BNP Paribas Trust Corporation UK Ltd (in its capacity as Bond Trustee, Issuer Security Trustee and Borrower Security Trustee) v Uro Property Holdings, S.A
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs |
| Judgment Date | 16 December 2022 |
| Neutral Citation | [2022] EWHC 3251 (Comm) |
| Docket Number | Case No: CL-2022-000072 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 3251 (Comm)
Mr Justice Jacobs
Case No: CL-2022-000072
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
David Allison KC and Ryan Perkins (instructed by Baker & McKenzie LLP) for the Claimant
Sonia Tolaney KC, James MacDonald KC and Oliver Butler (instructed by Humphries Kerstetter LLP) for the Defendant
Hearing date: Wednesday 30 th November 2022
Approved Judgment
This judgment was handed down remotely at 16:30pm on 16 th December 2022 by circulation to the parties or their representatives by e-mail and by release to the National Archives (see eg ).
A: Introduction and the arguments of the parties in outline
The Defendant (“Uro”) seeks summary judgment or to strike out the proceedings on the basis of what it describes as a short point of construction of financial contracts made between sophisticated commercial parties.
The Claimant in these proceedings (“BNPP”) seeks to recover a substantial sum, approximately €251 million, alleged to be due and payable under a Loan Agreement (“the Loan Agreement”) between an SPV called Silverback Finance Ltd (“Silverback” or “the Issuer”) and Uro. BNPP is the assignee of Silverback. BNPP alleges that Uro is liable to make this payment pursuant to terms of the Loan Agreement which concern a Bond Make Whole Premium (“BMWP”). The underlying reason for the obligation is that there was an event, namely the loss of a particular tax status enjoyed by Uro at the time that the Loan Agreement was agreed, which meant that the monies advanced thereafter (“the loan”) had to be repaid many years prior to its full term. There is no dispute that this event did occur, and indeed Uro has – albeit somewhat belatedly – made repayment of the loan itself.
The dispute concerns an additional payment which Uro is potentially liable to make in certain circumstances where the loan is required to be repaid, or is repaid voluntarily, prior to its term. This is the BMWP. It is, as explained in the expert evidence served by BNPP for the purposes of this application, a provision which is designed to provide compensation for the early termination of the Loan Agreement and thus the early repayment of the loan. The compensation is calculated by reference to the interest that BNPP (as assignee of Silverback) – but in reality the bond holders who had financed the loan under the overall transaction structure – would have received if the Loan Agreement had run to its full term. Accordingly, the BMWP is essentially immediate compensation for the premature termination of a contract and loss of the benefits that would have been received by the lender (and in reality the bondholders) if the contract had been fully performed.
The concept of a party to a financial instrument receiving compensation for loss suffered in consequence of early termination is, of course, familiar from the many cases on the ISDA contract form which have been litigated over the past 10 – 15 years. The parties referred, in the course of argument, to many of these authorities. It is also the approach of the common law where damages fall to be assessed consequent upon a repudiatory break leading to early termination of a contract.
There are a number of circumstances in which, under the Loan Agreement, this compensatory BMWP becomes payable. One circumstance is where there is a voluntary repayment by Uro; in other words, where Uro simply decides to repay early. That is not what happened here, although the provisions concerning the payment of the BMWP in that event are of some relevance to the parties' arguments. Another circumstance is the loss of Uro's tax status, known as “SOCIMI” status. There is no dispute that this did happen in the present case, and that therefore an early prepayment of the loan was indeed required. However, the BMWP would only become payable if “the relevant SOCIMI Status Loss Event giving rise to such prepayment was caused by any act or omission of [Uro]”. There is a substantial dispute as to whether the loss of tax status here was, or was not, caused by any act or omission of Uro. It is, however, common ground that that dispute raises issues which cannot be resolved in the context of a summary judgment or strike-out application.
The obligation to pay the BMWP, when there is a loss of tax status, is expressed in the following terms in Clause 7.1 of the Loan Agreement:
“the Borrower must pay to the Issuer, on the Loan Payment Date specified for prepayment, an amount equal to the Bond Make Whole Premium applicable to such prepayment (as certified by or on behalf of the Issuer to the Borrower and the Borrower Security Trustee at least five Business Days prior to the specified date of prepayment).”
This provision utilises various expressions defined elsewhere. These are described below. In summary, however, Uro contends that there was a failure by the “Issuer” (i.e. Silverback) to follow the procedures which were preconditions to any liability to pay the BMWP. There were two aspects to that argument, and Uro contended that these were separate points. They concerned (i) the calculation of the BMWP, and (ii) the certification of the BMWP.
The issue in relation to calculation concerns the failure of Silverback to obtain, at the relevant time, price quotations from certain dealers in German “Bunds”. Bunds are German government bonds, and are the equivalent of “gilts” in the UK. Uro contends that, in order for there to be an effective calculation of a BMWP, such written price quotations had to be obtained at or about 3.30 pm Frankfurt time on 7 February 2022. It is common ground that this was not done, at that time. BNPP contends that it was not essential to do so then, and that quotations could be (and were in this case) obtained retrospectively. Such retrospective quotations are, BNPP submits, sufficient for the purposes of calculating the BMWP. In any event, even if the retrospective process was not contractually effective, this does not mean that no BMWP is payable: the court can step in and ascertain and fix the appropriate pricing for the purposes of calculating the BMWP.
For the purposes of the calculation argument of the Loan Agreement, none of the procedures relied upon are apparent from the words of Clause 7.1 quoted above. In order to find those procedures, it is necessary to walk through a large number of complex provisions, and these are set out below.
By contrast, the issue concerning certification does arise on the words quoted above. This refers to the BMWP being “certified by or on behalf of the Issuer to the Borrower and the Borrower Security Trustee at least five Business Days prior to the specified date of prepayment”. In the present case, it is common ground that the specified date of prepayment under the Loan Agreement was 21 February 2022, and accordingly the certificate should have been provided by 14 February 2022. There is no dispute that it was not so provided. Uro contends that the provision of a certificate no later than that date is a condition precedent to any obligation to pay the BMWP. Accordingly, if it is not provided by that time, it can never be provided subsequently. BNPP says that this construction is wrong.
On behalf of Uro, Ms Tolaney KC's written and oral argument focused principally on the calculation issue, rather than the certification issue which was addressed relatively briefly. Mr Allison KC's argument on behalf of BNPP dealt in some detail with the certification issue, and why it was not a condition precedent. He submitted that this, or at least the principles governing the question of whether it was a condition precedent, had some bearing on the calculation issue, which he also addressed in some detail.
Accordingly, Uro's application is based on the proposition that BNPP, and Silverback (the “Issuer”) whose rights BNPP is seeking to enforce, have failed to comply with the contractual terms they seek to enforce. Since the sum claimed by way of the BMWP was not calculated or certified at the required time in accordance with the terms of the applicable contracts, Uro contends that there is no contractual amount due from Uro and that BNPP's claim has no real prospect of success.
The reference to “real prospect of success” reflects the standard for summary judgment. Although the application was also advanced on a strike-out basis, there was no suggestion that this added anything to the summary judgment application. Accordingly, if the Claimant's case has a real prospect of success, then the claim must proceed. If it does not, then reverse summary judgment is appropriate and the claim can also be struck out.
Both parties referred to the approach to summary judgment applications in the well-known judgment of Lewison J in Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]. The court must consider whether the claimant has a realistic, as opposed to a fanciful, prospect of success. A realistic claim is one that carries some degree of conviction. This means a claim that is more than merely arguable. In reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial. In relation to issues of law or construction, Lewison J said:
“On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the...
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