Britannia Bulk Plc v Pioneer Navigation Ltd & Anor

Britannia Bulk Plc v Pioneer Navigation Ltd & Anor

The 'nil loss' argument fails because, under the ISDA Master Agreement with Automatic Early Termination, it is impossible for a Bankruptcy Event of Default to continue without termination. The Loss calculation must be made on the basis that all conditions precedent are satisfied, i.e., as if there was no continuing Event of Default. The Second Method requires the Non-defaulting Party to pay the Defaulting Party for any gain resulting from early termination, calculated on this 'clean' basis.

Parties
Claimant: Britannia Bulk plc (in liquidation); Defendant: Pioneer Navigation Limited; Defendant: Atlas Shipping Limited; Defendant: Bulk Trading S.A.
Jurisdiction
England and Wales
Judgment Date
25 March 2011
Procedural Posture
Commercial Contractual Dispute (preliminary Issue) / Judgment on Preliminary Issue
Outcome
Preliminary issue resolved in favour of Britannia Bulk (claimant); 'nil loss' argument rejected.
Legal Topics
Interpretation of ISDA Master Agreement, Automatic Early Termination, Calculation of Loss Under Derivatives Contracts, Effect of Bankruptcy Event of Default, Second Method and Loss Provisions
Commercial Law Contract Law Insolvency Law Derivatives Law Interpretation of ISDA Master Agreement Automatic Early Termination Calculation of Loss Under Derivatives Contracts Effect of Bankruptcy Event of Default +1 more

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Parties

Britannia Bulk plc (in liquidation)

Claimant

Pioneer Navigation Limited

Defendant

Atlas Shipping Limited

Defendant

Bulk Trading S.A.

Defendant

Procedural Posture

Commercial Contractual Dispute (preliminary Issue) / Judgment on Preliminary Issue

Legal Issues

  1. 1 Whether the 'nil loss' argument applies under the ISDA Master Agreement with Automatic Early Termination and Second Method/Loss provisions
  2. 2 How 'Loss' is to be calculated under Section 6(e) of the ISDA Master Agreement in the context of a Bankruptcy Event of Default and Automatic Early Termination

Ratio Decidendi

The 'nil loss' argument fails because, under the ISDA Master Agreement with Automatic Early Termination, it is impossible for a Bankruptcy Event of Default to continue without termination. The Loss calculation must be made on the basis that all conditions precedent are satisfied, i.e., as if there was no continuing Event of Default. The Second Method requires the Non-defaulting Party to pay the Defaulting Party for any gain resulting from early termination, calculated on this 'clean' basis.

Court Disposition

Preliminary issue resolved in favour of Britannia Bulk (claimant); 'nil loss' argument rejected.

Orders

  • The preliminary issue in both actions is resolved in favour of Britannia Bulk.