BNY Mellon Corporate Trustee Services Ltd v LBG Capital No 1 Plc and Another: SC 16 Jun 2016

The Court was asked whether Lloyds Banking Group was entitled to redeem 3.3 billion pounds of loan notes which would otherwise carry a relatively high rate of interest, namely over 10% per annum. The loan notes are contingent convertible securities (perhaps inevitably known as ‘Cocos’), and are formally described as enhanced capital notes, or the ECNs. The ECNs are potentially convertible into fully paid up shares in LBG, and they were issued in November 2009, at a time when LBG, like many other banks, was in dire need of recapitalisation in order to protect its capital position and to comply with regulatory requirements.
Held: The trustees’ appeal failed (Sumption and Clarke LL dissenting). The Trust Deed had to be understood in the context of FSA’s regulatory policies at the time. The ECNs had to be interpreted so as to allow the bank to pass the stress test.

Lord Neuberger, President, Lord Mance, Lord Clarke, Lord Sumption, Lord Toulson
[2016] UKSC 29, [2016] WLR(D) 310, [2016] Bus LR 725, UKSC 2016/0007
Bailii, Bailii Summary, SC, SC Summary
England and Wales
CitedThe Egyptian Salt and Soda Company Limited v The Port Said Salt Association Limited PC 21-Apr-1931
(Egypt) Disapproving the trial judge’s reliance on ‘surrounding circumstances at the time when the memorandum was framed’, Lord Macmillan said that ‘the purpose of the memorandum is to enable shareholders, creditors and those who deal with the . .
CitedHomburg Houtimport BV v Agrosin Private Ltd (the ‘Starsin’) HL 13-Mar-2003
Cargo owners sought damages for their cargo which had been damaged aboard the ship. The contract had been endorsed with additional terms. That variation may have changed the contract from a charterer’s to a shipowner’s bill.
Held: The specific . .
CitedAttorney General of Belize and others v Belize Telecom Ltd and Another PC 18-Mar-2009
(Belize) A company had been formed to manage telecommunications in Belize. The parties disputed the interpretation of its articles. Shares had been sold, but the company was structured so as to leave a degree of control with the government. It was . .
CitedChartbrook Ltd v Persimmon Homes Ltd and Others HL 1-Jul-2009
Mutual Knowledge admissible to construe contract
The parties had entered into a development contract in respect of a site in Wandsworth, under which balancing compensation was to be paid. They disagreed as to its calculation. Persimmon sought rectification to reflect the negotiations.
Held: . .
At CALBG Capital No 1 Plc and Another v BNY Mellon Corporate Trustee Services Ltd CA 10-Dec-2015
The court was asked whether Issuers were entitled to redeem, pursuant to their terms, certain contingent convertible securities.
The reference to ‘the Consolidated Core Tier 1’ in para (2) of the Definition should, in the events . .
At ChDBNY Mellon Corporate Trustee Services Ltd v LBG Capital No 1 Plc and Another ChD 3-Jun-2015
The court was asked whether the defendants, wholly-owned subsidiaries of Lloyds Banking Group plc, are now entitled to redeem certain enhanced capital notes in advance of their respective maturity dates. That turns on whether or not a Capital . .
CitedSigma Finance Corporation, Re; (in administrative receivership) SC 29-Oct-2009
The court considered how the losses of the insolvent company were to be distributed as between secured creditors and preferential creditors, given the terms of the applicable trust deed.
Held: The court considered the interpretations of the . .

Lists of cited by and citing cases may be incomplete.


Updated: 17 January 2022; Ref: scu.565567