Fondazione Enasarco v Lehman Brothers Finance SA & Anor [2015] EWHC 1307 (Ch) (12 May 2015)

Fondazione Enasarco v Lehman Brothers Finance SA & Anor [2015] EWHC 1307 (Ch) (12 May 2015)

ARIC's determination of Loss by reference to the cost of the replacement put option with Credit Suisse, obtained on 6 May 2009, was reasonable and in accordance with the ISDA Master Agreement. The complexity of the transaction, market conditions post-Lehman collapse, and the absence of earlier binding quotations justified the timing and method of calculation. The differences in terms between the original and replacement options did not invalidate the Loss calculation. The calculation was made at the earliest reasonably practicable date, and ARIC (via Enasarco) was entitled to rely on a quotation obtained and negotiated by Enasarco.

Citation
[2015] EWHC 1307 (Ch)
Parties
Claimant: Fondazione Enasarco; Defendant/part 20 Defendant: Lehman Brothers Finance S.A.; Defendant/part 20 Claimant: Anthracite Rated Investments (Cayman) Limited
Jurisdiction
England and Wales
Judgment Date
12 May 2015
Procedural Posture
Commercial/contractual Dispute / High Court Trial Judgment
Outcome
Claim allowed in favour of Enasarco; counterclaim dismissed.
Legal Topics
ISDA Master Agreement, Derivatives, Calculation of Loss, Early Termination, Replacement Transactions, Reasonableness Standard
Commercial Law Contract Law Banking and Finance ISDA Master Agreement Derivatives Calculation of Loss Early Termination Replacement Transactions +1 more

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Parties

Fondazione Enasarco

Claimant

Lehman Brothers Finance S.A.

Defendant/part 20 Defendant

Anthracite Rated Investments (Cayman) Limited

Defendant/part 20 Claimant

Procedural Posture

Commercial/contractual Dispute / High Court Trial Judgment

Legal Issues

  1. 1 Whether ARIC/Enasarco's calculation of Loss under the ISDA Master Agreement was reasonable and in accordance with the contract terms
  2. 2 Whether the cost of the replacement put option with Credit Suisse was a proper basis for Loss calculation
  3. 3 Whether the Loss calculation was made at the earliest reasonably practicable date after the Early Termination Date

Ratio Decidendi

ARIC's determination of Loss by reference to the cost of the replacement put option with Credit Suisse, obtained on 6 May 2009, was reasonable and in accordance with the ISDA Master Agreement. The complexity of the transaction, market conditions post-Lehman collapse, and the absence of earlier binding quotations justified the timing and method of calculation. The differences in terms between the original and replacement options did not invalidate the Loss calculation. The calculation was made at the earliest reasonably practicable date, and ARIC (via Enasarco) was entitled to rely on a quotation obtained and negotiated by Enasarco.

Court Disposition

Claim allowed in favour of Enasarco; counterclaim dismissed.

Orders

  • LBF to pay Enasarco US $61,507,902 plus interest.
  • Declaration that no sums are payable by Enasarco or ARIC to LBF.