Nationwide Building Society v The Bank of New York Mellon, London Branch & Anor
| Court | Queen's Bench Division (Commercial Court) |
| Judge | Sean O'Sullivan KC |
| Neutral Citation | [2025] EWHC 1046 (Comm) |
| Date | 01 May 2025 |
| Year | 2025 |
| Counsel | Ben Valentin Kc,Lord Grabiner Kc,Simon Gilson,Simon Salzedo Kc,Kyle Lawson |
Neutral Citation Number: [2025] EWHC 1046 (Comm)
Case No: CL-2023-000128
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Date: 01/05/2025
Before :
Sean O'Sullivan KC (sitting as a Deputy Judge of the High Court)
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Between :
NATIONWIDE BUILDING SOCIETY Claimant
- and -
(1) THE BANK OF NEW YORK MELLON,
LONDON BRANCH
(2) ALLEN OVERY SHEARMAN
STERLING LLP
(formerly ALLEN & OVERY LLP) Defendants
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BEN VALENTIN KC (instructed by Travers Smith LLP) for the Claimant
LORD GRABINER KC and SIMON GILSON (instructed by Hogan Lovells
International LLP) for the First Defendant
SIMON SALZEDO KC and KYLE LAWSON (instructed by Clyde & Co LLP)
for the Second Defendant
Hearing dates: 4 and 5 March 2025, then written submissions 12, 21 and 25 March 2025
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Approved Judgment
This judgment was handed down remotely at 1pm on 01 March 2025 by circulation to the
parties or their representatives by e-mail and by release to the National Archives.
Sean O'Sullivan KC
Approved Judgment
Nationwide Building Society v
The Bank of New York Mellon, London Branch & Another
Sean O’Sullivan KC (sitting as a Deputy High Court Judge):
1. The background to this dispute is a windfall for HMRC and the UK Treasury. If
certain notes issued by the Claimant, Nationwide, as part of its US Medium Term
Note Programme in 2018 and 2019, had been listed on the London Stock Exchange,
they would have qualified for the quoted Eurobond exemption from withholding tax
in s.889 of the Income Tax Act 2007. But, as a result of an oversight, no application
for listing was made. As a result, Nationwide faced a substantial tax liability.
2. This case concerns, in simple terms, responsibility for that oversight. The First
Defendant (“BNY”) had various powers and duties in relation to the notes as Trustee
and Paying Agent. The Second Defendant (“A&O”) was Nationwide’s lawyer,
assisting with aspects of the issue of the notes. Initially, as I will explain, Nationwide
had both BNY and A&O in its sights. Now, as a result of some concessions, its guns
are aimed only at A&O.
3. However, the primary issue with which I am concerned is A&O’s Part 20 claim
against BNY for a contribution. A&O says that BNY owed a legal duty to
Nationwide, either in contract or in tort, to confirm that the notes had been listed and
that BNY’s failure to do so gives rise to a liability to provide an indemnity for, or at
least a contribution to, any damages which A&O is obliged to pay to Nationwide.
BNY says that A&O has no real prospect of succeeding on its allegation that BNY
owed such a duty and, on that basis, seeks summary judgment on A&O’s Part 20
contribution claim. There is also a more limited, and contingent, issue about the costs
of an application by Nationwide to amend.
4. Both the background to the dispute and the procedural history are a little involved, so
I will say a little about each before turning to the specific issues which arise on the
summary judgment application and then the amendment application.
The factual background
Introduction
5. What follows is not intended to be comprehensive. I have focussed on the parts of the
story which seemed to me potentially relevant to the specific issues which I have to
decide. Nor should my short narrative be understood as involving any findings of fact;
I am deciding a summary judgment application. For the most part, therefore, I am
simply recording what I have been told by one or other party.
The Programme in outline
6. Nationwide’s US Medium Term Note Programme was established in around 2000. I
understand it to be a way of raising capital, borrowing money for periods of up to 10
years on the basis of a fixed interest return (or “coupon”), with a fixed redemption
date, largely aimed at institutional investors in the US.
7. A&O acted as US and English law legal adviser to Nationwide from 2006. BNY took
over as Trustee and Paying Agent in 2007.
Sean O'Sullivan KC
Approved Judgment
Nationwide Building Society v
The Bank of New York Mellon, London Branch & Others
8. Twenty-four notes were issued between 2009 and 2022 pursuant to the US Medium
Term Note Programme. Each series was referred to by the parties by reference to its
issue date: so “Series 2018-1” refers to the first series of notes issued in 2018.
9. The present action concerns Series 2018-1, 2018-2, 2019-1 and 2019-2, all of which
were not listed upon issue on the Official List of the UK Listing Authority (i.e. the
Financial Conduct Authority), nor admitted to trading on the London Stock Exchange.
I will refer to them collectively as “the Unlisted Notes”.
10. I was shown some of the key documentation which was in place at the time the
Unlisted Notes were issued. It is important to understand that there is a high degree of
regulation in this regard which is aimed at protecting investors in notes of this kind,
despite them not being aimed at “retail” investors. By way of example, it was
common ground that EU Directive 2003/71/EC (as amended) applied at the time to
require the publication of a prospectus for the issuance of the notes “ to enable investors
to make an informed assessment of the assets and liabilities, financial position, profit and
losses, and prospects of the issuer and of any guarantor, and of the rights attaching to such
securities. This information shall be presented in an easily analysable and comprehensible
form” (see Article 5(1) of that Directive).
The Base Prospectus
11. I was shown the “Base Prospectus” dated 20 December 2017, which I understand to
have been in place when the 2018-1 and 2018-2 series were issued on 8 March 2018.
Although slightly updated versions were in place by the time of issue of each of the
2019-1 and 2019-2 series, it was agreed that the specific terms which I was being
shown did not change. The updates concerned the detail of disclosures about
Nationwide’s financial position over time, which is not relevant for my purposes.
12. The overview explained the role of the prospectus:
“This overview highlights important information regarding, but is not a complete description
of, our medium-term note program. We urge you to read the remainder of this Base
Prospectus where we set out a description of our medium-term note program in more detail.
You should also review the applicable Final Terms for additional information about the
particular series of notes that you are considering purchasing. The following overview does
not purport to be complete and is taken from, and is qualified in its entirety by, the remainder
of this Base Prospectus and, in relation to the terms and conditions of any particular tranche
of notes, the applicable Final Terms.”
13. In the opening paragraph of the prospectus, it was stated that an application had been
made to list the notes on the LSE and for admission on the FCA’s Official List. The
prospectus referred to Nationwide’s covenant to make good any sums it was obliged
to withhold or deduct from interest payments, i.e. to pay interest gross:
“All payments in respect of the notes will be made without deduction for or on account of
United Kingdom withholding taxes, unless the withholding is required by law. In that event,
we will (subject to certain exceptions as described in “Terms and Conditions of the Notes–
Payment of additional amounts”) pay such additional amounts…
as will result in the holder of any notes receiving such amounts as they would have received
in respect of the notes had no such withholding been required”.
3
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