Bank of New York Mellon v Sterling Biotech Ltd

On an application for summary judgment, the claimant must show that the defendant has no real prospect of successfully defending the claim. Where the court can assume, for the purpose of the application, that the defendant’s legal argument is correct, judgment may still be appropriate if the defence would fail on the facts. A professional trustee exercising enforcement powers must have regard to the general interests of bondholders as a class. A change of view by some bondholders does not itself establish that enforcement is manifestly contrary to that class interest. Unsupported assertions that recovery proceedings may worsen creditors’ position are insufficient.

The claimant, a professional trustee, sought summary judgment for more than $183 million due under bonds issued by the defendant. The defendant had failed to redeem the bonds at maturity and admitted that the sums were due and payable. It argued that the trustee lacked power to pursue enforcement because the proceedings were not in the general interests of bondholders as a class. It also relied on the legal issue said to arise from Fitton v Holt and on evidence that a substantial proportion of bondholders opposed continuation of the proceedings.

The court considered whether there was a real prospect of a successful defence and whether the application should proceed immediately.

1. The claimant had to establish that there was no real defence to the action before summary judgment could be given.
2. For the purposes of the application, the court assumed in the defendant’s favour that its interpretation of Fitton v Holt was correct, namely that the court might review whether enforcement proceedings were in the general interests of bondholders where they were manifestly contrary to those interests.
3. Even on that assumption, the defendant had no real prospect of showing that the proceedings were manifestly contrary to the general interests of bondholders. The trustee remained under a duty to have regard to those interests as a class, notwithstanding that individual bondholders might change their views or have particular interests.
4. The contention that obtaining judgment, or potentially a winding-up order, would worsen the bondholders’ position was unsupported by convincing detail. The trustee was an experienced professional with no apparent interest of its own in the outcome.
5. The application was adjourned for a short period. The order was to record the defendant’s admission that the sums were due and payable, and the defendant was required to disclose documents concerning any arrangements between bondholders, including any alleged buy-out arrangements.