Lehman Brothers Finance AG v Klaus Tschira Stiftung GmbH & Anor [2019] EWHC 379 (Ch) (22 February 2019)

Lehman Brothers Finance AG v Klaus Tschira Stiftung GmbH & Anor [2019] EWHC 379 (Ch) (22 February 2019)

The Defendants' Loss Calculation was not contractually valid and binding on LBF because it was not determined reasonably or in good faith as required by the ISDA Master Agreement. The Defendants' calculation relied on non-executable, hypothetical valuations and failed to properly consider the contractual requirement...

Source-derived case information.

Citation
[2019] EWHC 379 (Ch)
Parties
Claimant: Lehman Brothers Finance AG (in liquidation); Defendant: Klaus Tschira Stiftung GmbH; Defendant: Dr H C Tschira Beteiligungs GmbH & Co KG
Jurisdiction
England and Wales
Judgment Date
22 February 2019
Procedural Posture
Commercial/financial Dispute / High Court Trial Judgment
Outcome
Claimant succeeds; Defendants' Loss Calculation not binding.
Legal Topics
ISDA Master Agreement Interpretation, Loss Determination, Automatic Early Termination, Collateral Release, Close Out Valuation
Contract Law Financial Law Insolvency Law ISDA Master Agreement Interpretation Loss Determination Automatic Early Termination Collateral Release Close Out Valuation

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Parties

Lehman Brothers Finance AG (in liquidation)

Claimant

Klaus Tschira Stiftung GmbH

Defendant

Dr H C Tschira Beteiligungs GmbH & Co KG

Defendant

Procedural Posture

Commercial/financial Dispute / High Court Trial Judgment

Legal Issues

  1. 1 What is the correct date for determining Loss under the ISDA Master Agreement?
  2. 2 Should Loss be calculated on a collateralised or uncollateralised basis when collateral is unavailable?
  3. 3 Did the Defendants reasonably determine Loss in good faith as required by the Agreement?

Ratio Decidendi

The Defendants' Loss Calculation was not contractually valid and binding on LBF because it was not determined reasonably or in good faith as required by the ISDA Master Agreement. The Defendants' calculation relied on non-executable, hypothetical valuations and failed to properly consider the contractual requirement to determine Loss as of the Early Termination Date or as soon as reasonably practicable thereafter, and on a collateralised basis where possible.

Court Disposition

Claimant succeeds; Defendants' Loss Calculation not binding.

Orders

  • Defendants' Loss Calculation declared invalid and not binding on LBF.
  • Parties to recalculate Loss in accordance with the judgment's interpretation of the ISDA Master Agreement.