England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT CHANCERY DIVISION
The Rt. Hon the Vice-Chancellor

		Royal Courts of Justice Strand, London, WC2A 2LL
		28th July 2004

Lord Justice Jonathan Parker:

INTRODUCTION

1. This appeal concerns a bond issue in the aggregate sum of €510,000,000 made in 2002 by Elektrim Finance BV ("the Issuer"), a member of a Polish group of companies specialising in telecommunications and energy. The issue is guaranteed by the Issuer's parent company Elektrim SA ("Elektrim"). Elektrim owns, through its shareholding in a company known as ET, a majority shareholding in a substantial Polish telecommunications company known as PTC ("the PTC shares"). ET is a joint venture company between Elektrim and Vivendi Universal SA. Elektrim's obligations as guarantor are secured by a pledge over its shareholding in ET. The remainder of the shares in PTC are held by Deutsche Telekom ("DT"), a German company.
2. The appellant, Concord Trust ("Concord"), holds some 10 per cent of the bonds. The respondent, The Law Debenture Trust Corporation plc ("the Trustee"), is the trustee under the terms of the Trust Deed governing the bond issue.
3. The bonds are redeemable in December 2005, but under condition 12 of the terms and conditions of the bond issue, on the occurrence of a defined 'Event of Default' the Trustee may (and must if required to do so by 30 per cent in value of the bondholders) give notice to the Issuer and to Elektrim rendering the bonds immediately due and payable. However, that power (or, as the case may be, that duty) is expressed to be subject to the Trustee being indemnified 'to its satisfaction'.
4. An issue has arisen as to whether an 'Event of Default' has occurred. More than 70 per cent in value of the bondholders (including Concord) take the view that such an event has occurred; and on that footing they have required the Trustee to give notice under condition 12 accelerating repayment of the bonds. Elektrim, on the other hand, contends that no 'Event of Default' has occurred; and it has made clear that it intends to challenge the validity of any such notice.
5. The Trustee (having sought the directions of the court) concurs with the view of the majority of the bondholders that an 'Event of Default' has occurred, and is willing to give a notice under condition 12, subject to its being indemnified to its satisfaction. Concord, on behalf of a syndicate of bondholders holding some 45 per cent in value of the bonds, has tendered an indemnity by itself and others, but the Trustee has rejected that indemnity on the footing that it does not provide satisfactory protection against its exposure to costs and adverse claims should it transpire that no 'Event of Default' has occurred. The Trustee fears that if it purports to give notice under condition 12 in circumstances where no 'Event of Default' has occurred it may be faced with a claim for damages by Elektrim for breach of contract in a sum in the region of €1 billion, and it has accordingly requested a substantially greater indemnity than that which has been tendered.
6. Concord contends that the Trustee's fear is fanciful, and that its rejection of the tendered indemnity is so unreasonable as to entitle Concord to require it to give notice under condition 12 on the basis of that indemnity. Concord is also concerned that Elektrim may (via ET) divest itself of the PTC shares, which in Concord's view represent its only substantial asset. Concord is accordingly anxious that notice under condition 12 should be given as soon as possible, in order to minimise the risk of the bondholders' security being diminished or possibly being entirely lost.
7. On 30 April 2004 Concord commenced proceedings against the Trustee under Part 8 of the Civil Procedure Rules, claiming a declaration that the Trustee is obliged forthwith to give notice under condition 12 accelerating repayment of the bonds.
8. The expedited hearing of the proceedings took place before the Rt. Hon. Sir Andrew Morritt V-C on 19 and 20 May 2004. Counsel for Concord (Miss Susan Prevezer QC, leading Mr Stephen Houseman) invited the Vice-Chancellor to conclude that the Trustee's estimate of its potential exposure at €1 billion was so absurd as to indicate how unreasonably it had approached the whole question of indemnity. The Vice-Chancellor did not accept Concord's invitation. On the contrary, in his judgment he concluded that a notice requiring immediate repayment of the bonds where no 'Event of Default' had occurred would plainly constitute a breach of contract; and that what he described as a 'wrongful acceleration' could, on the available information, give rise to a claim by Elektrim against the Trustee for damages in the region of €876 million (that is to say a claim which, as is common ground, would substantially exceed the scope of the indemnity tendered by Concord).
9. Accordingly, by his order dated 28 May 2004 the Vice-Chancellor dismissed Concord's application.
10. Concord now appeals to this court, with permission granted by the Vice-Chancellor.

THE TRUST DEED

11. The Trust Deed is dated 15 November 2002 and made between the Issuer, Elektrim (defined as "the Guarantor") and the Trustee.
12. By clause 2 of the Trust Deed the Issuer covenants that it will repay the bonds on their maturity date "or on such earlier date as the same or any part thereof may become immediately due and repayable". Clause 8 contains the Guarantor's guarantee of due and punctual payment of the sums payable by the Issuer under the Trust Deed.
13. Clause 9 of the Trust Deed is headed 'Enforcement'. Clause 9(3) is in the following terms (so far as material):

"In case of an Event of Default, the Trustee may, and shall if requested to do so in writing by holders of at least thirty per cent in principal amount outstanding of the Bonds …. and …. subject to it being secured and/or indemnified to its satisfaction, direct the Security Agent to enforce the security created in the Security Documents in favour of the Bondholders …."

14. Clause 1.1 defines 'Event of Default' as meaning "any of the conditions, events or acts provided in Condition 12 to be events upon the happening of which the Bonds would, subject only to notice by the Trustee as therein provided, become immediately due and repayable"; and 'Conditions' as meaning the conditions set out in the Second Schedule to the Trust Deed.
15. Clause 10 of the Trust Deed is headed "Proceedings, Action and Indemnification". Clause 10.1 provides as follows (so far as material):

"The Trustee shall not be bound to take any proceedings mentioned in Clause 9 or any other action in relation to these presents unless respectively directed or requested to do so …. in writing by the holders of at least thirty per cent in principal amount outstanding of the Bonds and …. then only if it shall be indemnified to its satisfaction against all Liabilities to which it may thereby render itself liable or which it may incur by so doing."

16. The word "Liabilities" is defined in clause 1.1 as meaning (so far as material):

"…. any loss, damage, cost, charge, claim, demand, expense, judgment, action, proceeding or other liability whatsoever …. including …. legal fees and expenses properly incurred on a full indemnity basis".

17. Clause 10.2 of the Trust Deed provides that only the Trustee may enforce the provisions of the Trust Deed or the security created by it.
18. Clause 16.5 of the Trust Deed provides that the Issuer shall pay and discharge all "Liabilities" properly incurred by the Trustee in exercising its powers and generally in performing its duties under the Trust Deed.
19. Clause 17 of the Trust Deed confers on the Trustee a number of specific powers in addition to those conferred on trustees by the Trustee Act 1925. Clause 17.1(J) provides as follows (so far as material):

"Without prejudice to the right of indemnity by law given to trustees, the Issuer and the Guarantor shall indemnify the Trustee …. and keep it …. indemnified against all Liabilities to which it …. may be or become subject or which may be incurred by it in the execution or purported execution of any of its …. trusts, powers, authorities and discretions under these presents …."

20. Clause 20 of the Trust Deed contains a power for the Trustee to waive an 'Event of Default' if in its opinion the interests of the bondholders would not thereby be materially prejudiced. Clause 27 contains a covenant by the Guarantor to provide the security specified in condition 8 (which includes the pledge over Elektrim's shareholding in ET).
21. I can turn now to the conditions in Schedule 2 to the Trust Deed. Condition 10(d) confers on the bondholders the right to nominate a member of Elektrim's management board, but subject to Elektrim's right to dismiss such a nominee on certain specified grounds, provided that at the same time it dismisses one other member of the board. In the event of the bondholders' nominee being dismissed under this condition, the Trustee has the right to appoint a replacement (subject, once again, to Elektrim's right to dismiss any such replacement on any of the specified grounds).
22. Condition 12 is central to the issues on this appeal. It is in the following terms (so far as material):

"The …. Trustee at its discretion may, and if so requested in writing by the holders of at least thirty per cent in principal amount outstanding of the Bonds …. shall (subject …. to being indemnified to its satisfaction), give notice to the Issuer and the Guarantor that the Bonds are, and they shall accordingly immediately become, due and repayable at their relevant redemption value, …. , upon the occurrence of any of the following events ("Events of Default") …."

23. Various events are then listed, including (at paragraph (ii)) a failure by the Issuer or the Guarantor to perform or observe its obligations under the Trust Deed, with the qualification that if the failure is capable of remedy the Trustee must first have served a notice requiring the failure to be remedied within 30 days. There then follows a proviso in these terms (so far as material):

"…. provided that in the case of paragraphs (ii) …. the …. Trustee shall have certified that such event is materially prejudicial to the interests of the Bondholders."

THE EVENTS LEADING TO THE COMMENCEMENT OF PROCEEDINGS

24. In June 2003 Elektrim purported to 'suspend' the bondholders' nominee on its management board. The Trustee took the view that Elektrim had no power to 'suspend' the bondholders' nominee. Accordingly on 24 July 2003 the Trustee notified Elektrim that the suspension of the bondholders' nominee was a breach of condition 10(d), and required such breach to be remedied within 30 days, failing which an 'Event of Default' would occur should the Trustee certify that such event was materially prejudicial to the interests of the bondholders.
25. The Trustee, uncertain whether it could properly so certify, applied to the High Court for directions, joining Concord and two other bondholders as defendants. Elektrim was not a party to those proceedings, and (it seems) did not even know of their existence.
26. The application was heard by Peter Smith J, who, by his order dated 16 February 2004, declared that on the true construction of the conditions the Issuer and Elektrim were in breach of condition 10(d) by suspending the bondholders' nominee on the management board of Elektrim; that such breach was, in the events which had happened, materially prejudicial to the bondholders; and that the Trustee was at liberty so to certify without any further enquiry or investigation. In his judgment (which did not, of course, bind Elektrim) Peter Smith J found the suspension of the bondholders' nominee to be not only a material breach of the conditions, but also self-evidently materially prejudicial to the interests of the bondholders.
27. On the following day, 17 February 2004, the Trustee provided the requisite certificate pursuant to condition 12. The question of an appropriate indemnity then arose. On 26 February 2004 Bingham McCutchen LLP, solicitors for Concord, sent to Simmons & Simmons, solicitors for the Trustee, a draft form of indemnity to be provided by itself, Elliott Associates LP ("Elliott") and another. The form of indemnity followed an earlier form which had been proposed in the Autumn of 2003. It provided that the indemnifiers would be liable only severally, and only for a proportion of any liability incurred by the Trustee. This was not satisfactory to the Trustee, and on 2 March 2004 Simmons & Simmons returned the draft form of indemnity amended so as to provide for joint and several liability for any liability incurred by the Trustee.
28. By 22 March 2004 the Trustee had received requests from more than 30 per cent in value of the bondholders to give notice under condition 12 accelerating repayment of the bonds on the footing that an 'Event of Default' had occurred.
29. On 2 April 2004 Mr Hunter Baker of Skadden, Arps, Slate, Meagher & Flom (UK) LLP ("Skadden Arps"), solicitors for Elektrim, wrote to Bingham McCutchen LLP and to Simmons & Simmons in response to the Trustee's 30-day notice. The letter is central to the issues which arise on this appeal. The letter reads (so far as material):

"We understand that the Trustee has received instructions to accelerate the Bonds, and that it requires appropriate indemnity arrangements before it will do so. This letter is (i) to reserve our client's rights in all respects in such matters, (ii) to call to your attention one material issue in connection with any enforcement of the Bonds, and (iii) to request a process for assuring [sic] that we have the correspondence and other information you and your clients deem relevant and an opportunity for informed and constructive discussion of Elektrim's position with you over the next few weeks.

1. It remains the case that affiliates of [DT] have arbitration proceedings under way against Elektrim and ET and that an acceleration of the Bonds will give rise to a claim of economic impairment against Elektrim by [DT] – with the stipulated contractual remedy being that [DT] may purchase [the PTC shares] for book value. We expect this claim would arise again as a result of an acceleration of the Bonds. Any such claim (and clearly any such outcome) would severely damage the value of the PTC shares …. with direct consequences on the value of security pledged to secure the Bonds and on the prospects for full repayment on or before the maturity of the Bonds. This risk was discussed with you in the earlier restructuring in 2002; and you will recall that [DT] initiated 'economic impairment' claims as part of its arbitration at that time. This risk is part of the overall consideration the Trustee should give to any acceleration request (as well as to its own indemnity arrangements). Based on what we understand of the facts today – this risk remains a compelling factor against acceleration of the Bonds …"

30. The letter went on to refer to the decision of Peter Smith J, stating that Elektrim had "serious concerns regarding the proceedings, facts and Polish legal assumptions which underpin that decision". The letter concluded by suggesting a meeting to discuss the matter before the Trustee took "any further step towards acceleration".
31. It is to be noted that there is no reference in that letter to any possible claim for damages for breach of contract on the basis that no 'Event of Default' has occurred. On the contrary, the letter is premised on the fact that acceleration is an available option; in other words, that an 'Event of Default' has occurred. The writer is asserting that if acceleration occurs there is a serious risk that it may cause the PTC shares to be acquired by DT at a knock-down price, thereby reducing the value of the bondholders' security and prejudicing the prospects of full repayment on "or before" the maturity of the bonds.
32. In paragraphs 20 to 26 of his judgment the Vice-Chancellor traces the further history of the matter as follows:

"20. On 16th April 2004 the solicitors for Elektrim wrote again to those for Concord asking for an undertaking to give 2 days notice to Elektrim before delivering an indemnity to the Trustee and for Concord to authorise the Trustee to give 2 days' notice to Elektrim before issuing a notice of acceleration. The writer expressed the hope that such undertakings "would enable vigorous settlement negotiations to be undertaken".

21. On Monday 19th April 2004 the solicitors for Elektrim notified those for the Trustee of their clients' intention to make an ex parte application in the Commercial Court for an injunction to restrain the Trustee from declaring the bonds to be immediately due and repayable. The solicitors for the Trustee notified those for Concord. The latter asked Elektrim to desist from applying for the injunction for 48 hours to enable them to complete consideration of the requests made by Elektrim in the letter of 16th April 2004. In the event the application for an injunction was not made.

22. On 20th April 2004 the solicitors for the Trustee wrote again to those for Concord with a further draft of the indemnity it sought extended to cover any damages arising under the arbitration proceedings then threatened by Elektrim. On the same day the solicitors for Concord sought an undertaking from Elektrim that it would not arrange for the sale of ET's stake in PTC. It was not given.

23. On 23rd April 2004 the solicitors for Concord sent to the Trustee and its solicitor an indemnity "which we believe is in satisfactory form" executed by both Concord and Elliott Associates LP. They indicated that they expected the Trustee to accelerate the bonds that day and emphasised that the Trustee should not tell Elektrim of the delivery of the indemnity and imminent acceleration. The indemnifier was Concord and its obligations were guaranteed by Elliott Associates LP. The form had not been negotiated between the solicitors for the Trustee and Concord. Later that day the solicitors for the Trustee replied to the effect that the Trustee had expected a joint and several indemnity from Acciona and Elliott Associates and wanted legal opinions as to the validity of the obligations undertaken by the Elliott companies. Later still the solicitors for Concord sent to those for the Trustee on a strictly privileged and confidential basis audited financial information relating to Elliott Associates LP.

24. Further exchanges between the solicitors for the Trustee and Concord took place later in the evening of 23rd April. The former pointed out a number of features of the form of indemnity submitted by Concord with which it did not agree. The latter supplied the legal opinions previously requested. On Monday 26th April 2004 the solicitors for Concord wrote commenting on the form of indemnity sought by the Trustee. They suggested that some of the provisions sought by the Trustee went beyond what was reasonable and asked the Trustee to point out all the specific provisions which it found unreasonable and their reasoned justification for those findings. On the same day Elliott Associates LP wrote to the Trustee undertaking to give the Trustee 10 days' prior notice of any return to partners of 50% or more of total partners' capital.

25. On 27th April 2004 the solicitors for the Trustee warned those for Concord that the Trustee was not then satisfied with the indemnity on the financial front, particularly in view of the length of time that litigation arising out of an acceleration might last. On 28th April 2004 the solicitors for Concord wrote a long letter responding to the various points made by the Trustee and enclosing a further deed of indemnity executed by both Concord and Elliott Associates LP. They asked the solicitors for the Trustee "to confirm by return that the Trustee will now accelerate the bonds without further delay". The solicitors for the Trustee replied on the same day commenting on the letter from the solicitors for Concord, in particular in relation to the financial standing of Elliott Associates LP. Concord's solicitors replied the following day emphasising the strong financial background and stability of Elliott Associates LP through the years. They expressed the opinion that "they have provided an extremely satisfactory indemnity".

26. The Trustee remained unmoved. On 29th April 2004 its solicitors wrote:

"Unfortunately, in these circumstances Law Debenture are not able to reach the conclusion that the indemnity proffered is satisfactory.

The magnitude of the liabilities which may be incurred by acceleration are such that unfortunately the Trustee requires greater comfort than Elliott has to date provided. The Trustee still has a number of concerns including the uncertainty surrounding the level and composition of Elliott's assets from time to time and, in particular, the fact that these may be affected by matters such as the possibility that capital can be withdrawn and that Elliott may not be ready to liquidate assets to meet any demand. This uncertainty is not acceptable to the Trustee. As a result, the Trustee has reached the conclusion that in order to accelerate without delay a guarantee or an indemnity from a body such as a major clearing bank is required.

This is in no way a comment on Elliott's standing. It is simply that in these circumstances in particular given the comments made by Hunter Baker in his letter to you and to us of 2 April 2004, it is possible to see that post any acceleration, the Trustee could be in receipt of a claim for many hundreds of millions of Euro."

The solicitors for Concord replied the same day indicating their view that the indemnity "should be more than satisfactory to the Trustee" and that "any reasonable trustee would accept it". It described the Trustee's request for a guarantee from a major clearing bank as "wholly unreasonable". They concluded by stating that they would be instituting proceedings in the Chancery Division the next day seeking declaratory relief."

33. The references in Simmons & Simmons' letter dated 29 April 2004 to "the magnitude of the liabilities which may be incurred by acceleration" and to a possible claim "post any acceleration" suggests that the writer of the letter, Mr John Davies, had interpreted Skadden Arps' letter dated 2 April 2004 as referring to a risk that an acceleration (i.e. the giving of an effective notice under condition 12, following the occurrence of an 'Event of Default') might lead to a very substantial claim for damages being made against the Trustee. That, however, was not what the letter said. Nor can I see what possible claim for damages might be brought against the Trustee arising out of the giving of an effective notice of acceleration. In any event, the primary issue on this appeal is the reverse of that. The primary issue on this appeal is whether the giving of an ineffective notice of acceleration, no 'Event of Default' having occurred, would expose the Trustee to a claim for damages. I shall address that issue in due course.
34. Also on 29 April 2004 Elektrim wrote direct to the Trustee contending that Elektrim had not breached any of its obligations under the Trust Deed and the conditions, and asserting that Elektrim had repeatedly requested the Trustee to designate a replacement nominee to serve on its management board but without response – that is to say, it contended that no 'Event of Default' had occurred. The letter went on to suggest that the bondholders' true motive in pressing for acceleration of repayment was not to receive payment but to take over Elektrim's assets.
35. On the following day, 30 April 2004, Concord commenced the present proceedings against the Trustee. As in the case of the earlier proceedings before Peter Smith J, Elektrim was not notified of the present proceedings and did not discover their existence until after the Vice-Chancellor had delivered his judgment.
36. The Vice-Chancellor continues his recital of the history of the matter in paragraphs 27 to 29 of his judgment, as follows:

"27. The claim form was duly issued on 30th April 2004. It was supported by a witness statement made the same day by Mr Roome, a partner in the solicitors acting for Concord. In paragraph 15 he criticised the attitude of the Trustee and of the points made by its solicitors. In paragraph 15.13 he dealt with the cost of providing a bank guarantee for a period of five years in the sum of €500m as between €13m and €14m per annum. On 3rd May 2004 the solicitors for Concord wrote to those for the Trustee in relation to a letter from Elektrim dated 29th April 2004. They pointed out:

"2. Elektrim has one valuable asset, namely its shares in ET and Carcom, which in turn hold shares in PTC, the very substantial Polish Telecommunications company. Elektrim is aware that it is contrary to the terms and conditions of the Bonds (see Condition 12(vii)) for Elektrim to sell this asset without Bondholder consent. Elektrim has nonetheless been openly negotiating for the sale of this asset.

3. The Committee of Bondholders is extremely concerned that the proceeds of any sale of the PTC shares (in breach of Condition 12(vii) of the Bonds) would be dissipated by ET and Carcom or otherwise used for purposes other than the redemption of the Bonds."

28. On 5th May 2004 the solicitors for the Trustee wrote to those for Concord at length setting out the information and protection the Trustee required. They enclosed a form of Letter of Credit. The form of Letter of Credit was in a sum of €1bn. for a period of 12 years. They concluded

"For the avoidance of doubt, we should make clear that given the possible scale of liabilities and the duration of the risk an unsupported indemnity from Elliott Associates LP will not satisfy [the Trustee]."

They confirmed that as at that date 71.88% of the bondholders had requested acceleration.

29. On 7th May 2004 the solicitors for Concord gave further information relating to Elliott Associates LP. It does not appear to me to be any more informative than the information given before. On 12th May 2004 the solicitors for Concord wrote again and at length making most of the points raised in argument before me. The correspondence continued in the same vein with letters dated 14th, 18th and 19th May 2004."

THE EVIDENCE BEFORE THE VICE-CHANCELLOR

37. Before the Vice-Chancellor were four witness statements by Mr James Roome of Bingham McCutchen, a witness statement by Mr Davies (of Simmons & Simmons), and a witness statement by a Mr Golacik, a securities analyst employed by Elliott, in which he provided confidential information as to Elliott's financial position. For present purposes, it is necessary to refer only to the witness statement of Mr Davies.
38. In paragraph 10 of his witness statement, Mr Davies states that the Trustee's remuneration for acting as trustee of the Trust Deed consisted of an initial acceptance fee of £2,000 and an annual management fee of £2,500. In paragraph 78 of his witness statement, he says this:

"In considering the form of indemnity provided to it, the Trustee naturally considered the possible liabilities which might arise against it if it were to take the step of accelerating the Bonds. Elektrim has made it clear …. that it contends that there has been no 'Event of Default' entitling the Trustee to serve an acceleration notice and has threatened to seek damages in the event that such a notice is served." (Emphasis supplied)

39. Mr Davies makes the same point in paragraph 79 of his witness statement, where he says this:

"Elektrim has already threatened the Trustee with a damages claim arising from Elektrim's contention that there has been no event of default or no event of default involving material prejudice to the bondholders."

40. Mr Davies goes on to estimate the size of the possible damages claim at €1 billion.

THE HEARING BEFORE THE VICE-CHANCELLOR

41. At the hearing before the Vice-Chancellor, Concord's case was that the Trustee's fear of exposure to a claim for damages in a sum in the region of €1 billion was merely fanciful, and that in consequence its conclusion that the tendered indemnity was not satisfactory was so unreasonable that no reasonable trustee could ever have come to it (to adapt the much-quoted words of Lord Greene MR in Associated Picture Houses Ltd v. Wednesbury Corporation [1948] 1 KB 223 at 230). Miss Prevezer's primary submission in support of that proposition was that the giving of a notice which proved to have been ineffective since no 'Event of Default' had occurred could not lead to a claim based on 'economic impairment' of Elektrim: in other words, that an ineffective notice under condition 12 could not cause any substantial damage.
42. This point had not been specifically taken in Concord's written skeleton argument, and it was raised only briefly in the course of Miss Prevezer's opening. The only clear reference to it in the transcript of Day 1 of the hearing is at page 8 where she is recorded as saying (at lines 26 to 36):

"The first point is this. An obvious answer for Elektrim [if] it is contested that the right to accelerate is not valid will be to say and establish in court that it is not a valid acceleration, and as a consequence it is not economically impaired. So the real likelihood is that nothing will happen if Elektrim can successfully show that acceleration was invalid, and it will litigate the position and if it is right it can establish it. If it is wrong it has no claim."

43. Miss Prevezer reverted to the point briefly, and (if I may say so) somewhat confusingly, at page 1 of the transcript of Day 2 (at lines 20 to 23):

"As I said yesterday, there are numerous hurdles, the first hurdle being that Elektrim has to establish no breach under the bond [i.e., presumably, no 'Event of Default']. That was the first hurdle. No events before that. Because if there was, then there could be no complaint [i.e., presumably, an acceleration under the terms of condition 12 could not give rise to a valid claim]."

44. At no stage of the hearing (so far as I can discover) did Miss Prevezer submit to the Vice-Chancellor that, quite apart from not causing damage to Elektrim, the giving of an ineffective acceleration notice would not constitute a breach of contract by the Trustee.
45. For the Trustee, Mr Robert Miles QC, leading Mr Andrew Clutterbuck, began by drawing the Vice-Chancellor's attention to the possibility that acceleration (i.e. effective acceleration) might lead to DT "stripping out" the PTC shares. In this context, he referred to paragraph 1 of Skadden Arps' letter dated 2 April 2004, saying this (at page 5 of the transcript of Day 2 (at lines 15 to 19)):

"Your Lordship will see …. what Skadden Arps are saying in paragraph 1 of their letter. Acceleration of the bonds will give rise to a claim of economic impairment against Elektrim…."

46. However, Mr Miles did not go on to make submissions as what cause of action Elektrim might have for recovering such damage from the Trustee. Rather, he turned to the exclusion clauses in the Trust Deed, contending that the liability of the Trustee for serving an ineffective notice of acceleration under condition 12 was not excluded by the Trust Deed, on its true construction. Thus, referring to paragraph (G) in clause 17.1 of the Trust Deed, which provides that the Trustee shall not be liable for any liability which results from an exercise of "its trusts, powers, authorities or discretions under these presents", Mr Miles said this, at page 8 of the transcript of Day 2 (at lines 48 to 50):

"If there is no event of default, then there is no power, authority or discretion to serve the notice. That is the first argument."

47. Later in his submissions, however, Miles did address the first point made by Miss Prevezer, saying this (at page 28 of the transcript of Day 2 (line 48) to page 29 (line 7)):

"My Lord, the next point which is made is the suggestion that the acceleration notice on its own would have no consequences. I think I have dealt with this in addressing your Lordship this morning. I repeat the point that the mere service of the acceleration notice is not the whole of the story. It is a stepping stone to further steps by the bondholders. More than that, it is itself a fact which could cause any of the creditors of the company to call in their own debts and precipitate the whole castle of cards coming down. If the trustee were to serve a notice without the right to do so we say that would be an actionable claim and it would be a breach of contract. The service of such a notice, which is capable of having such consequences, is quite different from, for example, a party to a contract just alleging that the other party is in breach. It is a public act which has obvious consequences, not a mere assertion."

48. No further argument appears to have been addressed to the Vice-Chancellor on the point.

THE VICE-CHANCELLOR'S JUDGMENT

49. After setting out the facts, the Vice-Chancellor addressed the question of the test to be applied in deciding whether the Trustee's rejection of the tendered indemnity was unreasonable in the Wednesbury sense. After referring to Wednesbury and other authorities, the Vice-Chancellor said this (in paragraph 33 of his judgment):

"…. it was suggested by counsel for Concord that the onus was on the Trustee to establish reasonableness. I do not agree. The onus is on the party who seeks to impugn the determination by the Trustee. Accordingly it is for Concord to establish unreasonableness in the Wendesbury sense …."

50. The Vice-Chancellor continued (in paragraph 34 of his judgment):

"…. where the maximum amount [of a possible claim] is unknown the amount of any retention should be calculated on the basis of what is, on reasonable but not fanciful assumptions in favour of the trustee, the worst case. …. Thus the issue of Wednesbury unreasonableness alleged by Concord must be considered on a 'worst case scenario' from the point of view of the Trustee."

51. It is evident from the above passage that at this stage in the judgment the Vice-Chancellor was assuming the existence of a claim (i.e. of a cause of action) on the part of Elektrim for the recovery of damages from the Trustee, and was addressing only the question of the size of that possible claim.
52. The Vice-Chancellor went on to summarise the competing submissions of Miss Prevezer and Mr Miles. In paragraph 35 of his judgment he recorded Miss Prevezer's first submission as being that:

"…. there is no reason to think …. that if the Trustee accelerates the bonds it may be successfully sued by Elektrim …."

53. In paragraph 36 of his judgment the Vice-Chancellor recorded that Miss Prevezer developed that submission by submitting (among other things) that:

"….[i]t is not possible to formulate, and the Trustee has not sought to do so, any claim which could be advanced by …. Elektrim …. against the Trustee arising from a wrongful acceleration of the bonds." (My emphasis)

54. At this point it seems to me that a degree of confusion has arisen. Miss Prevezer's primary submission, as recorded by the Vice-Chancellor in paragraph 35 of his judgment, assumes an effective acceleration notice (i.e. it assumes that an 'Event of Default' had occurred). However her development of that submission, as recorded by the Vice-Chancellor in paragraph 36 of his judgment, appears to assume an ineffective acceleration notice. At all events, I find difficulty in attaching any other meaning to the epithet 'wrongful' in the Vice-Chancellor's expression 'wrongful acceleration'; and my interpretation of that expression is effectively confirmed by later passages in the Vice-Chancellor's judgment.
55. The Vice-Chancellor then summarised Mr Miles' submissions as follows (in paragraphs 37 and 38 of his judgment):

"37. Counsel for the Trustee accepted that the right conferred on the Trustee by condition 12 to be 'indemnified' did not entitle the Trustee to insist on security as such. His submission was that the requirement for the indemnity to be to the satisfaction of the Trustee entitled it, within the limits of Wednesbury reasonableness, to reject an indemnity if it was not suitably secured. He also accepted that Vivendi Universal had no direct claim against the Trustee in the event of a wrongful acceleration. He submitted that it could well have an indirect claim through Elektrim.

38. Counsel for the Trustee submitted that the question was not as formulated by counsel for Concord but as posed by the claim form, namely whether in the circumstances the Trustee is entitled not to be satisfied with the indemnity offered. He submitted that the answer was affirmative with the consequence that the Trustee was under no present obligation to accelerate the bonds. He contended that Elektrim had an arguable claim against the Trustee for damages for breach of contract in the event of a wrongful acceleration of the bonds which could well amount to an award of €1bn. or thereabouts. He suggested that in view of all the uncertainties it is not unreasonable in the Wednesbury sense to require the protection of the Trustee to endure for a period of 12 years. He contended that none of the clauses in the Trust Deed relied on by Concord would provide a clear and complete defence so as to make it unreasonable in the Wednesbury sense to insist on an indemnity."

56. The Vice-Chancellor accordingly treated Mr Miles' submissions as having been advanced solely on the basis of a 'wrongful acceleration', on the footing that a 'wrongful acceleration' would constitute a breach of contract.
57. The Vice-Chancellor then turned to the question: 'Could an acceleration give rise to a cause of action, and if so for what?'. Addressing that question, the Vice-Chancellor said this (in paragraphs 39 to 46 of his judgment):

"39. If the answer to this question is in the negative, as counsel for Concord submits, then the succeeding questions do not arise. The starting point is to recognise that the relationship between the Trustee and Elektrim is contractual. The contract is to be found in the terms of the Trust Deed and of the bonds. Clause 9.3 of the Trust Deed and Condition 12(ii) of the Bonds entitles the Trustee to accelerate the bonds by requiring immediate repayment if there is an event of default. Plainly any notice given under either of those provisions requiring immediate repayment in any case where there is no event of default will constitute a breach of contract. In any such event Elektrim will be entitled to damages assessed in accordance with the usual principles.

40. The submission for Concord I have summarised in paragraph 36(3)(i) above accepts that Elektrim is not bound by the judgment of Peter Smith J to the effect that the suspension of the nominated director constituted an event of default. But counsel submitted that it is fanciful to suggest that another judge is likely to reach any different conclusion. This submission presupposes that Elektrim would not be in a position to adduce any further evidence or different submissions to those advanced before Peter Smith J. But this is not an assumption the Trustee is required to make. The letter dated 2nd April 2004 from the solicitors for Elektrim, which I have quoted in paragraph 19 above, contains a clear indication that Elektrim would adduce further evidence including evidence of the law of Poland.

41. Accordingly it is necessary to consider what level of award might be made against the Trustee in the event of Elektrim successfully alleging that there was no event of default entitling the Trustee to accelerate the bonds. The contention of the Trustee is based on the matters referred to in paragraph 5 above. The Trustee contends that the letter from the solicitors for Elektrim dated 2nd April 2004 and the letter from the solicitors for Concord both indicate that there is an agreement or agreements between Elektrim and DT to the effect that if DT can establish that Elektrim has become economically impaired then DT is entitled to acquire the 51% shareholding in PTC it does not already own at book value. The Trustee submits that an acceleration, even if wrongful, may well give rise to such impairment, not least by causing creditors of Elektrim themselves to insist on prompt repayment.

42. Counsel for Concord submits that such suggestions are fanciful. She contends that an invalid acceleration could not give rise to economic impairment. She points out that Elektrim does not hold the 51% shareholding in PTC so that no loss would be sustained by Elektrim even if DT did succeed in establishing economic impairment of Elektrim.

43. In my view the submissions of Counsel for the Trustee cannot be stigmatised as fanciful. The agreement or agreements between DT and Elektrim have not been adduced in evidence in this action. The best evidence, and allowing a good deal of latitude in recognition of the need to have regard to 'the worst case scenario', is that DT has the right to acquire the outstanding 51% of the shares in PTC at book value. Whether the test is 'economic impairment' or whether that is a convenient shorthand for the various insolvency procedures available to creditors of Elektrim is unclear. Further there is no evidence as to what the insolvency processes would be under the law of Poland. Either way it seems to me to be plain that there is a risk that a wrongful acceleration of the bonds could give rise to whatever is the exact event which triggers the right of DT to acquire the shares in PTC.

44. If the right of DT does arise then will it give rise to some loss and if so to whom? In particular can that loss underpin an award of damages for a comparable amount in favour of Elektrim against the Trustee? Plainly if the true value of the 51% holding in PTC is greater than book value then a loss equivalent to the difference will be sustained by the present holders of that 51%, namely ET and Carcom. Counsel for Concord submits that such a loss, which she does not accept, could not be recoverable either directly or indirectly by Elektrim. As she points out, whatever may have been the position when the agreement between DT and Elektrim was concluded, Elektrim now holds only one share in PTC.

45. Plainly the loss, if any, will be sustained directly by the present shareholders in PTC, namely ET and Carcom. But Elektrim holds 49% of the shares in both those companies, the remaining 51% being held by Vivendi Universal. If a substantial and corresponding loss is sustained by ET and Carcom because of the loss of the PTC shares at book value then it may diminish the value of their shares in the hands of Elektrim. Such a loss is, in principle, recoverable by Elektrim against the Trustee in respect of the assumed breach by the Trustee of the contract between the Trustee and Elektrim.

46. Counsel for the Trustee submits that it should not be assumed that the loss arising from the exercise of the pre-emption right of DT over the PTC shares attributable to the 51% shareholding of Vivendi Universal in ET and Carcom is not recoverable by Vivendi from Elektrim and by Elektrim from the Trustee. He points out that there is a partnership between Elektrim and Vivendi Universal constituted by an agreement dated 28th June 2001 of which no details are available. He suggests that it is more than likely that under the agreement Elektrim has provided some protection to Vivendi Universal to protect the latter from the PTC shares being removed from ET and Carcom at an undervalue. It seems to me that this is a good deal more speculative but unless and until the Trustee has been provided with a copy of all the relevant underlying documents I do not see why it should be required to assume that any loss sustained by Vivendi Universal cannot be recovered from Elektrim and by Elektrim from the Trustee if the cause of the shares being taken by DT is economic impairment triggered by an unjustified acceleration of the bonds."

58. The Vice-Chancellor then turned to the figures, saying this (in paragraphs 47 to 49 of his judgment):

"47. The amount of the loss is also hotly disputed. For the Trustee counsel relies on an announcement made on 16th September 2003 of an offer by DT to buy from ET and Carcom their 51% holding in PTC for €1.1bn. The sale did not proceed but, it is submitted, the offer is some indication of the open market value of 51% of the shares. The Trustee also tentatively suggested in its letter to Concord's solicitor dated 5th May 2004 that the book value might be as low as €100m; but it got no response. It is the difference between these two figures which led the Trustee to suggest that the amount of the letter of credit it sought should be €1bn.

48. Counsel for Concord challenged both figures. With regard to the open market value she suggested that, as the press release which gave the bid price as €1.1bn. also showed, only €400m or 36% would have been due to Elektrim. This is true, but of the remaining €700m €691m or 63% of the whole was due to Vivendi Universal. Thus 99% would have been due to Elektrim and Vivendi Universal together. With regard to the book value counsel for Concord relied on the annual report and accounts of PTC for the year 2003, which are available on the web but in Polish, as showing that the book value of the PTC shares is the equivalent of €439m. But that would be the book value for 100% of the shares in PTC; the book value for 51% is €224m. The conclusion counsel for Concord invited me to reach is that the estimate of potential liability at €1bn is so absurd as to indicate clearly how unreasonably the Trustee has approached the whole question of indemnity.

49. I do not reach that conclusion. The figures are high but they are more than mere speculation. In the absence of any better evidence I do not see why the open market value of 51% of the PTC shares should not be taken to be €1.1bn or thereabouts. Even if it is correct at this stage to fix the book value at €224m. this still gives rise to a loss to Elektrim and Vivendi Universal together of €876m or thereabouts. Accordingly I conclude, in answer to the question I posed at the beginning of this section, that on the basis of such information as is now available and on a worst case scenario a wrongful acceleration could give rise to a claim by Elektrim against the Trustee for damages in the region of €876m or thereabouts."

59. In the next section of his judgment the Vice-Chancellor addressed the question: 'Is a claim by Elektrim against the Trustee precluded by the terms of the Trust Deed?' After referring to various clauses of the Trust Deed on which Concord had relied in support of its submission that the question should be answered in the affirmative, the Vice-Chancellor said this (in paragraph 58 of his judgment):

"58. For all these reasons I consider that none of the clauses on which Concord relies could provide a clear and unambiguous defence to the claims of Elektrim. It follows that in considering the adequacy or otherwise of the indemnity offered by Concord the Trustee was entitled to consider that it was potentially liable for €876m or thereabouts."

60. The Vice-Chancellor then turned to the question: 'Was the indemnity offered adequate?' He concluded that it was not, for reasons set out in a confidential annex to the judgment. It followed that Concord could not attack the Trustee's conclusion that the indemnity offered was not satisfactory as being 'Wednesbury unreasonable'; and that Concord's application should accordingly be dismissed.
61. After referring to correspondence which had taken place after the Trustee's rejection of the form of indemnity, the Vice-Chancellor expressed his overall conclusion thus (in paragraph 65 of his judgment):

"65. Reverting to the issue between counsel as to what is the question the court is required to answer, it is not, in my view, whether or not the Trustee was justified in seeking an indemnity by means of a letter of credit in the sum of €1bn. Rather it is whether the Trustee was Wednesbury unreasonable in concluding that the indemnities offered on 23rd and 28th April 2004 were unsatisfactory. For the reasons I have given, in my judgment, the answer to that question is in the negative. Accordingly I dismiss this application."

THE GROUNDS OF APPEAL

62. Concord's overall contention that the effect of the Vice-Chancellor's judgment is to alter, wrongly and to the detriment of the bondholders, the balance of rights and interests agreed and enshrined in the Trust Deed.
63. As to the test to be applied, Concord challenges the Vice-Chancellor's conclusion (in paragraph 33 of his judgment) that the onus is on the bondholders to establish 'Wednesbury unreasonableness' on the part of the Trustee; and his conclusion (in paragraph 34 of his judgment) that the matter had to be considered on a 'worst case scenario' from the Trustee's point of view.
64. As to the application of the test to the facts of the instant case, in paragraph 10(i) of the grounds of appeal there is an assertion that the first 'hurdle' which the Trustee has to surmount is that of establishing that the giving of a notice of acceleration could give rise to a cause of action by Elektrim against the Trustee. However, notwithstanding that the grounds of appeal extend to 13 paragraphs spread over some 6 pages of typescript, they contain no clear assertion that, whether or not an 'Event of Default' has occurred, Elektrim can have no cause of action for breach of contract against the Trustee arising out of the giving of a notice, or the purported giving of a notice, under condition 12; or that the Vice-Chancellor was in error in concluding (in paragraph 39 of his judgment) that a notice purporting to have been given under condition 12 in circumstances where no 'Event of Default' has occurred would constitute a breach of contract.

THE ARGUMENTS ON THIS APPEAL

65. At the commencement of the hearing, we invited the assistance of counsel (the same counsel appeared before us as had appeared before the Vice-Chancellor) as to the nature of the cause of action for damages which Elektrim might possibly have against the Trustee by reason of the giving by the Trustee of an ineffective acceleration notice (that is to say, a notice given in circumstances where no 'Event of Default' had occurred). In so doing we indicated that, as at present advised, it was not clear to us on what basis such an action on the part of the Trustee could be categorised as a breach of contract.
66. Miss Prevezer's response (naturally enough) was to embrace the point enthusiastically. She asserted that Concord had taken this very point before the Vice-Chancellor, referring us to the passage in the transcript of her opening submissions to the Vice-Chancellor quoted in paragraph 42 of this judgment. Taking her cue, as it were, from the concerns which the court had expressed, she submitted that an ineffective notice could, by definition, have no contractual effect; and that the giving of a notice having no contractual effect was not in itself a breach of contract.
67. Mr Miles (again, naturally enough) did not share Miss Prevezer's enthusiasm for the point. He submitted that the Vice-Chancellor was right to conclude that the giving of a notice under condition 12 in circumstances where no 'Event of Default' had occurred was a breach of contract. When asked to identify the particular contractual term which the giving of such a notice would breach, Mr Miles' first submission was that it would constitute a breach of the express terms of condition 12. In the alternative, he suggested that it might constitute a breach of an implied term to the effect that the Trustee would not serve a notice under condition 12 save in circumstances where it would have contractual effect under that condition. In the further alternative he suggested that Elektrim might have a cause of action in tort against the Trustee arising out of the giving of such a notice. Asked to identify the tort which he had in mind, Mr Miles suggested that an action in defamation might lie against the Trustee at the suit of Elektrim.
68. Having heard Mr Miles' submissions as to the nature of Elektrim's possible cause of action against the Trustee, we invited counsel's submissions as to (a) the relief which should be granted should we conclude that the Vice-Chancellor was in error in concluding that the giving of an ineffective notice would constitute a breach of contract, and (b) as to the desirability or otherwise of the issue whether an 'Event of Default' has occurred being litigated as a matter of urgency in proceedings between the Trustee and Elektrim.
69. Miss Prevezer submitted that the right course would be to grant the relief sought by Concord, viz. a declaration that the Trustee is obliged forthwith to give an acceleration notice. She pointed out that it would then be for Elektrim to take proceedings to establish whether an 'Event of Default' had occurred. She suggested that Elektrim might be bluffing when, through Skadden Arps, it threatened to challenge any purported notice of acceleration. Mr Miles, on the other hand, submitted that the right course would be for the Trustee, before serving any notice (and subject always to the Trustee being indemnified to its satisfaction), to commence proceedings against Elektrim seeking a determination of the question whether an 'Event of Default' has occurred. He suggested that Concord should also be joined as a defendant, so that issue could be joined between the interested parties, viz. the bondholders on the one hand and Elektrim on the other.

CONCLUSIONS

70. The following questions arise:

1. Would the giving by the Trustee of a notice under condition 12 in circumstances where no 'Event of Default' has occurred have any (and if so what) contractual effect as between the Trustee and Elektrim?

2. If not, would the mere act of giving such a notice in such circumstances give Elektrim any (and if so what) cause or causes of action for damages (if proved) against the Trustee?

3. If so, what damages might be recoverable?

Question 1

71. In my judgment the answer to this question is plainly: No. Under condition 12 an obligation of immediate repayment ('acceleration') can only arise where the circumstances prescribed by condition 12 exist, one of which is the occurrence of an 'Event of Default'. It follows that a notice purporting to accelerate under condition 12 but given at a time when no 'Event of Default' has occurred will be ineffective to achieve an acceleration: it will, in other words, be of no contractual effect.
72. As Lord Hobhouse said in Borealis AB v. Stargas Ltd [2002] AC 205 at 229G-H, albeit in a different context:

"A rightly rejected demand for delivery by one who is not entitled to delivery is an act devoid of legal significance." (Emphasis supplied)

73. Lord Hobhouse continued (at p.230A-B):

"A 'demand' made without any basis for making it or insisting upon compliance is not in reality a demand at all. …. It is a request which can be voluntarily acceded to or refused as the person to whom it is made may choose."

74. In my judgment, a notice purportedly given pursuant to condition 12 but in fact given at a time when no 'Event of Default' has occurred is similarly 'devoid of legal significance', in the sense that by virtue of the very terms of condition 12 it will have no effect on the contractual relationship between the Trustee and Elektrim.
75. It follows that, in terms of the contractual significance of such a notice, I am, with respect, unable to accept the Vice-Chancellor's concept of a 'wrongful' or 'unjustified' acceleration. A contractually ineffective notice cannot, by definition, effect an acceleration under condition 12. Thus, in the context of condition 12 a 'wrongful' or 'unjustified' acceleration is, in truth, no acceleration at all.
76. Since the hearing, we have been referred by counsel for the Trustee to an extract from Butterworths Encyclopaedia of Banking Law (paragraph 3404), to the effect that whilst a borrower may ignore a 'wrongful acceleration' by a bank, if the acceleration is public the bank may be liable for substantial damages if such damages can be proved. No authority is cited for this proposition, which (if and in so far as it refers merely to the giving of an ineffective notice) is in my judgment contrary to principle.
77. Counsel for the Trustee have also referred us to an article in the April 1998 edition of the International Financial Law Review by Mr Richard M. Gray of Messrs Milbank, Tweed, Hadley & McCloy, Singapore. The article concerns clauses relating to 'material adverse change' in the financial affairs of a borrower (referred to as 'MAC' clauses). In the course of the article, the writer says this:

"The primary risk borne by lenders who incorrectly invoke a MAC clause is liability for damages suffered by the borrower. Whether or not they acted in the good faith belief that a material adverse change had occurred may not be a defence. It is thus incumbent on lenders deciding whether to invoke a MAC clause in uncertain circumstances to consider the impact on the borrower, and therefore their liability.

The most potentially serious remedy is terminating lending commitments and accelerating loans. These actions could trigger cross-default provisions in other financings and result in a bankruptcy of the borrower, with potential liability for the loss of its going concern value. …."

78. Once again, if and in so far as the writer is referring merely to the giving of an ineffective notice purporting to accelerate repayment of a loan, any suggestion that the lender may thereby be rendered potentially liable for damages for breach of contract is in my judgment contrary to principle.

Question 2

79. In paragraph 39 of his judgment the Vice-Chancellor said this:

"Plainly any notice given under [condition 12] requiring immediate repayment in any case where there is no event of default will constitute a breach of contract." (Emphasis supplied)

80. Once again, I find myself in respectful disagreement with the Vice-Chancellor. Patently there is no express term in the Trust Deed or in the conditions that the Trustee will not give an (ex hypothesi) contractually ineffective notice purporting to be an acceleration notice under condition 12; so the question must be whether such an obligation is to be implied.
81. Mr Miles submits that such an obligation is to be implied in condition 12 itself, in that a contractual provision that a notice may be given in certain prescribed circumstances necessarily implies or imports a negative obligation not to give such a notice in any other circumstances. I cannot accept that submission, which I regard (with respect to Mr Miles) as nonsensical. As I have said, there can be no acceleration save in the circumstances prescribed by condition 12, with the consequence that a purported notice of acceleration given in other circumstances will, by definition, not be an acceleration notice under condition 12. So far as I can see, the most that the suggested implied obligation could amount to would be an obligation not to make an erroneous assertion as to Elektrim's obligation of repayment under the contract, and I can see no basis whatever for implying into the contract such an extraordinary obligation. Apart from any other considerations, I find it difficult, if not impossible, to conceive of a set of circumstances in which service of a contractually ineffective notice could cause substantial (as opposed to nominal) damage to the contracting party to whom it is given – an aspect to which I shall return briefly below.
82. Mr Miles suggests that Elektrim might have a cause of action against the Trustee in tort arising out of the mere fact of the giving by the Trustee of a notice purporting to be an acceleration notice but given in circumstances where no 'Event of Default' has occurred. He suggests the tort of defamation as a possibility.
83. The possibility of a cause of action in tort was not raised or developed before the Vice-Chancellor, and it has not been developed in this court. For my part, absent allegations of bad faith (and none are made here) I am unable to see what cause of action in tort Elektrim could possibly have against the Trustee in such circumstances. In particular, it seems to me fanciful to suggest that the Trustee might be exposed to a claim for substantial damages for defamation by reason merely of its having served an ineffective notice purporting (but failing) to impose an obligation of immediate repayment on Elektrim.

Question 3

84. In the light my conclusions on questions 1 and 2 this question does not arise. However, I should say that even if, contrary to my view, the proposition stated by the Vice-Chancellor in paragraph 39 of his judgment (quoted in paragraph 57 of this judgment) is correct – that is to say, the giving of a notice of acceleration at a time when no 'Event of Default' has occurred would constitute a breach of contract by the Trustee – I am unable to see what substantial (as opposed to nominal) damage such a breach of contract could cause to Elektrim.
85. It may be that in stating the proposition quoted above the Vice-Chancellor was assuming that a notice purporting to be a notice of acceleration under condition 12 but given at a time when no 'Event of Default' had occurred would nevertheless effect an acceleration (in the sense of imposing on the Issuer and Elektrim an obligation of immediate repayment), and might thus render the Trustee liable for damage suffered by Elektrim by reason of the imposition of that obligation. For reasons already given in answer to question 1, that is in my judgment a false assumption.
86. I accordingly conclude, in respectful disagreement with the Vice-Chancellor, that in seeking an indemnity in a sum in the region of €1 billion the Trustee fundamentally misconceived the scale of the risk which it would face were it to seek to effect an acceleration on the basis of Elektrim's suspension of the bondholders' nominee on its management board. In my judgment, the only real risk which the Trustee would run if it took that course would be its exposure to the costs of proceedings brought either by itself or by Elektrim to determine whether or not that event constituted an 'Event of Default': that is to say, to determine whether or not the giving of such a notice is or would be effective to impose on the Issuer and Elektrim an obligation of immediate repayment of the bonds.
87. I would accordingly set aside the Vice-Chancellor's order. In doing so, I would merely comment that very much fuller argument has been addressed to this court on the associated topics of 'wrongful acceleration' and a possible breach of contract arising therefrom than appears to have been addressed to the Vice-Chancellor.
88. It does not, however, follow from the conclusions expressed above that Concord is entitled to the declaration which it seeks. In my judgment, such a declaration would only be appropriate where it is established that all the conditions prescribed by condition 12 have been met; in particular, that an 'Event of Default' has occurred. Only then will condition 12 oblige the Trustee to give an acceleration notice. As it is, there is a live issue, raised by Elektrim, as to whether an 'Event of Default' has occurred. That being so, in my judgment it would not be appropriate for the court to make a declaration in the terms sought by Concord pending final determination of that issue.
89. I turn, then, to the practicalities of the situation as it now stands.
90. The issue as to whether an 'Event of Default' has occurred must plainly be resolved as a matter of urgency. Notwithstanding that Elektrim has contended throughout that no 'Event of Default' has occurred, and notwithstanding that two separate sets of proceedings have been brought relating to that very issue, Elektrim has not as yet been afforded an opportunity to present its arguments to the court. In my judgment it must now be afforded that opportunity. Assuming that in the meantime Elektrim has not carried out its threat to commence proceedings against the Trustee to determine whether an 'Event of Default' has occurred, the appropriate course for the Trustee to take, in my judgment, is to commence proceedings joining Elektrim and Concord as defendants, in order to seek a determination of that issue. In principle, given the obvious urgency of the matter, any such proceedings should be conducted as expeditiously as is reasonably possible.
91. Since the Trustee is not holding any trust fund out of which it can indemnify itself, it will, on the face of it, be entitled to a satisfactory indemnity from the bondholders in respect of its own costs of such proceedings and of any costs which it may be ordered to pay.
92. Having identified the way forward in, necessarily, somewhat general terms, I would propose to hear counsel as to the appropriate form of order.

Mr Justice Laddie:

93. I agree.

Lord Justice Peter Gibson:

94. I also agree.
Order: Appeal allowed; no order for costs both in the Court of Appeal and below; sum paid on account to be repaid to appellant (with interest); application for permission to appeal to the House of Lords refused; further orders as per agreed draft minute of order. (Order does not form part of the approved judgment)