Pioneer Freight Futures Company Ltd v TMT Asia Ltd

Pioneer Freight Futures Company Ltd v TMT Asia Ltd

For the purposes of determining what is due and payable on any particular Settlement Date under ISDA 92, section 2(c) imposes an automatic netting process that sets off all aggregate amounts due from each party in respect of all transactions, without regard to whether the section 2(a)(iii) conditions precedent have been satisfied. The contrary construction would undermine the commercial purpose of mitigating counterparty risk and is not supported by the language or structure of the agreements.

Parties
Claimant: Pioneer Freight Futures Company Limited (in liquidation); Defendant: TMT Asia Limited
Jurisdiction
England and Wales
Judgment Date
21 July 2011
Procedural Posture
Commercial Court Contract/financial Instruments / Post Summary Judgment; Application for Re Quantification Following Permission to Amend Defence; Judgment After Settlement
Outcome
Had the case not settled, judgment would have been entered for Pioneer in the further sum of $9,531,271.84, making a total of $26,088,865.94. The case was settled prior to hand-down of this judgment.
Legal Topics
Netting Under ISDA Master Agreement, Automatic Early Termination, Anti Deprivation Rule, Interpretation of 'payable' in ISDA 92, Summary Judgment, Settlement of Claims
Contract Law Banking and Finance Law Insolvency Law Netting Under ISDA Master Agreement Automatic Early Termination Anti Deprivation Rule Interpretation of 'payable' in ISDA 92 Summary Judgment +1 more

Case Brief

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Parties

Pioneer Freight Futures Company Limited (in liquidation)

Claimant

TMT Asia Limited

Defendant

Procedural Posture

Commercial Court Contract/financial Instruments / Post Summary Judgment; Application for Re Quantification Following Permission to Amend Defence; Judgment After Settlement

Legal Issues

  1. 1 Whether payment obligations suspended by section 2(a)(iii) of ISDA 92 are taken into account for netting under section 2(c) (Netting Issue)
  2. 2 Whether Automatic Early Termination applies to FFAs after the last Contract Month (AET Issue)
  3. 3 Whether a suspended debt obligation is extinguished at the end of the last Contract Month (Expiry Issue)

Ratio Decidendi

For the purposes of determining what is due and payable on any particular Settlement Date under ISDA 92, section 2(c) imposes an automatic netting process that sets off all aggregate amounts due from each party in respect of all transactions, without regard to whether the section 2(a)(iii) conditions precedent have been satisfied. The contrary construction would undermine the commercial purpose of mitigating counterparty risk and is not supported by the language or structure of the agreements.

Court Disposition

Had the case not settled, judgment would have been entered for Pioneer in the further sum of $9,531,271.84, making a total of $26,088,865.94. The case was settled prior to hand-down of this judgment.

Orders

  • No further orders due to settlement; proceedings to be formally withdrawn upon hand-down of judgment.