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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Knighthead Master Fund LP & Ors v The Bank of New York Mellon & Anor [2015] EWHC 270 (Ch) (13 February 2015) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2015/270.html Cite as: [2015] EWHC 270 (Ch) |
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OF
JUSTICE
CHANCERY DIVISION
![]() ![]() Rolls Building, Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
(1) Knighthead Master Fund LP (2) RGY Investments LLC (3) Quantum Partners LP (4) Hayman Capital Master Fund LP |
Claimants/ Applicants |
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- and - |
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The ![]() ![]() The ![]() ![]() |
Defendants/ Respondents |
____________________
(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
____________________
OF
JUDGMENT
Crown Copyright ©
Mr Justice David Richards:
Introduction
The exchange bonds
"In respectof
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.
"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 Holdersof
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."
"Pending such application, such amounts shall be held in trust by the Trustee for the exclusive benefitof
the Trustee and the Holders entitled thereto in accordance with their respective interests and the Republic shall have no interest whatsoever in such amounts."
"has its Corporate Trust Office in the Boroughof
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."
The US proceedings
"The Securities will constitute (except as provided in Section 11 below) direct, unconditional, unsecured and unsubordinated obligationsof
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)."
"the plaintiff maintained that because the transferof
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."
"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 scopeof
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)."
"First, the district court's order precluding a distributionof
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."
Declarations
1) A declaration that the sumof
€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
The second declaration
Direction to the trustee
Conclusion