LM-2024-000238 - [2025] EWHC 1441 (Comm)

Mr Mukherjee argued for a broad reading of the words “otherwise acting on behalf of or for the benefit of” in clause 5.1. He relied primarily on the distinction made within the clause itself between “an agent” and one “otherwise” acting for or on behalf of another. He also submitted that clause 5.8.2 could not refer only to the case of agency, because it presupposed substantive contractual rights and obligations as between the intermediary and the Principal. Therefore (he said) the case of a back-to-back sale to Hyposwiss would fall within clause 5.1. As regards the definition of “Principal” in clause 1.3 purely in terms of agency, Mr Mukherjee pointed to the 2014 iteration of the Terms of Business, which define “Principal” not within the definitions clause but solely within clause 5.1 (see paragraph 11 above), and he submitted that the introduction in later iterations of a narrower definition in clause 1.3, conflicting with the usage in clause 5.1, represented a failure to reflect the fact that one might act on behalf of or for the benefit of another without being an agent stricto sensu. Mr Mukherjee also submitted that clause 5.8.2 made no sense if the intermediary must be an agent.

Attractively though that argument was made, I do not think that it is correct.

The Terms of Business have to be read as a whole and ought to be construed, so far as is reasonably possible (though no further), so that they cohere. The definition of “Principal” in clause 1.3 cannot simply be ignored. Even if it were to be modified by other provisions, it would still in my view limit the possible scope of the words relied on in clause 5.1. It is a strained construction to say that a buyer under a sub-sale (here, Hyposwiss) is one “on behalf of or for the benefit of” whom the buyer from Jefferies (here, Ashenden) contracts with Jefferies. The buyer from Jefferies buys on its own behalf and sells on its own behalf. All those in trade might be said to act for the benefit of their customers, but such a broad reading is inherently implausible and does not sit easily with clause 1.3.

Clauses 5.2, 5.3, 5.4 and 5.5—and, indeed, the very notion that the Principal is bound by a contract entered into by the intermediary—require that the intermediary be acting as agent, whatever label might have been attached to the intermediary.

If Ashenden was not Hyposwiss’s agent for buying the Notes, Hyposwiss cannot have liability to Jefferies under the contract, no matter what clause 5.4 says. Clause 5.4 cannot enable Ashenden to make Hyposwiss liable under the contract with Jefferies, unless Ashenden was acting as Hyposwiss’s agent. (No one has suggested to me that, notwithstanding clause 29.1, some consideration of foreign law affects this conclusion.)

I think that clause 5.8.2, far from assisting Mr Mukherjee on this point, leaves him in a bind. His contention is that the sub-clause applies (at least) to an intermediary who is not an agent; in the present case, to an intermediary, Ashenden, that ex hypothesi buys from Jefferies in order to effect a back-to-back sale to Hyposwiss. What he meant, as I understood it, was that clause 5.8.2 covered the case where the intermediary has substantive performance rights against the Principal (such as the right to receive payment from its own buyer, here Hyposwiss). This does not assist Ashenden, however, unless the contractual obligations in respect of the Trade were owed by Hyposwiss and not by Ashenden. And that can only be the case if (a) Ashenden had authority to contract on behalf of Hyposwiss (that is, was acting as its agent) and (b) clause 5 excludes any liability on the part of Ashenden.

The question remains of what to make of the words “or otherwise acting on behalf of or for the benefit of” in clause 5.1. If the explanation does not lie in overenthusiastic drafting, the wording probably represents an attempt to ensure that the provisions of clause 5 operate where, regardless of the description or label attached to the intermediary by the Principal, there is in substance a relationship of agency. I also note that, if it were the case that the intermediary contracted for a third party for which it was not an agent, it would be in breach of its warranty of authority and liable to Jefferies accordingly.

Therefore I do not consider that it assists Ashenden to argue that, if it was not acting as Hyposwiss’s agent, it was nevertheless acting on behalf of or for the benefit of Hyposwiss.

However, even if Ashenden were an intermediary within the scope of clause 5, its position would not, in my judgment, be improved. This follows from a consideration of the construction and operation of clause 5 as a whole.

The effect of clause 5.1 is that, even if the intermediary has disclosed that it has a Principal, and even if it has disclosed the identity of the Principal, the intermediary is to be treated as the counterparty to the Trade, save insofar as the further provisions of clause 5 provide differently. This is the default provision.

Clause 5.3, however, is drafted on the basis that the Principal is to be bound by the contract. Thus, for example, clause 5.3.1 is a warranty of authority; clause 5.3.2 is a warranty of the Principal’s ability to contract; and clause 5.3.6 presupposes that the Principal has obligations and liabilities under the contract—it is a contractual promise by Ashenden to procure the performance by its Principal (here, Hyposwiss) of all obligations and liabilities arising under or by virtue of the Terms of Business. These all imply agency; they are premised on the intention that the contract shall bind the Principal.

Although I do not find the relationship between clause 5.1 and clause 5.3 to be obvious, I think the clue lies in clause 5.2. Clause 5.1 does not intend to relieve the Principal, with whose authority the intermediary has contracted, from liability under the contract. Rather, it seeks to do two things: first, make clear that, save only as further provided in the remainder of clause 5, the intermediary is liable on the contract; second, make clear that, save only for the same further provisions, Jefferies is contracting as though only the intermediary were its customer (and thus undertakes no regulatory obligations to the Principal).

Clause 5.3.6 makes clear that, even in cases where the intermediary has no primary liability under the contract, it has a secondary liability in respect of performance by the Principal.

Clause 5.4 provides that, if Ashenden has notified Jefferies of the identity of the Principal to which an instruction relates, the contractual rights and obligations other than under clause 5 itself shall be between Jefferies and the Principal alone. If that clause is engaged, the liabilities undertaken by the agent/intermediary pursuant to clause 5.3 subsist. In that case, the Principal (Hyposwiss) has the primary liability and the agent/intermediary (Ashenden) has the liabilities it has undertaken in clause 5.3, including the liability to procure performance by the Principal of the Principal’s obligations and liabilities.

Clause 5.8 deals with matters arising after the contract has been made, namely when “an event of default” (such as non-payment) occurs. In construing it, it is well to have in mind a basic legal proposition, with which it is consistent: “It has long been established that a principal who was at the time of contracting completely undisclosed as such can sue or be sued on the contract of the agent”: Chitty on Contracts, 35th edition, para 22-073. The opening words of the clause mean, in my view, that the Principal is in default. They are rather awkward; that, however, is because they refer to the relevant matter, namely “an event of default”. The clause does not say, “If an event of default occurs”, though it could have done. The words, “If in relation to any Principal of yours …”, are simply to be taken as referring to the Principal being in default. The premise, accordingly, is precisely the same as that of clause 5.3: the Principal is bound. The following sub-clauses simply mean (to put it broadly) that the intermediary must assist Jefferies to get payment from the Principal. The need to comply with clause 5.8.1 might not arise; the intermediary might have provided this information previously. Clause 5.8.2 is grammatically ambiguous, in that it could refer to legal action by Jefferies or legal action by the intermediary. Probably, in context, it refers to the former, because the premise is that the performance obligations (in particular, payment) are owed to Jefferies. For reasons already indicated, the sub-clause does not assist Ashenden in any event.

This takes us back to the opening words of clause 5.4: “Where you have notified us of the identity of the Principal to which an instruction relates …” For Ashenden, Mr Mukherjee submitted that this notification could be given at any time; in particular, it could be given after the time of contracting and after the occurrence of “an event of default”. Thus, he said, the notification of the identity of Hyposwiss as Principal on 4 July 2023 was sufficient to engage clause 5.4, and the rights and obligations under the contract lay between Jefferies and Hyposwiss alone. In my judgment, that is incorrect. First, the default position is that, if Ashenden contracted without identifying its Principal, Ashenden is liable under the contract. The proposed construction would mean that Ashenden could subsequently be relieved of that liability. This is an uncommercial reading, especially since Jefferies would then have no control over or knowledge of the party with whom it was contracting. Second, the use of the perfect tense (“have notified”, not “notify”) militates strongly against the suggested construction. Third, the double reference to “instruction” in the first sentence of the clause is relevant: the focus is on the instruction and any contract made pursuant to the instruction, and this naturally indicates that it is dealing with the situation where Ashenden says, in effect, “I am giving this instruction as agent for (or on behalf of) X”, and a transaction is entered into pursuant to that instruction.

Accordingly, while I accept that the structure of clause 5 is awkward, the logic is in my view quite clear:

If this is correct, Ashenden has primary liability under the contract, pursuant to clause 5.1, because nothing has been done to avoid or extinguish that primary liability. Even if (contrary to my view) the notification of the identity of the Principal (Hyposwiss) on 4 July 2023 was sufficient to extinguish Ashenden’s primary liability, Ashenden remains liable on its contractual promise in clause 5.3.6.

Accordingly, the Strike-out Application is dismissed.