Mortgage Developments

Citibank NA and MBI Assurance SA v QVT Financial LP

(2007) EWCA Civ 11

The Court of Appeal was asked to decide on the rights of various parties following a securitisation of debt owed by the Euro Tunnel Group, which operated the Channel Tunnel. Whilst these rights depended partly on the interpretation of highly complex finance documents, various general points emerged on the rights of a mortgagee and the duties of a trustee.

Citibank NA had applied for directions in its capacity as trustee under the terms of a trust deed dated 20 February 2001 made between Citibank, MBI Assurance SA and Fixed-Link Finance BV. These parties had entered into a deed of charge on the same date. The trust related to what was described as "Euro Tunnel tier 3 Junior Debt" of £506 million and e918 million owned by Fixed- Link Finance, which was a special purpose vehicle. This debt was used to secure seven tranches of notes, having aggregate nominal amounts of £432,050,000 and e745 million.

By August 2006 the Euro Tunnel Group had started proceedings in the French courts for approval of a restructuring Safeguard Plan. The Commercial Code of Paris had approved the Safeguard Plan, which (so far as the appeal is concerned) provided for the assignment of the Euro Tunnel tier 3 Junior debt by Fixed-Link Finance to a Euro Tunnel company in return for the issue of further notes redeemable as shares in Euro...