Frances Coulson
- Partner
- Insolvency & Restructuring
Credit Suisse Virtuoso Sicav-Sif & Anor v Softbank Group Corp & Ors
The judgment of Miles LJ, as he now is, in Credit Suisse Virtuoso Sicav-Sif & Anor v Softbank Group Corp & Ors [2025] EWHC 2631 (Ch) is over 800 paragraphs long, and the ground it covers is factually complicated, so not easy to digest. At the root of the case was what the judge described as “a programme of securitised notes originated by companies in the Greensill Group.”
In very simple terms, the first claimant, Credit Suisse Virtuoso, through a sub-fund, Credit Suisse (Lux) Supply Chain Finance Fund, invested in notes which were originated and administered in England by Greensill Capital (UK) Limited and issued by Hoffman Sàrl under what came to be called “the Fairymead note programme.”
The intended security for the Fairymead Note Programme took the form of rights (known as “participations”) granted under a “participation agreement” involving a special purpose vehicle, Greensill Limited. Those participation rights were assigned to Hoffman and then to Citibank NA London Branch as note trustee for the Fairymead note programme. The Participations related to receivables sold, or purportedly sold, to Greensill Limited pursuant to a “receivables purchase agreement” by companies in the Katerra Group, a group of US construction companies of which the parent, Katerra Inc, was a Cayman entity.
The notes, the face value of which was around $440 million, defaulted when they matured and/or fell due for payment in March 2021.
The first claimant, Credit Suisse, and a second claimant, GLAS Trust Corporation Limited (the current note trustee) issued proceedings claiming remedies under s 423 Insolvency Act 1986 (transactions defrauding creditors) on the basis that they were victims (within the meaning of the provision) of transactions entered into by Greensill Limited in connection with an out of court restructuring of the Katerra Group which was completed in December 2020. The impugned transactions took the form of a “contribution and exchange agreement” and a share transfer agreement, each of 30 December 2020, which had the effect of leaving Greensill with no assets and rendering the Fairymead notes valueless. The claimants’ case was that the first to sixth defendants, SoftBank Group Corp and others (referred to as “the SoftBank defendants”), had been involved in giving effect to and benefited from the impugned transactions. The SoftBank Group had been a significant indirect investor in and lender both to the Katerra Group and the Greensill Group.
The claimants sought an order to restore the position to what it would have been if the impugned transactions had not been entered into.
The SoftBank defendants resisted the claim, challenging, among many things, their susceptibility to relief on the basis that what had occurred formed a series of linked transactions which did not satisfy the statutory purpose which had to be made out under s 423; to the extent they benefitted, any benefit they derived was limited to shareholdings in the Katerra Group which became worthless when Katerra went into bankruptcy in June 2021.
Miles LJ summarised the case law on s 423 Insolvency Act as establishing a number of points which he summarised thus:
(1) When identifying a “transaction” for the purposes of s 423 the court will give effect to the statutory purpose of giving relief against debtors seeking to avoid or prejudice their creditors.
(2) A “transaction” may include the release by the debtor of a debt.
(3) The term “transaction” is a broad one which extends to arrangements and is not limited to legally binding contracts.
(4) It is possible for a transaction to comprise or include arrangements which are not legally binding contracts to which the debtor is a party.
(5) The court must take a common sense view of what is comprised in a transaction and should have regard to the statutory purpose of preventing the avoidance of debts.
(6) The fact that a series of steps may be interlinked, even in the strong sense that one step would not have happened without the other(s), does not mean that the entire series necessarily constitutes a single transaction for the purposes of s 423.
(7) Indeed, the courts are likely to be reluctant to view a number of contracts involving different parties as constituting a single transaction unless the contracts have been artificially divided.
(8) The statutory phrase “a person enters a transaction” is a composite one. There must be a transaction and the relevant person must have entered into it.
(9) In deciding whether the transaction includes a step said to comprise part of a wider transaction, it is material to consider the subject matter of the step, the parties to the relevant step and to the other elements of the alleged transaction, and whether there has been an artificial division of an overall transaction into (apparently) separate parts.
(10) The purposes of the debtor in entering into a particular step may be relevant to whether it constitutes part of the relevant transaction for the purposes of the statute.
Applying the legal principles to the facts of the case, Miles LJ concluded:
(1) That the SoftBank defendants would not have entered into the various transactions in issue unless they had anticipated that all the remaining transactions for that phase would be entered into. However, the relevant transaction for the purposes of the claim was limited to the two impugned transactions and did not include various other agreements or understandings pleaded by the defendants.
(2) Those two transactions had been at an undervalue by reason of Greensill’s releasing rights it enjoyed under the receivables purchase agreement (worth $86 million) without obtaining a return that came close to that value.
(3) Greensill had entered into the impugned transactions for the statutory purpose, namely removing assets from the reach of creditors by removing the only source of assets out of which they could be repaid:
“I have concluded that [Greensill Limited] did have that purpose. The [contribution and exchange agreement] had only one function, which was to release the RPA. That brought down the securitisation structure, and wrote off [Greensill Limited’s] only asset. It thereby prejudiced the interest of the claimants. The claimants lost their interests under the securitisation structure and were left with an unsecured claim against the Greensill companies. Mr Greensill knew that those companies lacked the existing resources to meet the claimants’ claims. […] In my judgment, he caused [Greensill Limited] to enter the transactions on 30 December 2020 with the purpose of releasing the only asset of [Greensill Limited]. He had to do that in order to keep SoftBank on side. That was because he was seeking a loan of $1.5 billion from SoftBank in order to deal with the demands of BaFin [the German financial supervisory authority] concerning Greensill Bank. Mr Greensill knew that Credit Suisse would not consent to the release of the [receivables purchase agreement]. That is why he did not ask for its consent. He then concealed the position from Credit Suisse in the hope that his continuing efforts to raise money from SoftBank, TDR [Capital, an investor] and others would work out.”
Given that the claimants succeeded in establishing that the impugned transactions had been at an undervalue, that Greensill Limited (through Lex Greensill, one of its directors) had entered into them for the relevant purpose, and given that it was accepted that Credit Suisse was a victim, the conclusion to the judgment comes as something of a surprise. Miles LJ went on to refuse the claimants the relief they sought or indeed any relief. He took that course for a number of reasons:
(1) He concluded that the SoftBank defendants did not know or suspect that the impugned transactions were being entered into with a view to prejudicing creditors. The yad acted in good faith.
(2) Another single defendant had received Kanterra shares worth some $11.3, but that was all. Further benefits it and other defendants received were diluted to nothing.
(3) The bankruptcy of Kanterra made the order of any payment inappropriate: the effect would be “to require [the parties to be found] to become guarantors against market fluctuations,” something not justified by the law.
The claim was therefore dismissed, a result that the judge himself recognised might be regarded as exceptional. However, as he noted, “In Sequana Rose J explained…that there are some circumstances in which the court may properly decide that it is not appropriate for there to be any remedy imposed, [although] that this would only be in an exceptional case.”
It remains to be seen whether or not there will be an appeal, although it would seem likely. Section 423 Insolvency Act may be said to be developing area of the law, and there has been a great deal of authority on it at a number of levels in the last five years or so, notably Sequana, to which Miles LJ referred as allowing for the exceptional course he adopted.
This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.
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