Plaza BV v The Law Debenture Trust Corporation Plc
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Proudman |
| Judgment Date | 16 January 2015 |
| Neutral Citation | [2015] EWHC 43 (Ch) |
| Date | 16 January 2015 |
| Court | Chancery Division |
| Docket Number | Case No: HC 2014 000518 |
[2015] EWHC 43 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Proudman
Case No: HC 2014 000518
Gabriel Moss QC and Robert Ham QC (instructed by Harcus Sinclair) for the claimant
Richard Snowden QC, Andrew Clutterbuck QC and Sharif Shivji (instructed by Eversheds LLP) for the defendant
Hearing dates: 29 and 30 October 2014
The defendant The Law Debenture Trust Corporation PLC ("LDTC") seeks an order pursuant to CPR Part 11 r 11 (1) staying proceedings brought by Plaza BV ("Plaza"). If it should be unsuccessful, it seeks an order under CPR Part 24 granting summary judgment or, in the alternative, striking out the whole claim.
Mr Moss QC and Mr Ham QC appeared for the claimant and Mr Snowden QC, Mr Clutterbuck QC and Mr Shivji appeared for the defendant.
Background
LDTC is the trustee of five subordinated bond issues issued by an Australian Group of companies, the Bell Group. There are, briefly, two categories of subordinated bond issues:
• Three bond issues ("the BGNV bonds") issued by Bell Group NV (in insolvent liquidation in Curaçao (the place of the principal liquidation) and Australia (the place of the ancillary liquidation)), a Dutch Antilles Curaçao company. The BGNV bond issues (and also the BGF bond issue—see below) were guaranteed by the Bell Group's holding company, The Bell Group Ltd, ("TGBL") on a subordinated basis. TBGL's obligations under its subordinated guarantee rank equally with TBGL's other present and future subordinated indebtedness.
• There are two other bond issues, one issued by TBGL and one issued by Bell Group Finance Pty ("BGF"). Both TBGL and BGF are Australian companies in insolvent liquidation in Australia. The Insurance Commission of Western Australia ("ICWA") is the sole bondholder but not the sole beneficiary under the trust deeds. The senior creditors of TBGL and BGF including BGNV are also beneficiaries and they rank in priority to ICWA.
All the trust deeds are governed by English law, all have a non-exclusive English jurisdiction clause and all expressly authorise LDTC to act as trustee in relation to bond issues by other companies in the Bell Group.
The claimant ("Plaza") was incorporated in the Netherlands but its address is in Curaçao. It is a substantial holder of BGNV bonds. BGNV lent on the proceeds of the bond issues to TBGL and BGF. TBGL is also a guarantor of the BGNV and BGF bond issues. The loans have not been repaid and BGNV is a senior unsubordinated creditor of TBGL and BGF.
Plaza, as beneficiary under the BGNV trust deeds, has brought proceedings in England against LDTC and contends that its claim is both meritorious and appropriately brought in this country.
The way the bonds work has been treated in detail by Owen J in his judgment in Western Australia in The Bell Group Ltd (in liquidation) v. Westpac Banking Corporation (No 9) [2008] WASC 239 at [2574] and following. However, at the risk of repetition, I propose to explain briefly: (i) the structure of the Bell group financing arrangements, (ii) the disputes which have arisen from the insolvency of the Bell Group, (iii) distribution issues arising after what has been termed the Main Action, namely an action described in more detail below and (iv) Plaza's current claim with which I am concerned.
The structure of the Bell Group Financing Arrangements
TBGL undertook to the BGNV bondholders not to create, have outstanding or guarantee any other indebtedness for borrowed money other than the BGNV bonds convertible into the equity of TBGL unless such indebtedness was subordinated and ranked equally in all respects with or junior to the BGNV bonds or TBGL's subordinated guarantee of the BGNV bonds.
Accordingly, TBGL could only issue or have outstanding the TBGL bonds or guarantee the BGF bonds if those bonds and guarantee ranked at all times equally with or junior to TBGL's subordinated guarantee of the BGNV bonds. Thus ICWA's rights as bondholder of the TBGL and BGF issues are contractually subordinated through the trust deeds.
Further, as one of the senior creditors of TGBL and BGF, BGNV also benefits from a turnover trust. The trust deeds require LDTC to hold any moneys paid to it in the winding up of TGBL and BGF on trust to pay out the claims of, inter alia, the senior creditors of TBGL and BGF. Owen J in Western Australia has held that these provisions create "a presently constituted trust": see the Bell Group case (cited above) at [3326].
Thus Plaza, through BGNV, stands in priority to ICWA as a creditor of the Bell Group under these arrangements.
Collapse of the Bell Group
The Bell Group collapsed in 1991 and BGNV, TBGL and BGF all went into liquidation. On 18 December 1995 the liquidators of the principal companies in the Bell Group commenced proceedings in Western Australia (CIV 1464 of 2000, "the Main Action") challenging security taken prior to the liquidation by two groups of banks which were at that time senior creditors benefiting from the same turnover trust subordination provisions in the TBGL and BGF trust deeds as BGNV.
It seemed at the time that the Bell Group's unsecured creditors would recover nothing unless the Main Action was successful. Two of those major unsecured creditors were Plaza and ICWA (as the principal bondholders of BGNV, TBGL and BGF) and they therefore largely (with the Commonwealth of Australia) funded the Main Action to the tune of hundreds of millions of Australian dollars. Without such funding it was doubtful whether the Main Action would have proceeded at all and there would be no recovery for the BGNV, TBGL and BGF bondholders.
The funding arrangements proceeded on the basis that the parties would receive a preferential share of any recoveries by the liquidators under the provisions of s.564 of the Australian Corporations Act 2001 ("s.564"), which provides as follows:
" Power of Court to make orders in favour of certain creditors
Where in any winding up:
(a) property has been recovered under an indemnity for costs of litigation given by certain creditors, or has been protected or preserved by the payment of moneys or the giving of indemnity by creditors; or
(b) expenses in relation to which a creditor has indemnified a liquidator have been recovered;
the Court may make such orders, as it deems just with respect to the distribution of that property and the amount of those expenses so recovered with a view to giving those creditors an advantage over others in consideration of the risk assumed by them."
However ICWA's main interest in the Bell Group liquidation was as bondholder and under the terms of the TBGL and BGF issues, it was LDTC as trustee and not ICWA as beneficiary, which had the legal right to prove in the liquidations. There was thus a risk that the court might take the view that ICWA was not a creditor within the meaning of s. 564. Its funding was therefore provided through LDTC as trustee for the TBGL and BGF bonds. Likewise, Plaza provided its funding through BGNV.
This did not solve ICWA's problems; since the banks being sued in the Main Action were senior creditors of TBGL and BGF, there was still a risk that a s.564 award would primarily benefit them rather than ICWA.
It was therefore decided to amend the TBGL and BGF trust deeds by supplemental deeds ("the Second Supplemental Deeds") disapplying the subordination provisions to the extent of any award pursuant to s.564. This has been referred to before me as the "Partial Desubordination" strategy.
The Second Supplemental Deeds were executed by LDTC on 20 March 1995, but were not executed by TBGL and BGF, whose liquidators sought the approval of the Supreme Court of Western Australia ("the Western Australian Court") before doing so. That approval was not forthcoming because of the intervention of the Other Action referred to and defined below. However Plaza and BGNV were kept informed of these developments at the time and indeed ICWA, LDTC and BGNV entered into an agreement dated 4 July 1997 whereby BGNV specifically agreed (by Clauses 1 and 5) that it would not challenge Partial Desubordination.
It is notable that Mr R. Paul Griese has been closely affiliated with both BGNV and Plaza throughout, and executed documents as a representative of both. It is fair to assume that in practice BGNV and Plaza make common cause.
The banks who were defendants in the Main Action launched separate proceedings, CIV 2061 of 1996 ("the Other Action"), challenging the propriety of Partial Desubordination and the Second Supplemental Deeds. ICWA and LDTC counterclaimed for declaratory relief upholding that propriety.
In 1999 Plaza ceased to fund the liquidators. However BGNV was to remain entitled to a share of any recoveries made against the banks. Plaza agreed that the liquidators would apply for a s.564 award resulting in BGNV receiving 37.5% of 2/3 of net recoveries, the Commonwealth of Australia receiving 9% and ICWA and LDTC 53.5%. An agreement has been approved by the court in Curaçao whereby Plaza is to receive 70–80% of BGNV's net bankruptcy estate. Thus Plaza will receive most of any recoveries that may enure to BGNV. Mr Snowden pointed out that Plaza's expectation of receiving recovery through LDTC as BGNV trustee in consequence of its status as BGNV bondholder is very small by comparison.
The trial of the Main Action commenced on 22 July 2003. On 7 April 2004 the banks were permitted to amend their claim (and thus extend the trial) raising some of the issues already raised in the Other Action. Rather than face this prospect, the liquidators of the Bell Group Companies invited ICWA to withdraw its proposal to effect Partial Desubordination and ICWA and LTDC agreed....
To continue reading
Request your trial
-
Peter Ola Blomqvist v Zavarco Plc
...588Harrods (Buenos Aires) Ltd, In re [1992] Ch 72; [1991] 3 WLR 397; [1991] 4 All ER 334, CAPlaza BV v Law Debenture Trust Corpn plc [2015] EWHC 43 (Ch)Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32; [1997] 3 WLR 1143; [1997] 4 All ER 929; [1998] 1 Lloyd’s Rep 129, HL(E)Starlight Sh......
-
Dominic Liswaniso Lungowe & Others v (1) Vedanta Resources Plc (First Defendant) (2) Konkola Copper Mines Plc (Second Defendant)
...including JCN v JCN [2010] EWHC 843 (Fam); [2011] FLR 826, Ferrexpo v Gilson Investments [2012] EWHC 721; [2012] CLC 645 and Plaza BV v Law Debenture Trust Corp [2015] EWHC 43 (Ch) do not arise for consideration here. In any event, the position in relation to parallel proceedings has now ......
-
Gulf International Bank BSC v Sheik Badr Fahad Ibrahim Aldwood
...into an agreement which contained a jurisdiction clause in favour of the courts of Guernsey. 50 Winnetka was followed in Plaza v The Law Debenture Trust Corporation PLC [2015] EWHC 43 (Ch). In that case, Proudman J reviewed a number of first instance decisions including: Konkola Copper Min......
-
Black Diamond Offshore Ltd & Others v Fomento De Construcciones Y Contratas S.A. (Respondent/Claimant)
...EWHC 2243 (Ch) in which Newey J recognised that a case management stay could be granted, but did not do so and to Plaza BV v The Lord Debenture Trust Organisation plc [2015] EWHC 43 (Ch) in which Proudman J granted a temporary case management stay. 40 Lastly, in this regard, Ms Toube took m......
-
Third State jurisdiction clause respected – Owusu considered
...be resolved before that third state court pursuant to a jurisdiction clause? The decision in Plaza BV v Law Debenture Trust Corp plc [2015] EWHC 43 (Ch), 16 January 2015, of Mrs Justice Proudman in the Chancery Division grapples with these tricky questions, which remain unresolved, ten year......