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Neutral Citation Number: [2015] EWHC 270 (Ch) |
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Case No: HC-2014-000704 |
IN THE HIGH COURT
OF
JUSTICE
CHANCERY DIVISION
|
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Royal Courts of Justice Rolls Building, Fetter Lane, London, EC4A 1NL |
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13 February 2015 |
B e f o r e :
MR JUSTICE DAVID RICHARDS
____________________
Between:
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(1) Knighthead Master Fund LP (2) RGY Investments LLC (3) Quantum Partners LP (4) Hayman Capital Master Fund LP
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Claimants/ Applicants
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- and -
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The Bank of New York Mellon The Bank of New York Depositary (Nominees) Limited
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Defendants/ Respondents
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____________________
Mark Hapgood QC, David Quest QC and David Simpson
(instructed by Reynolds Porter Chamberlain LLP) for the Claimants/Applicants
Robert Miles QC and Andrew de Mestre
(instructed by Allen & Overy LLP) for the Defendants/Respondents
Hearing date: 18 December 2014
____________________
HTML VERSION
OF
JUDGMENT
____________________
Crown Copyright ©
Mr Justice David Richards:
Introduction
- The claimants in these proceedings are four investment funds which hold or are interested in euro-denominated debt securities issued by the Republic
of
Argentina (the Republic) in 2005 and 2010. These securities are subject to the terms
of
a trust indenture dated as
of
2 June 2005 (as amended) (the trust indenture) and both the securities and the trust indenture, as it applies to the securities, are governed by English law.
- The first defendant, The
Bank of New York Mellon
(the trustee), is the trustee with respect to the relevant debt securities. It is a company formed under the laws
of
the State
of New York
and its registered office is in
New York
. It has a registered place
of
business in England. The second defendant, The
Bank of New York
Depository (Nominees) Limited, is a company incorporated under the laws
of
England and Wales and is a wholly-owned subsidiary
of
the trustee. It is the registered holder
of
the global securities issued in respect
of
each series
of
the relevant debt securities.
- On the present application, the claimants seek two interim declarations, as to the status
of
funds held by the trustee and as to the obligations under English law
of
the trustee, and also a direction to the trustee to bring the terms
of
such declarations, if made, to the attention
of
courts in the United States.
The exchange bonds
- The securities held by the claimants are among the debt securities (the exchange bonds) issued in exchange for securities previously issued by the Republic under a Fiscal Agency Agreement made in 1994 and governed by
New York
law (the FAA bonds). The Republic defaulted on the FAA bonds in 2001 when it declared a "temporary moratorium" on the payment
of
principal and interest on debt in excess
of
US $80 billion. Since then, the Republic has not made any payments on the FAA bonds.
- In 2005 the Republic made an offer to the holders
of
FAA bonds to exchange those bonds for
new
unsecured bonds at a very significant discount. Some 76%
of
the holders
of
the FAA bonds with an aggregate par value
of
some US $62.3 billion accepted the offer. A second exchange offer was made on materially the same terms in 2010 and was accepted by the holders
of
a further 15%
of
the original FAA bonds. Accordingly, some 91%
of
the FAA bonds have been exchanged. The terms
of
the FAA bonds did not include a collective action clause enabling a majority to bind the minority, so the holders
of
the remaining FAA bonds are not bound by the restructuring and they have become known as the Holdout Creditors.
- The exchange bonds were issued in a number
of
different series and in three different currencies: Argentine pesos, euros and US dollars. So far as relevant for present purposes, they are governed by the trust indenture and by the terms endorsed on the relevant global securities.
- The present proceedings are concerned only with the euro-denominated exchange bonds (euro debt securities). As noted above, the euro debt securities are governed by English law and section 12.7
of
the trust indenture (as amended in 2010) provides, so far as relevant:
"In respect
of
Debt Securities
of
a Series governed by English law, this Indenture, such Debt Securities and any non-contractual obligations arising out
of
or in connection therewith shall be governed by and construed in accordance with the laws
of
England and Wales without regard to principles
of
conflicts
of
laws, except with respect to authorisation and execution by the Republic, which shall be governed by the laws
of
the Republic."
The words in bold were added in 2010.
- By section 12.8, so far as relevant, the Republic irrevocably submits to the jurisdiction
of
the courts
of
England and
of
the Republic with respect to any proceedings arising out
of
or in connection with the indenture as it relates to debt securities governed by English law.
- By section 3.1
of
the trust indenture, the Republic covenants to pay the principal
of
and interest on the exchange bonds to the trustee, at the places and times and in the manner provided in the debt securities and the trust indenture. Section 3.1 continues:
"All monies (save for its own account) paid to the Trustee under the Debt Securities and this Indenture shall be held by it in trust for itself and the Holders
of
Debt Securities in accordance with their respective interests to be applied by the Trustee to payments due under the Debt Securities and this Indenture at the time and in the manner provided for in the Debt Securities and this Indenture."
- Section 3.5 provides that any sums due are to be paid to the trustee no later than the business day prior to each interest payment date or principal payment date. It continues by providing that the trustee shall apply the amounts so received in payment
of
the sums due on the relevant payment date and:
"Pending such application, such amounts shall be held in trust by the Trustee for the exclusive benefit
of
the Trustee and the Holders entitled thereto in accordance with their respective interests and the Republic shall have no interest whatsoever in such amounts."
- In the case
of
the euro debt securities, payment is made in euros to an account in the name
of
the trustee at Banco Central de la República Argentina (the Central
Bank
) in Buenos Aires.
- The structure created by the trust indenture and the terms
of
the euro debt securities are therefore clear and straightforward. Payments made by the Republic to the trustee in respect
of
the euro debt securities are to be held by the trustee on the trusts
of
the trust indenture and for the purpose
of
making payments due on the euro debt securities
of
principal and interest. Once received by the trustee, the funds are held on those trusts and the Republic has no interest in them. It may however be noted that payment is not deemed to be made on the euro debt securities until the relevant sums are received by the Holder: paragraph 2
of
the terms and conditions
of
the euro debt securities.
- In the context
of
the present proceedings, it is also relevant to note that save in one respect, these arrangements involve no connection at all with the United States. The euro debt securities, and the trust indenture so far as it relates to them, are governed by English law, and the Republic has submitted to the jurisdiction
of
the English courts. Payments are made in euros and are made to an account in the Republic for onward transmission to those ultimately entitled to them, through the systems operated by Euroclear
Bank
SA/NV (Euroclear) and Clearstream Banking SA (Clearstream) under Belgium and Luxembourg law respectively. The one connection with the United States is that the trustee is incorporated under
New York
law and has its registered office in
New York
. This is not a coincidence. The criteria for appointment as trustee are set out in section 5.8
of
the trust indenture and include requirements that the trustee:
"has its Corporate Trust Office in the Borough
of
Manhattan, the City
of New York
and is doing business in good standing under the laws
of
the United States or
of
any State or territory thereof or the District
of
Columbia that is authorised under such laws to exercise corporate trust powers (including all powers and related duties set forth in this Indenture), and subject to supervision or examination by federal, or state authority."
- Any trustee that ceases to be eligible in accordance with the provisions
of
section 5.8 is required to resign immediately. No successor trustee may accept appointment unless at the time
of
such acceptance it is eligible under the terms
of
Article 5.
The US proceedings
- The background to the present proceedings, and the reason for them, are the proceedings brought by some Holdout Creditors in the United States and orders made in those proceedings.
- Proceedings were brought by different groups
of
Holdout Creditors in the US District Court for the Southern District
of New York
(the District Court). As a result
of
the failure
of
the Republic to pay interest due under the FAA bonds, events
of
default were declared and the full amount
of
the principal
of
those bonds became due and payable. Judgments have been entered in the District Court in favour
of
Holdout Creditors for the full amount
of
their bonds.
- For example, NML Capital Limited commenced proceedings in November 2003 in the District Court to recover the principal and interest due under the FAA bonds held by it. The Republic appeared and defended the proceedings. On 18 December 2006, NML obtained judgment in a sum
of
a little over US $284 million on a motion for summary judgment. NML has brought proceedings in England for judgment on the District Court's judgment and the Supreme Court has held that the Republic is not entitled to rely on state immunity: NML Capital Ltd v Republic
of
Argentina [2011] UKSC 31; [2011] 2 AC 495.
- The Holdout Creditors have relied on a term
of
the FAA bonds to argue that no payment
of
interest may be made on the exchange bonds without making a rateable payment
of
the amount due on the FAA bonds. As the full amount
of
principal
of
the FAA bonds is due and payable, this means that if, for example, the Republic wishes to pay the full amount
of
interest due on the exchange bonds on a particular interest payment date, it must simultaneously pay the full amount due on the FAA bonds. The provision in question, known as a pari passu clause, reads so far as relevant as follows:
"The Securities will constitute (except as provided in Section 11 below) direct, unconditional, unsecured and unsubordinated obligations
of
the Republic and shall at all times rank pari passu and without any preference among themselves. The payment obligations
of
the Republic under the Securities shall at all times rank at least equally with all its other present and future unsecured and unsubordinated External Indebtedness (as defined in this Agreement)."
- In 2012, the District Court held in favour
of
the Holdout Creditors' construction
of
the pari passu clause, a decision which was subsequently upheld on appeal by the Court
of
Appeals for the Second Circuit (the Court
of
Appeals). The US Supreme Court has declined to hear an appeal against this. This construction is controversial but, as Newey J said in a judgment to which I will later refer, this is
of
little or no significance because the clause has been definitively interpreted in accordance with its governing law by a court
of
competent jurisdiction.
- On 23 February 2012, on an application by NML Capital Limited and other Holdout Creditors, and having heard the Republic in opposition, the District Court granted an injunction (the injunction) that enjoined the Republic from making payment
of
any percentage
of
the amount due under the exchange bonds without concurrently or in advance making payment
of
a similar percentage
of
amounts due under the FAA bonds. The Republic was also required to provide copies
of
the order to all persons and entities who act in active concert or participation with the Republic to assist the Republic in fulfilling its payment obligations under the exchange bonds, who "shall be bound by the terms
of
this order" and who were prohibited from aiding and abetting any violation
of
the order.
- On 26 October 2012, the Court
of
Appeals affirmed the order but remanded the case to the District Court for more precise definition
of
the third parties to which the injunction would apply. That clarification was provided by the District Court on 21 November 2012, specifically identifying certain third parties including the trustee who were subject to the terms
of
the order. Other third parties include the registered owners
of
the exchange bonds and nominees
of
the depositories for the exchange bonds (including the second defendant in these proceedings), Clearstream and Euroclear, trustee paying agents and transfer agents for the exchange bonds. The order provides that any non-party that has received proper notice
of
the order and that requires clarification as to its duties, if any, under the order may apply to the District Court on notice to the Republic and NML. On 23 August 2013, the Court
of
Appeals affirmed the order and refused leave to appeal to the US Supreme Court. On 16 June 2014, the US Supreme Court denied the Republic's petition for a writ
of
certiorari, thus lifting the previously ordered stay
of
the injunction.
- On 26 June 2014 the Republic transferred the funds necessary to make the payment
of
interest due on the exchange bonds on 30 June 2014 to the trustee's account at the Central
Bank
. This included €225 million for interest on the euro debt securities (the euro funds). The following day the Republic published a notice addressed to holders
of
its bonds stating that it had made this payment. On the same day NML and other Holdout Creditors filed a motion before the District Court alleging that the payment was a breach
of
the injunction. A hearing took place that day at which other parties, including the trustee and the claimants in the present proceedings and other holders
of
euro debt securities, were represented and made submissions. The judge stated that the funds should "simply be returned" to the Republic and invited counsel for NML to draft an order.
- On 29 June 2014, the claimants and other holders
of
euro debt securities (euro bondholders) filed an emergency motion seeking clarification
of
the injunction. The clarification sought was that the injunction does not apply to the third parties that processed payments on the euro debt securities.
- On 6 August 2014 the District Court entered an order in terms which had been submitted by Holdout Creditors on 1 August 2014. By the order, the court declared that the payment by the Republic
of
funds, including the funds in euros, made to the trustee on 26 June 2014 "was illegal and a violation
of
" the injunction. The trustee was ordered to retain the funds in its account at the Central
Bank
pending further order
of
the court and was restrained from making or allowing any transfer
of
the funds unless ordered by the court. The Republic was restrained from taking any steps to interfere with the trustee's retention
of
the funds in accordance with the order. The order further provided that the trustee's retention
of
the funds pursuant to the terms
of
the order should not be deemed a violation
of
the injunction and that the trustee "shall incur no liability under the Indenture governing the Exchange Bonds or otherwise to any person or entity for complying with this Order" and the injunction.
- On 15 August 2014 the euro bondholders issued an appeal against this order but on 22 October 2014 the Court
of
Appeals declined jurisdiction to hear the appeal.
- In August 2014, two groups
of
Holdout Creditors filed motions in the District Court seeking orders that the trustee pay over to them the funds transferred to the trustee by the Republic on 26 June 2014, including the euro funds, or so much
of
them as was sufficient to satisfy their judgments together with post-judgment interest (the turnover motions). In September 2014, the trustee filed briefs in opposition to the turnover motions, as did NML and other Holdout Creditors.
- By an order issued on 27 October 2014, the District Court denied the Turnover Motions on the grounds that the euro funds were located outside the United States. The court's reasoned judgment stated that even if the plaintiffs could show that the Republic maintained an interest in the euro funds, a point "which the court does not reach", a turnover order would constitute an attachment or execution
of
the property
of
a foreign sovereign located outside the United States, which is not authorised under the terms
of
the Foreign Sovereign Immunities Act.
- In early November 2014, appeals were filed with the Court
of
Appeals against the order denying the turnover motions. The trustee filed with the Court
of
Appeals a motion for leave to intervene as a non-party appellee, although the attorneys for some
of
the Holdout Creditors stated that such leave was not necessary. In any event on 28 January 2015, the Court
of
Appeals granted this motion. A similar motion filed by the euro bondholders was denied by the Court
of
Appeals which instead granted them leave to file amicus curiae briefs. As I understand it, reasons were not given for the denial
of
the euro bondholders' motion. oolH
- I have been supplied with the appellants' briefs in the appeals against the refusal
of
the turnover motions in two sets
of
proceedings, both briefs being dated 22 December 2014. The foundation
of
the turnover motions is that the payment
of
sums to the trustee by the Republic on 26 June 2014 was in breach
of
the injunction issued by the District Court and was therefore "illegal". This, it is said, gives the Holdout Creditors with judgments a better claim to the funds than the trustee or those for whom it otherwise holds the funds. In the brief submitted on behalf
of
the appellant in Dussault v Republic
of
Argentina, the plaintiff's submission in support
of
the turnover motion is summarised as follows:
"the plaintiff maintained that because the transfer
of
funds to BNY was in direct contravention
of
the February 23, 2014 order, the transfer gave BNY possession and custody, but not title to or control
of
the funds. The Republic thus undoubtedly had an interest in the funds. … The Republic is thus effectively entitled to possession and control
of
the funds which, as the District Court acknowledged, will have to be returned to the Republic. In addition, the plaintiff maintained that as a judgment creditor its rights to the funds were greater than BNY's rights to the funds as a mere trustee or custodian."
- The brief records the basis
of
the trustee's opposition, being that the trust indenture provided that the funds were held for the benefit
of
the bondholders and the trustee. The Republic had opposed the motion on the grounds that it had no interest in the funds held in the trustee's accounts, which belonged to the bondholders. The euro bondholders who had submitted opposition as non-parties had claimed title to that portion
of
the funds held for payment
of
interest on the euro debt securities, the ownership
of
which was governed by English law.
- In reply, the plaintiff had submitted that since the transfer
of
funds to the trustee was illegal, the Republic retained an interest in the funds. She disputed that the euro funds belonged to or were held ultimately for the benefit
of
the euro bondholders, noting that by its terms the Indenture Trust does not apply to illegal transfers
of
money. In any event, relying on relevant provisions
of
US law, she submitted that where funds have been transferred from or by the judgment debtor, the judgment creditor's rights to the property are superior to those
of
the transferee.
- By way
of
summary
of
her position on the appeal the plaintiff's brief states:
"Finally, although the district court did not reach this issue, it is clear that the funds currently on deposit in BNY's account are subject to execution within the scope
of
the provisions
of New York
Civil Practice Law and Rules ("CPLR") §5225(b) because the Republic retains actual control
of
the funds. Indeed, only the Republic can give the directive for the funds to be paid out in accordance with the district court's and this Court's directives, failing which, as the district court has indicated, the funds will have to be returned to the Republic. In any event, as a judgment creditor, Plaintiff's right to the funds is greater than BNY's right to the funds as a trustee on behalf
of
bondholders. Accordingly, BNY should be directed "to pay the money, or so much
of
it as is sufficient to satisfy the judgment to the judgment creditor." CPLR §5225(b). (Point III)."
- In her brief, the plaintiff repeats and expands on the submissions made to the District Court. She submits that "[t]here is no question that the Republic has an interest in the funds currently being held by BNY." The brief goes on to state that "[i]t is also clear that the Republic is entitled to possession
of
the funds currently being held by BNY. During the June 27, 2014 and July 22, 2014 hearings before the district court it was made clear that the transfer made by the Republic was illegal and the transferred amount should be returned to the Republic." It is further submitted that "it cannot be gainsaid that as a judgment creditor the Plaintiff's right to the funds are superior to those
of
BNY, which as a trustee has no personal right to the funds, but rather has possession
of
the fund for the benefit
of
others." Specifically addressing submissions made by the euro bondholders, it is submitted:
"First, the district court's order precluding a distribution
of
the funds to the bondholders raises serious questions as to whether or not they have any right or claim to the funds improperly transferred to BNY. The plaintiff's rights as a judgment creditor are certainly superior to the bondholders' rights to receive an interest payment under the bonds. This is particularly true since any payment to the bondholders would violate the injunction issued by the district court."
- I have cited at some length from this appeal brief because it gives some idea
of
the nature
of
the claims being made by Holdout Creditors with judgments as regards the euro funds currently held by the trustee and the basis on which it is said that those claims are superior to the claims
of
the beneficial owners
of
the funds under the terms
of
the trust indenture.
Declarations
- The terms
of
the declarations sought by the claimants have undergone a number
of
changes but I take them now to be in the following form:
1) A declaration that the sum
of
€225 million transferred by the Republic
of
Argentina to the account
of
the trustee with Banco Central de la República Argentina and still held to the credit
of
that account is held on the trusts declared by a Trust Indenture between the Republic as Issuer and The
Bank of New York
as trustee dated as
of
2 June 2005 and subsequently amended, such trust being governed by English law, (as would be any other funds paid to it in attempted satisfaction
of
the Republic's payment obligations under the Euro Debt Securities).
2) Subject to the terms
of
the Trust Indenture, and any other defences available under English law, the obligations and liabilities
of
the
Bank of New York Mellon
under the Trust Indenture and the Euro Debt Securities (including the obligation under clause 3.5(a)
of
the Trust Indenture and clause 2
of
the Euro Debt Securities to transfer the Euro Funds to the Second Defendant) are unaffected by the
New York
Injunction, whether or not the First Defendant is subject to that injunction as a matter
of
US law.
The first declaration
- As regards the first interim declaration which is sought on this application, the trustee does not dispute that it holds the funds received by it on 25 June 2014 on the trusts
of
the trust indenture and it does not oppose the making
of
such declaration, provided that the court is satisfied in accordance with well-established principles that it is appropriate to make a declaration in these circumstances.
- Whether in the circumstances it is appropriate to make this declaration was an issue addressed by Newey J when this application was before him in November 2014. Having considered the relevant authorities, he concluded that it would be appropriate to do so: see [2014] EWHC 3662 (Ch) at [21]-[26]. It is not necessary for me to consider this question afresh but in any event I agree with the conclusion
of
Newey J and, in circumstances where there is so much dispute surrounding the attempt by the Republic to pay sums due on the exchange bonds, I consider that a declaration, authoritatively stating the position under the governing law
of
the trust indenture and the euro debt securities, is helpful.
- It was a matter
of
concern to Newey J that the Holdout Creditors had not had an opportunity to challenge the proposed declaration. As he observed, it is they who might want to dispute the existence or terms
of
a trust and contend that the Republic had a continuing interest in the funds held by the trustee. He therefore adjourned the application to give the Holdout Creditors the chance to put forward any arguments that they might wish to make in opposition. He directed that notice should be given to the attorneys acting in the US proceedings for the Holdout Creditors that it was open to them to intervene in these proceedings. As he observed, if any
of
the Holdout Creditors were to argue that the funds were not subject to the trust asserted by the claimants, the court hearing the matter would be reassured that both sides
of
the argument had been fully ventilated.
- Notice was duly given to the attorneys acting for the Holdout Creditors in proceedings before the District Court and nine firms requested copies
of
the documents filed in these proceedings. No Holdout Creditors have applied to intervene and to make representations to the court.
- Nonetheless, attorneys acting for a number
of
Holdout Creditors sought to make their views known to the court. A letter dated 5 December 2014 from Dechert LLP and three other firms to the claimants' solicitors was copied to the court. Duane Morris, attorneys acting for another group
of
Holdout Creditors, wrote directly to the court on 19 November 2014.
- There are difficulties in this way
of
proceeding. First, it is clear that the opportunity provided by the order
of
Newey J was to enable Holdout Creditors wishing to make submissions to intervene in the English proceedings and make submissions to the court. In this way, the court would have the benefit
of
submissions from different parties responding to each other and would have the opportunity
of
probing those submissions with counsel advancing them.
- Secondly, the claimants and the trustee are agreed that, at any rate, the letter from Duane Morris contains some important errors. The claim made by them that the issue
of
the exchange bonds has been ruled illegal by the US courts is wrong. The US courts have never ruled or even suggested that the exchange bonds were illegal. The injunction granted by the District Court is concerned with compelling payments to Holdout Creditors in conjunction with payments under the exchange bonds, not in any sense with the legality or otherwise
of
the exchange bonds themselves. Further, it is wrong to suggest that the trust indenture has been "abrogated or suspended" by the injunction granted by the District Court or that the injunction created a constructive trust which superseded the trust indenture.
- The fundamental point made in both letters is that the English court is not the proper forum to determine the matters raised by the claimants' application. It is pointed out that the claimants and other persons entitled to the benefit
of
euro debt securities have appeared in the proceedings in the District Court and the Court
of
Appeals and have made submissions to the effect that the injunction granted by the District Court does not or should not extend to payments on the euro debt securities, albeit not as parties to the proceedings in the United States. They further point out, as is obviously the case, that the District Court is well able to determine issues
of
foreign law, including the English law
of
trusts, and that the claimants could have introduced evidence
of
English law in the District Court.
- This court is,
of
course, very concerned not to intrude improperly into matters which are before the US courts. But the making
of
a declaration in the terms sought by the claimants would not, in my judgment, do so. The declaration would establish the status
of
the funds held by the trustee as a matter
of
English law. As the letter dated 5 December 2014 states, issues
of
English law have not been raised before the District Court. A declaration as to the effect
of
a trust indenture governed by English law is in my view peculiarly within the proper jurisdiction
of
this court.
- The declaration sought by the claimants does not in any way interfere with or impede the US courts in their consideration
of
the issues before them. They are concerned with the effect
of
the breach by the Republic
of
the injunction granted by the District Court. Because the trustee is subject to the personal jurisdiction
of
the District Court, it can properly be the subject
of
any orders which that court considers appropriate. It would be quite wrong for this court to make, and I do not make, any comment on such orders as may be appropriate and their effect as a matter
of
US law. The only comment I would make is that, as a matter
of
English law, I can see no basis on which any such order could
of
itself give either the Republic or the Holdout Creditors any proprietary interest in the funds held by the trustee with the Central
Bank
.
- More problematic is the state
of
"paralysis", as leading counsel for both the claimants and the trustee described it, in the operation
of
the trust caused by the injunction. A continuing state
of
paralysis may have a number
of
consequences in English law. Such consequences may not arise, at this time at any rate, and they have not been the subject
of
any submissions to the court. They are at most issues which may arise in the future. For the present, I consider that the first proposed declaration accurately sets out the position under English law.
- Accordingly, I consider that it is appropriate for the court to make the first declaration sought by the claimants.
The second declaration
- The second declaration raises rather different issues. The main purpose
of
the declaration is to establish that the injunction provides no defence to a claim to enforce the terms
of
the trust indenture, including the obligation under clause 3.5(a) to transfer the euro funds to the second defendant. At the same time the opening words
of
the proposed declaration, referring to the terms
of
the trust indenture and any defences under general trust law, keep open the position that, because the trustee is subject to the personal jurisdiction
of
the US courts, it may as a matter
of
English law be able to rely on the injunction as a proper ground for non-compliance with what would otherwise be its obligations under the trust indenture.
- It is clearly right to keep those matters open. It is highly arguable that the terms
of
section 5.2(xvi) and (xx) would relieve the trustee
of
its obligations under the trust indenture to the extent that they were prohibited from performing them by the injunction. It is also arguable that where a trustee is subject to a legal inhibition, preventing it from performing its obligations as trustee, that too can provide a defence to a claim for breach
of
trust under general principles
of
law: see Concord Trust v The Law Debenture Trust Corporation Plc [2004] EWHC 1216 (Ch) at [33]. In my judgment, a declaration which is qualified in these terms, as this declaration must be, serves no useful purpose. It would be, in short, a declaration that the trustee would be in breach
of
trust unless it had a defence. No-one is assisted by a declaration in those terms. Accordingly, I shall decline to make the second proposed declaration.
Direction to the trustee
- Finally, the claimants seek an order that the trustee bring the declaration that I have made to the attention
of
any relevant court before which it appears in the United States. The claimants are critical in some respects
of
the conduct
of
the trustee in the US proceedings. I do not propose to enter into a discussion
of
those criticisms. I am in no doubt that the trustee is conscious
of
its obligations as trustee but equally it is conscious, as it must be,
of
the delicate position in which it finds itself as a trustee subject to the personal jurisdiction
of
the US courts. In presenting its case on behalf
of
itself and those interested in the exchange bonds, the trustee and its attorneys have to take fine decisions as to the most effective way
of
dealing with it. No doubt there can be different views as to the best way in which the case can be presented, but I am not satisfied that the trustee's conduct
of
the litigation has been outside the reasonable range
of
possible approaches.
- I do not think that it would assist if I were to give the direction sought. It is a matter for the trustee to decide, with its attorneys, the proper time and way, if at all, to bring this judgment and order to the attention
of
the US courts. In any event, it is
of
course open to the claimants, who have permission to file non-party briefs in the Court
of
Appeals, to bring the judgment and order to the attention
of
that court.
Conclusion
- Accordingly, for the reasons given in this judgment, I shall make the first interim declaration sought but I shall not make either the second interim declaration or a direction that the trustee bring this judgment and order to the attention
of the US courts.
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URL: http://www.bailii.org/ew/cases/EWHC/Ch/2015/270.html