Law Debenture Trust Corporation Plc v Acciona SA and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Peter Smith |
| Judgment Date | 18 February 2004 |
| Neutral Citation | [2004] EWHC 270 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC04C00454 |
| Date | 18 February 2004 |
[2004] EWHC 270 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Peter Smith
Case No: HC04C00454
Mr Robin Potts QC (instructed by Simmons & Simmons) for the Claimant Ms Sue Prevezer QC and Mr Stephen Houseman (instructed by Bingham McCutchen LLP) for the Defendants
Hearing dates: Friday 13 th February 2004
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.
Approved Judgment
INTRODUCTION
This is an application by the Claimant by Part 8 claim form issued on 10 th February 2004 seeking directions as to the construction of a provision in a Trust Deed as set out in this judgment as between the Claimant as Trustee and the Defendants as Beneficiaries.
The issue with the construction concerns the meaning of the expression contained in Condition 12 'materially prejudicial to the interests of the Bondholders" in the context of a Bond Issue where the Claimant is the Trustee of the Bond Issue and the Defendant Beneficiaries are Bondholders.
BACKGROUND
The wording referred to above appears in Condition 12 of the Second Schedule to the Amended and Restated Trust Deed dated 15 th November 2002 ('The Trust Deed') between Elektrim Finance BV ('The Issuer'), Elektrim S.A. ('The Guarantor') and the Claimant, the Law Debenture Trust Corporation Plc ('The Trustee').
The subject of the Trust Deed comprises 510 million Euro 2% Bonds ("the Bonds") due 2005 of the Issuer.
Condition 12 sets out the Events of Default upon the occurrence of which the Trustee is entitled or may become bound to give a notice to the Issuer and the Guarantor that the Bonds have become immediately due and repayable, together with accrued interest.
TERMS OF TRUST DEED
The two major provisions about which the arguments essentially revolved were Condition 10(d) and 12(ii), which provide as follows:-
"(d) Member of Management Board Appointed by the Bondholders
So long as the principal amount outstanding of the Bonds exceeds £150,000,000, the Bond Trustee, acting on the written instructions of the holders of at least 25 per cent in principal amount outstanding of the Bonds (an "Instructing Bondholder Group"), shall have the right to require the Supervisory Board of the Guarantor to have appointed one member to the Management Board of the Guarantor nominated by such Instructing Bondholder Group (the "Bondholder Nominated Director"). The Supervisory Board shall have the right to reject any individual nominated by an Instructing Bondholder Group, provided that it shall give reasonable written justification to the Bond Trustee and to the Bondholders in accordance with condition 16 for such rejection on grounds that (a) the nominee (including any replacement thereof selected by such Instructing Bondholder Group):
(i) has insufficient experience;
(ii) has a conflict of interest that would prevent the nominee properly conducting the function of a management board member;
(iii) is of unsound mind;
(iv) is an undischarged bankrupt; or
(v) is not a full-time resident of Poland,
or (b) the Supervisory Board reasonably considers that the Management Board so constituted could not reasonably be expected to operate on a consensual basis. In the event that the individual nominated by an Instructing Bondholder Group is rejected by the Supervisory Board on the grounds specified in paragraph (b) above, any alternative individual nominated by an Instructing Bondholder Group (with respect that the particular appointment) may only be rejected by the Supervisory Board on one of the grounds specified in paragraph (a) above or on the grounds that then nominee is reasonably considered by the Supervisory Board to be so objectionable (on grounds other than those stated in paragraph (a) above) that it would be impossible for the Management Board to operate on a consensual basis.
If the Bondholder Nominated Director shall resign or become incapable of acting or if the Bond Trustee is requested in writing by the holders of at least 50 per cent in principal amount outstanding of the Bonds to request that the Supervisory Board dismiss the Bondholder Nominated Director, then the Bond Trustee, acting on the written instructions of an Instructing Bondholder Group, shall have the right to require the Supervisory Board to appoint a replacement member nominated by such Instructing Bondholder Group (subject to the Supervisory Board's right to reject any individual nominated by an Instructing Bondholder Group as described in the first paragraph of this Condition 10(d)).
The Guarantor agrees that its Management Board will consist of two or three members having positions, status and benefits commensurate with their role in the joint management of the Guarantor. Material decisions of the Guarantor and all financial decisions relating to amounts exceeding Euros 25,000 may only be taken with the consensus of the entire Management Board.
In the event of any impasse or deadlock of the Management Board that the Supervisory Board reasonably believes to be prejudicial to the interests of the Guarantor, the Supervisory Board may dismiss the entire Management Board or any two members of the Management Board and appoint other persons in their place. In the event that only two members of the Management Board are to be dismissed of which one is the Bondholder Nominated Director, the Bond Trustee, acting on the written instructions of an Instructing Bondholder Group, may direct the Supervisory Board as to which of the two members (who are not the Bondholder Nominated Director) shall be dismissed. In addition, the Bond Trustee, acting on the written instructions of an Instructing Bondholder Group, shall have the right to require the Supervisory Board to appoint a replacement member nominated by the Bondholders (subject to the Supervisory Board's right to reject any individual nominated by an Instructing Bondholder Group as described in the first paragraph of this Condition 10(d)) …"
"12 Events of Default
The Bond Trustee at its discretion may, and if so requested in writing by the holders of at least thirty per cent in principal amount outstanding of the Bonds or if so directed by an Extraordinary Resolution of the Bondholders shall (subject in each case to being indemnified to its satisfaction), give notice to the Issuer and the Guarantor that the Bonds are, and they shall accordingly immediately become, due and repayable at their relevant redemption value, together with the accrued Interest Amount as provided in the Bond Trust Deed, upon the occurrence of any of the following events "Events of Default"):
(i) if default is made for seven days or more in the payment of any principal and premium (if any) or default is made for more than fourteen days in the payment of interest due on any bond; or
(ii) if either the Issuer or Guarantor fails to perform or observe any of its other respective obligations under the Bonds, the Bond Trustee Deed, the Pledge Agreements, the Mortgages, the Assignments, the Security Administration Agreement or the Deed of Delegation or if any event occurs or any action is taken or fails to be taken which is (or but for the provisions of any applicable law would be) a breach of any of the covenants referred to in Condition 10 and in any such case (except where the Bond Trustee considers the same to be incapable of remedy when no such continuation or notice as is hereinafter referred to will be required) the same continues for the period of 30 days (or such longer period as the Bond Trustee may permit) next following the service by the Bond Trustee on the Issuer or Guarantor of notice requiring the same to be remedied, except in the case of the Issuer failing to make the First initial Payment and such failure continuing for a period of three days next following the service by the Bond Trustee on the Issuer or Guarantor of notice requiring the same to be remedied; or
(iv) if any governmental authorisation necessary for the performance of any (i) payment obligation of the Issuer or the Guarantor under the Bonds or (ii) any material obligation of the Issuer or the Guarantor under the Bond Trust Deed or the paying and Transfer Agency Agreement (other than any approvals required in connection with the pledge over the Pledged PAK Shares) fails to take full force and effect or remain valid and subsisting; or
(v) if an order of a court of competent jurisdiction is made or an effective resolution is passed for winding up the Issuer, the Guarantor or any Material Subsidiary of the Guarantor, except (a) a winding up for the purpose of a consolidation, merger, reconstruction or amalgamation the terms of which have previously been approved in writing by the Bond Trustee or by an Extraordinary Resolution of the Bondholders, or (b) in the case of a solvent winding up of a Subsidiary of the Guarantor (other than the Issuer) where the undertaking and assets of the Subsidiary are transferred to or otherwise vested in the Guarantor or another of its Subsidiaries; or
(vi) if, after the Restructuring Date, an encumbrancer takes possession, or a receiver, manager or administrator is appointed, of the Issuer, the Guarantor or any Material Subsidiary of the Guarantor or of the whole or of any part of the undertaking or assets of any of them (being substantial in relation to the undertaking or assets of the Guarantor and its Subsidiaries taken as a whole) or if a distress, execution, attachment, sequestration or other process is levied or enforced upon or sued out of or put in force against the whole or any part of the...
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