Lonrho Exports Ltd v Export Credits Guarantee Department

The plaintiffs, Lonrho, having exported goods to Zambia, were owned a great deal of money because of the state of the economy in Zambia in 1975, coupled with foreign exchange restrictions. However, Lonhro had entered into export credit agreements with the defendant, Export Credit Guarantee Department(ECGD), under which ECGD had agreed to reimburse them 95% of the amount of any losses arising under its contracts of sale with buyers in specified contracts by reason of, inter alia, “political events, or economic difficulties…”After ECGD had indemnified the plaintiffs for their loss, they recovered a sum of money from the Zambia Government, which money was then placed in a fund. The plaintiffs then claimed that the fund held by ECDG owed them their uninsured losses(outstanding 5%) and the interest on that sum. The general principle of subrogation to the effect that, where an insure recovers, by way of subrogation, a sum of money greater that what he has paid out to the assured, he (the insurer) holds the balance on trust for the assured, who has an equitable propriety interest in the money. However, the court ruled that, as the money received by ECDG was, in the circumstances, the absolute property of the State and was, therefore, not recoverable by the plaintiffs under the terms of the credit export agreement, the plaintiffs claim must fall.