The result of unclear law is futile and expensive litigation, with potentially unfair results. Regrettably, whether the solution is to reaffirm Foakes v Beer (and reaffirm its scope of application), to overrule the part-payment rule entirely, or to reform the doctrine of consideration in some other way, the Supreme Court has failed in this duty. Conclusion

It is hoped (though not optimistically) that another opportunity will arise soon for the Supreme Court to re-examine the issue of consideration, so that Rock v MWB can be remembered not as “the opportunity that got away” but as the case which recognised the effect of NOM clauses; this recognition is welcome, though, as has been argued, it is unfortunate that the majority agreed with Lord Sumption’s reasoning rather than that of Lord Briggs. A final point worth noting in conclusion is that the Supreme Court seems to have become increasingly reluctant to overturn well-entrenched, historic cases without 58. [2007] EWCA Civ 1329; [2008] 1 WLR 643 (Mummery, Arden, and Longmore LJJ). 59. At [18]. 60. See eg In re Selectmove (Peter Gibson LJ’s dictum at 481 that any extension of the concept of “practical benefit” to cases governed by the principle in Foakes v Beer “must be by the House of Lords”); Collier v Wright (Arden LJ’s dictum at [6] that “the point … is not open in this court”); Birmingham City Council v Forde [2009] EWHC 12 (QB); [2009] 1 WLR 2732 (Christopher Clarke J). 61. [2016] EWCA Civ 553; [2016] EWCA Civ 553; [2017] QB 604, [50–63] (Kitchin LJ) and [91–92] (Arden LJ). 62. Gard Marine and Energy Ltd v China National Chartering Co (The Ocean Victory) [2017] UKSC 35; [2017] 1 Lloyd’s Rep 521; [2017] Lloyd’s Rep IR 291; [2017] 1 WLR 1793.

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deliberation by a larger panel.63 It is unclear what magic of combination is achieved by having a larger panel but, whilst this remains the position of the Supreme Court, parties would be well advised to request a larger panel whenever departure from an important case may become necessary. The consistency and coherence of English law depends on it. Robert Harris*

THE GOVERNING LAW(S) OF A LETTER OF CREDIT Taurus v SOMO revisited

The decision of the Supreme Court in Taurus v SOMO (“Taurus”)1 has been the subject of two Comments in the May 2018 edition of the Quarterly, by Dr CH Tham2 (focusing in particular on whether a third-party debt order can or should extend to a sum directed to be paid by the debtor to a third party) and Stephen Tricks3 (principally directed to the relationships between banks under a letter of credit). Both Comments identify some difficulties with the decision of the Supreme Court. This Comment addresses a further issue arising from Taurus. It is what (if anything) the Supreme Court decided about the governing law of the contracts contained in a letter of credit and in particular those contracts to which the issuing bank is a party. The point is of importance not only in relation to the factual situation in Taurus itself (concerning a letter of credit issued by the branch of a bank in London advised by an overseas bank to an overseas beneficiary) but also to what might be described as the mirror image of those facts: a letter of credit issued by the branch of a bank overseas through a nominated/ confirming bank4 in London where an attachment or injunction is obtained from a court in the jurisdiction of the issuing bank which prevents or purports to prevent the issuing bank from making payment to the nominated bank or to the beneficiary. Traditionally, the English courts have taken a robust approach to such orders. One reason has been that the obligations of the issuing bank to both the beneficiary and the nominated bank are governed by English law and, even if the issuing bank is subject to the overseas court’s jurisdiction, that court order will not as such discharge those obligations as a matter

63. In addition to Lord Sumption’s assertion in Rock v MWB at [18], see eg R (Keyu) v Secretary of State for Foreign and Commonwealth Affairs [2015] UKSC 69; [2016] AC 1355 (Lord Neuberger’s dictum at [132] that the Supreme Court would require “a panel of nine justices” in order to reconsider the rationality test laid down by the Court of Appeal in Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223). * Keble College, University of Oxford. 1. Taurus Petroleum Ltd v State Oil Marketing Co of the Ministry of Oil, Iraq [2017] UKSC 64; [2018] 1 Lloyd’s Rep 29; [2017] 3 WLR 1170. 2. “Different debts for different purposes” [2018] LMCLQ 210. 3. “Bank-to-bank relationships in letters of credit” [2018] LMCLQ 217. 4. For convenience, this Comment will refer in general to a nominated bank, since a confirming bank is essentially a nominated bank which has added an independent prior promise to pay the beneficiary against conforming documents. The obligations of an issuing bank to a nominated bank do not differ depending on whether the nominated bank has issued its confirmation as is apparent from Art.7 of UCP 600 (infra, fn.8).