Summary judgment on €250m bond dispute

31/10/22

On 17 October 2022, the Commercial Court granted summary judgment in favour of GLAS S.A.S (London Branch) (“GLAS”) in relation to parts of its ongoing €250m bond dispute with European Topsoho S.à r.l (“ETS”).

GLAS was appointed 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) on 24 December 2020. A dispute emerged about the validity of GLAS’s appointment, which led GLAS to issue Part 8 proceedings in June 2021. Those proceedings were then compromised by a Deed of Confirmation of Appointment (the “Deed of Confirmation”), by which ETS agreed that GLAS was the Trustee of the Bonds going forward.

The Bonds matured in September 2021. 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 commenced Part 7 proceedings in England seeking judgment on the debt under the Bonds, as well as further relief in relation to the unsecured shares. GLAS obtained worldwide freezing relief in the Commercial Court in November 2021.

ETS defended the debt claim on the basis that (i) GLAS had not been validly appointed in December 2020, and (ii) the Deed of Confirmation was liable to be rescinded on the basis of misrepresentations made to ETS by members of the Carlyle Group, one of the bondholders, as to its intention to refinance the debt. In light of ETS’s dispute that GLAS was validly appointed as Trustee, it has been unable to realise the security it holds in the form of the shares in SMCP.

GLAS sought summary judgment declaring that it was validly appointed as Trustee, and on the €250m debt. The Court held in its judgment that:

1.  GLAS’s appointment in December 2020 had been valid and effective under the terms of the Trust Deed. In particular, the previous trustee (BNP Trust) had appointed GLAS as a co-Trustee and then immediately resigned, following a resolution of Bondholders instructing them to do so. The Court held that this was a valid method of appointment, notwithstanding that the intention was always for BNP Trust to immediately retire, leaving GLAS as the sole Trustee.
2. It was common ground that ETS would not be entitled to rescind the Deed of Confirmation based on Carlyle’s alleged wrongdoing, unless ETS could show that either GLAS had known of Carlyle’s misrepresentations or that GLAS was acting as Carlyle’s agent. Neither allegation was made in ETS’s Defence. The Court held that it would not be appropriate to allow the claim to continue to see whether ETS would be able to make such an allegation following disclosure.