Deutsche Trustee Company Ltd v Fleet Street Finance Three PLC & Anor

In construing complex commercial instruments, the court must give effect to their objective meaning in context. It may correct an obvious drafting mistake by construction only where it is clear that the language is mistaken and equally clear what correction is required. Commercial desirability or perceived inconsistency is insufficient.

Defined terms used throughout a single provision should ordinarily be given a consistent meaning. Clear references to particular transaction documents cannot be expanded to include other documents merely because the wider construction appears commercially sensible. The court should not reconstruct the parties’ bargain or second-guess undocumented commercial intentions.

The claimant trustee sought directions concerning the distribution of approximately €220 million of prepayment proceeds under notes issued by Fleet Street Finance Three PLC. The dispute concerned whether amendments extending the maturity date of the Saxony Senior Loan affected the definition of a Sequential Payment Trigger in Condition 6.2 of the transaction documents.

The central questions were whether a Material Senior Default had occurred under paragraphs (ii) and (iv) of that definition, and whether the funds should be distributed wholly sequentially or partly pro rata and partly sequentially.

1. Construction and correction of mistakes. The court applied the principles stated in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101. Correction by construction requires both a clear mistake in the instrument and clarity as to the correction required. The exercise remains one of interpreting the document in its commercial and factual context.
2. Trigger (ii). The bracketed qualification referred repeatedly to amendments of the relevant Intercreditor Agreements. It did not clearly include amendments to the underlying Facility Agreements. There was no sufficiently clear mistake and no sufficiently clear correction. The Saxony Facility Agreement’s extended maturity date therefore governed, so no Material Senior Default had occurred under paragraph (ii).
3. Trigger (iv). The defined terms Loan Event of Default and Material Senior Default had to be read consistently throughout the single definition of Sequential Payment Trigger. The qualifications in paragraphs (i) and (ii) applied to the corresponding defined terms when used in paragraph (iv). The court rejected a construction giving Material Senior Default different meanings within the same definition.
4. The court expressly left open whether the provisos in paragraphs (i) and (ii) also carried across to paragraph (iv).
5. The answers were that no Material Senior Default had occurred under either paragraph (ii) or paragraph (iv), and the GSW Funds were to be applied partly by pro rata and partly by sequential payments under Conditions 6.2(a) and (b). The court reserved the form of order and costs.