High Court applies Supreme Court decision in relation to Novo Banco bonds

Published: 10/4/2019

In Winterbrook Global Opportunities Fund v NB Finance Limited and Others [2019] EWHC 737 (CH), Mr Justice Marcus Smith struck out a claim brought by Winterbrook Global Opportunities Fund (“Winterbrook”) against NB Finance Limited (“NB Finance”), Novo Banco S.A (“Novo Banco”) and The Bank of New York Mellon in a judgment dated 1 April 2019 (the "Judgment”).


The background to the Winterbrook decision was closely entwined with the background considered by the Supreme Court in Goldman Sachs International v Novo Banco SA[1] (the "GSI Proceedings”), in which Enyo Law acted for the Bank of Portugal as intervener (more on that decision can be found here).

Winterbrook was the beneficial owner of two categories of debt securities (referred to hereafter as the "Notes”) with a total aggregate principal amount of €550m. The Notes were originally issued by BES Finance Limited (“BES Finance”), but NB Finance succeeded BES Finance as issuer with effect from July 2015. The Notes were originally guaranteed by Banco Espirito Santo (“BES”), but Novo Banco replaced BES as guarantor by virtue of Portuguese legislation made pursuant to the European Bank Recovery and Resolution Directive.

Winterbrook’s underlying claim sought various declarations that certain Events of Default had been triggered pursuant to the Terms of the Notes. However, for the purposes of this application, Mr Justice Smith had to consider (a) an application by Winterbrook to amend its Particulars of Claim[2] and (b) an application by NB Finance and Novo Banco that Winterbrook’s claims be struck out and/or for summary judgment in their favour. The relevance of the GSI Proceedings to the Notes is that the declarations sought stemmed from events relating to the underlying facility (the "Oak Loan”) that was at the centre of the GSI Proceedings, in which the Supreme Court unanimously held that the Oak Loan remained with BES and did not transfer to Novo Banco. As described at paragraph 26 of the Judgment, “the essence of Winterbrook’s claim was that [the Events of Default] could be attributed – at least in part – to Novo Banco”.


Mr Justice Smith acknowledged that the GSI Judgment rendered potentially tricky questions much more “straightforward”. He saw no basis to distinguish the reasoning of the Supreme Court in the GSI Judgment which meant that the Oak Loan had never affected Novo Banco in any way. Whilst Novo Banco became the Guarantor of the Notes from 3 August 2014, the Oak Loan did not transfer from BES to Novo Banco. It was therefore “impossible to see, as a matter of construction or interpretation” how BES’s default in relation to the Oak Loan, which occurred after 3 August 2014, could give rise to any kind of default on Novo Banco’s part. Accordingly, Winterbrook’s attempt to find a nexus between the Notes and the Oak Loan failed, and NB Finance and Novo Banco’s claim for strike out and/or summary judgment succeeded.


The Judgment is not surprising in the light of the guidance provided by the Supreme Court. Whilst that judgment dealt with the question of jurisdiction, its application extended to the contractual dispute that arose in Winterbrook’s claim, and it proved decisive in NB Finance and Novo Banco overcoming the high hurdle for a successful strike out and/or summary judgment application. Furthermore, the Judgment serves as a useful reminder of the difficulties a party faces when trying to persuade an English Court as to what a foreign court may decide in the future (in this case, in relation to ultimate liability for the Oak Loan, which is being decided by the Portuguese Administrative Courts and is likely to take a number of years).

The full Winterbrook judgment can be found here

[1][2018] UKSC 34, which was heard at the same time as Guardians of New Zealand Superannuation Fund and others v Novo Banco SA.

[2]As noted at paragraph 27 of the Judgment, the original Particulars of Claim had been settled before the Supreme Court’s judgment in the GSI Proceedings was handed down

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