The Bank Of New York Mellon, London Branch v Essar Steel India Ltd

A trustee holding contractual rights on trust has standing to enforce them for the full beneficial interest. An irrevocable contractual service-of-process clause may make service on the named agent effective between the contracting parties, despite the agent's withdrawal of authority.

Declaratory relief is discretionary. It should ordinarily resolve a real and present dispute, serve a useful purpose, and be determined after all affected interests have been properly represented. Relief may properly be refused where it has no clear utility between the parties and could affect an unrepresented third party in a foreign insolvency process.

The claimant was trustee for unsecured notes issued by the defendant under an English-law trust deed. By a Part 8 claim it sought declarations of the principal and interest due under the notes. The defendant took no part in the proceedings. It contended that service was ineffective because its appointment of the contractual process agent had ended.

The defendant was also subject to an insolvency resolution process in India. The trustee had lodged a claim in that process, where its standing and entitlement to interest were disputed. The issues were whether the trustee had standing, whether service was valid, and whether the court should grant the requested monetary declarations.

Declarations refused. Marcus Smith J held that the claimant had standing and that the defendant had been validly served, but declined to grant declaratory relief.

1. Clause 5.1 of the trust deed placed the rights under the notes in the trustee's hands. The noteholders were beneficially interested, but the trustee was the proper claimant and could recover the full beneficial interest. Clause 6.1 regulated when the trustee must act and when noteholders could themselves proceed if the trustee, after direction and indemnity, failed to do so.
2. The process-agent clause was an irrevocable contractual promise by the defendant to accept service in England through the named agent. It operated between the contracting parties and did not depend upon the continuance of the agency relationship. Service in accordance with that clause was therefore good service, even though the agent said that its authority had terminated.
3. The court had jurisdiction to grant declarations under section 19 of the Senior Courts Act 1981 and CPR 40.20. The remedy was nevertheless discretionary. Applying the guidance in Rolls Royce plc v Unite the Union, [2009] EWCA Civ 387, the court considered the existence of a real and present dispute, the utility of relief, whether all affected interests were represented, and whether a declaration was the most effective resolution.
4. Those considerations pointed against relief. The defendant's absence meant that its case would not be heard. More importantly, the declarations had no clear utility as between trustee and issuer: the issuer could not pay. They might, however, affect an Indian insolvency resolution professional who was not before the court and whose treatment of the claim could not be assessed without evidence of Indian law. Any disputes within that process should be resolved there.
5. The refusal did not reflect any doubt about the merits or quantum of the trustee's claim.

not stated in the judgment.