Date: Fri, 11 Jul 2003 11:59:52 -0400

From: Jason Neyers

Subject: Estoppel Question

3. If Z is subordinated to Y, he will be subordinated to everyone who ranks pari passu with Y and everyone who ranks above Y. Why should other creditors take the benefit of a representation that was not made to them and of which they were unaware?

I should make it clear that there are no other creditors except Y and Z.

Robert Stevens wrote:

1. I don't think there is any doctrine of transferred representation.

2. It is very doubtful whether a negative pledge in favour of an unsecured creditor is capable of binding subsequent incumbrancers (Kelly v Central Hannover bank 11 F Sup 497). This is an aspect of the general rule that third parties are not bound by contracts to which they are not parties. There are limited exceptions to this rule (eg Swiss Bank v Lloyds Bank [1979] Ch 548; Tettenborn 1982 CLJ 58) but none wide enough to cover the situation you describe. This being so, I think it is very doubtful whether a third party would be bound by the sort of non-contractual statement you are postulating.

3. If Z is subordinated to Y, he will be subordinated to everyone who ranks pari passu with Y and everyone who ranks above Y. Why should other creditors take the benefit of a representation that was not made to them and of which they were unaware?

Looks fairly hopeless to me but I am not an expert in estoppel.

R

--
Jason Neyers
Assistant Professor of Law
Faculty of Law
University of Western Ontario
N6A 3K7
(519) 661-2111 x. 88435

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