The need for a trustee to carefully scrutinise expenses (UBS AG, London Branch v Glas Trust Corporation)

The need for a trustee to carefully scrutinise expenses (UBS AG, London Branch v Glas Trust Corporation)

In UBS AG London Branch v Glas Trust Corporation Ltd, a dispute arose as to whether the note trustee had properly incurred expenses under the terms of the transaction documents.

Original news

UBS AG London Branch v Glas Trust Corporation Ltd

 [2017] EWHC 1788 (Comm)

UBS AG, London branch brought a claim for declaratory relief against GLAS Trust Corporation Ltd (the note trustee) and Fairhold Securiirsation Ltd (the issuer of the notes) in relation to a securitisation transaction. An extraordinary resolution of noteholders authorised and directed the note trustee to meet certain legal and financial expenses of an ad hoc group of noteholders (the AHG expenses). The dispute arose as UBS argued that such expenses were not expenses that might be properly incurred by or reimbursed to the note trustee under the terms of the transaction documents. These AHG expenses fell to be paid in priority to UBS. The court held that UBS had made good its objections to the extraordinary resolution, and that, as conceded by the note trustee, the adoption of the AHG expenses could not proceed as it had originally proposed.

What are the practical implications of this case?

This case emphasises the importance for a trustee of ensuring that they follow the terms of the trust deed very carefully and ensure that when incurring any expenses, to ensure that they are incurred properly and in line with the transaction docmentation. The case also highlights the importance of a trustee maintaining its independence and ensuring that it does not act blindly on another party’s instructions.

What was this case about?

UBS AG sought declaratory relief against GLAS Trust Corporation Ltd and Fairhold Securitisation Ltd in relation to legal and other expenses incurred by GLAS Trust Corporation Ltd referable to the work of an ad hoc group of Noteholders.

Parties to the case

GLAS Trust Corporation Ltd was

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About the author:

Meet Emma:

1.Banking and finance lawyer with experience in derivatives, debt capital markets, securitisation and structured finance in London and Paris

2.Likes ballet, playing the harp and holidays

3.Thinks the law is always changing!

Emma trained and qualified at Allen & Overy LLP and worked in their derivatives and structured finance teams in London and Paris.  She then joined the foreign exchange prime brokerage legal team at Deutsche Bank before spending 4 ½ years with Crédit Agricole CIB advising the fixed income and derivatives desk.