Sigma Finance Corp, Re

Sigma Finance Corp, Re

The majority held that the natural and ordinary meaning of clause 7.6 of the STD required the Security Trustee to pay Short Term Liabilities falling due during the Realisation Period on a first-in-time basis, using available assets, so far as possible, and that the clause did not require pari passu or pro rata distribution among all creditors. The drafting and structure of the STD did not support importing a pro rata or pari passu regime during the Realisation Period, and the court's role was to interpret, not rewrite, the commercial bargain.

Parties
Appellant: Interested Party B; Appellant: Interested Party C; Appellant: Interested Party D; Respondent: Interested Party A; Respondent: Administrative Receivers; Respondent: Security Trustee
Jurisdiction
England and Wales
Judgment Date
25 November 2008
Procedural Posture
Civil Appeal / Appeal From High Court (chancery Division, Companies Court)
Outcome
Appeals dismissed (by majority)
Legal Topics
Structured Investment Vehicles, Security Trust Deeds, Priority of Creditors, Interpretation of Commercial Documents
Insolvency Law Banking and Finance Law Trust Law Structured Investment Vehicles Security Trust Deeds Priority of Creditors Interpretation of Commercial Documents

Case Brief

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Parties

Interested Party B

Appellant

Interested Party C

Appellant

Interested Party D

Appellant

Interested Party A

Respondent

Administrative Receivers

Respondent

Security Trustee

Respondent

Procedural Posture

Civil Appeal / Appeal From High Court (chancery Division, Companies Court)

Legal Issues

  1. 1 Proper construction of clause 7.6 of the Security Trust Deed (STD) governing priority and payment of liabilities during the Realisation Period in an insolvency of a structured investment vehicle (SIV)
  2. 2 Whether liabilities falling due during the Realisation Period are to be paid on a first-in-time basis, pari passu, or pro rata with all other liabilities

Ratio Decidendi

The majority held that the natural and ordinary meaning of clause 7.6 of the STD required the Security Trustee to pay Short Term Liabilities falling due during the Realisation Period on a first-in-time basis, using available assets, so far as possible, and that the clause did not require pari passu or pro rata distribution among all creditors. The drafting and structure of the STD did not support importing a pro rata or pari passu regime during the Realisation Period, and the court's role was to interpret, not rewrite, the commercial bargain.

Court Disposition

Appeals dismissed (by majority)

Orders

  • Appeals by Parties B, C, and D dismissed; order of Sales J affirmed.