EMIS Finance BV v ICU Trading Ltd & Ors

Where contractual terms govern the appointment and removal of a trustee, the court must construe the provisions together, giving effect to their language, structure and commercial purpose.

A clause vesting the power of appointing a new trustee in the issuer may include replacing an existing trustee and may be exclusive, even where noteholders have powers connected with trustee approval and removal. A noteholders’ power to remove a trustee may nevertheless coexist with that issuer power. Where the contract requires a successor before removal takes effect, removal is ineffective until the issuer or the court appoints a replacement.

EMIS issued two series of loan participation notes. The contractual documents provided for a trustee to hold security and enforce rights for the noteholders. After the existing trustee ceased to act because of sanctions concerns, ICU procured extraordinary resolutions purporting to remove that trustee and appoint GLAS Trustees.

EMIS sought declarations concerning the proper construction of the trustee appointment and removal provisions. The central questions were whether the issuer or the noteholders held those powers, whether the powers were exclusive, and when any removal could take effect.

1. Construction of the contractual scheme. The court applied the ordinary principles of commercial contract interpretation: the objective meaning of the words must be assessed in their documentary, factual and commercial context, having regard to the contract as a whole, its purpose, commercial consequences and business common sense. Those considerations could not displace clear language.
2. Issuer’s appointment and removal power. Clause 18.1 vested in the issuer the power of appointing a new trustee. The phrase naturally included substituting one trustee for another, not merely filling a vacancy. Its structure, emphatic wording and interaction with clause 18.4 supported the conclusion that the issuer alone held the appointment power and could remove a trustee as part of the replacement process.
3. Noteholders’ powers. Schedule 1 paragraph 1.19(d) gave noteholders power to approve a person proposed to be appointed as a new trustee, but that was not a freestanding power of appointment. It was expressed to operate without prejudice to powers conferred on others and therefore could not override clause 18.1. The same paragraph did confer a power to remove a trustee. That removal power was not inconsistent with the issuer’s appointment and removal powers.
4. Effect of removal. Clause 18.2 required removal of a sole trustee or sole trust corporation to await appointment of a successor. That requirement applied to removal by noteholders as well as removal in the circumstances expressly mentioned in clause 18.2. The noteholders’ removal resolution therefore could not take effect until the issuer or the court appointed a replacement. If the issuer refused to do so, an application to the court could be made.
5. The extraordinary resolutions were ineffective to appoint GLAS Trustees or remove BNYM Trustees. The issuer could independently appoint and remove the trustee. No implied term was necessary.