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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> The Argo Fund Ltd v ArcelorMittal Nippon Steel India & Ors [2025] EWHC 581 (Comm) (04 March 2025) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2025/581.html Cite as: [2025] EWHC 581 (Comm)

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IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		4 March 2025

HH JUDGE PELLING KC:

1. This is the hearing of (a) an application by the third, eighth and ninth defendants for an order either striking out the claimant's claim against them or granting them summary judgment, and (b) an application by the claimant for permission to amend its claim. It is common ground that if the application to amend fails, then the third, eighth and ninth defendants are entitled to the orders they seek, and it is conceded by the claimant that in any event the third and ninth defendants are entitled to orders either striking out the claim against them or granting them summary judgment in any event.
2. The claim has had an unfortunate procedural history, which culminated in the hearing of the strikeout and summary judgment application being listed before me on 16 January 2025. At that hearing, it was conceded by the claimant that the applying defendants were bound to succeed in their applications unless the claimant was able to reformulate its claim. This reflected the clear indication given by Foxton J at an earlier hearing in these proceedings that the claimant's then case (that for present purposes the fourth defendant was to be treated as a subsidiary of the first defendant even though in fact the opposite was the case) was untenable. Notwithstanding that concession, there was no application for permission to amend at that stage, nor even any draft re-amended claim form or particulars of claim to consider. In those circumstances, I adjourned the summary judgment application, gave directions for the filing of an amendment application if so advised, and ordered the claimant to pay the costs thrown away to be assessed on the indemnity basis. As the claimant and its solicitors recognise, that situation should not have been allowed to arise. The remainder of this judgment is concerned with the application for permission to amend.
3. The framework principles that apply to an application of this sort are well established. The defendants do not rely on the principles that apply to applications to amend that are either made late or very late. It follows that if an application to amend is to succeed, the claimant must show that the claim it now seeks to advance has a real, as opposed to a fanciful, prospect of success, and as it is sometimes put, one that carries some degree of conviction - see by way of example Elite Holdings Limited v Barclays Bank Plc [2019] EWCA Civ 204 per Asplin LJ at [40] to [42]. The claim does not have more than a fanciful prospect of success if the claimant has pleaded insufficient facts in support of the inferences on which any inferential case depends - see Elite Holdings, ibid at [41] - or where claimant is unable to demonstrate it has a more than fanciful prospect on either standing to bring its claim, or that its claim is not statute-barred where a limitation defence arises. The claimant's case is that it is to be inferred from the terms of the certificate to which I refer below that the first defendant had dishonestly concealed that it held an interest in some loan notes nominally held by the first defendant. That being so, it is necessary to remember that if permission is to be granted the primary facts pleaded (in this case the language used in the certificate) must be such as to make the inference of the dishonesty alleged (dishonest concealment of the first defendant's interest in the loan notes) more likely than one of innocence or negligence - see Bank of Moscow v Kekhman [2015] EWHC 3073 (Comm), per Flaux J, as he then was, at [20].
4. The claimant was the holder of a beneficial interest global loan notes issued by the first defendant (hereafter either "first defendant" or "ESIL"). This particular debt investment was governed by a trust deed ("Trust Deed") under which one global note, or series of global notes, registered in the name of Cede & Co, a nominee for the Depository Trust Company ("DTC") was held on trust to be administered by a trustee in accordance with the express term set out in the Trust Deed. I refer to Cede & Co hereafter as the "DTC Nominee", which is how it is referred to in the Trust Deed. These notes are referred to in the Trust Deed as the "DTC Global Notes". The structure that applied provided for various financial institutions, referred to in the Trust Deed as "DTC participants," to stand between the DTC nominee and the underlying investors, who in consequence held and hold only beneficial interests in the global notes concerned. These investors were referred to in the Trust Deed as "Noteholders". This structure was adopted for the purpose of permitting dematerialised trading of investors' beneficial interests in the notes concerned. It is common ground that the notes were held subject to the Trust Deed, which incorporated various terms and conditions, some of which I will have to look at in more detail later in this judgment, and was governed by English law.
5. The claimant's case is that by February 2015, it held notes, or, more accurately, a beneficial interest in the global notes held by the DTC Nominee to a value of $1.5 million, and by May 2023 it had acquired a further beneficial interest in the global notes to a value $18 million from an entity known as Springwell Navigation Corporation ("Springwell").
6. The first defendant was obliged to pay interest semi-annually and to repay the principal on 30 September 2018. Subclause 9 of the trust deed provided that a failure to pay any principal or interest otherwise due constituted an event of default. When such an event of default occurred, the trustee was obliged to serve a notice accelerating the repayment of all sums otherwise due, but only if directed to do so by a resolution passed by those who were beneficially interested in the notes at a meeting convened for that purpose. The majority required was 75% of the votes cast at the relevant meeting.
7. The claimant alleges -- and it is not in dispute, at least for the present purposes -- that on 30 September 2014, the first defendant failed to pay interest when it fell due, on 9 October 2014 the trustee notified the noteholders of the event of default and on 21 January 2015, the claimant and Springwell issued a noteholder instruction to the trustee requiring the trustee to convene a meeting at which noteholders could vote on a resolution to accelerate repayment at the sums due under the notes. On 30 January 2015, the trustee issued a notice convening the meeting for 25 February 2015. On 12 February 2015, the first defendant requested the trustee to request the noteholders to call off that meeting. That did not happen.
8. The first defendant is and was at all material times a subsidiary of the fourth defendant. The fourth defendant held was a noteholder and as such had a beneficial interest in the global notes with a value of $2.98 million-odd. It is common ground that if the fourth defendant held its interest for itself as opposed to being a nominee for the first defendant then it was entitled to vote on the resolution to accelerate repayment. In the result, the meeting to consider the resolution duly took place, the fourth defendant voted against the resolution in its capacity as holder of the notes it held and the resolution to accelerate the sums due under the notes failed to achieve the required majority. The claimant then commenced these present proceedings.
9. As will be appreciated, that from a commercial perspective if the first defendant or its subsidiaries became noteholders, and thereby could vote against an acceleration resolution following a default, it might be able to defeat a resolution for acceleration contrary to the interests of other noteholders. The structure of the trust deed was designed to ensure that this could not happen by eliminating the possibility of either the first defendant or any of its subsidiaries being able to vote even though it or they had acquired a noteholder interest that would otherwise entitle it or them to vote. To this end, by clause 6(c) of the Trust Deed, the first defendant and any of its subsidiaries were permitted to purchase a beneficial interest in the global note or notes in the open market, but by clause 6(d), any such notes, if purchased the first defendant or any of its subsidiaries, were to be cancelled and could not be resold thereafter. The effect of such cancellation is that such notes ceased to be "outstanding" and so did not entitle the first defendant or any of its subsidiaries to vote.
10. As to what constituted an "outstanding" note, that was defined as meaning:

"In relation to the new dollar notes, all the new dollar notes issued except: (a) those which have been redeemed in accordance with the conditions; (b) those in respect of which the date for redemption has occurred and the redemption monies, including all interest accrued on such new dollar notes to the date for such redemption, and any interest payable up to the conditions for such date have been duly paid to the trustee or to the principal paying agent as provided in clause 2; (c) those in respect of which claims have been proscribed; and (d) those which have been purchased and cancelled, as provided in the conditions, provided that for the purpose of: (i) ascertaining the right to attend and vote at any meeting of the noteholders; (ii) the determination of how many new dollar notes are outstanding for the purpose of conditions 9 and 13 and Schedule 3; (iii) the exercise of any discretion, power or authority which the trustee is required expressly or impliedly to exercise in or by reference to the interests of the noteholders, and; (iv) the certification, where relevant, by the trustee as to whether a potential event of default is, in its opinion, materially prejudicial to the interests of noteholders, those new dollar notes which are held by the company or any of its subsidiaries and not cancelled shall be deemed not to remain outstanding." [Emphasis supplied]

The key points for present purposes that are to be derived from that definition are that:

a. a note (meaning a beneficial interest in the global notes) in respect of which the first defendant or any of its subsidiaries was a noteholder is to be regarded as outstanding unless it had been cancelled in accordance with the procedures that I have already referred to – see sub paragraph (d) of the definition; but

b. if and to the extent the first defendant or any of its subsidiaries was a noteholder in respect of any beneficial interest in the global notes that had not been cancelled in accordance with those procedures, then those notes were to be deemed not "outstanding" for the purpose of voting at any meeting of noteholders and for the purpose of requiring the trustee to exercise any powers it otherwise had by reference to the interests of the noteholders see subs paragraph (i) of the proviso within the definition.

11. By clause 7.10 of the Trust Deed, so long as any of the notes remained "outstanding", the first defendant would send to the trustee, as soon as practical after being requested to do so

"... a certificate of [the first defendant] signed by two of its directors stating the aggregate principal amount of [the notes] held at the date of such certificate by or on behalf of [the first defendant] or any of its subsidiaries ..."

12. Returning to the chronology, the fifth and sixth defendant, as directors of the first defendant, provided a certificate to the trustee "certificate"), prior to the meeting at which the resolution to accelerate was to be considered, which insofar as material stated as follows:

"Essar Steel India Limited (formerly known as Essar Steel Limited)

(the issuer)

Meeting of the holders of the outstanding

US$31,580,000, 0.25% unsecured notes due 2018 ...

due to be held at 10.00 am London time on 25 February 2015 ...(the Meeting)

…

we the undersigned, Mr Dilip Oommen and Mr Mahadev Iyer, being two directors of the issuer, duly authorised in that behalf by the issuer, hereby certify to you in your capacity as trustee for the holders of the notes that:

(i) the total principal of the amount of the notes created and issued by the issuer constituted by the trust deed was US$31,580,000;

(ii) the aggregate principal amount of the notes outstanding as at the date hereof is US$31,580,000;

(iii) at the date hereof, the total principal amount of the notes outstanding, which is held by the issuer or any of its subsidiaries, and is therefore deemed not to remain outstanding for the purpose of ascertaining the right to attend and/or vote at the meeting, is US$ NIL ..."

As is obvious from a comparison of the definition of outstanding with the terms of paragraph (iii) of the certificate. That sub paragraph tracks exactly the language used in the definition.

13. As originally formulated, the claim alleged that the fourth defendant was or was to be regarded for present purposes as a subsidiary of the first defendant with the result that the certificate should have but failed to take account of the notes of which the fourth defendant was noteholder. It was this assertion that was criticised by Foxton J at an earlier stage in these proceedings and was conceded to be unarguable at the last hearing before me. This was so because in fact the first defendant is a subsidiary of the fourth defendant. The case based on the allegation that the fourth defendant should be regarded as a subsidiary of the first defendant has now been abandoned and has been struck out of the Particulars of Claim as part of the proposed re amendments.
14. The proposed re-amended Particulars of Claim starts the new case that the claimant now wishes to advance with a proposed re-amendment to paragraph 48 so as to allege that the certificate was issued in breach of clause 7.10 of the trust deed because it did not certify the principal amount of the notes held "on behalf of" the first defendant and its subsidiaries, but only those "held by" the first defendant or its subsidiaries. It is alleged that the fourth defendant had purchased the notes I referred to earlier, and alleges that it continued to hold those notes until at least 22 March 2022. It is proposed by the claimant that it should be permitted to add a new paragraph 50A to the particulars of claim, which reads as follows:

"It is to be inferred that Essar Steel Asia held the notes (sic) in paragraph 19 'on behalf of' ESL as at 24 and 25 February 2015. Pending disclosure herein, TAF will rely in this regard on the omission of Mr Iyer and Mr Oommen to certify that the aggregate principal amount of new dollar notes held as at 24 February 2015 on behalf of ESL in circumstances where they were obliged to do so would, as further particularised in paragraph 55 below, have been expected to do so ..."

After various deletions the defendant applies to amend paragraph 55 of the particulars of claim so that it reads:

"Messrs Iyer and Oommen and ESL, to whom their knowledge is to be attributed, knew or must have known ... that the certificate did not comply with clause 7.10. It is inherently improbable that their failure to comply with clause 7.10 was inadvertent in circumstances where ...

55.1. The certificate was an important document with legal ramifications which (it is to be inferred) would have been drafted or reviewed by lawyers As to which ESL is a sophisticated multinational company with sufficient resources (including, it is to be inferred, legal support) at its disposal.

55.2. Messrs Iyer and Oommen are experienced commercial executives.

55.3. ESL have previously had a dispute with the claimant which proceeded to the Court of Appeal) regarding the meaning of the phrase 'other financial institutions' in a syndicated loan agreement ...

55.4. Clause 7.10 imposes a simple obligation to certify 'the aggregate principal amount of new dollar notes held at the date of such certificate by or on behalf of the company or its subsidiaries'.

55.5. The certificate otherwise replicated the wording of and complied with clause 7.10."

15. At the date when the certificate was issued, all the noteholders held beneficial interests in the notes held in global form on their behalf by the DTC's nominee, as explained above. Whilst that could change in certain defined events, it is not suggested that any of the exceptions that would result in such a change apply. However, once this methodology is understood, and clause 7.10 is read together with the definition of "outstanding" quoted earlier (and in particular the proviso within the definition) it becomes clear that clause 7.10 is formulated as it is to cater both for the default situation that noteholder have a beneficial interest in the global notes, which are held on behalf of the noteholders by DTC's nominee and the possibility that the notes cease to be held by the DTC nominee. The word "by" has been used to cater for the possibility that individual definitive notes, as referred to in clause 3.4, are held by noteholders and, therefore the first defendant or any of its subsidiaries at the time when a certificate is issued. That also explains why, for example, clause 9.15 is expressed in the terms it is. Unless and until the global note structure has come to an end, however all notes by definition are held on behalf of those beneficially interested in them by the DTC as nominee. It is to cater for that that situation that the phrase ",,, on behalf of…" has included.
16. The definition of "outstanding" and the proviso contained within it excludes from the definition, and therefore the right to vote, any notes purchased and cancelled pursuant to the provisions of the deed referred to earlier and the proviso caters for loan notes -- or beneficial interests in such notes more accurately -- held by the first defendant or its subsidiaries, including following purchase where cancellation had not taken place as required by the provisions in the Trust Deed referred to earlier. The phrase "held by" used in the certificate tracks to the letter the language used in the proviso and that phrase as used in the proviso means "held by or on behalf of" albeit in the limited sense that I have explained. That is important context that it is necessary to take into account when deciding whether dishonest concealment of the first defendant's interest in the loan notes was more likely to be the reason for the omission from the certificate of the words "on behalf of" from the certificate than an innocent explanation.
17. I do not consider that the more likely inference is the one contended for by the claimant. The certificate is signed by two directors of the first defendant. Nothing turns on the inclusion in the certificate of the words "duly authorised in that behalf" by the first defendant. It is merely confirmation that the directors have been authorised to sign the certificate. It was submitted on behalf of the claimant that there was no need to include either paragraphs (i) or (ii) within the certificate, because neither the proviso, or for that matter clause 7.10, required the inclusion of either of those subparagraphs and by implication that their inclusion fuels the inference on which the claimant seeks to rely. In my judgment, the inclusion of paragraphs (i) and (ii) is immaterial to the issues that arise. They simply set the scene for and give context and sense to what is then set out in paragraph (iii). There may have been other ways of certifying what had to be certified, but that is the method that had been adopted, and that it has been adopted does not invalidate the certificate if otherwise it's a valid certificate.
18. The claimant's submission is that the omission of the words "on behalf of" it is more likely to have been omitted dishonestly for the purpose of avoiding disclosing that the notes held by the fourth defendant were held by the fourth defendant as nominee for the first defendant, and thus the notes or beneficial interest in the notes held by the fourth defendant should have been certified and excluded for voting purposes. In my judgment is not realistically arguable that such is more likely to be the reason as opposed to the phrase being omitted because the language used tracked the express terms of the proviso which was why the certificate was being provided and/or because the notes belonged to the fourth defendant beneficially.
19. I accept, hypothetically, that in order to provide a valid certificate for the purposes of the proviso it would be necessary to include any notes, or the beneficial interest in such notes, held by any third party other than the DTC's nominee as nominee for the first defendant or one or more of its subsidiaries. However, the sole basis for asserting that the fourth defendant held its notes as nominee or on trust for the first defendant is an inference to be drawn from the omission of the phrase "on behalf of" from the certificate. For the reasons I have given I am unpersuaded that there is a sufficiently strong inference to be drawn from this omission to justify granting permission to amend to make this allegation given that the purpose of the certificate was to address the requirements of the definition of outstanding in the Trust Deed and the proviso within the definition. The language used in the certificate tracked the terms used in the proviso within the definition. The fourth defendant is not a subsidiary of the first defendant but was and is its parent. It was fully entitled to hold a beneficial interest in the notes for its own business purposes. It simply does not follow from the fact that the fourth defendant was a noteholder, that it is more likely that a court will infer from the failure to include the words "on behalf of" that the notes it held were held by it as nominee for its subsidiary as opposed to them being held beneficially for itself for its own business purposes including protecting the interests of its subsidiary by voting as it did. It follows that the proposition referred to in paragraph 50A of the proposed amendment has a no more than fanciful chance of succeeding at trial.
20. It was argued on behalf of the eighth defendant that there was a contradiction between what is alleged in paragraph 50A of the proposed amended pleading and the allegation in paragraph 63.2 of the proposed draft, where it is alleged that the certificate impliedly represented that no notes were held on behalf of the first defendant. Treating that as meaning other than by the DTC nominee, I see no necessary contradiction between the two. If the language used in the certificate permitted the inference for which the claimant intends, then what is alleged in paragraph 63 would, as it seems to me, be consistent.
21. It is now necessary to refer to the allegations made against the eighth defendant, Mr Wright. He is a solicitor and is said to have attended the meeting at which the relevant votes were cast on the resolution to accelerate repayment by the first defendant of the sums represented by the notes. The sole allegation against him is that it is to be inferred from his "... senior legal role within the ESL Group ..." that he attended the meeting knowing that Mr Fadia, who voted on behalf of the fourth defendant, was not entitled to vote. Given the conclusions that I have so far reached, there are no better than a fanciful chance of succeeding in that allegation.
22. I conclude, therefore, that permission to amend in the terms sought should be refused. Had I come to a different conclusion on the core issue, I would not have been persuaded to refuse permission by reference to the other submissions made on behalf of the claimant concerning mental state, intention to injure, limitation, or standing to commence proceedings. Each of these issues would have been issues for trial, had I concluded that the claimant's inference case was otherwise realistically arguable. In the result, the application for permission to amend fails and the application by the eighth defendant for summary judgment succeeds. It has been accepted that the summary judgment application must also succeed in relation to the third and ninth defendant in any event.