![CL-2024-000082 - [2025] EWHC 2292 (Comm)](https://backend.juristeca.com/files/emisores/logo_WAai98v.png){kind=logo}
The existing claims
The existing claims
Turning, then, to the original claims pleaded against the defendants. I can take the claim against the first defendant shortly, because Mr Béar KC for the claimants candidly accepts that the original claim cannot be maintained absent his amendment. Put shortly, the existing claim against the first defendant is for damages for breach of contract in respect of the Loan Participation Notes under the Master Terms and associated documentation for the Unpaid Coupons and Unpaid Redemptions. This is undeniably the assertion of a claim for breach of an obligation to pay sums due under a contract to which both the claimant and the first defendant are party.
The problem for Mr Béar is that the first defendant was not party to any contract with the claimant. It owed no payment obligations to the claimant; its only obligations were owed to the second defendant under the loan contracts. It was, therefore, not party to any contract at all which obliged it to pay the claimant, let alone one which conferred jurisdiction on the English courts to determine such a claim. As I say, none of this is in dispute, and it is therefore conceded that, subject to the impact of the putative amendment, service cannot stand against the first defendant and must be set aside.
Turning then to the second defendant, the existing claim is pleaded in identical fashion as a claim for damages for the non-payment of money due in respect of the Loan Participation Notes under the Master Terms and associated documents. However, the position here is distinct, as the second defendant was the Issuer of the notes and thus occupied a different position in the contractual structure. I was taken through the contractual framework in some detail by both Mr Quest KC for the first defendant, Mr Head for the second defendant, and Mr Béar, and I will not take up time retracing that journey.
Suffice it to say that, on the basis of what I was shown, I am satisfied that Mr Head has the better argument that:
The claimant was not party to any of the notes documentation containing the jurisdiction clauses relied on.
All the constituting documents exclude the application of the 1999 Third Parties Act.
The second defendant, as Issuer, owed obligations to the Holders of the notes except for the purposes of payment of principal and interest, where its obligations were owed to the Global Noteholder defined as the depository.
The claimants are neither within the definition of Holder nor are they the depository.
In any event, only the Bearer – defined as the depository – is entitled to receive payment of principal and interest, and only the Bearer has the right to claim payment of principal and interest.
Further, only the Trustee can pursue remedies under the Trust Deed, including enforcement of the loan security, but it is not bound to do so unless a resolution has been passed by the requisite percentage of Noteholders. This is the “no look-through” provision.
Moreover, no Noteholder can proceed directly against the second defendant unless the Trustee has become bound to do so but fails to take action within reasonable time.
No suggestion is made in this case that the Trustee has been called upon to act but has failed to take action. Mr Béar placed reliance on a letter from the then Trustee, BNYM, dated 9 May 2022, stating that it was unable to continue acting due to the impact of Russian sanctions. But a statement by the Trustee that it is unable to continue to act is not quite the same as a demand that it should act supported by the requisite percentage of Noteholders. But in any event, as I have said, the claimants are not Noteholders. (I pause to note that Mr Béar made the entirely fair point that if the claimants are not Noteholders, then they are not caught by this particular barring provision. That is true, but if so, it is difficult to discern what contractual claim they might be able to assert against the second defendant as Issuer.)
In any event, the second defendant as Issuer is only obliged under the documents to make payments of amounts which it has actually and irrevocably received from the first defendant, and there is no evidence to suggest that it has received any sums for which it failed to account. Mr Béar suggested that the witness statement of Mr Kenkre on behalf of the second defendant was suspiciously reticent on this point. He submitted that there were plausible grounds for suspicion that the second defendant was carefully avoiding disclosing whether it had or had not received funds and suggested that I could and should draw an adverse inference that it had. However, the rug was rather pulled from under his feet in this respect by Mr Head’s offer on instructions to provide a witness statement confirming that, in fact, no sums had been received by the second defendant for which it had failed to account. In those circumstances, I decline to draw the inference.
The structure of the transactions here seems to have been typical of that described in Secure Capital v Credit Suisse [2017] EWCA Civ 1486. I see force in Mr Head’s submission that a claim such as that asserted by the claimant would, therefore, subvert what he described as “the democracy of the structure.”
For all these reasons, I hold that the second defendant has the better of the argument and that the claimants cannot show any good arguable case that the claim as originally asserted against the second defendant falls within the gateway. My putative conclusion is, therefore, that service must be set aside as against both defendants.