BNY Mellon Corporate Trustee Services Ltd v LBG Capital (No 1) Plc [2016]

BNY Mellon Corporate Trustee Services Ltd v LBG Capital (No 1) Plc [2016]

In BNY Mellon Corporate Trustee Services Ltd v LBG Capital (No 1) Plc [2016] UKSC 29, heard by the Supreme Court, the dispute centred around contingent convertible securities issued by two wholly-owned subsidiaries of a banking group. These securities carried a high rate of interest and were not redeemable until specific dates between 2019 and 2032, but they could be converted into shares upon the occurrence of certain events, one of which was a stress test of the group's consolidated CT1 ratio – a measure of financial strength.

However, regulatory changes in 2013 led to the replacement of the CT1 ratio with a more restrictive alternative, CET1 ratio. In 2014, a stress test was conducted that did not take the contingent convertible securities into account, prompting the group to announce their intention to redeem the securities. The trustee, acting on behalf of the securities holders, sought a declaration that the group was not entitled to redeem the securities, arguing that the triggering event specified in the trust deed was a CT1 ratio stress test, not a CET1 ratio test.

The key issue before the Supreme Court was whether the relevant clause in the trust deed could be interpreted to include CET1 ratio stress tests. The court, in its decision, held that the defendants were entitled to redeem the securities. The interpretation was based on several factors, including the anticipation of regulatory changes, the understanding that phrases like CT1 capital could change meaning, and the essential feature of the securities allowing conversion into core capital, which is defined at the time of redemption.

The case established that while normally, very considerable circumspection is required before extraneous documents are used to interpret a deed or contract governing the holding terms of negotiable instruments, in this case, regulatory material was deemed admissible to interpret the deed. The court considered the regulatory policy in force at the time the deed was made to properly understand its terms.

Additionally, the case addressed the secondary argument that the relevant clause should be interpreted contra proferentem – against the party seeking to enforce it. Lord Neuberger rejected this argument, stating that the contra proferentem rule is a last refuge and should not be applied in this case, emphasising the importance of interpreting the document based on its terms and surrounding context rather than resorting to the rule as a default position.
Back to blog
UOL Case Bank

UOL Case Bank

Upon joining, you become a valuable UOL student and gain instant access to over 2,100 case summaries. UOL Case Bank is constantly expanding. Speed up your revision with us now.

Subscribe Now

Where are our students from?

Yale University
Council of Europe
Baker Mckenzie 
University of Chicago
Columbia University
New York University
University of Michigan 
University College London (UCL)
London School of Economics (LSE)
King’s College London (KCL)
University of London
University of Manchester
University of Zurich
University of York
Brandeis University
University of Exeter
University of Sheffield
Boston University
University of Washington
University of Leeds
University of Law
Royal Holloway, University of London 
Birkbeck, University of London
SOAS, University of London
University of Kent
University of Hull
Queen’s University Belfast
Toronto Metropolitan University
Hong Kong University of Science and Technology
University of Buckingham

  • Criminal Practice

    Diagrams and Charts

    Our carefully designed diagrams and charts will guide you through complex legal issues.

  • Criminal Law

    Clear and Succinct Definitions

    Key concepts are concisely defined to help you understand legal topics quickly.

  • Property Law

    Statutory Provisions

    Statutory provisions are provided side by side with legal concepts to help you swiftly locate the relevant legislation.

  • Public Law

    Case Summaries

    We have summarised important cases for you so that you don't need to read long and boring cases.

  • Evidence

    Rules and Exceptions

    Rules and exceptions are clearly listed so that you know when a rule applies and when it doesn't.

  • Company Law


    Legal terms and key concepts are explained at the beginning of each chapter to help you learn efficiently.

  • Case Law

    Case law is provided side by side with legal concepts so that you know how legal principles and precedents were established.

  • Law Exam Guide

    Law Essay Guide

    You will learn essential law exam skills and essay writing techniques that are not taught in class.

  • Law Exam Guide

    Problem Question Guide

    We will show you how to answer problem questions step by step to achieve first-class results.

  • Conflict of Laws

    Structured Explanations

    Complex legal concepts are broken down into concise and digestible bullet point explanations.

  • Legal System and Method

    Legal Research

    You will learn legal research techniques with our study guide and become a proficient legal researcher.

  • Jurisprudence and Legal Theory


    All essential concepts, principles, and case law are included so that you can answer exam questions quickly.