Azevedo & Anor v Imcopa Importacao, Exportaacao E Industria De Oleos Ltda & Ors

Openly disclosed consent payments offered on equal terms to all members of a bondholder class do not ordinarily constitute bribery, invalidate a vote or breach the pari passu principle. The critical distinction is between an open offer forming part of the scheme submitted for approval and a secret or privately negotiated inducement to secure a decisive vote. A consent payment made in return for agreeing to a restructuring is not, without more, payment of interest or another amount owed rateably to all noteholders. A no-action clause may be displaced where there has been an accepted repudiation, but that requires an arguable substantive claim. Where the evidence is complete and the issue is a short point of law or construction, the court may determine it summarily.

The claimants, individual investors in guaranteed notes issued by an Imcopa group company, challenged extraordinary resolutions approving restructuring proposals. They alleged that consent payments offered to noteholders voting in favour were illegal bribes, breached the pari passu principle and rendered the resolutions invalid. They sought declarations, repayment and damages.

The defendants sought strike-out and summary judgment. They argued that the claim against the former issuer had no pleaded basis, that the trust deed’s no-action clause barred direct proceedings against the issuer and guarantor, and that the substantive claims had no real prospect of success. The central issues were the effect of the issuer substitution, the validity of the consent payments and votes, and the consequences for the no-action clause.

1. Summary judgment. The claimants’ application was dismissed and the defendants’ cross-application for summary judgment was granted. The evidence was sufficient to determine the legal issues summarily.
2. Former issuer. The first supplemental trust deed expressly released Imcopa U from its obligations following substitution by Imcopa C. In any event, the claimants’ pleaded cause of action arose from consent solicitations beginning in October 2009, with no pleaded involvement by Imcopa U. The claim against it therefore had no real prospect of success.
3. Consent payments and bribery. Goodfellow v Nelson Line Liverpool Ltd and British American Nickel Corporation Ltd v M J O’Brien established the relevant distinction. An openly disclosed scheme may provide for separate treatment of holders with a different interest, whereas a secret bargain or advance private negotiation to secure a vote may invalidate the resolution. The consent payments here were repeatedly disclosed, offered equally to every noteholder voting in favour, and left each holder free to vote either way. They were therefore not bribes and did not invalidate the resolutions.
4. Pari passu treatment. The payments were consideration for agreeing to the restructuring, not interest or money payable under the notes to all holders. The restructuring amendments bound all noteholders equally, the payment was made by the solicitation agent rather than the trustee, and nothing in the trust deed or notes prohibited such payments. The pari passu principle was not infringed.
5. Repudiation and no-action clause. The repudiation claim depended on showing that the resolutions were invalid. Since they were not impugned, the repudiation claim failed. No basis was established for bypassing the contractual restriction that only the trustee could enforce the notes or trust deed, subject to the specified exception.
6. Costs. The defendants were awarded £100,000 on summary assessment. Indemnity costs were refused. The security-for-costs costs were included, subject to a 25 per cent discount reflecting the original formulation of that application.

This was a first-instance decision in the High Court (Commercial Court). Permission to appeal was refused because the proposed appeal was not considered to have a real prospect of success.