CL-2025-000062 - [2025] EWHC 1506 (Comm)

On 14 February 2025 Eraaya issued but did not serve the Claim Form. The relief sought in the Claim Form was damages for breach of the Engagement Letter, and for negligence and an injunction requiring Elara to provide the confirmation purportedly required for the release of the Unutilised Funds.

On the same day Eraaya filed a statement on the BSE website in respect of the proceeds of the Second Tranche, which stated that "Out of total 60 Million US$, receipt of US$ 40 Million less Issue Expenses is pending".

On 11 March 2025 Hogan Lovells for the Bondholders wrote to Elara’s lawyers indicating that the Bondholders considered that they had a proprietary claim to any proceeds GLAS is holding insofar as they represent the traceable proceeds of the Bondholders’ contribution towards the Second Bond Issue and asking that Elara provide certain undertakings “to ensure that our clients' proprietary interests in those monies are protected pending the resolution of a potential dispute between our clients, on the one hand, and Eraaya on the other, in respect of the Bonds.”

That letter also:

On 12 March 2025, Eraaya issued the Injunction Application. Immediately thereafter it served the Claim Form and the Injunction Application on Elara. It indicated that it intended to seek expedition of the Injunction Application to a hearing on 28 March 2025. The Application notice gave a time estimate of half a day.

On 14 March 2025 Elara’s solicitors sent the entire package of materials on to Hogan Lovells (the “Documents”). It is this communication which lies at the heart of the Collateral Use arguments. The Documents were not provided with any indication or qualification that they were subject to collateral use restrictions. They were sent under cover of a letter which indicated that Elara found itself caught “in the middle of a dispute in which it has no direct interest. On the one hand, the Issuer has sued it, contending that it is required to give the clause 3.4 confirmation and claiming damages resulting from its not having done so; on the other hand, your clients contend that the confirmation should not be given.” It also suggested that the Bondholders should apply to be joined to the proceedings.

On the same day Elara also wrote to Eraaya. Early in that letter Elara indicated that it was its view that “given the very obvious interest of the Majority Bondholders in the present proceedings, including in particular your client’s application for an interim mandatory injunction, they ought to have been made parties to the claim. Please explain why they have not been made parties to the proceedings.” The letter went on to say that it was “extraordinary” that Eraaya was attempting to have the Injunction Application heard on an expedited basis without joining the Bondholders. The Bondholders were copied into this letter and Eraaya were invited to join them into the communication loop. Elara also highlighted:

At about the same time as Elara wrote to Eraaya, Eraaya applied to the Court for expedition. The Commercial Court Guide sets out at D2.2 and J1.3 the Court’s approach to expedition. Expedition will be granted in cases of sufficient urgency and importance, and the Guide makes clear that the Court will have regard to “the nature and degree of urgency, and the importance of the case, the state of the list, the procedural history (including the pre-action history), and especially (unless the application is agreed by all parties) the question whether the expedited trial proposed by the applicant will be fair to each respondent.” It does not explicitly say that applicants should make full and frank disclosure in relation to the relevant factors. It has probably been taken for granted that this falls within paragraph A1.10 of the Guide which records the expectation of a high degree of co-operation and realism from the legal representatives of the parties.

The basis of the application advanced by Eraaya’s solicitors was:

There are a number of concerning features of Eraaya’s letter. The first is that it estimated the hearing time for the application as being 2.5 hours. Given the complexity of this matter it is hard to see how that estimate was ever thought to be realistic. The second is that the letter and the witness statement which was referred to failed to make any reference to the facts that:

Overall, those matters were ones which were significant in the context of the question of expedition. Had a full and frank presentation of the expedition factors been made it appears highly unlikely that expedition would have been granted.

At this point there also emerged the issue about collateral use. On Monday, 17 March 2025, Eraaya responded to Elara, copying Hogan Lovells, asking Hogan Lovells to confirm if they had received the Documents, to which CPRs 31.22 and 32.12 applied. Elara responded the same day, explaining that it was considered that providing the Documents to the Bondholders was “for the purpose of the proceedings”, and stating that it appeared that Eraaya was attempting “to engineer a situation in which the Bondholders[…] are effectively shut out from opposing the application for an injunction.”.

On Tuesday, 18 March 2025, the Bondholders wrote to: (1) Eraaya, asking for their consent for the Bondholders to be joined to the proceedings and for the Bondholders to be served with the Injunction Application; (2) Elara, asking for their consent to joinder (which was provided); and (3) Commercial Court Listing, indicating their intention to intervene in the proceedings and to seek Eraaya’s consent to be joined.

Eraaya’s response did not address the Bondholders’ proposals, but instead alleged that Elara, the Bondholders and their legal representatives were all in breach of CPR 31.22 and 32.12 and that use of the Documents constituted “clear collateral use”.

On 19 March 2025, the Bondholders issued the Joinder Application. On the same day, Elara wrote to the Court taking issue with the proposed expedition sought (though not opposing some limited expedition) and highlighting:

Thereafter, protracted correspondence between the parties and with Commercial Court Listing followed. It does not make edifying reading. Despite repeated reminders from the court that such correspondence must be kept brief and to the point it was lengthy and often discursive. It runs, in the hearing bundle, to nearly 60 pages. The attention of the Judge in Charge was repeatedly required. It is overall not at all in the spirit of paragraph A1.10 of the Guide.

At this point, Eraaya maintained that the Injunction Application should be determined on an expedited basis without reference to the Joinder Application; alternatively, that the Joinder Application should be struck out as an abuse of process. An extremely firm line was taken on collateral use: Eraaya implicitly threatened contempt proceedings against the Bondholders and its legal representatives, for example stating that Eraaya would “seek subsequent orders in respect of the misused material and information, as against the applicants for joinder and their lawyers”, that the Bondholders and their legal representatives would “bear the consequences”, and Eraaya would “seek appropriate orders in due course”. Eraaya repeatedly refused to confirm in correspondence that it would not bring such proceedings. Eraaya also suggested that the Bondholders’ legal representatives are debarred from participating in these proceedings.

On 25 March, Henshaw J indicated that the proposed expedited hearing was unworkable. While agreeing to a degree of expedition to a 2 day hearing shortly after Easter he noted “It is unclear why the Claimants sought an expedited hearing on 14 days' notice in circumstances where the claim form was issued a month previously and, it appears, the potential issue has existed since October 2024.” Succinct responses were requested.

Once Henshaw J indicated that he was minded to direct that the Bondholders be permitted to participate in the Injunction Application, Eraaya granted the Bondholders prospective permission to use the Documents for the purposes of responding to the Injunction Application. Eraaya however continued to refuse the Bondholders permission to use the Documents for the Joinder Application.

The Bondholders in turn took issue with the proposed joined up hearing suggesting that joinder needed to be considered first. Eraaya indicated (over the course of a distinctly non-succinct letter of 7 pages) that it was concerned that the manner of listing “does not waive or excuse breaches of the collateral use restrictions” and contended for the reverse order.

On 31 March Henshaw J responded again, highlighting concerns with the way in which Eraaya had attempted to have the hearing listed. In particular he stated:

“Requests for expedition involve allocating the resources of the court for the benefit of one party in preference to the needs of other parties. It is incumbent on a party seeking expedition to do so on proper grounds, ensuring the court has all the relevant information, and to take a co-operative approach to the management of the case. Certainly in some respects, it does not appear to me that the Claimant has lived up to these expectations:-

1 The Claimants on 14 March 2025 sought an expedited hearing on 14 days' notice in circumstances where the claim form had been issued a month previously and, it appears, the underlying issue had existed since October 2024.

2 The Claimants provided a 2.5 hour time estimate, which was obviously unrealistic for a contested application that would in substance dispose of a claim for payment of approximately US$40 million.

3 The court was not told that there was a further group of potential parties, the bondholders, who might reasonably be expected to claim an interest in the proceedings and the claimants' application […]

[…]the expedition application has taken up an excessive amount of the time of the Judge in Charge and the court's listing team.

If this approach continues, the court may simply refuse expedition altogether and direct that the applications be listed, in such order as it considers appropriate, in the ordinary course.”

On 7 April 2025, after a further barrage of correspondence, Henshaw J indicated that the procedural difficulties caused by Eraaya’s collateral use objection might be resolved by the issue “being determined on the papers in the very near future”; alternatively, at this hearing, which “might in practice resolve the joinder issue as a whole”. Eraaya objected to the issue being determined on the papers.

Ultimately Henshaw J directed that (among other things) the Bondholders be made Respondents and served with the Injunction Application forthwith, and that the Joinder and Declaration Applications be dealt with at the outset of this hearing, subject to the Judge hearing the applications.

Consequently this matter came before me for a two day expedited hearing against a background of a very contentious and to some extent intemperate approach. That approach was also manifest in the witness evidence served, with all parties larding their witness statements with argument and adjectives.