British Energy Power and Trading Ltd and Others v Credit Suisse and Others
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE LANGLEY |
| Judgment Date | 19 June 2007 |
| Neutral Citation | [2007] EWHC 1428 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2007/256 |
| Date | 19 June 2007 |
[2007] EWHC 1428 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN's BENCH DIVISION
COMMERCIAL COURT
the Honourable Mr Justice Langley
Case No: 2007/256
Mr Mark Howard QC and Mr Tom Adam (instructed by Barlow, Lyde and Gilbert) for the Claimants
Mr Christopher Symons QC and Miss Sonia Tolaney (instructed by Linklaters LLP) for Credit Suisse
Lord Anthony Grabiner QC and Mr Tom Smith (instructed by Cadwalader, Wickersham & Taft LLP) for the Second and Third Defendants
Hearing dates: 21, 22 and 23 May 2007
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Hon. Mr Justice Langley:
This dispute relates to the Eggborough power station in North Yorkshire. The Claimants are companies in the British Energy Group. The Third Claimant (“EPL”) owns the business and assets of the power station. The Second Claimant (“EPHL”) is the holding company of EPL. I shall refer to the Claimants collectively and the Group as “British Energy”.
The power-station is coal-fired. It was acquired by British Energy in March 2000 for £646 million. The acquisition was re-financed in July 2000 by a £550 million loan advanced to EPL by a consortium of Banks on the terms of a credit agreement dated 13 July 2000. The power-station has a strategic value to British Energy as it offers operational advantages (largely more flexible output) in comparison with British Energy's portfolio of nuclear power stations.
British Energy suffered well-publicised financial difficulties in the period 2002–04. They resulted in a general restructuring of its finances which was finally achieved in relation to the power station on 30 September 2004 by the execution of four detailed agreements which, it is not in issue, together formed a single transaction and are to be construed as such. The four agreements (which I will refer to collectively as such) are:
(1) An amended and restated version of the July 2000 credit agreement, to which I will refer as “the Restated Credit Agreement”;
(2) A Share Option Agreement;
(3) An Asset Option Agreement; and
(4) An Amended and Restated Intercreditor Deed (“the Intercreditor Deed”).
In very general terms, the effect of the restructuring was that the Banks agreed to compromise their claims under the July 2000 credit agreement by writing off about £340 million of principal debt due from EPL and agreeing to a new credit facility of £150 million, and British Energy agreed to grant the Options to purchase the shares in or assets of EPL in accordance with the terms of the two Option Agreements. In nearly all relevant respects the terms of the two Option Agreements are the same and references in this judgment are to the Share Option Agreement save where otherwise stated.
The First Defendant, Credit Suisse, is the successor to the rights and obligations of almost 90% of the interests of the Banks. The Second (“Ampere Ltd”) and Third (“Ampere 1”) Defendants (together “Ampere”) are companies incorporated for the purpose of consolidating various sub-participation rights in relation to the facilities granted by the Banks to EPL. The consolidation proposed, and the proposed obligations of Credit Suisse pursuant to it, lie at the heart of the dispute. The consolidation is masterminded by the investment bank, Greenhill & Co International LLP (“Greenhills”) and the law firm Cadwalader, Wickersham & Taft LLP, the solicitors for Ampere. I shall refer to it as “the Ampere transaction”.
There are two major issues, albeit I think it became apparent, in the course of the hearing, that resolution of the first of those issues is the real key to resolution of the matters before the court.
The Issues
The first issue is whether Credit Suisse is bound by the terms of the Option Agreements at all. Those Agreements contained restrictions on transfer or other dealing with the option rights. The Option Agreements were entered into by Barclays Bank Plc (“Barclays”) “as agent and security trustee” for the Banks, including Credit Suisse. British Energy contends that the effect of the quoted words is that Barclays, as their agent, bound the Banks to the terms of, and in particular the restrictions contained in, the Agreements. Credit Suisse and Ampere contend that the words are no more than descriptive of the role of Barclays and Barclays alone is bound by the restrictions. I shall refer to this as “The Party Issue”.
The second issue, which was a particular focus of Lord Grabiner QC's submissions for Ampere, is whether, even if Credit Suisse is a party to the Option Agreements, the Ampere transaction is or would be (if executed) a breach of the restrictions and, in particular, the restriction to be found in Clause 31.2.1 of the Share Option Agreement. I shall refer to this as “The Breach Issue.” British Energy submits there is or would be a breach.
Ampere also submitted that if the answers to the first two issues resulted in the restrictions being binding upon Credit Suisse, then that result would be contrary to public policy and so void. I shall refer to this as “The Public Policy Issue.”
The Restated Credit Agreement
The Restated Credit Agreement related to the Loan of £150 million agreed as part of the restructuring of British Energy. It was expressed to be made between EPL as “the Borrower”; Barclays Capital 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).”
The Definitions clause (clause 1.1) included:
“ Asset Option Agreement 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 (as defined …).”
“ Commitment means (a) in relation to a Bank … the amount of its participation in the “Loan”; and (b) … the amount of any other Bank's Commitment acquired by it under Clause 25 …”
“ Finance Document means:
(a) this Agreement;
(b) …
(c) …
(d) …
(e) the Intercreditor Agreement;
(f) …
(g) an Option Agreement,
…”
“ 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 Asset Option Agreement; or
(b) the Share Option Agreement.”
“ Security Documents” is defined in terms which Mr Howard accepted for the purpose of the hearing did not include the Option Agreements.
“ Share Option Agreement 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 Schedule 1 Banks included Credit Suisse.
Mr Symons QC for Credit Suisse placed some emphasis on the description of the Option Agreements as made with and granting the options to “the Security Trustee.” He submitted (rightly) that the role of trustee was a principal role. The same point was made in relation to Clause 9 (see below).
Clause 1.4 envisaged and provided for the eventuality that there might be only one “Bank”. It is not in issue that Credit Suisse subsequently and validly acquired sufficient participations in the Loans to constitute itself “Majority Banks.”
Finance Party was defined in terms wide enough to cover Barclays in each of its capacities and “a Bank.” Clause 2.2 provided that:
“2.2. Nature of a Finance Party's rights and obligations.
(a) The obligations of a Finance Party under the Finance Documents are several. Failure of a Finance Party to carry out those obligations does not relieve any other Party of its obligations under the Finance Documents.
No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
(b) The rights of a Finance Party under the Finance Documents are divided rights. A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce those rights.”
Clause 9 provided:
“ OPTIONS
The Security Trustee will only exercise an Option on the instructions of the Majority Banks and in accordance with the terms of the relevant Option Agreement.”
Clause 10 provided that payment “by the Borrower or a Bank under the Finance Documents” should be made to “the Agent”.
Clause 19 provided:
“19. THE AGENT AND THE ARRANGER
19.1 Appointment and duties of the Agent
(a) Each Finance Party (other than the Agent) irrevocably appoints the Agent to act as its agent under and in connection with the Finance Documents.
(b) Each party appointing the Agent irrevocably authorises the Agent on its behalf to:
i) perform the duties and to exercise the rights, powers and discretions that are specifically delegated to it under or in connection with the Finance Documents, together with any other incidental rights, powers and discretions; and
ii) execute as agent for that Party each Finance Document to which the Agent is a party.
(c) The Agent has only those duties which are expressly specified in the Finance Documents. Those duties are solely of a mechanical and administrative nature.
19.2 Role of the Arranger
….
19.3 Relationship
The relationship between the Agent and the other Finance Parties is that of agent and...
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