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

The first question to ask is the “serious issue to be tried” question. That question can be simply answered. There plainly is a serious issue to be tried.

However, some further consideration of the merits is appropriate because what is being sought is a mandatory injunction; and one which is, if not final, in practical terms fairly proximate to being final. On one analysis one might indeed say that Eraaya is seeking a final decree of specific performance; as Burrows notes in “Remedies for Torts, Breach of Contract and Equitable Wrongs” (4th edn 2019) 465-466 the role of specific performance is the enforcement of a positive contractual promise. Certainly, what is being sought comprises all of the relief in paragraph (1) of the prayer to the Particulars of Claim. And while, strictly speaking, any decision made in Eraaya’s favour on this point could be found to be wrong at a later stage, in practical terms if this relief is granted the genie is out of the bottle and is not going back in. This was a point which was frankly accepted on behalf of Eraaya by Mr Salve KC, who described the relief being sought as “extraordinary”.

Thus, while technically the threshold jurisdictional test remains one of “serious issue to be tried”, the merits will have to come into the equation at a later stage when considering the balance of convenience and the question of where the lesser risk of irremediable harm lies.

It is perhaps with this point in mind that Eraaya at times placed its submissions on the basis that this was such a clear case that there was no defence. This would of course be the test to be met (by reference to summary judgment standards) if final relief had explicitly been sought. This was also the approach inherent in the submission that this is not the ordinary sort of interim injunction application where the American Cyanamid guidelines apply but rather a case where it would be a “misuse of the process of the court to withhold from the claimants an interim remedy” (by reference to inter alia Manchester Corp v Connolly [1970] Ch 420, CA).

If one asks whether that summary judgment test is met, the answer is simple. It is not met by a very comfortable distance. Even if one poses the test historically applied to interim mandatory relief and asks if the Court feels a “high degree of assurance” that Eraaya will establish at trial that the injunction was properly granted and that its case is “unusually strong and clear” or a “clear case” where relief should be granted, the answer is again no.

The preliminary assessment on the basis of the material available to the Court on this application suggests that the merits of the claim, while plainly arguable, are some way short of strong. I would unhesitatingly say that on the material before me it is Elara’s case which appears at this early stage to be stronger. The facts which feed into this conclusion are as follows.

Eraaya’s application and underlying claim is not well defined and on some levels is conceptually confused. Eraaya focusses almost entirely on Clause 3.4 of the Second Settlement Agency Agreement as the basis for saying that Elara is bound to give the confirmation required under that clause for GLAS to release the Unutilised Proceeds. It says that this is the clear meaning of the clause. But, even putting aside the questions which do arise as to that proposition, that is simply the wrong starting point - because Elara is not a party to the Second Settlement Agency Agreement. Whatever Clause 3.4 should be taken as saying, Elara has no obligations under Clause 3.4 that Eraaya can enforce.

The correct first point to consider is what Elara’s relationship with and obligations to Eraaya were. On the basis of the material currently in play Eraaya’s only apparent contract with Elara is that under the Engagement Letter. But that is a letter which on its face only appoints Elara as a financial adviser. The terms of the letter impose duties consistent with that: to “assist and advise” Eraaya on an “exclusive best efforts basis”. The defined duties (“(i) assistance with preparation of offering documents (if required) which shall contain such information as [Elara and Eraaya] may mutually determine to be required […]; (ii) assistance with the distribution of materials to investors following approval by [Eraaya]; (iii) evaluating indications of interest; (iv) assisting [Eraaya] and its counsel in drafting definitive documents”) are likewise of a piece with an essentially advisory role.

The means by which they somehow become obligations which incorporate a specifically enforceable obligation that requires Elara to provide a confirmation (of whatever sort) under Clause 3.4 is not readily discernible. This is the more so, given that on any analysis the later form of Clause 3.4 did not exist at the time the Engagement Letter was entered into (see further below).

It may well be that Elara’s relationship with Eraaya was not entirely defined by that Engagement Letter, and that at some subsequent point (possibly around the time that version 2 of Clause 3.4 was drafted), Elara entered into a relationship with Eraaya which imposed further responsibilities on it. There are some indicia of this. Eraaya pointed to documents in which Elara allowed itself to be identified in regulatory documents as “Lead Manager/Arranger”, as well as to the correspondence surrounding the suggested instructions, in which Elara itself proffered an instruction which identified a company called Pershing, and a specific account with Pershing (not in Eraaya’s name) as the destination for funds. But this did not add up to evidence of a further or varied relationship; and it formed no part of Eraaya’s pleaded case, which rested solely on the Engagement Letter.

Nor does the fact that Elara gave an instruction in the context of the First Bond Issue (on 23 August) assist, because this instruction was of a different nature to the confirmation required by Clause 3.4; it was the notification of contact details which could easily be seen as falling within the financial advisor/documents drafter role envisaged by the terms of the Engagement Letter.

Further there was plainly some scope for Elara to be acting in some respects for investors, which would add an extra complication to decoding what was going on. The Pershing exchange refers to “discussions with principals”. The Bondholders pointed to Clause 3.3 of the Engagement Letter, which: (1) draws Eraaya’s attention to the fact that Elara may have conflicting interests or duties in connection with a transaction; (2) permits Elara to assist and advise other parties to the transaction; and (3) states that, in the relevant circumstances, “[Elara] will act in the best interests of the source of finance”. While this formed no part of Elara’s own case at this stage in response to the injunction application there is plainly scope for the relevant circumstances, which apparently involved Elara in the process of the genesis of Clause 3.4 of the Second Settlement Agency Agreement to involve a situation falling within the scope of Clause 3.3 of the Engagement Letter, whereby it was trusted by one or more investors to exercise its unfettered discretion under that clause to provide the confirmation in accordance with the condition it is said that Eraaya agreed with Selvi.

The second strand is Clause 3.4 itself. As already noted, Eraaya would like to rely almost exclusively on this clause, and what it sees as the objective construction of that clause. As already noted, that is not really an apt approach when it is not a contractual term which binds Elara. So, for the purposes of the merits the question of the correct construction of the clause is one which does not arise. But the mere fact of the two versions of Clause 3.4 asks questions which Eraaya does not answer. The most important one is: why is this clause redrafted between the First and Second Bond Issues? That it is redrafted is clearly the case. Elara and the Bondholders offer a detailed account as to why that happened which is consistent with their case. Eraaya refuses to engage, saying that such material is not admissible in the process of objective construction of Clause 3.4. Technically that may be right. But in circumstances where Clause 3.4 presents as an anomaly, and the basis upon which Elara is to be considered to be obliged to act under it is obscure, a strong case for Eraaya would have provided some account which could reconcile these points.

Thus, even standing alone and without considering the proprietary issues, I would conclude that Eraaya’s case against Elara is confused and far from strong.