The High Court has ruled that A&O Shearman can proceed with its contribution claim against BNY over a costly note listing error.
The case relates to a failure to list Nationwide-issued notes on the London Stock Exchange, which triggered an £83 million withholding tax charge from HMRC.
A&O Shearman has cleared a major hurdle in its attempt to share liability over a tax blunder that cost client Nationwide £83 million, after the High Court refused The Bank of New York Mellon’s attempt to shut down the case.
Background
The dispute stems from the failure to list four series of US medium-term notes issued by Nationwide in 2018 and 2019 on the London Stock Exchange.
The error meant the notes didn’t qualify for a crucial withholding tax exemption that applies to debt securities listed on a "recognised stock exchange" (the quoted Eurobond exemption). Nationwide has already paid £83 million in tax over to HMRC, with interest and penalties still to come.
Nationwide initially targeted both A&O and BNY - the trustee and paying agent on the deal - but later focused its claim solely on A&O.
Since then, A&O has brought a contribution claim against BNY, arguing the bank owed Nationwide a duty - either contractually or in tort - to ensure the notes were listed, or at least to confirm the listing had occurred.
BNY applied for summary judgment in March, claiming it owed no such duty and had no contractual relationship with Nationwide. But in a ruling handed down last week (1 May), the judge rejected that argument and allowed the case to go to trial.
What the court said
The key provision is paragraph 4 of the signing and closing agenda (S&CA) for the note issuances - drafted by A&O - which referred to BNY confirming that the notes had been listed on the exchange.
The judge said he was initially "somewhat sceptical" that the checklist imposed contractual obligations, but ultimately concluded that the formality and way in which the documents were prepared meant "A&O does have real prospects of showing that there was an intention to create legal relations in respect of paragraph 4.1 of the S&CAs."
He also noted that A&O should be allowed to argue that BNY owed a duty in tort to Nationwide to confirm the listing, adding it would be "very unwise" to prevent A&O from running that argument at trial.
What’s next
The decision keeps A&O’s Part 20 contribution claim alive and raises bigger questions about how much weight transactional checklists carry, and whether paying agents like BNY are on the hook when post-closing missteps turn costly.
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