Banca Generali SpA v Sovereign Credit Opportunities SA & Anor

After a Trigger Notice in a securitisation, a direction by the Senior Noteholders to remove and replace the Fiscal Agent may fall within a contractual power to direct the Issuer in relation to the management and administration of the Receivables. A clause dealing with removal and replacement is not an exhaustive code merely because it sets out several removal mechanisms. The question is how the provisions interact. Where the Fiscal Agent acquires post-trigger powers concerning monies, payments and protective action in respect of the Receivables, it has a role in their management and administration. The direction power may therefore operate through the agent-removal provisions. Overlap with the Collection Agent’s functions, and the possibility of proceedings against the directing Noteholder, do not alter that construction.

The Issuer issued Notes under three securitisation schemes. After the schemes failed to redeem in full at maturity, the Senior Noteholders served Trigger Notices. The Claimant, representing the Senior Noteholders, sought declarations that they could direct the Issuer to remove and replace the Fiscal Agent without the Issuer’s consent.

The Deputy High Court judge held that Condition 12 of the Notes and clause 14.1 of the Fiscal and Calculation Agreement gave that power, operating through clauses 9.1.1 and 9.4.1, but held that the Noteholders could not remove and replace the Calculation Agent without cause. The Defendants appealed the Fiscal Agent ruling. The central issue was the interaction between the post-trigger direction power and the detailed agent-removal provisions.

1. Appeal dismissed. Arnold LJ, delivering the leading judgment, held that the Deputy High Court judge reached the correct conclusion. Phillips LJ and Asplin LJ agreed.

2. Clause 9 was not expressed to be an exhaustive code governing removal and replacement of the Fiscal Agent. On the proper construction, the source of the power to remove and replace the Fiscal Agent in the absence of a Termination Event remained clauses 9.1.1 and 9.4.1. The issue was therefore the interaction between those provisions and clause 14.1.

3. Service of a Trigger Notice represented a fundamental shift in the balance of power under the schemes in favour of the Noteholders. The words in clause 14.1 requiring the Issuer to comply with directions in relation to the management and administration of the Receivables were broad. They encompassed a direction to remove and replace the Fiscal Agent where that agent had a role in managing and administering the Receivables.

4. The Fiscal Agent acquired such a role after a Trigger Notice. Clause 14.3, particularly paragraph (c), gave it powers to take action in the name and on behalf of the Issuer to protect the interests of the Issuer, the Noteholders and other Issuer creditors in respect of the Receivables. The overlap between the Fiscal Agent’s powers and those of the Collection Agent was immaterial and inherent in the design of the schemes.

5. The fact that the Collection Agent could not be removed and replaced in the same way was understandable because obligors were not notified that the assets had been securitised and would regard their obligations as owed to CFE(S), which was also the Collection Agent. Nor was the theoretical possibility that the Fiscal Agent might bring proceedings against the Claimant an objection. The Fiscal Agent remained subject to its professional duties and would not be restrained by the Claimant’s involvement in its appointment where those duties required proceedings.

• Court of Appeal (Civil Division) dismissed the Defendants’ appeal and upheld the declarations made below: [2024] EWCA Civ 886.
• High Court of Justice, Business and Property Courts, Business List (ChD), Simon Gleeson sitting as a Deputy High Court Judge, held that the Senior Noteholders could direct removal and replacement of the Fiscal Agent, but not the Calculation Agent without cause: [2023] EWHC 1732 (Ch).