Trimast Holding Sarl v Tele Columbus GmbH

A declaration is discretionary, but the court may determine contractual rights even where coercive relief is not sought and immediate payment is unlikely. The court should consider justice to both parties, utility, and any procedural or substantive advantage created by the declaration. It may impose conditions to prevent unfair advantage.

In construing an intercreditor agreement, the agreement must be construed on its own terms. “Enforcement” provisions concerning termination after commencement of enforcement action require two separate events. The commencement of a termination process is not a separate event from termination where the process constitutes one termination event. A request for a standstill, without more, is not a formal step in relation to a reorganisation or suspension of payments.

Tele Columbus entered into highly leveraged financing arrangements, including hedging transactions with ING and Rabobank. An Intercreditor Agreement ranked liabilities and regulated payments to hedge counterparties. Following financial difficulties, the parties entered into a Standstill Agreement requiring the hedging transactions to be closed out. The claimant later acquired the hedge counterparties’ rights to the resulting closed-out amounts.

The claimant sought declarations that the amounts were due and payable to it. The central issues were whether the amounts fell within the payment mechanism for liabilities then due, or instead had to be treated as proceeds of enforcement under clause 9.6 of the Intercreditor Agreement, and whether declaratory relief should be granted.

1. Declaratory relief. The grant of a declaration is discretionary. The court may make a binding declaration under CPR 40.20 whether or not another remedy is claimed. Relevant considerations include justice to the claimant and defendant, whether the declaration serves a useful purpose, and any special reason for granting or withholding it.
2. The issue was not entirely hypothetical because restructuring negotiations were continuing. Determining the person entitled to receive payment could serve a useful purpose, although it would not finally determine the rights of ING or other interested parties who were not before the court.
3. The court could address any procedural advantage created by the declaration through conditions. The proposed declaration could be made without unfairly preferring the claimant, provided its enforcement consequences were appropriately limited and the declaration was without prejudice to any claims of the priority senior lenders under the Intercreditor Agreement.
4. Construction of the Intercreditor Agreement. The Standstill Agreement made the closed-out amounts due and payable subject to the Intercreditor Agreement. The latter therefore had to be construed on its own terms; the Standstill Agreement could not be used to construe it.
5. Clause 9.6 contemplated two separate events: termination of a hedging transaction and a later commencement of Enforcement Action. Termination was a single event, even though its completion might involve several steps. Treating commencement of the termination process and its completion as separate events produced an insensible construction.
6. The request for a standstill was not a step in relation to a reorganisation or suspension of payments within the definition of Enforcement Action. The contemplated step was a formal step having legal consequences. Clause 9.6 therefore did not apply, and clause 10 governed the payment position.
7. The court would make a declaration in the claimant’s favour, subject to further argument on the precise terms of any condition.

Not stated in the judgment.