SMP Trustees Ltd, Re

Where a trust instrument secures obligations arising from multiple issues over a single pool of assets, references to bondholders and enforcement thresholds may require a global, rather than issue-specific, construction. The court may correct an evident drafting mistake where it is clear that something has gone wrong with the language and what reasonable parties would have meant. Meeting provisions may be construed as treating all bondholders as one class where the matter affects them collectively and the security structure supports that interpretation. A valid plenary vote may therefore bind bondholders across all issues, even where some issue meetings were inquorate.

SMP Trustees Ltd, trustee of a Luxembourg bond programme, sought directions concerning the proposed liquidation of Lifemark SA and the enforcement of security over a single portfolio securing 25 bond issues. Earlier relief had been granted to facilitate a controlled liquidation, but the Luxembourg liquidator subsequently indicated that he would not agree to the proposed protocol.

The principal issue was whether a Holder Request or Extraordinary Resolution Direction under the Trust Deed had to be made separately for each issue, or could reflect the wishes of all bondholders collectively. The issue also affected the validity of plenary voting and made questions concerning a proposed payment to Keydata administrators and bond redenomination unnecessary.

1. The court was willing to determine the construction issue despite the absence of joined defendants. Although the court is generally reluctant to decide disputed construction without adversarial argument, the rule is not absolute. Fair presentation of both sides, avoidance of expense and delay, the absence of any identified interested party wishing to argue the contrary construction, the essentially procedural context, and the need to determine whether SMP could act under clause 5.7 justified deciding the issue.

2. Applying the principles stated by Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, the court held that the definition of “Bonds”, and consequently “Holder Request”, included Existing Bonds as well as Further Bonds. The drafting contained an apparent mistake because later Trust Deeds repeated a definition which failed to account for earlier issues. A Holder Request was therefore a global, not issue-specific, concept.

3. The provisions governing bondholder meetings in Schedule 3 were likewise construed as treating all bondholders as a single class, at least for matters affecting them collectively. The February 2012 plenary meeting was consequently valid, and its votes bound all bondholders.

4. Because the construction issue was resolved in that way, the court did not decide separately whether the Keydata proposal or the redenomination proposal should be approved issue by issue. It concluded that it was too late to challenge the merits of the Keydata proposal, while expressing no view on its intrinsic merits.