Plaza BV v The Law Debenture Trust Corporation Plc

Factual and Procedural Background

The Defendant, Company A, acting as trustee of subordinated bond issues issued by an Australian corporate group ("the Group"), seeks a stay of proceedings brought by Plaintiff, a substantial bondholder of one category of those bonds. The Group’s insolvency and related disputes have resulted in multiple legal actions, including a principal action ("the Main Action") and a related proceeding ("the Other Action") in the courts of The State. The trust deeds governing the bonds are subject to English law with non-exclusive jurisdiction clauses, and the Defendant is authorized to act as trustee for various bond issues within the Group.

The Plaintiff, incorporated in The City but with an address in The State, holds bonds issued by one of the Group companies and has brought proceedings in England against the Defendant, alleging breach of trust and conflict of interest concerning the Defendant’s potential implementation of amendments ("the Second Supplemental Deeds") to the trust deeds. These amendments would partially remove subordination provisions ("Partial Desubordination"), potentially affecting the rights of senior creditors, including the Plaintiff.

The Group collapsed in 1991, and the insolvency proceedings have involved complex funding arrangements and litigation concerning priority of claims and trust deed amendments. The Defendant and other parties entered into a Deed of Settlement in The State in 2013, containing an exclusive jurisdiction clause in favor of The State’s courts and provisions relating to the release of undertakings given in prior litigation.

The Plaintiff’s claim in England was issued in 2014, after the Deed of Settlement but before certain applications made in The State. The Defendant seeks a stay of the English proceedings based on the exclusive jurisdiction clause and principles of international jurisdiction, or alternatively summary judgment or striking out of the claim.

Legal Issues Presented

1. Whether the exclusive jurisdiction clause in the Deed of Settlement governs the dispute and thus requires a stay of the English proceedings.
2. Whether the mandatory effect of Article 2 of Council Regulation (EC) 44/2001 (the Brussels Regulation) compels the English court to exercise jurisdiction notwithstanding the exclusive jurisdiction clause favoring The State’s courts.
3. Whether the exceptions to Article 2, including Articles 23 and 28 of the Brussels Regulation, can be applied reflexively to justify a stay of the English proceedings.
4. Whether the English court should exercise its inherent and case management powers to stay the proceedings in light of parallel litigation in The State and to avoid conflicting judgments.
5. Whether summary judgment or striking out of the Plaintiff’s claim is appropriate on the basis that the claim has no realistic prospect of success or is premature.

Arguments of the Parties

Defendant's Arguments

• The exclusive jurisdiction clause in the Deed of Settlement mandates that disputes connected with the Deed be resolved in The State’s courts, engaging the doctrine of party autonomy.
• The Brussels Regulation’s Article 2 generally requires defendants domiciled in England to be sued in England; however, exceptions under Articles 23 and 28 allow for exclusive jurisdiction clauses and lis alibi pendens principles to be applied reflexively.
• The existence of parallel proceedings in The State, which are closely connected and involve the same subject matter, supports a stay of the English proceedings to avoid irreconcilable judgments.
• The court’s case management powers under CPR and inherent jurisdiction justify a stay to prevent duplication and conflicting outcomes.
• The Plaintiff’s claim is premature (a quia timet action) lacking evidence of immediate threat, and summary judgment or strike out is appropriate.

Plaintiff's Arguments

• The mandatory effect of Article 2 of the Brussels Regulation requires the English court to exercise jurisdiction over the Defendant domiciled in England.
• The Plaintiff denies that the exclusive jurisdiction clause applies to its claim or that it bars proceedings in England.
• The Defendant is in a conflict of interest due to its dual trustee roles and intends to implement Partial Desubordination, adversely affecting the Plaintiff’s interests.
• The Plaintiff seeks to restrain the Defendant from taking steps to implement the Second Supplemental Deeds or similar amendments, alleging breach of trust.
• The claim is not premature as the Defendant’s obligations under the Deed of Settlement create an imminent risk of Partial Desubordination.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first considered whether the exclusive jurisdiction clause in the Deed of Settlement was engaged. Applying established principles of construction, including the broad and purposive approach endorsed in Sebastian Holdings and Fiona Trust, the court found that the Plaintiff’s claim was "in connection with" the Deed of Settlement and thus fell within the scope of the exclusive jurisdiction clause favoring the courts of The State.

The court then examined the effect of Article 2 of the Brussels Regulation, which mandates that persons domiciled in a Member State be sued in that State’s courts. The Defendant, domiciled in England, was subject to this rule. However, the court acknowledged exceptions under Articles 23 and 28, permitting exclusive jurisdiction clauses and lis alibi pendens to be applied reflexively, even where proceedings involve non-member states.

The court reviewed conflicting first instance authorities on reflexive application of Article 28 (lis alibi pendens) and concluded that while forum non conveniens arguments are excluded by Owusu, the court retains discretion to stay proceedings reflexively in appropriate circumstances. Given the existence of parallel proceedings in The State concerning the same subject matter and the undertakings given to that court, the court found a strong presumption in favor of a stay to avoid irreconcilable judgments.

The court applied the three-stage test from The Alexandros for lis alibi pendens: (i) the earlier proceedings in The State were commenced before the English claim and remain pending due to the undertakings; (ii) the proceedings are closely connected and related to the same issues; and (iii) discretion to grant a stay was appropriate considering the relatedness, stage of proceedings, and the connection of the dispute to The State’s courts by exclusive jurisdiction clause and governing law.

Further, the court found that its case management powers under CPR and inherent jurisdiction supported granting a stay to prevent duplication and conflicting decisions, as well as to respect party autonomy embodied in the exclusive jurisdiction clause.

Regarding summary judgment or striking out, the court identified significant factual disputes, including the Defendant’s present intentions concerning the Second Supplemental Deeds and the extent of its independence from the sole bondholder, as well as the immediacy of the risk of Partial Desubordination. These disputes required a full trial and disclosure, making summary judgment or strike out inappropriate at this stage.

Holding and Implications

The court ORDERS A STAY of the English proceedings brought by the Plaintiff against the Defendant.

The stay is grounded principally on the engagement of the exclusive jurisdiction clause in the Deed of Settlement favoring the courts of The State and the relatedness of ongoing proceedings there. The court also relied on the reflexive application of exceptions under the Brussels Regulation and its case management powers to avoid conflicting judgments and respect party autonomy.

No summary judgment or striking out of the claim is granted due to unresolved factual disputes requiring trial.

The direct effect is that the Plaintiff’s claim in England is suspended pending resolution in The State’s courts, reflecting the parties’ agreed forum and the interconnected nature of the litigation. The decision does not establish new precedent but applies established principles of jurisdiction, international litigation, and case management.