The Law Debenture Trust Corporation Plc v Elektrim SA & Anor (Rev 1)

A contractual obligation to make a contingent payment is not lost merely because redemption is delayed beyond the contractual maturity date, particularly where the delay results from the obligor’s breach. Contractual provisions must be construed as a whole, in their commercial context, and consistently with the presumption that a party cannot benefit from its own breach.

In assessing damages for loss of a chance, the claimant must establish a real and substantial chance of a beneficial outcome. The court then evaluates that chance by reference to the evidence and may make a broad assessment. Where the lost opportunity depends on a single coherent legal and factual assessment, the court should make its own best assessment rather than construct speculative alternative scenarios.

The claimant trustee sued Elektrim in respect of convertible Eurobonds issued by Elektrim Finance and guaranteed by Elektrim. Following a restructuring, the bond conditions provided for a contingent payment calculated by reference to the fair market value of Elektrim’s assets.

The bonds were not finally redeemed by 15 December 2005. They were eventually redeemed in April 2008, but Elektrim had not operated the valuation machinery or paid any contingent payment. The trustee claimed damages for the loss of a chance to receive such a payment. The central issues were whether the obligation depended on timely redemption, how fair market value was to be calculated, and how the lost chance should be valued.

1. Construction of the contingent-payment obligation. The court rejected Elektrim’s submission that the machinery in condition 6(k) was triggered only if the bonds were redeemed by 15 December 2005. The first sentence imposed the primary obligation to pay any contingent payment. The later wording dealt principally with allocation between bondholders and the definition of the final date. Read with clause 2.3 of the Trust Deed, it did not qualify the primary obligation.
2. The construction was reinforced by the commercial purpose of the restructuring and the presumption that a contracting party cannot take advantage of its own breach. Delayed redemption could not sensibly enable Elektrim to defeat the contingent-payment right. The trustee therefore succeeded on its primary claim. The alternative estoppel and rectification arguments would also have succeeded, if necessary.
3. Fair market value. The valuation was to identify Elektrim’s assets and liabilities separately. The relevant IAS concepts informed the meaning of assets, liabilities and contingent liabilities, but the contractual calculation was not identical to the preparation of statutory accounts. Assets included items recognised in accounts and contingent assets requiring disclosure because an inflow was probable, but excluded improbable contingent assets.
4. The PTC shares were not an asset beneficially available to Elektrim. Elektrim held them subject to obligations to transfer them to DT and to account to ET for the proceeds. The value was therefore reflected indirectly through Elektrim’s 49 per cent interest in ET. Other assets, including PAK, Port Praski and specified receivables, were valued on the evidence and by appropriate commercial valuation methods.
5. Loss of chance. The trustee had to show a real or substantial, rather than speculative, chance that the notional investment banks would have produced a beneficial contingent-payment valuation. The court then assessed the probability and value of the outcome. Because the claim involved one unified set of contingencies, the court made its own best assessment of the legal advice and valuation exercise, rather than valuing a series of hypothetical and inappropriate alternative opinions.
6. The trustee was entitled to substantial damages. The parties were directed to agree the figures for the fair-market-value calculation and, failing agreement, to refer outstanding matters back to the court for determination.

First-instance decision. The judgment records earlier proceedings before Hart J concerning accelerated repayment of the bonds, but no citation for that decision is stated.