British Energy Power and Trading Ltd and Others v Credit Suisse and Others
| Jurisdiction | England & Wales |
| Judge | Sir Anthony Clarke MR |
| Judgment Date | 07 February 2008 |
| Neutral Citation | [2008] EWCA Civ 53 |
| Docket Number | Case No: A3/2007/1620/1621 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 February 2008 |
[2008] EWCA Civ 53
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COMMERCIAL COURT
The Hon Mr Justice Langley
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Anthony Clark Mr
Lord Justice May and
Lady Justice Halleet
Case No: A3/2007/1620/1621
Mr Jonathan Sumption QC & Miss Sarah Love (instructed by Messrs Herbert Smith) for the Appellants
Mr Andrew Popplewell QC & Mr Tom Adam (instructed by Messrs Barlow Lyde & Gilbert) for the Respondents
Hearing dates: 13 & 14 November 2007
Introduction
This is the judgment of the court.
This is an appeal from part of an order made on 28 June 2007 by Langley J in which he granted three declarations arising out of his construction of two Option Agreements made in 2004. They were to the effect that Credit Suisse entered into the Option Agreements through Barclays Bank Plc ('Barclays'), that Credit Suisse is a party to the Option Agreements and bound by the restrictions in clauses 31 and 39 of them respectively and that entry into a transaction known as the Ampere Transaction would be a breach by Credit Suisse of clauses 31.2.1 and 39.2.1 respectively. The judge described the issues which led to the first two declarations as 'the Party Issue' and those which led to the third declaration as 'the Breach Issue' and we will do the same.
The judge refused permission to appeal but permission was subsequently granted by Rix LJ. The appellants say that the judge was wrong on the Party Issue. At the hearing of the appeal they abandoned their appeal against his decision on the Breach Issue and accepted that if, contrary to its submission in this appeal, Credit Suisse is a party to and bound by clauses 31 and 39 of the option agreements, entry into the Ampere Transaction would be in breach of them. The appeal was argued on that basis and, subject to the postscript to this judgment, we will consider it on that basis. There was a third point before the judge, namely whether the restrictions on the exercise of the options in clauses 31 and 39 are contrary to public policy. This was called 'the Public Policy issue' but is not an issue in this appeal.
Factual background
Eggborough is a coal fired power station in North Yorkshire, which we will call 'Eggborough'. It is owned by the second respondent ('EPL'). The third respondent ('EPHL') is the holding company of EPL. All the respondents are part of the British Energy group, which we will together call 'British Energy'. Eggborough is the only coal fired power station operated by British Energy, which operates six nuclear power stations. Eggborough was acquired by British Energy in March 2000 for £646 million using the group's own funds. In July 2000 the acquisition was re-financed by a project loan of £550 million. The loan was advanced by a group of lending banks on the security, among other things, of the shares in and assets of EPL.
In 2002 British Energy announced that it had serious financial difficulties and that Eggborough was worth considerably less than the debt it carried. The issues in this appeal arise out of the further refinancing agreements which were entered into on 30 September 2004 and which we will together call 'the Agreements'. There were numerous Agreements which were all executed on the same day and which it is common ground all form part of the factual matrix of each other. This appeal is concerned in particular with four of those Agreements as follows: an Amended and Restated Credit Agreement ('RCA'), an Amended and Restated Intercreditor Deed ('ARID'), a Share Option Agreement ('SOA') and an Asset Option Agreement ('AOA'). The SOA and the AOA are in very similar terms; so we will for the most part refer to the SOA.
In essence the restructuring involved the writing off of about £340 million of the debt outstanding under the July 2000 agreements and replacing it with a loan for £150 million. In return, the British Energy Group provided 76.6 million new shares, £20 million of bonds and security of various kinds and also granted both a share option and an assets option. This was a syndicated financing arrangement of a kind which is, as we understand it, not uncommon in the market. When the RCA was entered into there were 15 lending banks, often described as the Lenders of Record. They included Barclays and Credit Suisse (then called Credit Suisse First Boston), whose commitments were £18,344,058.10 and £1,773,633.44 respectively. It can thus be seen that Credit Suisse was initially committed in respect of a very small share of the total of £150 million.
By the time these proceedings began Credit Suisse had succeeded to almost 90 per cent of the interests of the banks. It is important to note that the banks lent the monies severally and not jointly. It is common ground that, when the Agreements were made in September 2004, it was contemplated that the banks would or might enter into sub-participation agreements with other financial institutions and that such agreements would not create legal relations as between the British Energy Group and the sub-participants. There is, however, an issue as to the extent to which sub-participation was permissible under the terms of the Agreements.
The dispute which has led to this appeal arises out of a proposed sub-participation agreement between Credit Suisse and Ampere Limited and Ampere 1 Limited, which we will together refer to as 'the Ampere Companies'. They were incorporated for the purpose of consolidating various sub-participation rights in relation to the facilities granted under the Agreements. The Ampere Companies were separately represented before the judge but they are now represented by Mr Sumption QC and Miss Sarah Love, who also represent Credit Suisse. The holders of the sub-participation rights include but are not limited to hedge funds.
The issues
The principal issues in this appeal turn on the true construction of clause 31 of the SOA, which is set out in paragraph 47 below. In particular, as we see it, the principal question is whether Credit Suisse is bound by restrictions in clause 31.2 on the exercise of the option rights created by the SOA. The judge held that it is, whereas the appellants say that it is not. They say that Credit Suisse is not a party to or bound by the obligations in clause 31.2 and that the clause binds only Barclays as Security Trustee. If the appellants' principal submissions fail, they have a subsidiary point on the form of the order.
The Agreements
The RCA
The RCA is described as the Amended and Restated Credit Agreement because it is, at any rate formally, “the credit agreement originally dated 13 July 2000 as amended and restated by an amendment and restatement agreement dated 30 September 2004”. The facility is of £150 million, with 15 Lenders of Record. These were the same banks as were the lending banks under the previous agreements as at 30 September 2004. They were not the same as the original Lenders of Record because some of those banks had novated their rights and obligation to others under the previous agreement.
The RCA, although formally an amendment of the earlier agreements was in truth a fresh agreement. It was expressed to be made between EPL as “the Borrower”; Barclays Capital, which is the investment banking division of Barclays Bank Plc as “the Arranger”; “The Financial Institutions listed in Schedule 1 as Banks (the Banks)”; Barclays Bank Plc “as Agent (in this capacity the Agent)”; and Barclays Bank Plc “as Security Trustee (in this capacity the Security Trustee).” As already stated, Barclays Bank Plc was one of the Banks of Record and, again as already stated, we will call Barclays Bank Plc 'Barclays'. As can be seen, Barclays had and has a number of hats. We are principally concerned in this appeal with its hats as Agent and as Security Trustee. We note in passing that we do not have the signature page of the RCA.
Clause 1.1, which is the Definitions clause, included:
“[ AOA] means the asset option agreement between the Borrower and the Security Trustee … under which the Borrower grants an option to the Security Trustee to acquire the Business and Station Assets (each as defined in that agreement).
Finance Document means (a) this Agreement; (b) the Amendment and Restatement Agreement [ie the deed bringing the RCA and ARID into effect]; (c) a Security Document; … (e) [the ARID]; … (g) an option Agreement or any other document designated as such by the Agent and the Borrower.
Finance Party means the Arranger, a Bank, the Security Trustee, the Account bank or the Agent (and together the Finance Parties).
Majority Banks means, at any time, Banks whose participations, in the Loans then outstanding aggregate more than 66 ? per cent of the Loans then outstanding.
Option means an option to acquire the assets of or shares in the Borrower granted to the Security Trustee under either of the Option Agreements.
Option Agreement means:
(a) the [AOA]; or (b) the SOA.
Security Documents [is defined in terms which it is agreed do not include the Option Agreements].
[SOA] means the agreement between EPHL and the Security Trustee … under which EPHL grants an option to the Security Trustee to acquire all the shares of EPHL in the Borrower.”
The facility is described in clause 2. Clause 2.2 provides that the obligations of each Finance Party are several...
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