The English case, Saltri III Ltd v MD Mezzanine SA SICAR and others [2012] EWHC 3025 (Comm) presents a good example of the potential conflict of interest between a security trustee (who owes potential duties to all lenders, both senior and mezzanine) and the senior facility agent (who acts solely for the senior lenders) in respect of a syndicated loan when it comes to realisation of security under the terms of an Intercreditor Deed. The potential for conflict of interest being particularly acute, as in this case, where the security trustee and facility agent are the same entity.

In this case the senior facility agent JPMEL (acting on unanimous senior lender instructions) issued an enforcement notice to itself as security trustee to sell the debtor's business as part of debt restructure deal whereby the debtor assets were transferred for nominal cash consideration but subject to a revised debt and security structure for the benefit of only the senior lenders, leaving the subordinated mezzanine lenders without any significant assets. Even though the sale was not for cash consideration, the Court held that JPMEL (as security trustee) had complied with its duty of care to obtain the best price in respect of an enforcement sale (such duty owed to all lenders) under the Intercreditor Deed.

The court further held that, like a mortgagee, the security trustee had no generalised fiduciary duty and the contractual terms of the Intercreditor Deed delineated the scope and nature of any duties that might exist. In particular, a security trustee was entitled to act in its own interest as a senior lender. The security trustee would be liable only if its conduct was plainly on the "wrong side of the line". Finally, the mezzanine lenders did not suffer any damages since JPMEL (as security trustee) could not have sold the relevant assets for more than what was owed to the senior lenders.