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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Satinland Finance SARL & Anor v BNP Paribas Trust Corporation UK Ltd & Anor  EWHC 3062 (Ch) (24 November 2010)
Cite as:  Bus LR D96,  EWHC 3062 (Ch)
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Strand, London, WC2A 2LL
B e f o r e :
| (1) Satinland Finance SARL
(2) Trimast Holding SARL
|- and -
|(1) BNP Paribas Trust Corporation UK Limited
(2) Irish Nationwide Building Society
Robert Miles QC and Joanna Perkins (instructed by Clifford Chance LLP) for the 1st Defendant
Mark Howard QC and Stephen Midwinter (instructed by Linklaters LLP) for the 2nd Defendant
Hearing dates: 18th & 19th November 2010
Crown Copyright ©
Mr Justice Mann :
The procedural circumstances of this application
"the issue of £126,131,000 Lower Tier II Notes due 2016".
The interest rate was 13%, payable on 12th August each year.
"(A) The Dated Subordinated Notes and the Receipts and Coupons relating thereto constitute direct, unsecured and, in accordance with sub-paragraph (B) below, subordinated obligations of the Issuer and rank pari passu without any preference among themselves.
(B) The claims of the holders of Dated Subordinated Notes and the Receipts and Coupons relating thereto will, in the event of the winding up or other dissolution of the Issuer, be subordinated in right of payment in the manner provided in the Trust Deed to the claims of all Senior Creditors, present and future, of the issuer and will rank, in the event of the winding up or other dissolution of the Issuer, at least pari passu in right of payment with all other Subordinated Indebtedness, present and future, of the Issuer."
The noteholders are holders of Dated Subordinated Notes within that condition. The effect of this condition is that they are subordinated behind Senior Creditors (whose definition I do not need to set out).
Interest on Fixed Rate Notes"
Each Fixed Rate Note bears interest from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each year up to (and including) the Maturity Date."
"REDEMPTION AND PURCHASE"
"(a) Redemption and maturity
Unless previously redeemed or purchased and cancelled as specified below, each Senior Note and each Dated Subordinated Note (including each Index Linked Redemption Note and Dual Currency Redemption Note) will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms in the relevant Specified Currency on the Maturity Date."
The redemption date for the notes is in 2016.
"9. (b) Events of Default relating to Dated Subordinated Notes
This Condition 9(b) shall apply only to Dated Subordinated Notes and in this Condition 9(b) references to Notes, Receipts and Coupons and Noteholders, Receiptholders and Couponholders shall be construed accordingly.
(A) If default is made in the payment of any principal or interest due in respect of the Notes and such default continues for a period of seven days (in the case of principal) or 14 days (in the case of interest) after the due date for the same the Trustee may, subject as provided below, at its discretion and without further notice, institute proceedings for the winding-up of the Issuer in Ireland (but not elsewhere), but may take no further action in respect of such default.
(B) If, otherwise than for the purposes of a Permitted Reorganisation or for the purposes of a reconstruction or amalgamation on terms previously approved in writing by the Trustee or by an Extraordinary Resolution of the Noteholders, an order is made or an effective resolution is passed for the winding-up of the Issuer in Ireland (but not elsewhere), the Trustee may, subject as provided below, at its discretion, give notice to the Issuer that the Dated Subordinated Notes are, and they shall accordingly thereby forthwith become, immediately due and repayable at their Early Redemption Amount referred to in Condition 6, plus accrued interest as provided in the Trust Deed.
(C) Without prejudice to paragraphs (A) and (B) above, the Trustee may, subject as provided below, at its discretion and without further notice, institute such proceedings against the Issuer as it may think fit to enforce any obligation, condition or provision binding on the Issuer under the Notes, the Receipts, the Coupons or the Trust Deed in respect of the Notes (other than any obligation for the payment of any principal or interest in respect of the Notes), provided that the Issuer shall not as a consequence of such proceedings be obliged to pay any sum or sums representing or measured by reference to principal or interest in respect of the Notes sooner than the same would otherwise have been payable by it or any damages.
(D) The Trustee shall be bound to take action as referred to in paragraph (A), (B) and/or (C) above if (i) it shall have been so requested in writing by Noteholders holding at least 25 per cent. of nominal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution of the Noteholders and (ii) it shall have been indemnified and/or secured to its satisfaction."
"(H) (1) In the event of the winding up of the Issuer, all amounts in respect of the Dated Subordinated Notes and the Receipts and Coupons (if any) relating thereto paid to the Trustee by the liquidator of the Issuer in the winding up of the Issuer (including, without limitation, principal, interest and any amounts paid for the account of holders of Dated Subordinated Notes and/or the Receipts and/or the Coupons relating thereto (if any) under Clause 21) shall be held by the Trustee upon trust:
(i) first for payment or satisfaction of all amounts then due and unpaid under Clauses 14 and 15(J) to the Trustee and/or any Appointee;
(ii) secondly for payment of claims of all Senior Creditors in the winding up of the Issuer to the extent that such claims are admitted to proof in the winding up (not having been satisfied out of the other resources of the relevant Issuer) excluding interest accruing after commencement of the winding up; and
(iii) thirdly as to the balance (if any) in or towards payment of the amounts owing on or in respect of the Dated Subordinated Notes and the Receipts and Coupons relating thereto (if any)."
"Save as expressly otherwise provided in these presents, the Trustee shall have absolute and uncontrolled discretion as the exercise or non-exercise of its trusts, powers, authorities and discretions under these presents (the exercise or non-exercise of which as between the Trustee and the Noteholders, the Receiptholders and Couponholders shall be conclusive and binding on the Noteholders, the Receiptholders and Couponholders) and (subject to clause 16) shall not be responsible for any Liability which may result from their exercise or non-exercise."
Clause 16 sets out a standard of liability of the trustee; it is not material to this application.
"I intend to inject the necessary capital through a combination of 100 million in Special Investment Shares in the Society and a Promissory Note for 2.6 billion issued to the Society, giving INBS a small buffer. This Note will be paid over 10-15 years, which will reduce the impact on the Exchequer this year. Following the investment by means of the Special Investment Share, the State will have extensive powers as well as economic ownership of INBS. As a result, the State will control the Society
As in the case of Anglo-Irish Bank, a new management team is now in charge of INBS. I will insist on Board changes in the changed ownership circumstances."
"On 30th March I announced that INBS would not have a future as an independent stand-alone entity. The institution is now under public control and arrangements for its sale or integration into another institution are being advanced in discussion between the State, the European Commission and the Society
The same approach will be adopted for Subordinated Bondholders in INBS as in Anglo."
It is said that as a consequence of the statement, the rating agencies downgraded the notes.
" It is right that the holders of Anglo's subordinate debt should share the costs which have arisen
I expect the subordinated debt holders to make a significant contribution towards meeting the costs of Anglo."
The claims made by the claimants in this action
i) INBS is under the control and direction of the Irish Government.
ii) In the 30th September statement, the Government indicated that INBS would not discharge its obligations to pay interest and/or principal as due on the notes and that losses would be sought to be imposed on the holders of the Notes, notwithstanding that INBS was not to be wound up or otherwise dissolved.
iii) Because of the degree of control exercised or exercisable by the Irish government, these statements are to be attributed to INBS.
iv) INBS had thereby committed an anticipatory repudiatory breach of the conditions, and in particular conditions 2, 4 and 6.
v) Under condition 9(b)(C) of the conditions BNP as trustee might institute proceedings, and under condition 9(b)(D) 25% of the noteholders by value could request such action and BNP would be bound to take it.
vi) The claimants hold 25% of the value and have made a request that BNP take action to enforce the obligations by instituting winding up proceedings. They have indicated a willingness to give appropriate indemnities. (The defendants accept, for the purposes of this application that the claimants do have the necessary proportion of the notes.)
vii) BNP has refused to take that step.
viii) Accordingly the claimants seek a direction from the court pursuant to condition 9(b)(C) that BNP as trustee should present a winding up petition forthwith to the Irish court.
The basis of the striking out action
The assumptions of this application
The correct approach to this application
The first basis of the claim further development of the arguments and decision
The alternative case
"The settlement gave an absolute discretion to appoint to the trustees and not to the courts. So long as the trustees exercise this power with the consent of persons called appointors under the settlement and exercise it bona fide with no improper motive, their exercise of the power cannot be challenged in the courts and their reasons for acting as they did are, accordingly, immaterial. This is one of the grounds for the rule that trustees are not obliged to disclose to beneficiaries their reasons for exercising a discretionary power "
They say that this applies to the decision whether or not to accept an arguable repudiation, and ultimately to present a petition. No bad faith or improper motive has been alleged so the trustee's decision not to go down that route cannot be challenged by the noteholders, on normal trust principles.
"If the trustees fail to pursue a claim which is vested in them in their capacity as such, then a beneficiary may commence an administration action against the trustees to compel them to take proceedings to enforce the claim. If a serious question arises as to whether or not the trustee ought to sue, then the court will determine the question in accordance with the principles applicable to Beddoes proceedings."
He also relied on certain dicta at p 609-10 of Sharpe v San Paolo Railway Co (1873) 8 Ch App 597.