Bingham McCutchen has won a landmark case in the House of Lords for the Elektrim bondholders. The ruling reduces the burden on banks and trustees when they are accelerating debt.
The case arose when the Law Debenture Trust, the trustee of e510m (£347m) of bonds guaranteed by Polish company Elektrim, refused to redeem the bonds before the maturity date until it had been indemnified by the bondholders in case the notice of acceleration was invalid.
The Lords confirmed last month that the only liability the trustee may face in English law is for the legal costs of establishing whether the notice of acceleration is invalid. They found that a trustee has to serve a notice to accelerate the bonds if the bondholders request it and that the trustee will not be held liable unless the notice was made in bad faith. The decision should improve the fortunes of banks, trustees and bondholders against defaulting debtors.
Bingham McCutchen finance partner James Roome and litigation partner Natasha Demetriou instructed Susan Prevezer QC of Essex Court Chambers. The Law Debenture Trust was advised by Simmons & Simmons partners John Davis and Robert Turner, instructing Brick Court Chambers’ Mark Howard QC.