State Street Bank and Trust Company v Sompo Japan Insurance Inc & Ors [2010] EWHC 1461 (Ch) (17 June 2010)

State Street Bank and Trust Company v Sompo Japan Insurance Inc & Ors [2010] EWHC 1461 (Ch) (17 June 2010)

It is clear from all relevant documents that the definition of 'Financial Guarantee Floating Amount' in the Conditions contains an obvious mistake by omitting the Total Return Swap Termination Amount. The court corrects this by construction, adopting the definition in the Offering Circular, so that the Guarantor is entitled to reimbursement from the Issuer for payments made under the Guarantee Agreement, with the appropriate priority of payments. Rectification is unnecessary.

Citation
[2010] EWHC 1461 (Ch)
Parties
Claimant/trustee: State Street Bank and Trust Company; Defendant/guarantor/part 20 Claimant: Sompo Japan Insurance Inc; Defendant/issuer/part 20 Defendant: Cheyne CLO Investments I Limited; Defendant/noteholder/part 20 Defendant: KBC Investments Limited
Jurisdiction
England and Wales
Judgment Date
17 June 2010
Procedural Posture
Part 8 Proceedings and Part 20 Claim / Judgment After Hearing on Construction and Rectification
Outcome
Declaration granted in favour of the Guarantor; construction of the relevant documents corrected to include the Total Return Swap Termination Amount in the Financial Guarantee Floating Amount.
Legal Topics
Construction of Contracts, Rectification, Trustee Duties, Priority of Payments, Interpretation of Financial Instruments
Commercial Law Trusts and Equity Banking and Finance Construction of Contracts Rectification Trustee Duties Priority of Payments Interpretation of Financial Instruments

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Parties

State Street Bank and Trust Company

Claimant/trustee

Sompo Japan Insurance Inc

Defendant/guarantor/part 20 Claimant

Cheyne CLO Investments I Limited

Defendant/issuer/part 20 Defendant

KBC Investments Limited

Defendant/noteholder/part 20 Defendant

Procedural Posture

Part 8 Proceedings and Part 20 Claim / Judgment After Hearing on Construction and Rectification

Legal Issues

  1. 1 Whether the definition of 'Financial Guarantee Floating Amount' in the Conditions contains an obvious mistake that should be corrected by construction to include the Total Return Swap Termination Amount; Whether the Guarantor is entitled to reimbursement from the Issuer for payments made under the Guarantee Agreement; Whether rectification is required if construction suffices

Ratio Decidendi

It is clear from all relevant documents that the definition of 'Financial Guarantee Floating Amount' in the Conditions contains an obvious mistake by omitting the Total Return Swap Termination Amount. The court corrects this by construction, adopting the definition in the Offering Circular, so that the Guarantor is entitled to reimbursement from the Issuer for payments made under the Guarantee Agreement, with the appropriate priority of payments. Rectification is unnecessary.

Court Disposition

Declaration granted in favour of the Guarantor; construction of the relevant documents corrected to include the Total Return Swap Termination Amount in the Financial Guarantee Floating Amount.

Orders

  • Declaration as to the true construction of the relevant documents to include the Total Return Swap Termination Amount in the Financial Guarantee Floating Amount; no order for rectification required.