Commercial Court refuses Norwich Pharmacal application in €250m bond dispute

23/05/22

On 17 May 2022, Robin Knowles J refused an application by European Topsoho S.à r.l (“ETS”) for Norwich Pharmacal relief against GLAS S.A.S (London Branch) (“GLAS”) and CELF Advisors LLP, a company within the Carlyle Group, the well-known private equity firm.

GLAS acts as the Trustee under €250m of Bonds issued by ETS in 2018, secured by shares in SMCP S.A. (the French fashion company which owns the well-known brands Sandro, Maje and Claudie Pierlot). The Bonds matured in September 2021. Following the maturity date, ETS commenced proceedings seeking Norwich Pharmacal disclosure on the basis of allegations that Carlyle had conspired against it to take control of SMCP.

In November 2021, having discovered that ETS had transferred away more than 12 million shares in SMCP (which were not security for the Bonds), GLAS obtained worldwide freezing orders against ETS and the transferee (a BVI company called Dynamic) in England, the BVI and Singapore.

In its evidence, ETS alleged two alleged unlawful means in support of its conspiracy claim, namely (1) representations by Carlyle as to its intention to refinance the Bonds so as to enable repayment in September 2021, and (2) procuring a breach of contract by causing the previous Trustee, BNP Trust, to retire in favour of GLAS in December 2020 (by a process which ETS alleges was ineffective under the Trust Deed). At the hearing, ETS abandoned the former, and pursued only its argument in relation to procuring a breach of contract.

Although the application initially sought wide-ranging documentary disclosure and witness evidence, by the time of the hearing only two documents were sought: a Deed of Indemnity and associated Fee Letter entered into by some of the Bondholders with GLAS at the time of its appointment in December 2020. The purposes of those documents were said to be to identify (1) which Carlyle entities had been parties to the conspiracy, and (2) whether GLAS had been a party to the conspiracy.

The Judge did not decide whether he had jurisdiction to make the order at all, but instead decided the case by reference to his discretion (the final stage in any application for Norwich Pharmacal relief). He cited four particular factors, namely that (1) it was clear on the documents that the only Carlyle entity which had provided the Indemnity was CSP Acquisitions IV LP; (2) Carlyle’s solicitor had confirmed that there was no term in the Deed of Indemnity incentivising GLAS to participate in the alleged conspiracy; (3) where a party could sue without a particular document and then amend its case following disclosure to make new allegations, the “necessity” test for Norwich Pharmacal relief would not be met, and (4) the dispute about the validity of GLAS’s appointment had been settled in June 2021, and ETS had agreed not to bring a claim in respect of that appointment.

The application was therefore refused, and indemnity costs were ordered.