Standard Chartered PLC v Guaranty Nominees Ltd & Ors [2024] EWHC 2605 (Comm) (15 October 2024)

Standard Chartered PLC v Guaranty Nominees Ltd & Ors [2024] EWHC 2605 (Comm) (15 October 2024)

Where the contractual definition of Three Month LIBOR ceases to be capable of operation due to the cessation of LIBOR publication, it is necessary and obvious to imply a term that dividends should be calculated using the reasonable alternative rate to three month USD LIBOR at the relevant time. The appropriate rate is CME Term SOFR plus the ISDA Spread Adjustment. Redemption is not required or implied.

Citation
[2024] EWHC 2605 (Comm)
Parties
Claimant: Standard Chartered PLC; First Defendant: Guaranty Nominees Limited; Second Defendant: D E Shaw Galvanic Portfolios LLC; Third Defendant: Olifant Fund Ltd.; Fourth Defendant: FFI Fund Ltd.; Fifth Defendant: FYI Ltd.
Jurisdiction
England and Wales
Judgment Date
15 October 2024
Procedural Posture
Financial Markets Test Case (commercial Court, Financial List) / Judgment After Trial
Outcome
Claim allowed in part; declaration granted that dividends are to be calculated by reference to CME Term SOFR plus the ISDA Spread Adjustment as the reasonable alternative rate.
Legal Topics
Implied Terms, Interpretation of Contracts, Financial Instruments, Fallback Provisions, LIBOR Transition
Banking and Finance Contract Law Company Law Implied Terms Interpretation of Contracts Financial Instruments Fallback Provisions LIBOR Transition

Case Brief

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Parties

Standard Chartered PLC

Claimant

Guaranty Nominees Limited

First Defendant

D E Shaw Galvanic Portfolios LLC

Second Defendant

Olifant Fund Ltd.

Third Defendant

FFI Fund Ltd.

Fourth Defendant

FYI Ltd.

Fifth Defendant

Procedural Posture

Financial Markets Test Case (commercial Court, Financial List) / Judgment After Trial

Legal Issues

  1. 1 What is the effect of the cessation of publication of USD LIBOR on the calculation of dividends for perpetual preference shares referencing that rate?
  2. 2 Should a term be implied into the contract to provide for an alternative rate or redemption upon LIBOR cessation?

Ratio Decidendi

Where the contractual definition of Three Month LIBOR ceases to be capable of operation due to the cessation of LIBOR publication, it is necessary and obvious to imply a term that dividends should be calculated using the reasonable alternative rate to three month USD LIBOR at the relevant time. The appropriate rate is CME Term SOFR plus the ISDA Spread Adjustment. Redemption is not required or implied.

Court Disposition

Claim allowed in part; declaration granted that dividends are to be calculated by reference to CME Term SOFR plus the ISDA Spread Adjustment as the reasonable alternative rate.

Orders

  • Declaration that, following the cessation of publication of USD LIBOR, dividends on the Preference Shares are to be calculated by reference to CME Term SOFR plus the ISDA Spread Adjustment.
  • No order for redemption of the Preference Shares.