Marex Financial Ltd v Creative Finance Ltd & Anor

Marex Financial Ltd v Creative Finance Ltd & Anor

Marex was contractually entitled to close out the Defendants’ positions by executing equal and opposite transactions and to liquidate the final balance under FEOMA and PCA; however, it was not contractually entitled to claim a mark-up profit on close-out trades unless expressly provided. Marex owed only a duty to act rationally, not a duty of care, and its close-out methodology was not arbitrary, capricious, or perverse. Exclusion of duty of care was reasonable under the circumstances.

Parties
Claimant: Marex Financial Limited; Defendant: Creative Finance Limited; Defendant: Cosmorex Limited
Jurisdiction
England and Wales
Judgment Date
25 July 2013
Procedural Posture
Commercial Claim / Final Judgment
Outcome
Claim succeeds in part; counterclaim dismissed
Legal Topics
Close Out Rights, Margin Requirements, Duty of Care, Rationality Standard, Mark Up Entitlement, Unfair Contract Terms
Contract Law Financial Services Law Close Out Rights Margin Requirements Duty of Care Rationality Standard Mark Up Entitlement Unfair Contract Terms

Case Brief

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Parties

Marex Financial Limited

Claimant

Creative Finance Limited

Defendant

Cosmorex Limited

Defendant

Procedural Posture

Commercial Claim / Final Judgment

Legal Issues

  1. 1 Whether Marex was contractually entitled to claim a mark-up profit on close-out trades
  2. 2 Whether Marex owed a duty of care beyond rationality when closing out positions
  3. 3 Whether Marex breached the duty to act rationally in the manner of close-out

Ratio Decidendi

Marex was contractually entitled to close out the Defendants’ positions by executing equal and opposite transactions and to liquidate the final balance under FEOMA and PCA; however, it was not contractually entitled to claim a mark-up profit on close-out trades unless expressly provided. Marex owed only a duty to act rationally, not a duty of care, and its close-out methodology was not arbitrary, capricious, or perverse. Exclusion of duty of care was reasonable under the circumstances.

Court Disposition

Claim succeeds in part; counterclaim dismissed

Orders

  • Marex’s claim succeeds except for the mark-up profit element on close-out trades and swaps/rolls
  • Defendants’ counterclaim dismissed