Lehman Brothers Special Financing Inc v Carlton Communications Ltd [2011] EWHC 718 (Ch) (28 March 2011)

Lehman Brothers Special Financing Inc v Carlton Communications Ltd [2011] EWHC 718 (Ch) (28 March 2011)

Section 2(a)(iii) of the ISDA Master Agreement operates as a suspensory condition precedent and does not offend the anti-deprivation principle or constitute a penalty clause; the claimant's entitlement to payment is suspended due to continuing Events of Default, and the claim fails.

Citation
[2011] EWHC 718 (Ch)
Parties
Claimant: Lehman Brothers Special Financing Inc.; Defendant: Carlton Communications Limited
Jurisdiction
England and Wales
Judgment Date
28 March 2011
Procedural Posture
Commercial Claim (derivatives/contract) / Trial Judgment
Outcome
Claim dismissed
Legal Topics
ISDA Master Agreement, Anti Deprivation Principle, Penalty Clauses, Derivatives, Interest Rate Swaps
Contract Law Insolvency Law Banking and Finance ISDA Master Agreement Anti Deprivation Principle Penalty Clauses Derivatives Interest Rate Swaps

Case Brief

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Parties

Lehman Brothers Special Financing Inc.

Claimant

Carlton Communications Limited

Defendant

Procedural Posture

Commercial Claim (derivatives/contract) / Trial Judgment

Legal Issues

  1. 1 Whether Section 2(a)(iii) of the 1992 ISDA Master Agreement is unenforceable as offending the anti-deprivation principle or as a penalty clause; Whether the claimant is entitled to payment under the swaps despite continuing Events of Default

Ratio Decidendi

Section 2(a)(iii) of the ISDA Master Agreement operates as a suspensory condition precedent and does not offend the anti-deprivation principle or constitute a penalty clause; the claimant's entitlement to payment is suspended due to continuing Events of Default, and the claim fails.

Court Disposition

Claim dismissed

Orders

  • Claim for payment of £2,656,649.31 plus interest dismissed
  • No declarations granted regarding unenforceability of Master Agreement provisions