Satinland Finance SARL & Anor v BNP Paribas Trust Corporation UK Ltd & Anor

A subordinated noteholder cannot use a contractual enforcement mechanism to obtain relief which bypasses the agreed subordination regime. A provision describing subordination does not, without more, create an enforceable obligation requiring the issuer to preserve the noteholders’ ranking. A winding-up petition is not an enforcement of a non-monetary obligation where it merely frustrates an anticipated breach. The court’s jurisdiction to direct trustees is limited. It will not intervene in a commercial trustee’s discretionary decision absent bad faith, improper motive, a perverse factual precondition decision, or another established ground for intervention.

The claimants, holders of more than 25 per cent of subordinated notes issued by Irish Nationwide Building Society, sought directions requiring the trustee to present an Irish winding-up petition. They relied first on the notes’ events-of-default provisions and alleged anticipatory breaches or renunciation of the issuer’s payment and subordination obligations. Alternatively, they invoked the court’s jurisdiction to control trustees and sought a direction requiring the trustee to accept the alleged repudiation and petition on the basis of a damages claim.

The defendants applied to strike out the claim or obtain summary judgment, contending that the contractual structure prevented the proposed petition and that no basis existed for judicial intervention in the trustee’s discretion.

1. Outcome. The court dismissed the action on the summary-judgment basis and struck it out. The claims were bound to fail even assuming the factual and legal matters advanced by the claimants in their favour.
2. Contractual enforcement. Conditions 9(b)(A)–(C) formed part of the contractual subordination regime. They restricted remedies, prevented premature payment and damages claims, and channelled enforcement of payment defaults through winding-up proceedings in which the contractual subordination provisions applied.
3. Condition 2(b) described the ranking of the subordinated notes. It imposed no express obligation on the issuer enforceable by the noteholders. The proposed implied obligation preventing conduct inconsistent with that ranking was not necessary and was commercially inappropriate, particularly because the detailed documents had addressed negative pledges and enforcement rights.
4. A petition to prevent threatened losses could not properly be characterised as enforcement of a provision under condition 9(b)(C). If it were treated as enforcement of the payment provisions, it was excluded by that condition. A damages claim following acceptance of repudiation would likewise defeat the carefully constructed subordination mechanism by converting subordinated debt into an unsubordinated claim.
5. Trustee directions. Applying the principles in Re Londonderry’s Settlement [1965] Ch 918, the trustee’s decision whether to treat the ministerial statements as repudiatory and litigate was a commercial discretion. No bad faith, improper motive or perverse judgment on a necessary factual precondition was properly alleged. In any event, the trustee had rationally considered the legal and commercial risks, and no direction could properly be given.
6. The court concluded that a trial or further evidence could not improve the claim. The distinction between striking out and summary judgment was left open for argument, although the judge considered there was no material difference on the facts.

Not an appeal. The judgment concerned an expedited first-instance application for strike-out or summary judgment in a newly commenced Part 8 claim.