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Concord Trust v The Law Debenture Trust Corporation plc: Difference between revisions

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Concord Trust v The Law Debenture Trust Corporation plc (view source)

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{{cite|Concord Trust|The Law Debenture Trust Corporation plc|2004|EWCACiv|1001)}} (Court of Appeal) <br>
{{cn}}{{cite|Concord Trust|The Law Debenture Trust Corporation plc|2004|EWCACiv|1001)}} (Court of Appeal) <br>
{{cite|Concord Trust|Law Debenture Trust Corporation plc|2005|UKHL|27}} (House of Lords)
{{cite|Concord Trust|Law Debenture Trust Corporation plc|2005|UKHL|27}} (House of Lords)
===Facts===
===Facts===
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Before the trustee could issue a notice of [[acceleration]], Elektrim denied the suspension qualified as an [[Event of Default]] and warned the [[trustee]] it would suffer substantial losses if they went ahead with it.  
Before the trustee could issue a notice of [[acceleration]], Elektrim denied the suspension qualified as an [[Event of Default]] and warned the [[trustee]] it would suffer substantial losses if they went ahead with it.  


The trustee sought indemnification from the bondholders for any liabilities it might incur for those losses.
The [[trustee]] feared<ref>[[Trustee]]s are fearful beasts, and will usually only do anything under cover of an {{t|indemnity}}</ref> that it might face a substantial claim upon a disputed acceleration of the bonds. It sought indemnification from the bondholders for any liabilities it might incur for those losses.


Bondholders did not like this. they offered a limited [[indemnity]] for the costs of taking action, but not for the wider liability to the issuer for damages.
Bondholders did not like this. They offered a limited [[indemnity]] for the costs of taking action, but not for the wider liability to the issuer for damages.


Writs flew.  
Writs flew.  
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===Judgments===
===Judgments===
====High Court====
====High Court====
The Vice Chancellor thought the Trustee’s refusal to accept a limited indemnity was not “[[Wednesbury]]” unreasonable.
At first instance the Vice Chancellor, Sir Andrew Morritt, thought the Trustee’s refusal to accept a limited [[indemnity]] was not “[[Wednesbury]]” unreasonable. He declined to regard as absurd the contention that the liability might be in the region of EUR1bn."
====[[Court of Appeal]]====
====[[Court of Appeal]]====
In which the [[Court of Appeal]] considered the legal dynamics of [[bond]] [[acceleration]] where the bond [[issuer]] disputed the purported [[acceleration]]. The central issue in this case was whether the trustee was entitled to call for an {{tag|indemnity}} from the bondholders before accelerating the bonds.
The [[Court of Appeal]] did not share the High Court’s view, nor the [[trustee]]’s timidity to acceleration. It thought that an [[acceleration]] notice, where there was no actual [[event of default]], would be of no ‘legal effect’, and did not therefore cause an effective (but wrongful) acceleration.  
The issuer disagreed that an [[event of default]] had occurred and intimated that it would challenge the validity of any [[acceleration]] notice. The [[trustee]] feared<ref>[[Trustee]]s are fearful beasts, and will usually only do anything under cover of an {{t|indemnity}}</ref> that it might face a substantial claim upon a disputed
acceleration of the bonds.
 
The Court of Appeal did not share the trustee’s timidity to acceleration. It declared that an acceleration notice served where there was no actual [[event of default]] was of no ‘legal effect’, and did not therefore cause an effective (but wrongful) acceleration.  


Therefore, concluded their Lord Justices, there could be no possible legal action against the trustee and hence, it needed no indemnity, ignoring the age old riposte from those who seek indemnities everywhere<ref>Namely that if there's no risk of being called to indemnify THEN YOU SHOULDN’T MIND GIVING US AN INDEMNITY SHOULD YOU?</ref>
Therefore, concluded their Lord Justices, there could be no possible legal action against the trustee and hence, it needed no indemnity, ignoring the age old riposte from those who seek indemnities everywhere<ref>Namely that if there's no risk of being called to indemnify THEN YOU SHOULDN’T MIND GIVING US AN INDEMNITY SHOULD YOU?</ref>


====House of Lords====
====House of Lords====


{{sa}}
{{sa}}
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