Banca Generali S.p.A v Sovereign Credit Opportunities SA & Anor

Permission to appeal requires a real, rather than fanciful, prospect of success, unless there is another compelling reason for the appeal to be heard.

A stay pending appeal is exceptional. The court must balance the risk of injustice to each side, ordinarily starting from the position that a successful claimant should be able to enforce its judgment. A declaration may be stayed where reliance on it could produce an irreversible change in the parties’ position or affect third parties.

Contractual powers expressed in broad or absolute terms should not be implicitly curtailed by other contractual mechanisms without a proper basis in the documentation. The possibility of a conflict arising from exercising a contractual power does not, without more, invalidate that power.

The court had previously given judgment for Banca Generali S.p.A against Sovereign Credit Opportunities SA and CFE Advisory Services. The parties agreed the declarations and costs, leaving the defendants’ applications for permission to appeal and for a stay pending appeal.

The proposed appeal concerned the construction of contractual provisions governing directions by noteholders, and the removal and replacement of a fiscal agent. The stay application raised whether declarations could be suspended pending appeal and whether implementation of the declarations might cause irreversible consequences before the appeal was determined.

1. Permission to appeal. Under CPR 52.6(1), permission could be granted only if the appeal had a real prospect of success or there was some other compelling reason. “Real” meant more than fanciful, as explained in Swain v Hillman. No other compelling reason existed.
2. The proposed contractual construction arguments had no realistic prospect of success. Condition 12 required the issuer, following a Trigger Notice, to comply with the noteholders’ directions. Clause 9 gave the issuer an expressed power to remove the agents. There was no proper basis for implying that Condition 12 was implicitly limited or that the power in Clause 9 became ineffective when exercised on the noteholders’ instructions.
3. Clause 11 of the Master Transfer Agreement did not demonstrate that the issuer had been divested of its powers so completely that it could neither act in relation to the receivables nor appoint the fiscal agent to act on its behalf. Clause 14.3(c) also contemplated the fiscal agent taking action in the issuer’s name in respect of the receivables.
4. The theoretical possibility that replacing the fiscal agent might create a conflict of interest did not invalidate the contractual power. Parties were capable of agreeing to arrangements in which conflicts might arise, particularly where the asserted conflict was entirely notional.
5. Stay pending appeal. The court applied the principles summarised in Re Maud, including the ordinary rule that an appeal does not operate as a stay under CPR 52.7, the need to balance the risks of injustice, and the relevance of the perceived strength of the appeal where the justice of the ordinary rule was doubtful.
6. Although a declaration was not executory in form, it could have practical effects which permanently altered the legal position, including effects involving third parties. The declarations were therefore capable of being stayed. The implementation of the claimant’s remediation plan might make restoration of the status quo impossible before the appeal. The declarations were stayed pending completion of the appeal process, with liberty to apply.

On 11 July 2023, the court gave judgment for the claimant. This judgment determined the consequential applications for permission to appeal and a stay pending appeal.