Macquarie Bank Limited v Phelan Energy Group Limited

Macquarie Bank Limited v Phelan Energy Group Limited

A valid Event of Default occurred under section 5(a)(i) of the ISDA Master Agreement because Phelan failed to pay the amount due on 28 May 2021, and the default notice, though containing a minor error in the amount, was sufficiently clear to the reasonable recipient. Macquarie was entitled to designate 4 June 2021 as the Early Termination Date, and the Alternative Early Termination Amount accrued as a debt from Phelan to Macquarie. However, summary judgment for the Alternative Early Termination Amount is not granted at this stage; an interim payment application is adjourned to allow for service of a precautionary notice and further consideration of quantum issues.

Parties
Claimant: Macquarie Bank Limited; Defendant: Phelan Energy Group Limited
Jurisdiction
England and Wales
Judgment Date
18 October 2022
Procedural Posture
Commercial Summary Judgment Application / Interlocutory (summary Judgment and Interim Payment Application)
Outcome
Declarations granted; interim payment application adjourned with liberty to restore.
Legal Topics
ISDA Master Agreement, Foreign Exchange Swaps, Summary Judgment, Early Termination, Event of Default, Contract Interpretation
Commercial Law Banking and Finance ISDA Master Agreement Foreign Exchange Swaps Summary Judgment Early Termination Event of Default Contract Interpretation

Case Brief

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Parties

Macquarie Bank Limited

Claimant

Phelan Energy Group Limited

Defendant

Procedural Posture

Commercial Summary Judgment Application / Interlocutory (summary Judgment and Interim Payment Application)

Legal Issues

  1. 1 Whether there was an Event of Default under section 5(a)(i) of the ISDA Master Agreement due to non-payment by Phelan.
  2. 2 Whether Macquarie validly designated an Early Termination Date under section 6(a) of the ISDA Master Agreement.
  3. 3 Whether Macquarie's calculation of the Early Termination Amount was correct and the consequences of any error.

Ratio Decidendi

A valid Event of Default occurred under section 5(a)(i) of the ISDA Master Agreement because Phelan failed to pay the amount due on 28 May 2021, and the default notice, though containing a minor error in the amount, was sufficiently clear to the reasonable recipient. Macquarie was entitled to designate 4 June 2021 as the Early Termination Date, and the Alternative Early Termination Amount accrued as a debt from Phelan to Macquarie. However, summary judgment for the Alternative Early Termination Amount is not granted at this stage; an interim payment application is adjourned to allow for service of a precautionary notice and further consideration of quantum issues.

Court Disposition

Declarations granted; interim payment application adjourned with liberty to restore.

Orders

  • Declarations to be agreed and recorded that if the strike price for the 28 May 2021 Settlement Trade was 22.05, then (i) there was an Event of Default, (ii) Macquarie validly designated 4 June 2021 as the Early Termination Date, and (iii) the Alternative Early Termination Amount accrued as a debt from Phelan to...
  • Interim payment application adjourned with liberty to restore regarding (i) whether the Alternative Early Termination Amount has become payable by notice, and (ii) the impact of any alleged gain on hedging transactions.