7.1 Introduction: Two Separate Questions
After discussing the Nordic Trustee’s right to sue in its own name on behalf of the bondholders, it is time to explore the Nordic Trustee’s right to be sued in its own name. The right to be sued must be split into two separate questions. First, there is the question of whether the Nordic Trustee can be sued in its own name in respect of actions performed in its capacity as bond trustee on behalf of the bondholders.(1) Note that the bond trustee can become liable due to breach of its contractual or fiduciary duties owed towards the issuer or the bondholders, but this topic is not within the ambit of this article. The issuer could, for instance, dispute a notice of an event of default or enforcement actions commenced by the Nordic Trustee. Furthermore, a third party creditor may file a suit seeking to have security interests, held by the Nordic Trustee on behalf of the bondholders, invalidated due to errors with the perfection or to dispute the priority ranking.
The second question is whether the issuer or other parties can sue the bondholders in the name of the Nordic Trustee. It would, prima facie, seem easier and more convenient to sue the bondholders in the name of the Nordic Trustee than to sue the individual bondholders themselves. For instance, the issuer may wish either to sue the bondholders for breach of the bond terms(2) The bondholder’s meeting could for instance instruct the Nordic Trustee to act in violation of one of the provisions of the bond terms. or to bring a cross action against the bondholders in a suit initiated by the Nordic Trustee.(3) A cross action could have been the case in LB-2015-137094 (n 137), whereby the defendants argued that the bondholders had contributed to the loss by negligence or bad faith. In order to gain some leverage in the subsequent settlement discussions, the defendants could have sought to obtain a declaratory judgment to that effect. See subsection 5.4 for a summary of the case. In addition, the issuer’s bankruptcy estate or individual creditors may want to bring avoidance actions(4) E.g. fraudulent transfers and preferences (Nw. omstøtelse). against pre-bankruptcy transactions favouring the class of bondholders or a group thereof.
There are no clear answers to these two questions in the Civil Procedure Act or in case law. Section 1-3 of the Civil Procedure Act and its preparatory works(5) Refer to note 54 for a list of these works. require a genuine need to sue the Nordic Trustee in its own name in order to allow the two categories of legal actions. Nonetheless, the starting point is yet again the main rule, as established by case law, that a representative cannot sue or be sued in its own name on behalf of the real party in interest. Neither can such a right, in principle, be agreed through contracting. However, the complexity of and the answers to the two questions, as set out below, differ significantly.