Concord Trust v The Law Debenture Trust Corporation plc
Concord Trust v The Law Debenture Trust Corporation plc [2004] EWCACiv 1001) (Court of Appeal)
Concord Trust v Law Debenture Trust Corporation plc [2005] UKHL 27 (House of Lords)
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 indemnity from the bondholders before accelerating the bonds. 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[1] 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[2]