SNCB Holding v UBS AG [2012] EWHC 2044 (Comm) (20 July 2012)

SNCB Holding v UBS AG [2012] EWHC 2044 (Comm) (20 July 2012)

The express terms of the ADA and Security Agreement governed the parties' rights and obligations. The ADA did not require UBS to deliver to SNCB the specific Ambac Municipal Bonds held in the Collateral Account at the time of the Credit Event. UBS was contractually entitled to manage the Collateral Account, including substituting collateral, and to deliver any qualifying obligations of the Affected Reference Entity as the Delivery Portfolio. The implied terms contended for by SNCB were not necessary for business efficacy, not so obvious as to go without saying, and inconsistent with the express terms. UBS's exercise of discretion was not arbitrary, capricious, or in bad faith....

Citation
[2012] EWHC 2044 (Comm)
Parties
Claimant: SNCB Holding; Defendant: UBS AG
Jurisdiction
England and Wales
Judgment Date
20 July 2012
Procedural Posture
Commercial Court Claim for Breach of Contract / Final Judgment After Trial
Outcome
Claim dismissed
Legal Topics
Implied Terms, Construction of Contracts, Credit Linked Deposit Agreements, Exercise of Contractual Discretion, Collateral Management
Contract Law Banking and Finance Implied Terms Construction of Contracts Credit Linked Deposit Agreements Exercise of Contractual Discretion Collateral Management

Case Brief

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Parties

SNCB Holding

Claimant

UBS AG

Defendant

Procedural Posture

Commercial Court Claim for Breach of Contract / Final Judgment After Trial

Legal Issues

  1. 1 Whether SNCB was entitled to delivery of specific Ambac Municipal Bonds from the Collateral Account following a Credit Event under the ADA
  2. 2 Whether UBS's removal and replacement of Collateral was an impermissible exercise of contractual discretion or breach of contract
  3. 3 Whether implied terms as pleaded by SNCB should be read into the ADA to restrict UBS's discretion

Ratio Decidendi

The express terms of the ADA and Security Agreement governed the parties' rights and obligations. The ADA did not require UBS to deliver to SNCB the specific Ambac Municipal Bonds held in the Collateral Account at the time of the Credit Event. UBS was contractually entitled to manage the Collateral Account, including substituting collateral, and to deliver any qualifying obligations of the Affected Reference Entity as the Delivery Portfolio. The implied terms contended for by SNCB were not necessary for business efficacy, not so obvious as to go without saying, and inconsistent with the express terms. UBS's exercise of discretion was not arbitrary, capricious, or in bad faith....

Court Disposition

Claim dismissed

Orders

  • Claim for damages for breach of contract dismissed
  • No order for damages or other relief in favour of SNCB